ASST CIT CEN CIR 46, MUMBAI V. MOIZ M. LOKHANDWALA, MUMBAI

ITA 2814/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1968 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 23-04-2014
• Court: TRIBUNAL
• Department Lawyers: N P SINGH CIT DR
• Keywords: Unexplained expenditure; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Source of fund; Capital expenditure
• Section: 69C; 153A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.2814/MUM/2014 ASSESSMENT YEAR: 2004-05 ACIT, CENTRAL CIRCLE-46, R. NO.659, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400020 / VS. SHRI MOIZ M. LOKHANDWALA, TEZ ZAHRA, PLOT NO.V/14C, TERTULIAM ROAD, OFF. PETER DIAS ROAD, BANDRA (W), MUMBAI-400050 ( ' / REVENUE) ( #$ % /ASSESSEE) P.A. NO. AAAPL3378C ' / REVENUE BY SHRI N.P. SINGH CIT- DR #$ % / ASSESSEE BY SHRI MANI JAIN & '' ( % ) / DATE OF HEARING : 15/11/2016 ( % ) / DATE OF ORDER: 30/01/2017 MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 31/01/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED BY THE REVENUE PERTAINS TO DELET ING THE ADDITION OF RS.1.5 CRORES MADE U/S 69C OF THE INCOM E TAX ACT, 1961 (HEREINAFTER THE ACT) WITHOUT APPRECIATING THE FACT THAT THE RENOVATION OF RESIDENTIAL BUNGALOW TEZ ZAHARA , BELONGING TO THE ASSESSEE AND THE SOURCE OF WHICH HAS NOT BEE N EXPLAINED BY THE ASSESSEE. 2. DURING HEARING, THE LD. CIT-DR, SHRI N.P. SINGH , ADVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED BY SUBMITTING THAT THE ASSESSEE DID NOT SUBSTANTIAT E THE CLAIM FOR MAKING THE RENOVATION OF THE BUILDING SATISFACT ORILY. THE ADDITION MADE IN THE ASSESSMENT ORDER WAS DEFENDED. ON THE OTHER HAND, SHRI MANI JAIN, LD. COUNSEL FOR THE ASS ESSEE, STRONGLY DEFENDED THE CONCLUSION DRAWN IN THE IMPUG NED ORDER BY EXPLAINING THAT THE LD. COMMISSIONER OF IN COME TAX (APPEAL) DULY CONSIDERED THE FACTUAL MATRIX AND THE REAFTER REACHED TO A CONCLUSION. THE IMPUGNED ORDER WAS DEF ENDED. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE AN INDIVIDUAL. A SEARCH AND SEIZURE ACTION U/S 132(1) WAS CARRIED OUT IN THE CASE OF LO KHANDWALA GROUP OF COMPANIES ON 23/12/2008 AND SUBSEQUENT DAT E. MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 3 THE PRESENT ASSESSEE WAS COVERED UNDER SEARCH ACTIO N ON THE BASIS OF THE SEARCH ON GROUP COMPANIES, THEREFORE, NOTICE U/S 153A OF THE ACT WAS ISSUED AND SERVED UPON THE ASSE SSEE. IN RESPONSE TO THE SAME, THE ASSESSEE DECLARED TOTAL I NCOME OF RS.9,61,180/- IN THE RETURN FILED BY THE ASSESSEE. SUBSEQUENTLY, NOTICE U/S 143(2) WAS SERVED UPON THE ASSESSEE. THE ASSESSEE WAS ASKED TO FURNISH THE NEC ESSARY DETAILS. THE ASSESSEE ATTENDED THE PROCEEDINGS ON V ARIOUS OCCASIONS AND SUBMITTED THE DETAILS ALONG WITH CLAR IFICATION AS MENTIONED IN THE ASSESSMENT ORDER ITSELF. THE ASSES SEE IS ONE OF THE DIRECTORS OF THE COMPANY NAMELY M/S LOKHANDW ALA INFRASTRUCTURE INDIA LTD.. AS PER THE REVENUE, CER TAIN INCRIMINATING DOCUMENTS/LOOSE PAPERS WERE FOUND AND SEIZED. AT PAGE-3 OF ANNEXURE-A-1, THERE WERE CERTAIN ROUGH NOTINGS WITH RESPECT TO CASH PAYMENTS INCURRED ON VARIOUS P ROJECTS UNDERTAKEN BY THE GROUP COMPANIES. THE STATEMENT OF THE ASSESSEE WAS RECORDED WITH RESPECT TO THE ENTRIES M ADE ON SUCH LOOSE PAPERS. THE ASSESSEE, AS PER THE REVENU E, ACCEPTED THAT THESE TRANSACTIONS ARE NOT RECORDED I N THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AND THUS AS PER THE STATEMENT OF SHRI M. A. LOKHANDWALA, AN ADDITIONAL INCOME OF RS.1,22,00,000/- WAS OFFERED FOR ASSESSMENT YEAR 20 09-10 IN THE HANDS OF THE M/S LOKHANDWALA INFRASTRUCTURE IND IA PVT. LTD.. SIMILARLY, THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) OF THE ACT ON 23/12/2008, AT HIS RESIDEN CE AND THE SEIZED MATERIAL WAS CONFRONTED TO HIM. THE ASSESSEE WAS ASKED TO GIVE THE DETAILS OF EXPENDITURE ON THE INT ERIOR MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 4 DECORATION MADE IN TEZ ZAHARA BUNGALOW. AS PER TH E REVENUE, HE ADMITTED THAT HE INCURRED EXPENDITURE O F RS.1.5 CRORES ON THE RENOVATION OF THE BUNGALOW. AS PER TH E REVENUE, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THE EX PENDITURE INCURRED ON THE RENOVATION, THUS, U/S 69C OF THE IM PUGNED AMOUNT WAS MADE TO THE INCOME OF THE ASSESSEE. 2.2. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEF ORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), WHEREIN, T HE EXPENDITURE WAS SATISFACTORILY EXPLAINED BY THE ASS ESSEE AND THUS THE ADDITION MADE U/S 69C WAS HELD TO BE UNWAR RANTED, CONSEQUENTLY, DELETED. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, BEFORE COMING TO ANY CO NCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION F ROM THE IMPUGNED ORDER FOR READY REFERENCE AND ANALYSIS:- 5.0 THE ONLY GROUND OF APPEAL PERTAINS TO THE AD DITION OF RS.1,50,00,000/- U/S.69C OF THE ACT ON ACCOUNT OF U NEXPLAINED EXPENDITURE. IT IS STATED IN THE ASSESSMENT ORDER T HAT DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS, THE STATEME NT OF SHRI MOIZ LOKHANDWALA, THE ASSESSEE, WAS RECORDED U/S.132(4) OF THE ACT ON 23.12.2008 AND HE WAS SPECIFICALLY ASKED TO GIVE THE DETAILS OF EXPENDITURE ON INTERIOR DECORATION MADE AT HIS RESI DENCE 'TEZ ZAHRA BUNGALOW'. IN REPLY, THE ASSESSEE STATED THAT HE HA D INCURRED EXPENDITURE OF RS,1.5 CRORES ON RENOVATION AND INTE RIOR DECORATION OF MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 5 HIS BUNGALOW AND THE RENOVATION WAS CARRIED OUT IN 2003. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE SOURCE OF EXPENSES MADE ON RENOVATION / INTERIOR DECORATION EXPENSES ON THE BUNGALOW. ACCORDING TO THE A.O., TH E ASSESSEE DID NOT OFFER ANY EXPLANATION IN THIS REGARD. THERE FORE, THE A.O HELD THAT THE ASSESSEE MADE SUCH EXPENSES OUT OF HI S UNDISCLOSED SOURCES OF INCOME AND ACCORDINGLY MADE AN ADDITION OF RS. 1,50,00,000/- ULS.69G OF THE ACT TO THE TOTAL INCOME OF THE ASSESSEE. 6.0. DURING THE APPEAL PROCEEDINGS, LD. A.R. OF THE APPELLANT FILED WRITTEN SUBMISSIONS. THE SUBMIS SIONS MADE BY THE APPELLANT IS REPRODUCED AS UNDER:- THE TEZ ZAHRA BUNGALOW IS OWNED BY MOONSTAR PROPERT IES PVT. LTD. THE COMPANY HAS INCURRED THE EXPENSES IN RELAT ION TO THE RENOVATION OF THE BUNGALOW FROM TIME TO TIME WHICH ARE DULY RE FLECTED IN THE BOOKS OF THE COMPANY. AS ON 31.03.2005, THE TOTAL AMOUNT SP ENT TOWARDS THE BUNGALOW AS APPEALING IN THE BOOKS OF THE COMPANY I S RS.1,50,62,617/-. THIS COMPANY IS OWNED BY THE LOKHANDWALA FAMILY AND THEY HAVE FUNDED TOWARDS THE RENOVATION OF THE BUNGALOW.'' 6.1 THE APPELLANT FURNISHED COPIES OF BALANCE SHEET OF M/S.MOONSTAR PROPERTIES PVT. LTD. AS ON 31.03.2003 AND AS ON 31.03.2004 AND THE LIST OF SHAREHOLDERS OF M/S.M OONSTAR PROPERTIES PVT. LTD. A COPY OF THE WRITTEN SUBMISSI ONS FILED BY THE APPELLANT DURING THE APPEAL PROCEEDINGS WERE FO RWARDED TO THE ASSESSING OFFICER VIDE LETTER DATED 01.12.2011 AND A REPORT WAS CALLED FOR ON THE OBJECTIONS RAISED BY THE APPE LLANT. THE ASSESSING OFFICER VIDE LETTER DATED 13.02.2012 HAS SUBMITTED THE REMAND REPORT. THE RELEVANT PORTION OF THE REPO RT IS REPRODUCED AS UNDER: 'IN THIS REGARD, ON VERIFICATION OF THE DETAILS SUB MITTED BY THE ASSESSEE AND MOONSTAR PROPERTIES PRIVATE LIMITED IT IS SEEN THAT THE BUNGALOW HAD BEEN SHOWN IN THE RETURN OF INCOME FILED BY MOO NSTAR PROPERTIES PVT. LTD. AS ITS ASSETS UNDER THE HEAD B UILDING, HOWEVER IT IS FURTHER SEEN THAT IN THE RETURN OF IN COME FOR ASSESSMENT YEAR 2004-05 THE COST OF THE BUILDING HA S BEEN SHOWN AT RS.73,91,275/- WHEREAS IN THE STATEMENT OF INCOM E THE ASSESSEE HAS STATED THAT THEY INCURRED APPROXIMATEL Y RS. 1.5 CRORES ON THE INTERIOR DECORATION OF THE BUNGALOW AND THAT RE NOVATION WAS MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 6 CARRIED OUT IN 2003. IN THIS REGARD IT IS PERTINENT TO NOTE THAT IN THE BALANCE SHEET THE INTERIOR DECORATION OF THE BUNGAL OW WAS METED OUT BY THE ASSESSEE FROM ITS UNDISCLOSED SOURCE OF INCOME. IT IS FURTHER SEEN FROM THE BALANCE SHEET OF THE MOONSTAR PROPERTIES PVT. LTD. FOR THE PERIOD ENDING 31 ST OF MARCH, 2004 THAT MIOZ LOKHANDWALA HAS BEEN SHOWN CREDITOR FOR RS. 7,27,50 0/-, HOWEVER, WHEN THE RETURN OF INCOME OF MOIZ M. LOKHANDWALA WAS CROSS VERIFIED FOR THE PERIOD ENDIN G 31 ST OF MARCH, 2004, IT IS SEEN THAT M/S. MOONS TAR PROPERTIES PRI VATE LIMITED HAS NOT BEEN SHOWN AS DEBTOR IN ITS BALANCE SHEET. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE WITH REGARD TO UNSECURED LOANS GIV EN BY HIM TO MOONSTAR PROPERTIES PRIVATE LIMITED AND THE ADDITIO N WAS RIGHTLY MADE BY THE ASSESSING OFFICER UNDER SEC TION 69C OF THE I.T. ACT.' 6.2 SINCE THE REMAND REPORT WAS FOUND TO BE INCONCL USIVE ON THE ISSUE OF ADDITION MADE U/S.69C OF THE ACT, VIDE ORDER SHEET NOTING DATED 15.03.2012, THE APPELLANT WAS DIRECTED TO APP EAR BEFORE THE ASSESSING OFFICER AND SUBMIT THE REQUIRED INFORMATI ON AND CLARIFICATIONS. THE ASSESSING OFFICER WAS DIRECTED TO SUBMIT THE REMAND REPORT THEREAFTER. THE ASSESSING OFFICER SUBSEQUENTLY SUBMITTED THE REMAND REPORT VIDE LETTER DATED 17.01 .2013, WHICH IS AS UNDER: '6. DURING THE COURSE OF REMAND PROCEEDINGS, VIDE LETTE R DATED 04.01.2013 ASSESSEE WAS ASKED TO FURNISH BILLS / VO UCHERS IN RESPECT OF RENOVATION AND COMPLETE SOURCES OF PAYME NTS IN RESPECT OF RENOVATION MADE TO THE BUNGALOW. ASSESSE E WAS ALSO ASKED TO FILE COPY OF BALANCE SHEET OF M/S.MOONSTAR PROPERTIES PVT. LTD. SHRI H.K. PANDA, CFO ATTENDED AND FILED SUBMISSIONS AND COPIES OF BALANCE SHEETS, LEDGER COPIES OF ACCO UNT RESPECTIVELY OF M/S.MOONSTAR PROPERTIES PVT. LTD. IN THE BOOKS OF M/S.LOKHANDWALA KATARIA CONSTRUCTIONS PVT. LTD. IT IS SUBMITTED THAT THE BUNGALOW IS OWNED BY M/S.MOONSTAR PROPERTIES PVT. LTD. AND EXPENSES INCURRED IN RELATION TO THE RENOVATION OF THE BUNGALOW ARE D ULY REFLECTED IN THE BOOKS OF THE COMPANY. AS ON 31.03.2005, THE TOTAL AMOUNT SPENT TOWARDS THE BUNGALOW AS APPEARING IN T HE BOOKS OF THE COMPANY WAS PS. 1,50,62617/-. THE ABOV E SAID COMPANY IS OWNED BY THE LOKHANDWALA FAMILY AND THEY HAVE FUNDED TOWARDS THE RENOVATION OF THE BUNGALOW. MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 7 7. SUBMISSIONS MADE BY THE ASSESSEE HAVE BEEN CONSIDER ED. ON GOING THROUGH THE BALANCE SHEET OF M/S.MOONSTAR PRO PERTIES PVT. LTD., IT WAS NOTICED THAT THE BUNGALOW IS OWNED BY THE SAID COMPANY AND NOT BY THE ASSESSEE I.E. MOIZ LOKHANDWALA . EVEN IN THE CASE OF M/S.MOONSTAR PROPERTIES PVT. LTD. FOR A. Y. 2004-05, THE BUNGALOW IS SHOWN IN FIXED ASSET SCHEDULE AFTER DEPR ECIATION AS ON 31.03.2004, AT RS.73,91,275/- (GROSS BLOCK RS.81 ,7 8,324/-). 8. IT IS ALSO SUBMITTED ON BEHALF OF ASSESSEE THAT THE RENOVATION WAS CARRIED OUT BY ANOTHER COMPANY M/S.LOKHANDWALA KATARIA CONSTRUCTION PVT. LTD. THE PERUSAL OF COPIES OF LED GER OF M/S.MOONSTAR PROPERTIES PVT. LTD. IN THE BOOKS OF M/ S.LOKHANDWALA KATARIA CONSTRUCTION PVT. LTD. FOR THE PERIOD 01.04 .2013 TO 31.03.2004, SHOWS TOTAL EXPENSES MADE ON BEHALF OF CONSTRUCTION OF BUNGALOW AT RS.41,29,179/-. IT IS NOTICED THAT THESE ENTRIES AR E FOUND TO BE JOURNAL ENTRIES PASSED AS ON 31.03.2004. THESE ARE CLAIMED TO BE TRANSFERRED TO M/S.MOONSTAR CONSTRUCTIONS PVT. L TD. AS RENOVATION COST. HOWEVER, THE BALANCE SHEET OF M/S.MOONSTAR PROP ERTIES PVT. LTD. AS ON 31.03.2004 DOES NOT SHOW ANY ADDITION IN 'FIX ED ASSET' SCHEDULE AS SAME AMOUNT OF RS.81,78,324/- IS APPEAR ING AS ON 31.03.2003 AND 31.03.2004. THUS, CLAIM OF THE ASSE SSEE THAT AN AMOUNT OF RS. 1.5 CRORES WAS SPENT IN 2003 IS NOT PROVED BY T HESE FACTS. 9. THE CLAIM OF THE ASSESSEE THAT ENTIRE AMOUNT SPENT ON BUNGALOW IS CONTRIBUTED BY LOKHANDWALA FAMILY. IT IS SEEN THAT THE CLAIM IS NOT CORRECT AS IN THE BALANCE SHEET OF M/S MOONSTAR PROPERTIES PVT. LTD. SHOWS THE POSITION AS FOLLOWS AS ON 31.03.2004. DETAILS AMOUNT AMOUNT BUNGALOW A/C. 81,78,329 1 M.A. LOKHANDWALA 89,08,000 2 MOIZ LOKHANDWALA 7,27,500 3 Z. A. LOKHANDWALA 8,55,000 4 ALI LOKHANDWALA 2,500 5 R.M. LOKHANDWALA 3,50,000 TOTAL 1,08,43,000 81,78,329 HENCE, IT IS CLEAR THAT THE AMOUNT OF EXPENDITURE MET ED OUT BY THE ASSESSEE ON INTERIOR DECORATION OF THE BUNGALOW CAR RIED OUT IN THE YEAR 2003 REMAINED UNEXPLAINED. FURTHER, THE SUM OF RS.1.50 CRORES EXPENDED BY THE ASSESSEE AS PER STATEMENT RE CORDED U/S. 132(4) ON 23.12.2008 REMAINED UNEXPLAINED IN THE AB SENCE OF ANY DOCUMENTARY EVIDENCE AS DISCUSSED ABOVE. FURTHER AS STATED ABOVE, THE UNSECURED LOAN IN THE BALANCE SHEET OF M/ S.MOOTISTAR PROPERTIES PVT. LTD. FOR THE YEAR ENDING 31.03.2004 SHOWS A SUM OF RS.7,27,5001- AS CLOSING BALANCE IN RESPECT OF MR. MOIZ MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 8 LOKHANDWALA AS ABOVE. THUS IT IS CLEAR THAT RENOVAT ION EXPENSES OF RS. 1.5 CRORE REMAINED UNEXPLAINED IN T HE HANDS OF MOIZ LOKHANDWALA. 10. THE DUTY IS CAST UPON THE ASSESSEE TO OFFER RE ASONABLE EXPLANATION AS REGARDS THE NATURE AND SOURCE OF THE SUM OF RS. 1.5 CRORE SPENT ON INTERIOR DECORATION ON THE BUNGALOW. THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF EXPENDITURE INCURRED. 11. THE NATURE OF THE TRANSACTION ALSO STANDS SUPPORTED BY THE ASSESSEE'S OWN ADMISSION THAT 'WE INCURRED APPR OXIMATELY RS. 1.5 CRORE ON THE INTERIOR DECORATION OF THE BUNGALOW. THE REN OVATION WAS CARRIED OUT IN 2003'. IN VIEW OF THE ABOVE, IT C AN BE SAID THAT EXPENDITURE INCURRED IN RENOVATION OF BUILDING COUL D NOT BE ESTABLISHED WITH DOCUMENTARY EVIDENCE AND THE A. 0 HAS TIGHTLY MADE THE ADDITION U/S.69C OF THE INCOME-TAX ACT, 1961. 12. SINCE THERE HAS BEEN NO EXPLANATION FROM THE ASSESS EE, NOR FROM THE CONCERNED THIRD PARTY AS ALLEGED DURING TH E COURSE OF STATEMENT RECORDED DURING SEARCH PROCEEDINGS, IT HA S TO BE HELD THAT THE AMOUNT INVOLVING THE TRANSACTIONS SHOULD BE TERMED AS UNEXPLAINED EXPENDITURE IN TERMS OF SECTION 69C OF THE ACT. SECTION 69C SPEAKS OF 'ANY' EXPENDITURE WHICH TERM BRINGS INTO FOLD OF THIS SECTION EVEN CAPITAL EXPENDITURE. COMING TO TH E SOURCE OF THIS EXPENDITURE, THE REAL SOURCE TO BE ESTABLISHED IS T HE BURDEN OF THE ASSESSEE WHICH HAS NOT BEEN DONE EVEN DURING THE REMAN D PROCEEDINGS. SIMPLY GIVING A STATEMENT WITHOUT ANY EVIDENCE WOULD NOT AMOUNT TO EXACTLY SHOWING THE SOURCE OF THE EXPENDITURE UNDER DISCUSSION, BECAUSE DUE TO THE DISCREPANCY LI KE NON- EXISTENCE OR NON- AVAILABILITY OF THE PARTIES, THE LE GAL PRESUMPTION COULD GO TO HOLD THAT THERE ARE SOME OTHER SOURCE FR OM WHICH THESE AMOUNTS WERE MADE OR THAT THESE EXPENDITURE ADDED T O ITSELF IS FROM UNDISCLOSED SOURCES INTRODUCED WITH A VIEW TO SANCTIFY THE UNACCOUNTED MONEY AND GRADUALLY TAKE BACK THE SAME B Y CLAIMING DEPRECIATION IN FUTURE YEARS. 13. IN THE INSTANT CASE, THE ASSESSEE HAS NOT OFFERED ANY SATISFACTORY EXPLANATION ABOUT THE SUM OF RS.1.50 CRORES INCURRED ON RENOVATION OF BUILDING. 6.3 A COPY OF THE REMAND REPORT WAS MADE AVAILABLE TO THE APPELLANT VIDE ORDER SHEET NOTING DATED 12.08.2013 AND AN OPPORTUNITY WAS GIVEN FOR OFFERING THE COMMENTS AND FURTHER EXPLANATIONS, IF ANY. THE APPELLANT SUBMITTED THE E XPLANATIONS AND COMMENTS ON THE REMAND REPORT ON 18.12.2013. THE SU BMISSION OF MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 9 THE APPELLANT IS GIVEN AS UNDER:- 'THE LD. ASSESSING OFFICER HAS ALREADY SUBMITTED A REMAND REPORT DATED - 13.02.2012 BEFORE THE HONORABLE CIT(A). THE HONORABLE CIT(A) AFTER CONSIDERING THE REMAND REPORT DATED 13 .02.2012 OF THE ASSESSING OFFICER, SPECIFICALLY DIRECTED THE LD. AS SESSING OFFICER ONLY TO EXAMINE THE SOURCE OF UNSECURED LOANS GIVEN BY THE ASSESSEE, HIS RELATIVE & HIS GROUP COMPANIES TO MOONSTAR PROPERTI ES PVT. LTD. THE HONORABLE CIT(A), NEVER DOUBTED UPON THE EXPENSES I NCURRED IN MOONSTAR PROPERTIES PVT. LTD., HONORABLE CIT(A) ONL Y WANTED TO KNOW THE SOURCE OF FUND GIVEN AS UNSECURED LOANS TO MOONSTAR PROPERTIES PVT. LTD. HOWEVER, THE LD. ASSESSING OFF ICER WHILE SUBMITTING THE REMAND REPORT HAS GONE BEYOND THE LI MIT & BROUGHT SOME OF THE ISSUES AGAIN AND AGAIN, WHICH WAS NOT C ALLED FOR. YOUR HONOR MAY APPRECIATE THE FACT THAT, THE ISSUE OF AMOUNT I NCURRED TOWARDS RENOVATION OF BUNGALOW TEZ ZAHRA IS EXPLAINED DURIN G THE COURSE OF INVESTIGATION PROCEEDINGS, AT THE TIME OF ASSESSMEN T AND ALSO IN THE HEARING BEFORE THE HONORABLE CIT(A). THE HONORABLE CIT(A) NEVER DOUBTED ON THE EXPENSES INCURRED TOWARDS THE RENOVA TION OF THE BUNGALOW. THE HONORABLE CLT(A) JUST WANTED TO KNOW THE SOURCE OF UNSECURED LOANS GIVEN TO MOONSTAR PROPERTIES PVT . LTD. HOWEVER, THE LD. ASSESSING OFFICER HAS RAISED CERTA IN ISSUES IN THE REMAND REPORT WHICH WAS NOT CALLED FOR, WITHOUT PRE JUDICE TO ABOVE WE MERE BY SUBMIT OUR DETAIL SUBMISSIONS ON T HE REMAND REPORT DATED 17.01.2013 SUBMITTED BY THE ASSESSING OFFICER AS UNDER: 1) THE RELEVANT STATEMENT RECORDED UNDER SECTION 13 2(4) DATED 23.12.2008, AS MENTIONED IN ASSESSMENT ORDER IS REPRODUCED HERE UNDER: Q. NO. 13 PLEASE GIVE DETAILS OF EXPENDITURE ON THE INTERIOR DECORATION OF TEZ 29JRA BUNGALOW? ANS. WE INCURRED APPROXIMATELY RS. 1.5 CRORES ON TH E INTERIOR DECORATION OF THE BUNGALOW. THE RENOVATION WAS CARR IED OUT IN2003. THE ASSESSEE STATED THAT THE RENOVATION WAS CARRIED OUT IN 2003 AND HAD NEVER STATED THAT, THE RENOVATION WAS COMPLETED IN 2003. THERE IS NO DOUBT THAT THE RENOVATION WAS STARTED I N THE YEAR 2003 AND WAS COMPLETED IN MID 2004. ALSO, CERTAIN BILL I S RECEIVED ONLY AFTER THE COMPLETION OF THE RENOVATION AND WHICH WAS SUBS EQUENTLY BOOKED IN THE BOOKS OF ACCOUNT, WHICH THE ASSESSING OFFICER FAILED TO TAKE INTO CONSIDERATION. THE ASSESSING OF FICER SUO MOTTO CONCLUDED THAT THE RENOVATION WAS COMPLETED I N THE YEAR 2003. THE LEDGER COPIES OF ACCOUNT OF MOONSTAR PROPERTIES PVT. LTD., IN THE BOOKS OF LOKHANDWALA KATARIA CONSTRUCTIONS PRIV ATE LIMITED WHICH WAS DULY SUBMITTED, ALSO SHOWS TOTAL EXPENSES OF PS. MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 10 7,06,5091- AND ADVANCES OF RS. 34,22,670/- TOTAL AM OUNTING TO RS. 41,29,1791- MADE ON BEHALF OF RENOVATION / CONSTRUC TION OF BUNGALOW. THE LD. ASSESSING OFFICER ERRED IN CONCLUDING THAT PS. 41,29, 179/- SHOULD HAVE BEEN INCLUDED IN BUILDING COST, SINCE R S.34,22, 670/- WERE MERELY ADVANCE PAID FOR WORKS TO BE, DONE SUBS EQUENTLY. HOWEVER , DUE TO CLERICAL ERROR THE AMOUNT OF PS.41,29,1791- IS NOT SHOWN IN THE BOOKS OF M/S. MOONSTAR PROPERTIES PVT. LTD. AS ON 31.03.2004, BUT THE FACT SHOULD ALSO BE ACKNOWLEDGE D THAT THE SAME WAS CONSIDERED SUBSEQUENTLY IN THE NEXT YEAR A ND DULY APPEARED IN THE BOOKS OF MOONSTAR PROPERTIES PRIVAT E LIMITED AS ON 31.03.2005. THE LD. A.0 FAILED TO CONSIDER THE UNSECURED LOAN P OSITION AS ON 31.03.2005, WHICH SHOWS THE INFLOW OF FUND FROM FAMILY MEMBERS TO THE TUNE OF PS. 76,29,399/- IN THE SUBSE QUENT YEAR, THE DETAILS BREAKUP OF THE UNSECURED LOANS AS ON 31.03. 2005 ARE AS FOLLOWS: NAME AMOUNT M.A. LOKHANDWALA RS. 96,43,000/- MOIZ LOKHANDWALA RS. 30,31,899/- Z.A. LOKHANDWALA RS. 31,50,000/- P.M. LOKHANDWALA RS. 3,50,000/ - ALIASGAR M. LOKHANDWALA RS.22,97,500/ - TOTAL RS. 1,84,72,399/- THE ABOVE MENTIONED POINT CLEARLY PROVES THE SOURCE OF THE FUND OF RENOVATION OF THE BUNGALOW.' 6.4 THE APPELLANT SUBMITTED THAT THE EXPENSES INCUR RED IN RELATION TO RENOVATION OF BUNGALOW ARE ACCOUNTED IN THE BOOKS OF M/S.MOON STAR PROPERTIES PVT. LTD. AS ON 31.3.20 05, THE TOTAL INVESTMENT IN THE BOOKS OF THE COMPANY IS RS.1,50,6 2,617/-. THE RENOVATION WAS STARTED IN THE YEAR 2003 AND GOT COM PLETED IN THE YEAR 2004 AND THE RENOVATION EXPENSES ARE ACCOUNTED IN THE F.Y.2003-04 AND F.Y.2004-05. THE APPELLANT FURNISHE D ACCOUNT COPIES OF THE ABOVE PARTIES REFERRED IN PARA 6.3 AB OVE WHO APPEAR AS THE LOAN CREDITORS IN THE BOOKS OF M/S.MOONSTAR PROPERTIES PVT. LTD. AND ALSO RECONCILED THE DIFFERENCE IN ACCOUNTS THE APPELLANT ALSO CONTESTED THE VALIDITY OF THE ADDITION MADE U/S 69C OF THE ACT AND CITED THE DECISION OF HONOURABLE DELHI HIGH COURT I N THE CASE OF RADHIKA CREATION (ITA 692/2009). DECISION: 7.0 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE , THE STAND MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 11 TAKEN BY THE A.0 IN THE ASSESSMENT ORDER AND IN THE REMAND REPORT, THE GROUNDS OF APPEAL, THE WRITTEN SUBMISSI ONS AND FURTHER REJOINDER FILED BY THE APPELLANT DURING THE HEARING PROCEEDINGS 7.1 DURING THE COURSE OF SEARCH THE APPELLANT ADMI TTED U/S.132(4) OF THE ACT THAT THEY HAVE INCURRED APPRO XIMATELY RS.1.5 CRORE ON THE INTERIOR DECORATION OF 'TEZ ZAH RA BUNGALOW' AND THE RENOVATION WAS CARRIED OUT IN THE YEAR 2003. DURING THE COURSE OF APPEAL PROCEEDINGS AS WELL AS DURING THE REMAND PROCEEDINGS THE APPELLANT EXPLAINED THAT THE RENOVATION EXPENSES ARE ACCOUNTED IN THE BOOKS OF M/S.MOON STA R PROPERTIES PVT, LTD. THE APPELLANT PRODUCED THE BAL ANCE SHEET OF THE COMPANY TO SHOW THAT A SUM OF RS.81,78,324/- WA S ACCOUNTED IN THE BOOKS OF THE COMPANY AS ON 31.3.20 04 AND A SUM OF RS.1,50,62,617/- WAS ACCOUNTED IN THE BOOKS OF THE COMPANY AS ON 31.3.2005. IT IS ALSO SEEN THAT THE R ENOVATION EXPENSES TO THE TUNE OF RS.41,29,179/- WAS INCURRED BY M/S.LOKHANDWALA KATARIA CONSTRUCTION PVT. LTD DURIN G THE PERIOD 2003-04 AND THE SAME WAS TRANSFERRED TO THE BOOKS OF M/S.MOON STAR PROPERTIES PVT. LTD. DURING THE YEAR 2004-05. THE APPELLANT ALSO FURNISHED THE DETAILS OF SOURCES BY FURNISHING THE ACCOUNT COPIES OF THE PARTIES CONCERNED INCLUDING T HE ACCOUNT STATEMENT OF THE APPELLANT. 7.2 IT MAY BE OBSERVED THAT THE APPELLANT DID NOT ADMIT ANY UNDISCLOSED INCOME ON ACCOUNT OF ANY RENOVATION EXP ENSES ON TEZ ZAHRA BUNGALOW IN THE STATEMENT RECORDED U/S.13 2(4) OF THE ACT AND WHAT HE STATED AT THE TIME OF SEARCH WAS TH AT A SUM OF RS.1.5 CRORE APPROXIMATELY WAS INCURRED BY THEM AS RENOVATION EXPENSES. THE APPELLANT DID NOT SAY THAT THE SUM OF RS.1.5 CRORE WAS INCURRED BY HIM AND INSTEAD HE USED THE WORD 'W E INCURRED'' MEANING THEREBY THAT THE INVESTMENT WAS MADE BY MAN Y PERSONS. THOUGH A SUM OF RS.1,50,62,617/- IS FOUND TO BE ACCOUNTED IN THE BOOKS OF M/S.MOONSTAR PROPERTIES P VT. LTD., THE MONEY WAS ACTUALLY INVESTED BY THE UNSECURED LOAN C REDITORS AS SHOWN IN PARA 6.3 ABOVE. FURTHER, IN THE STATEME NT RECORDED U/S.132(4) OF THE ACT THE RENOVATION WAS STATED TO HAVE BEEN CARRIED OUT IN THE YEAR 2003 AND THIS WAS EXPLAINED BY THE APPELLANT THAT THE YEAR 2003 COMPRISES TWO FINANCIAL YEARS 2002-03 AND 2003-04. THE APPELLANT WAS ALSO ABLE TO SUBSTANTIATE THAT TH E SUBSTANTIAL PORTION OF THE RENOVATION WAS CARRIED O UT DURING THIS PERIOD. AS ON 31.3.2004 A SUM OF RS.81,78,324/- WAS ACCOUNTED IN MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 12 THE BOOKS OF M/S MOON STAR PROPERTIES PVT. LTD. AND A SUM OF RS.41,29,179/- WAS INCURRED BY M/S.LOKHANDWALA KATA RIA CONSTRUCTION PVT. LTD AND THE BALANCE WAS INCURRED DURING THE PERIOD 2004-05. IN VIEW OF THE ABOVE AND CONSIDERING THE FACT THAT THE RENOVATION EXPENSES AS ADMITTED DURING THE COURSE OF SEARCH ARE ACCOUNTED IN THE BOOKS OF M/S. MOONSTAR PROPERTIES PVT. LTD, NO ADDITION CAN BE MADE IN THE HANDS OF T HE APPELLANT AND THEREFORE THE ADDITION OF RS.1.5 CRORE IS UNWAR RANTED AND IS HEREBY DELETED. IN THE RESULT, THE APPEAL IS ALLOWED. 2.4. CONSIDERING THE FINDING RECORDED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), WE FIND THAT T HE WHOLE ADDITION MADE BY THE ASSESSING OFFICER IS BASED UPO N THE STATEMENT RECORDED ON 23/12/2008 WITH RESPECT TO TH E EXPENDITURE INCURRED ON INTERIOR DECORATION MADE IN THE BUILDING TEZ ZAHARA BUNGALOW. THE EXPENDITURE WAS CLAIMED TO BE CARRIED OUT IN 2003. THE STAND OF THE REVENU E IS THAT THE ASSESSEE COULD NOT OFFER ANY EXPLANATION WITH R EGARD TO THE EXPENDITURE INCURRED ON THE BUILDING. IT IS NOTED T HAT DURING FIRST APPELLATE STAGE, THE ASSESSEE FILED WRITTEN S UBMISSIONS, WHICH HAS BEEN REPRODUCED IN THE IMPUGNED ORDER. TH E BUILDING WAS CLAIMED TO BE OWNED BY MOONSTAR PROPER TIES PVT. LTD. AND THE EXPENSES WERE INCURRED BY THE COMPANY ITSELF FROM TIME TO TIME AND THE EXPENSES WERE REFLECTED I N THE BOOKS OF THE COMPANY. AS ON 31/03/2005, THE TOTAL AMOUNT SPENT ON THE BUNGALOW AND APPEARING IN THE BOOKS OF THE COMP ANIES WAS RS.1,50,62,617/-. THE ASSESSEE HAS ALSO FURNISH ED THE COPIES OF THE BALANCE SHEET OF M/S MOONSTAR PROPERT IES LTD. AS ON 31/03/2003 AND 31/03/2004 ALONG WITH THE LIST OF SHARE MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 13 HOLDERS OF THE COMPANY. THE EXPLANATION OF THE ASSE SSEE ALONG WITH WRITTEN SUBMISSIONS WERE FORWARDED TO THE ASSE SSING OFFICER FOR HIS COMMENTS. THE LD. ASSESSING OFFICER VIDE LETTER DATED 13/02/2012 FURNISHED THE REMAND REPORT, BEFOR E THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AND THE REL EVANT PORTION OF THE SAME HAS BEEN REPRODUCED IN THE IMPU GNED ORDER ITSELF. THE ASSESSEE WAS ALSO DIRECTED TO APP EAR BEFORE THE ASSESSING OFFICER AND TO SUBMIT THE REQUIRED INFORMATION/CLARIFICATION. THE ASSESSING OFFICER WA S ALSO DIRECTED TO SUBMIT THE REMAND REPORT THEREAFTER. T HE LD. ASSESSING OFFICER VIDE LETTER DATED 17/01/2003 FURN ISHED THE REMAND REPORT WHICH HAS ALSO BE REPRODUCED IN THE I MPUGNED ORDER. IT IS FURTHER NOTICED THAT THE LD. ASSESSIN G OFFICER HIMSELF HAS ADMITTED THAT THE BUILDING IN QUESTION BELONGS TO M/S MOONSTAR PROPERTIES PVT. LTD. AND NOT BY THE AS SESSEE. THE PROPERTY WAS ALSO SHOWN AS FIXED ASSERT SCHEDUL E AFTER DEPRECIATION AS ON 31/03/2004 AT RS.73,91,275/- IN THE BOOKS OF THE COMPANY ITSELF. IT WAS ALSO FOUND BY T HE ASSESSING OFFICER THAT THE RENOVATION WAS ALSO CARR IED OUT BY ANOTHER COMPANY M/S LOKHANDWALA KATARI CONSTRUCTION PVT. LTD. AND THE TOTAL EXPENSES WAS DECLARED FOR THE C ONSTRUCTION OF THE BUNGALOW AT RS.41,29,179/-. TOTALITY OF FAC TS CLEARLY INDICATES THAT THE OBSERVATION MADE IN THE ASSESSME NT ORDER AND THE CONSEQUENT ADDITION MADE ON ACCOUNT OF RENO VATION MADE BY THE ASSESSEE IS NOT PROVED. THE EXPENSES WE RE CONTRIBUTED BY THE LOKHANDWALA FAMILY, THE DETAILS OF WHICH HAVE BEEN MENTIONED IN PARA-9 (PAGE-6) OF THE IMPUG NED MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 14 ORDER. IT IS ALSO NOTICED THAT BEFORE COMING TO TH E CONCLUSION, THE REMAND REPORT WAS MADE AVAILABLE TO THE ASSESSE E AND HIS COMMENTS WERE SOUGHT. THE SUBMISSIONS OF THE ASSESS EE ARE MENTIONED IN PARA-6.3 ONWARDS OF THE IMPUGNED ORDER . AS PER THE SUBMISSIONS OF THE ASSESSEE, THE EXPENSES WITH RESPECT TO RENOVATION OF THE BUILDING ARE ACCOUNTED FOR IN THE BOOKS OF THE M/S MOONSTAR PROPERTIES PVT. LTD. AS ON 31/03/2 005 AND THE TOTAL INVESTMENT MADE WAS RS.1,50,62,617/-. THE RENOVATION STARTED IN THE YEAR 2003 AND WAS COMPLET ED IN 2004, THUS, THE EXPENSES WERE ACCOUNTED FOR IN FINA NCIAL YEAR 2003-04 AND 2004-05. THE ASSESSEE ALSO PRODUCED THE NECESSARY DETAILS WITH RESPECT TO THE ACCOUNTS OF T HE PARTIES MENTIONED AT PAGE-10 OF THE IMPUGNED ORDER AND THES E PARTIES WERE LOAN CREDITORS IN THE BOOKS OF THE M/S MOONSTA R PROPERTIES LTD. AND DULY RECONCILED THE ACCOUNTS. C ONSIDERING THE TOTALITY OF FACTS, THE LD. COMMISSIONER OF INCO ME TAX (APPEAL) AND ALSO THIS TRIBUNAL ARE SATISFIED THAT THE RENOVATION EXPENSES ARE DULY ACCOUNTED FOR IN THE B OOKS OF THE COMPANY. THE ASSESSEE ALSO FURNISHED THE DETAILS OF SOURCES OF THE EXPENSES INCURRED BY THE RESPECTIVE PARTIES BY FURNISHING THE ACCOUNTS COPIES INCLUDING THE ACCOUNT STATEMENT S OF THE ASSESSEE. IT IS ALSO NOTED THAT THERE UNCONTROVERTE D FINDING IN THE IMPUGNED ORDER ( PARA 7.2) THAT THE ASSESSEE NO WHERE ADMITTED IN THE STATEMENT RECORDED U/S 132(4) OF TH E ACT THAT HE INCURRED THE EXPENSES HIMSELF FOR RENOVATION OF THE BUILDING AND RATHER IT HAS BEEN SPECIFICALLY TENDERED THAT WE INCURRED, WHICH MEANS INVESTMENT WAS MADE BY MANY PERSONS. TH E MOIZ M. LOKHANDWALA ITA NO.2814/MUM/2014 15 AMOUNT OF RS.1,50,62,617/- WAS ACTUALLY FOUND TO BE INCURRED AND ACCOUNTED FOR IN THE BOOKS OF M/S MOONSTAR PROP ERTIES LTD., THUS, THE ASSESSEE HAS DULY SUBSTANTIATED THA T THE EXPENSES WERE INCURRED BY THE COMPANY AND NOT BY TH E ASSESSEE, CONSEQUENTLY, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL). HIS ORDER IS AFFIRMED, RESULTING INTO DISMISSAL OF APPEAL OF THE REVENUE. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 15/11/2016. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; * DATED : 30/01/2017 F{X~{T? P.S / +' !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 2% ( ,- ) / THE CIT, MUMBAI. 4. 1 1 2% / CIT(A)- , MUMBAI 5. 4'5% , 1 ,-), 6 , / DR, ITAT, MUMBAI 6. 7#8 / GUARD FILE. ! / BY ORDER, 04-%% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI,