ASST CIT CIR 2, THANE V. THAKUR INFRA PROJECTS P. LTD, RAIGAD

ITA 5003/MUM/2011

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3869 (ITAT-PUNE)
• Duration Of Justice: 8 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MILIND CHAHURE
• Assessee Lawyers: HARI KRISHAN
• Keywords: Gross profit estimation; Unexplained expenditure; Business income; Depreciation; Business expenditure; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Tax effect; Retraction; Documents seized; TDS; Set aside
• Section: 44AD; 69C; 40A(3); 143(3); 153A; 14A; 40(a)(ia); 37(1); 194C; 72; 13; 22; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO , AM AND SHRI PARTHA SARATHI CHAUDHURY , JM SL. NO. ITA NO S . NAME OF APPELLANT NAME OF RESPONDENT ASST. YEAR 1 4169 / MUM / 2011 S.C. THAKUR & BROTHERS, PLOT NO.265/1, OM SADANIKA, PANVEL URBAN RD., PANVEL RAIGAD. PAN: AADCS8865K ACIT, CENTRAL CIRCLE, MUMBAI 2007 - 08 2 5002 / MUM /20 11 ACIT, CIRCLE - 2 , THANE S.C. THAKUR & BROTHERS, PLOT NO.265/1, OM SADANIKA, PANVEL URBAN RD., PANVE L RAIGAD. PAN: AADCS8865K 20 07 - 08 3 4171 / MUM / 2011 THAKUR INFRAPROJECT P. LTD., PLOT NO.265/1, OM SADANIKA, PANVEL URBAN RD., PANVEL RAIGAD. PAN: AACCT6451F ACIT, CENTRAL CIRCLE, MUMBAI 2008 - 09 4 5003 / MUM /20 11 ACIT, CIRCLE - 2, THANE THAKUR INFRAPROJEC T P. LTD., PLOT NO.265/1, OM SADANIKA, PANVEL URBAN RD., PANVEL RAIGAD. PAN: AACCT6451F 20 08 - 09 5 766/PUN/2015 DCIT, PANVEL CIRCLE, PANVEL M/S. S.C. THAKUR & BROTHERS, PLOT NO.265/1, OM SADMIKA, PANVEL, URAN ROAD, PANVEL, RAIGAD - 410206. PAN: AAACW2665A 2007 - 08 A SSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI MILIND CHAHURE / DATE OF HEARING : 26 . 0 2 .20 20 / DATE OF PRONOUNCEMENT : 2 8 . 0 2 .20 20 / ORDER PER D. KARUNAKARA RAO , AM: THERE ARE TWO SET S OF CROSS APPEALS UNDER CONSIDERATION FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAIN ST THE COMMON ORDER S OF THE CIT(A) - 1 , THANE DATED 15 .0 3 .20 11 INVOLVING TWO ASSESSMENT YEARS I.E. A.YS. 20 07 - 08 AND 2 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 20 08 - 09 . SINCE THE FACTS AND ISSUES ARE ALMOST COMMON IN BOTH THE SET OF CROSS APPEALS, THEREFORE, THESE CROSS APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER. 2. BRIEFLY STATED THE RELEVANT COMMON FACTS FOR ASSESSMENT YEARS INCLUDE THAT THE ASSESSEE WAS A FIRM AND THE SAME STANDS CORPORATIZED SINCE THE ASSESSMENT YEAR 2008 - 09 ONWARDS . THE ASSESSEE HAD ITS HEADQU ARTERS AT PANVEL AND HAS BRANCHES AT MANY PLACES INCLUDING NASHIK . THE NASHIK BRANCH HANDLES THE CONTRACT WORK FOR RESURFACING THE ROADS AT NASHIK AND IT WAS ASSI GN ED BY THE PUBLIC WORKS DEPARTMENT (PWD) AND THE MUNICIPAL CORPORATION OF NASHIK (MCN) . THE RE WAS SEARCH ACTION U/S 132 OF THE ACT ON THE BUSINESS PREMISES OF THE ASSESSEE ON 07.02.2008 RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 . THE SEARCH ACTION RESULTED IN DISCOVERY OF VARIOUS INCRIMINATING PAPERS AND CDS . INFLATION OF EXPENSES, UNDERSTATEMENT S OF PROFITS ETC ARE THE ISSUE S DISCOVERED DURING THE SEARCH ACTION . MR. PRASHANT THAKUR AND HIS FATHER MANAGE THE BUSINESS IN INDIA AND OUT SIDE OF INDIA RESPECTIVELY . SUBSEQUENTLY, MR. THAKUR DISCLOSED THE ADDITIONAL INCOME OF RS.6.5 CRORES UNDER VARIOU S HEADS OF INCOME INVOLVING THE FIRM AND THE CORPORATE ENTITIES OF THE GROUP FOR THE THEN CURRENT ASSESSMENT YEAR 2008 - 09. THE SAID DETAILS ARE GIVEN IN PARA 3.1 OF THE ORDER OF THE CIT(A). THE NOTICE U/S 153A OF THE ACT WAS ISSUED FOR THE SAID RELEVANT ASSESSMENT YEARS INCLUDING THE ASSESSMENT YEAR 2006 - 07 TO 2008 - 09 . THE SEARCH ASSESSMENTS WERE MADE DISTURBING THE CLAIMS OF THE ASSESSEE IN THE RETURNS OF INCOME IN THESE ASSESSMENT YEARS . THE DETAILS OF INCOME RETURNED BY THE ASSESSEE AND INCOME ASSESS ED BY THE ASSESSING OFFICER ARE TABULATED AS UNDER : - 3 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 A.Y. INCOME D ECLARED BY THE ASSESSEE (IN RS.) I NCOME ASSESSED BY THE ASSESSING OFFICER (IN RS.) GP AS PER BOOKS OF ACCOUNT GP AS PER CIT(A) 2006 - 07 6,32,46,370/ - 1 5,22,63,226/ - 7.49 10 2007 - 08 12,31,9 5,040/ - 28,09,97,872/ - 9.37 10 2008 - 09 18,72,73,260/ - 33,01,50,750/ - 12.82 14 3 . WE SHALL NOW TAKE UP THE FACTS AND THE DEVELOPMENTS IN MATTERS OF ADJUDICATION OF THE ISSUE FOR A.Y. 2006 - 07 ONWARDS IN THE FOLLOWING PARAGRAPHS. A. FACTS/ DEVELOPMENTS IN ASSESSMENT YEAR 2006 - 07 4 . SO FAR AS THE ASSESSMENT YEAR 2006 - 07 IS CONCERNED, THE PROFIT RATE AS PER THE ASSESSEES BOOKS OF ACCOUNT FOR ASSESSMENT YEAR 2006 - 07 IS 7.49%. IN THE SAID ASSESSMENT, THE ASSESSING OFFICER MADE VARIOUS ITEM - WISE ADDITIONS AM OUNTING TO RS.5.86 CRORES BASED ON THE SEIZED PAPERS AND THE SEIZED COMPUTER CDS INVOLVING THE NASHIK BRANCH AND OTHERS. IN THE FIRST APPELLATE PROCEEDINGS, D ISREGARDING THE ASSESSING OFFICERS MANNER OF MAKING ITEM - WISE ADDITIONS, THE CIT(A) FOUND IT REL EVANT TO ESTIMATE THE NET PROFITS AT THE 10% OF THE GROSS RECEIPTS INSTEAD OF THE ASSESSING OFFICERS ITEMIZED ADDITIONS . ON AN APPEAL TO THE TRIBUNAL, THE ASSESSEE PARTLY SUCCEEDED IN THE TRIBUNAL. IN THE ORDER, T HE TRIBUNAL DISCUSSED THE FACTS RELATING TO THE SAID INCRIMINATING EVIDENCES GA THERED DURING THE SEARCH ACTION; THE FACTS RELATING TO THE DISCLOSURE OF RS.6.5 CRORES FOR THE ASSESSMENT YEAR 2008 - 09 ; THE DETAILS OF ITEM - WISE ADDITIONS IN THAT YEAR AND OTHER ADDITIONS INVOLVING THE PROVISIONS OF S ECTION 40(A)(IA) OF THE ACT; THE DECISION OF THE CIT(A) IN ESTIMATING THE PROFIT @ 10 % OF THE GROSS RECEIPTS ; THE DETAILS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER BASED ON THE SEIZED CD; THE DETAILS OF UNUSUAL GP RATE IF THE DETAILS GATHERED DURING S EARCH FOR A SPECIFIC PERIOD INVOLVING THE NASHIK BRANCH ARE CONSIDERED 4 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 IN ISOLATION ETC. EVENTUALLY, T HE TRIBUNAL HELD THAT MAKING ADDITION OF RS.5.86 CRORES FOR THE ASSESSMENT YEAR 2006 - 07 IS NOT PROPER. 5 . FURTHER, I N PARA 14 OF THE ORDER OF THE TRIB UNAL (SUPRA), IT IS HELD THAT THE ESTIMATION OF PROFITS AT THE RATE OF 8% , IN PLACE OF 10% ADOPTED BY THE CIT(A) , IS APPROPRIATE AND REASONABLE. TRIBUNAL REJECTED THE ASSESSING OFFICERS MANNER OF MAKING THE ITEMISED ADDITIONS BASED ON THE INCRIMINATING D OCUMENTS IN ISOLATION . THE TRIBUNAL DISAPPROVED THE EXISTENCE OF THE HUGE/UNUSUAL PROFIT PERCENTAGE . IN THE LANGUAGE OF THE TRIBUNAL, IT IS HELD THAT .............. IN THE GIVEN CIRCUMSTANCES, WE NEED TO FIND OUT THE AMOUNT OF ADDITION LIABLE TO BE MADE . ORDINARILY, WE WOULD HAVE GONE WITH THE EVIDENCE ACTUALLY FOUND AT THE TIME OF SEARCH FOR MAKING ADDITION, BUT, THE POSITION AS INSTANTLY PREVAILS IS THAT ALBEIT THERE IS EVIDENCE OF INFLATION OF EXPENSES, BUT ITS PRECISE QUANTIFICATION IS NOT AVAILABLE . THUS, THE TRIBUNAL FELT JUDICIOUS TO ADOPT THE SPIRIT OF THE PROVISIONS OF SECTION 44AD OF THE ACT AND INCREASE D THE PROFITS OF THE ASSESSEE MARGINALLY FROM THE RECORD ED GP RATE OF ASSESSEE @ 7.49% TO 8% (DIFFERENCE OF PERCENTAGE IS 0.51%). THIS IS TH E FINDING OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 VIDE ORDER DATED 17.09.2019. THUS, WHILE UPHOLDING THE ALLEGATION OF INFLATION OF EXPENSES, THE TRIBUNAL ADOPTED THE APPROACH OF ESTIMATION OF PROFIT @ 8% FOR THE ASSESSMENT YEAR 2006 - 07 DUE TO L ACK OF PRECISE QUANTIFICATION OF SUCH INFLATION OF EXPENSES . B. FACTS/ DEVELOPMENTS FOR ASSESSMENT YEAR 2007 - 08 6 . AS STATED EARLIER, THE ASSESSEE FILED THE RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT. ACCORDING TO THE RETURN, THE TO TAL INCOME OF THE 5 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 ASSESSEE FOR ASSESSMENT YEAR 2007 - 08 IS RS.12,31,95,040/ - . HOWEVER, T HE ASSESSING OFFICER COMPLETED THE SEARCH ASSESSMENT DETERMINING THE ASSESSED INCOME OF RS.28,09,97,872/ - . THE RATIO OF RETURNED INCOME AND ASSESSED INCOME (AT RS.12.3 2 CRORES : RS.28.10 CRORES) IS HUGE AND ABNORMAL I.E. MORE THAN 200% IS THE INCREASE. THE DETAILS OF ADDITIONS AS GIVEN IN PARA 16 OF THE ASSESSMENT ORDER AND THE SAME ARE EXTRACTED HEREUNDER : - SL. NO. ADDITION UNDER THE HEAD RS. NET PROFIT 123552160 1 ADDITION U/S 69C 4869 4 91 2 ADDITION ON ACCOUNT OF NASHIK PANCHAVATI 22900000 3 ADDITION ON ACCOUNT OF NASHIK PANCHAVATI 859200 4 ADDITION ON ACCOUNT OF NASHIK PANCHAVATI 26185121 5 ADDITION ON ACCOUNT OF INFLATED EXPENSES 87427755 6 ADDITION ON AC COUNT OF INCOME NOT OFFERED FOR TAXATION 4632920 7 ADDITION ON ACCOUNT OF FUEL ACCOUNT 1287714 8 ADDITION U/S 40(A)(IA) 3773903 9 ADDITION U/S 14A 509608 10 ADDITION ON ACCOUNT OF WIP 5000000 11 ADDITION ON ACCOUNT OF DONATIONS 1,81,000 TOTAL ASSES SED INCOME 280997872 7 . DURING THE FIRST APPELLATE PROCEEDI NG, THE ABOVE MANNER OF ASSESSMENT BY ASSESSING OFFICER WAS FOUND UN ACCEPTABLE. THEREFORE, THE CIT(A) AFTER GRANTING OPPORTUNITY TO THE ASSESSEE, ESTIMATED THE NET PROFITS @ 10% OF THE TOTAL TUR NOVER. THE SAID DECISION RESULTED IN THE ADDITION OF RS. 1,37,13,252/ - ONLY . THE ANNUAL BUSINESS TURNOVER OVER FOR THE YEAR IS RS. 137.13 CRORES. CIT(A) CONFIRMED THE PROFITS AT THE RATE OF 0.63% OVER AND ABOVE THE BOOK RESULTS @ 9.39% . THE GP RATE OFFER ED BY THE AS S ESSEE AS PER THE BOOKS MAINTAINED BY THE ASSESSEE IS 9.37% , WHICH IS MUCH HIGHER THAN 8% AS APPROVED BY THE TRIBUNAL FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR 2006 - 6 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 07. FURTHER, THE CIT(A) CONFIRMED OTHER ADDITIONS MADE U/S 40(A)(I A) OF THE ACT TOO. NO TELESCOPIC BENEFIT IS ALLOWED AGAINST THE SAID UNDISCLOSED INCOME OF RS.6.5 CRORES OFFERED DURING THE SEARCH ACTION. 8 . AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS AND ADDI TIONAL GROUNDS : - G ROUNDS : - 1) THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS BY SUSTAINING/ CONFIRMING ADDITION OF RS.3773903/ - ON ACCOUNT OF DISALLOWANCE U/S 40(A) (IA) OF THE I.T . ACT. THE ADDITION OF RS. 3773903/ - BEING NOT WARRANTED BY FACTS AND I N LAW MAY BE DELETED. 2) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING SEPARATE ADDITION OF RS. 3773903/ - AS PER GROUND NO 1, BY NOT GIVING BENEFIT OF SETOFF (TELESCOPING) AGAINST TOTAL ESTIMATED INCOME AND AS SUCH IGNORED PROVISION OF LAW AND JUDICIAL DECISIONS. 3) THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING ALLEGED EXPENSES RS37,69005/ AS UNEXPLAINED EXPENDITURE U/S 69C ON THE BASIS OF NOTING FOUND ON COMPUTER FILE/DUMB DOCUMENT IN COURSE OF SEARCH. THE LEARNED A.O. AS WEL L AS C I T(A) FAILED TO APPRECIATE THAT THIS WERE DUMB ONE AND ADDITION WAS NOT BEING WARRANTED BY FACTS AND IN LAW MAY BE DELETED 4) THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING ALLEGED ILLEGAL EXPENSES OF NASIK PROJECT RS. 1,51,60,000/ AS UN EXPLAINED EXPENDITURE U/S 69C ON THE BASIS OF NOTING FOUND ON COMPUTER FI L E/DUMB DOCUMENT IN COURSE OF SEARCH. THE LEARNED A.O. AS WELL AS C I T(A) FAILED TO APPRECIATE THAT THIS WERE DUMB FILE AND ADDITION WAS NOT BEING WARRANTED BY FACTS AND IN LAW MAY BE DELETED 5) THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING ALLEGED ILLEGAL EXPENSES OF NASIK PROJECT RS. 859200/ AS UNEXPLAINED EXPENDITURE U/S 69C ON THE BASIS OF NOTING FOUND ON COMPUTER FILE IN CO U RSE OF SEARCH. THE LEARNED A.O. AS WELL AS C I T(A) FAILED TO APPRECIATE THAT THIS WERE DUMB FILE AND AD DITION WAS NOT BEING WARRANTED BY FACTS AND IN LAW MAY BE DELETED 6) THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING SEPARATE ADDITION OF RS. 37,69,005 +1,51,60,000 + 8,59200 AS PER GROUND NO 3, 4 & 5 BY NOT GIVING BENEFIT OF SETOFF (TELESCOPING) AGAINST ESTIMATED INCOME FOR A.Y. 2006 - 07 AND 07 - 08 ALTOGETHER AND AS SUCH IGNORED PROVISION OF LAW AND JUDICIAL DECISIONS.. 7) THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS BY SUSTAINING / CONFIRMING PART OF ESTIMATED ADDITION RS 137 LACS BY ESTIMATING INCOME @ 10% OF GTO, WITHOUT CONSIDERING THE FACT THAT ASSESSEE WAS ALSO HAVING SUB - CONTRACT RECEIPT. THE ADDITION OF RS.137 LACS ON FACTS AND IN LAW WAS NOT SUPPORTED BY ANY UNDISCLOSED INV ESTMENT/SEIZED ASSETS IN POSSESSION OF 7 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 ASSESSEE OR UNEXPLAINED EXPENDITURE AS PER SEARCH DOCUMENTS AND/OR AS PER ASSESSMENT ORDER. 8) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE OVERALL DISCLOSURE MADE BY ASSESSEE OF RS 650 L ACS U/S 132(4) IN A.Y. 08 - 09 TO BUY PEACE OF MIND WHILE SUSTAINING / CONFIRMING PART OF ADDITION IN THE ASSESSMENT. 9) THE ASSESSEE CRAVES LEAVE TO ADD/ ALTER ANY OF GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. ADDITIONAL G ROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT PROCEEDINGS INITIATED AS WELL AS THE ASSESSMENT ORDER PASSED U/S, 143(3) R.W.S. 153A OF THE I.T. ACT, IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W, THE LEARNED C.I. T . (A) ERRED IN NOT ADMITTING THE ADDITIONAL GROUNDS RAISED BEFORE HIM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. OUGHT TO HAVE ALLOWED DEPRECIATION WHILE COMPUTING THE IN COME UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING/SUSTAINING ADDITIONS RS. 161 LACS ASSESSABLE AS INCOME FROM INFLATED EXPENSES FOR NASIK PROJECT ON THE BASIS OF ERRO NEOUS INFERENCE DRAWN FROM VARIOUS STATEMENTS FOUND AS A COMPUTER FILE IN THE COURSE OF SEARCH ACTION, AS AGAINST APPARENT LOSS OF RS. 411 LACS IN TWO YEARS FROM THESE STATEMENTS PROVIDED THEY ARE READ IN TOTO. 5. THE LEARNED C.I.T. (A) ALSO ERRED IN LAW A ND ON FACTS SAME AS A.O. BY NOT CONSIDERING AND READING THE STATEMENTS AS WHOLE, FOUND FROM THE COMPUTER FILES IN RESPECT OF NASIK PROJECT IN THE COURSE OF SEARCH ACTION, AS DECIDED AND HELD BY THE JUDICIAL AUTHORITIES. THE APPELLANT CRAVES LEAVE TO ADD, T O ALTER, TO DELETE AND/OR TO AMEND ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AT ANY TIME. C. FACTS/ DEVELOPMENTS FOR THE ASSESSMENT YEAR 2008 - 09 9 . T HE ASSESSEE FILED THE RETURN OF INCOME FOR THE YEAR DECLARING THE TOTAL INCOME OF RS.18,72,73,260/ - . TH E ASSESSING OFFICER COMPLETED THE ASSESSMENT DETERMINING THE ASSESSED INCOME OF RS.33,01,50,750/ - . THE RATIO OF RETURNED INCOME AND THE ASSESSED INCOME ( AT RS.18.73 CRORES : RS.33.02 CRORES ) TOO IS 8 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 EXTREMELY HUGE AND ABNORMAL. THE DETAILS OF ADDITIONS AS GIVEN IN PARA 16 OF THE ASSESSMENT ORDER AND THE SAME ARE EXTRACTED HEREUNDER : - SL. NO. ADDITION UNDER THE HEAD RS. INCOME FROM BUSINESS 188174700 1 ADDITION ON ACCOUNT OF PUNE EXPENSES 80,00,000 2 ADDITION ON ACCOUNT OF NASHIK PANCHAVATI EXPENSES 26929993 3 ADDITION ON ACCOUNT OF INFLATION OF EXPENSES 104269175 4 ADDITION ON ACCOUNT OF FUEL ACCOUNT 1183413 5 ADDITION U/S 40(A)(IA) 580399 6 ADDITION ON ACCOUNT OF AMOUNTS INADMISSIBLE 391877 7 ADDITION U/S 40A(3) 16951 8 ADDITION U/S 14A 60424 2 TOTAL ASSESSED INCOME 330150750 10 . DURING THE FIRST APPELLATE PROCEEDING, THE ABOVE MANNER OF ASSESSED INCOME WAS FOUND UN ACCEPTABLE. THEREFORE, THE CIT(A) , AFTER GRANTING OPPORTUNITY TO THE ASSESSEE, ESTIMATED THE PROFITS @ 14 % OF THE ANNUAL TOTAL TURNOVER FOR THE ASSESSMENT YEAR 2008 - 09 . THE TURNOVER OVER FOR THE YEAR UNDER CONSIDERATION IS RS. 146.7 6 CRORES. THE GP RATE OFFERED BY THE AS S ESSEE AS PER THE BOOKS OF ACCOUNTS IS 12 . 82 % , WHICH IS MUCH HIGHER THAN 8% AS ORDER BY THE TRIBUNAL FOR THE E ARLIER ASSESSMENT YEAR 2006 - 07. CIT(A) CONFIRMED OTHER ADDITIONS TOO I.E. ADDITION U/S 69C AND U/S 40(A)(IA) OF THE ACT. 1 1 . AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS AND ADDITIONAL GROUNDS : - G ROUNDS : - 1) THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING ALLEGED ILLEGAL PAYMENT OF RS.75,00,000/ - AS UNEXPLAINED EXPENDITURE U/S 69C ON THE BASIS OF NOTING FOUND ON COMPUTER/DUMP DOCUMENT IN COURSE OF SEARCH. THE LEARNED A.O. AS WELL AS CIT(A) FAILED TO APPRECIATE THAT FILE WERE A DUMB ONE AND DO NOT 9 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 REFLECT ANY PAYMENT BEING MADE DURING THE YEAR ETC. UNDER APPEAL. THE ADDITION OF RS.7500000 BEING NOT WARRANTED BY FACTS AND IN LAW MAY BE DELETED. 2) THE LEARNED CIT(A) HAS ERR ED IN LAW AND ON FACTS BY SUSTAINING/CONFIRMING ADDITION OF RS.580399/ - ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE I.T. ACT. THE ADDITION OF RS.580399/ - BEING NOT WARRANTED BY FACTS AND IN LAW MAY BE DELETED. 3) THE LEARNED CIT(A) HAS ERRED IN LAW AN D ON FACTS BY SUSTAINING/ CONFIRMING ADDITION OF RS.41764/ - ON ACCOUNT OF DISALLOWANCE U/S 40A(3) OF THE I.T. ACT. THE ADDITION OF RS.41764/ - BEING NOT WARRANTED BY FACTS AND IN LAW MAY BE DELETED. 4) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS BY CO NFIRMING SEPARATE ADDITION OF RS.580399 + 41764 AS PER GROUND NO.2 & 3 BY NOT GIVING BENEFIT OF SETOFF (TELESCOPING) AGAINST TOTAL ESTIMATED INCOME AND AS SUCH IGNORED PROVISION OF LAW AND JUDICIAL DECISIONS. 5) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON F ACTS BY SUSTAINING/ CONFIRMING PART OF ESTIMATED ADDITION RS.182 LACS BY ESTIMATING INCOME @ 14% OF GTO, WITHOUT CONSIDERING THE FACT THAT ASSESSEE WAS HAVING SUB - CONTRACT RECEIPT ALSO. THE ASSESSEE HAS MADE OVERALL DISCLOSURE OF RS.650 LACS TO BUY PEACE OF MIND THOUGH SAME WAS NOT SUPPORTED BY ANY UNDISCLOSED INVESTMENT/SEIZED ASSETS ETC IN POSSESSION OF ASSESSEE AS PER SEARCH DOCUMENTS AND/OR AS PER ASSESSMENT ORDER. 6) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE DISCLOSURE MA DE BY ASSESSEE OF RS.6 . 50 U/S 132(4) IN A.Y. 08 - 09 TO BUY PEACE OF MIND WHILE SUSTAINING/ CONFIRMING PART OF ADDITION IN THE ASSESSMENT. 7) THE ASSESSEE CRAVES LEAVE TO ADD/ALTER ANY OF GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. ADDITIONAL G ROUND S : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT PROCEEDINGS INITIATED AS WELL AS THE ASSESSMENT ORDER PASSED U/S, 143(3) R.W.S. 153A OF THE I.T. ACT, IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED C.I. T . (A) ERRED IN NOT ADMITTING THE ADDITIONAL GROUNDS RAISED BEFORE HIM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. OUGHT TO HAVE ALLOWED DEPRECIATION WHILE COMPUTING THE IN COME U NDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING/SUSTAINING ADDITIONS RS. 89 LACS ASSESSABLE AS INCOME FROM INFLATED EXPENSES FOR NASIK PROJECT O N THE BASIS OF ERRONEOUS INFERENCE DRAWN FROM VARIOUS STATEMENTS FOUND AS A COMPUTER FILE IN THE COURSE OF SEARCH ACTION, AS AGAINST APPARENT LOSS OF RS. 411 LACS IN TWO YEARS FROM THESE STATEMENTS PROVIDED THEY ARE READ IN TOTO. 5. THE LEARNED C.I.T. (A) ALSO ERRED IN LAW AND ON FACTS SAME AS A.O. BY NOT CONSIDERING AND READING THE STATEMENTS AS WHOLE, FOUND FROM THE COMPUTER FILES 10 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 IN RESPECT OF NASIK PROJECT IN THE COURSE OF SEARCH ACTION, AS DECIDED AND HELD BY THE JUDICIAL AUTHORITIES. THE APPELLANT CRA VES LEAVE TO ADD, TO ALTER, TO DELETE AND/OR TO AMEND ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AT ANY TIME. 1 2 . WE HAVE SO FAR DISCUSSED THE FACTS AND THE PROCEDURAL DEVELOPMENTS FOR THESE ASSESSMENT YEARS I.E. A.YS. 2006 - 07, 2007 - 08 AND 2008 - 09. HAVIN G DISCUSSED, WE SHALL NOW TAKE UP THE CROSS APPEALS FOR A.Y. 2007 - 08 AND 2008 - 09 , WHICH ARE UNDER CONSIDERATION FOR ADJUDICATION IN THE SUBSEQUENT PARAGRAPHS OF THE ORDER. ITA NO.4169/MUM/2011 A.Y. 2007 - 08 BY ASSESSEE 1 3 . BEFORE US, DEVIATING FROM TH E GROUNDS/ADDITIONAL GROUNDS AND REFERRING TO THE ASSESSMENT ORDER, LD. COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSING OFFICER MADE 11 ITEM - WISE ADDITIONS (PARA 5 SUPRA) . THE DETAILS ARE ALREADY EXTRACTED IN DEALING WITH THE BACKGROUND FACTS OF THE RELEVANT CASE FOR THE ASSESSMENT YEAR 2007 - 08. REFERRING TO EACH OF THEM, LD. COUNSEL MENTIONED THAT ALL THESE ADDITIONS CAN BE GROUPED INTO TWO CATEGORIES. THEY ARE : (I) THE ADDITIONS RELATED TO THE BUSINESS OF THE ASSESSEE; AND, (II) THE ADDITIONS MA DE U/S 40(A)(IA) OF THE ACT AND OTHERS . LD. AR DID N OT PRESS THE ADDITIONAL GROUNDS AS THE ISSUES RAISED IN THERE ARE ALREADY MEANT IN THE ORIGINAL GROUNDS FOR THIS ASSESSMENT YEAR. 1 4 . REFERRING TO EACH OF TH O SE BUSINESS LINKED ADDITIONS, LD. COUNSEL SU BMITTED THAT THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 BECOMES RELEVANT SO FAR AS THE BUSINESS LINKED DISCREPANCIES NOTED BY THE 11 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 INVESTIGATION WING DURING THE SEARCH ACTION. STATING THAT THE TRIBUNAL DID NOT APPRECIATE THE ASSESSING OFF ICERS WAY OF MAKING ITEM - WISE ADDITIONS LINKED TO THE BUSINESS AND ALSO THE ADDITIONS BASED ON THE SAID SEIZED PAPERS , COMMON FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION, LD. AR SUBMITTED THAT THE SAID ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 20 06 - 07 ASSUMES SIGNIFICANT FOR DETERMINATION OF PROFITS FOR THE A.Y. 2007 - 08 AS WELL . REFERRING TO THE ORDER OF THE CIT(A), THE LD. COUNSEL MENTIONED THAT THE CIT(A) RESORTED TO ESTIMATION OF PROFIT S OF THE ASSESSEE AND IT IS ONLY WAY OF COMPUTATION OF PRO FITS FOR THE YEAR MEANINGFULLY AND JUDICIOUSLY . THE FACT THAT THE TRIBUNAL TOO PREFERRED THE METHOD FOLLOWED BY THE CIT(A) WAS ALSO PRESSED BEFORE US. REFERRING TO THE RECORDED GP RATE AT 9.37% AS DISCLOSED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 ON THE TOTAL TURNOVER OF RS.137.13 CRORES, LD. COUNSEL MENTIONED THAT THE SAME IS QUITE REASONABLE AND THERE IS NO NEED FOR FURTHER ITEMISED ADDITION OR ANY OTHERS. STATING THAT THE TRIBUNAL APPROVED 8% FOR THE ASSESSMENT YEAR 2006 - 07, THE LD. COUNSEL ME NTIONED THAT THE GP AT 9.37 % FOR THE YEAR UNDER CONSIDERATION IS MUCH HIGHER THAN 8% AND SIMILAR GP RATE OF 8% FOR THIS YEAR TOO SHOULD BE FAIR AND SUSTAINABLE. 15 . WITHOUT PREJUDICE, THE LD. COUNSEL SUBMITTED THAT THE TRIBUNAL SINCE CONSIDERED MAKING O F FURTHER ADDITION @ 0.51% (I.E. 8% - 7.49%) FOR A.Y. 2006 - 07 AND THE SIMILAR ADDITION AT THE RATE OF 0.51% MAY BE CONSIDERED FOR THE YEAR UNDER CONSIDERATION AS WELL. OTHERWISE, LD. AR LABOURED TO DEMONSTRATE THAT THE ITEMISED ADDITIONS MADE BY THE AS SES SING OFFICER IS UNREASONABLE, UNSUSTAINABLE IN LAW AND SUCH METHOD DOES NOT REFLECT THE TRUE PROFITS OF THE ASSESSEE FOR A.Y. 2007 - 08. 12 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 1 6 . REFERRING TO OTHER ADDITIONS U/S 40(A)(IA) OF THE ACT , LD. COUNSEL MADE VARIOUS SUBMISSIONS AND SUBMITTED THAT T HESE ISSUES WHICH WILL BE DISCUSSED AT APPROPRIATE PLACE IN SUBSEQUENT PARAGRAPHS OF THIS ORDER. 1 7 . SUMMING UP ALL THE ASSESSEES GROUNDS FOR THE ASSESSMENT YEAR 200 7 - 0 8 , THE LD. COUNSEL MENTIONED THAT WITH THE EXCEPTIONS OF GROUND NO.1 AND 8 OF THE AP PEALS , THE REST OF GROUNDS RELATED TO THE BUSINESS PROFITS OF THE ASSESSEE OR CORRECT PROFITS FOR THIS YEAR . 1 8 . LD. AR DISCUSSED OR ELABORATED ON EACH OF THE GROUNDS OF APPEAL AND SUBMITTED THAT THE G ROUND NO.1 RELATES TO THE DISALLOWANCE MADE U/S 40(A )(IA) OF THE ACT. IT IS THE CASE OF THE ASSESSEE BEFORE US THAT INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS NOT PROPER IN ITS ENTIRETY. ACCORDING TO HIM, PART OF THE PAYMENTS ARE OUTSIDE THE SAID PROVISIONS. O N THIS ISSUE , THE LD. COUNSEL FILED A WRITTEN SUBMISSION. FURTHER, T HE ASSESSEE ALSO HAS OBJECTIONS WITH REGARD TO THE ABOVE ESTIMATION MADE BY THE CIT(A) APPLYING THE FLAT RATE OF 10% AND ALSO IGNORING OF THE DISCLOSURE OF RS.6.5 CRORES MADE BY THE ASSESSEE IN THE LATER ASSESSMENT Y EAR 2008 - 09. THE LD. COUNSEL FOR THE ASSESSEE ALSO FILED THE ADDITIONAL GROUNDS AND SUBMITTED THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER IS NOT VALID (ADDITIONAL GROUND NO.1). THE ASSESSEE IS ALSO AGGRIEVED WITH THE REJECTION OF THE ADDITIONAL GRO UND RAISED BY THE ASSESSEE BEFORE THE CIT(A) (ADDITIONAL GROUND NO.2) IN THE ADDITIONAL GROUND 3, LD. COUNSEL DISCUSSED THE NEED FOR ALLOWING DEPRECIATION AFTER THE PROFITS ARE ESTIMATED. THE ADDITIONAL GROUNDS NO.4 AND 5 AGAIN RELATES TO THE BUSINESS PR OFITS OF THE ASSESSEE. 13 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 1 9 . REFERRING TO THE LIST OF 11 ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT, THE LD. COUNSEL FOR THE ASSESSEE ARGUED VEHEMENTLY STATING THAT ALL THESE ADDITIONS CAN BE GROUPED INTO TWO BROAD CATEGORIES , NAMELY (I) THE A DDITIONS CONNECTED TO THE BUSINESS OF THE ASSESSEE; AND, (II) THE OTHER ADDITIONS MADE UNDER VARIOUS PROVISIONS OF THE ACT . IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE FILED A STATEMENT (A CHART) AND SUBMITTED THAT , OUT OF 11 ADDITIONS , ITEM NO.1 OF THE CHART (RS.48,69,491/ - ); ITEM NO.2 (RS.2,29,00,000/ - ); ITEM NO.3 (RS.8,59,200/ - ); ITEM NO.4 (RS.2,61,05,121/ - ); AND, ITEM NO.5 (RS.8,74,27,755/ - ) PERTAINED TO THE BUSINESS OF THE ASSESSEE /SEIZED MATERIALS. FURTHER, R EFERRING TO THE ADDITIONS ON ITEM NO.6 ( RS.46,32,920/ - ); ITEM NO.7 (RS.12,87,714/ - ): ITEM NO.9 (RS.5,09,608/ - ); ITEM NO.10 (RS.50,00,000/ - ); AND, ITEM NO.11 (RS.1,81,000/ - ), LD. COUNSEL SUBMITTED THAT THESE ISSUES ALREADY STAND SETTLED AND THERE IS NO DISPUTE ABOUT THESE ADDITIONS. FURTHER ALSO , REFERRING TO ITEM NO.8 (RS.37,73,903/ - ), LD. COUNSEL SUBMITTED THAT THIS ADDITION MADE U/S 40(A)(IA) OF THE ACT BEING RELATED TO TRANSPORT CHARGES ELEMENT IN PURCHASE OF EARTH (MURUM) IS A NON - BUSINESS ADDITION AND NOW STANDS COVERED BY THE DECISION OF T HE TRIBUNAL IN THE CASE OF GOVIND DEORAO PATIL VIDE ITA NO.127/PUN/2017. REFERRING TO OTHER PART OF THE ADDITION OF RS.18,52,908/ - , LD. AR SUBMITTED THAT THE SAME IS NOT PRESSED . IN THIS REGARD, LD. COUNSEL BROUGHT OUR ATTENTION TO THE PAGE 19 TO 21 AT P ARA 7 ONWARDS OF THE WRITTEN SUBMISSION . 20 . FURTHER, LD. COUNSEL SUMMED UP THAT IF THE GP ADDITION @ 0.51% OVER AND ABOVE THE 9.37% OF BOOKS PROFITS IS CONSIDERED I.E. AN ALTERNATIVE ARGUMENT, ALL THE ITEM - WISE ADDITIONS MADE AT SL. NO.1 TO 5 , BEING CON NECTED TO 14 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 BUSINESS PROFITS GETS SUBSUMED IN VIEW OF THE SAID ADDITIONAL PROFITS OF 0.51% ON THE TURNOVER OF RS.137.13 CRORES. THUS, THE LD. COUNSEL IS CRITICALLY OF 10% ADOPTED BY THE CIT(A) WHICH WILL MEAN THE ADDITION AL PROFIT OF ( 10% - 9.39% = 0. 61% ) . AS PER LD. AR, IN PLACE OF THAT, SO FAR AS BUSINESS INCOME IS CONCERNED, ADDITIONAL PROFIT @ 0.51% MAY BE REASONABLE AND HAS THE STRENGTH OF THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 TO SUPPORT THE SAME . SO FAR AS OTHER ADDITION U/S 40(A) (IA) OF THE ACT IS CONCERNED , LD. COUNSEL SUBMITTED THAT THE TRIBUNAL CAN CONFIRM THE ADDITION TO THE EXTENT OF RS.18,52,908/ - ONLY OUT OF THE GROSS ADDITION OF RS.37,73,903/ - . REFERRING TO THE BALANCE AMOUNT OF RS.19,20,995/ - (RS.37,73,903 RS.18,52,908 ) I.E. THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT (TRANSPORT CHARGES ELEMENT IN PURCHASE OF EARTH/MURUM) , LD. AR SUBMITTED THAT THIS ISSUE CAN BE REMANDED TO THE FILE OF THE LOWER AUTHORITIES FOR FRESH ADJUDICATION CONSIDERING THE COVERED NATURE OF THE ISSUE. 21 . IN REPLY TO THE ABOVE SUMMARY OF EVENTS ON THE ADDITIONS, LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). N OTWITHSTANDING THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 (SUPRA), LD. DR R ELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE SEIZED CD IS RELEVANT AND SHOULD SUPPORT THE ASSESSING OFFICERS LIN E UP MAKING ITEM - WISE ADDITIONS. LD. DR STRONGLY SUPPORTED THE ASSESSING OFFICERS MANNER OF MAKING ITEMISED ADDITIONS B ASED ON THE SEIZED MATERIAL. HOWEVER, LD. DR HAS NOTHING TO MENTION ON THE LACK OF PRECISE QUANTIFICATION OF INFLATION OF EXPENSES FOR THE ENTIRE PERIOD UNDER CONSIDERATION. 15 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 2 2 . WE SHALL NOW TAKE UP EACH OF THE ISSUES DISCUSSED ABOVE FOR ASSESSMENT YEAR 2007 - 08. A. FINDING OF THE TRIBUNAL ON THE ITEMISED ADDITIONS RELATED TO THE BUSINESS PROFITS OF THE ASSESSEE / APPROPRIATE GP RATE/RELEVANCE OF TURNOVER FOR A.Y. 2006 - 07 (GROUNDS NO.3 TO 7 AND ADDITIONAL GROUNDS NO.3 TO 5) 2 3 . WE HEARD BOTH THE SIDES ON THIS ISSUE OF ITEM - WISE ADDITIONS LINKED TO THE BUSINESS OF THE ASSESSEE AND ALSO CONNECTED TO THE SEIZED PAPERS I.E. EXTRACTED FROM THE SEIZED CD AND OTHER PAPERS AT DIFFERENT LOCATIONS INCLUDING NASHIK/PANVEL BRANCH. THE ASSESSING OFFICER FOLLOWED TH E METHOD OF ITEM - WISE ADDITIONS LINKED TO THE SEIZED PAPERS FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION . THE SIMILAR PATTERN , RELYING ON THE SEIZED MATERIAL/SEIZED CD , WERE FOLLOWED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2006 - 07. ON PERUSA L OF THE COMMON FACTS, COMMON CDS, COMMON PROJECTS OF THE ASSESSEE AT NASHIK ETC, WE FIND THE MANNER OF ASSESSMENT , THE FINDING OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 , ETC BECOMES APPROPRIATE FOR THE ASSESSMENT YEAR 2007 - 08 AS WELL . IN THIS REGAR D, WE PERUSED THE RELEVANT PARAS FROM THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 AND PROCEED TO EXTRACT THE SAME AS UNDER : - 10. THE ONLY OTHER ISSUE RAISED IN THE ASSESSEES APPEAL IS AGAINST THE ESTIMATION OF IN COME AT 10% OF RECEIPTS. THE REVENUE IN ITS APPEAL IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN REDUCING THE ESTIMATION OF NET PROFIT TO 10%. 11. THE FACTS APROPOS THESE GROUNDS ARE THAT A NUMBER OF INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURS E OF SEARCH, WHICH WERE SEIZED. STATEMENT OF THE PARTNER, NAMELY, SH. PARESH RAM THAKUR WAS RECORDED U/S.132(4) OF THE ACT ON 8.2.2008. THE SEIZED DOCUMENTS INDICATED RECORDING OF INFLATED EXPENSES. INITIALLY, THE ASSESSEE MADE SURRENDER OF RS.6.50 CROR E IN ITS HANDS FOR THE A.Y. 2007 - 08 AND ITS SUCCESSOR, NAMELY, THAKUR INFRA PROJECTS PVT. LTD. FOR THE A.Y. 2008 - 09. HOWEVER, IN THE SUBSEQUENT STATEMENT, THE ASSESSEE REVISED SURRENDER OF RS.6.50 CRORE ONLY IN THE HANDS OF THAKUR INFRA PROJECTS PVT. LTD. AND THAT TOO FOR THE A.Y. 2008 - 09. THE AO FOUND THAT THE ASSESSEE HAD 16 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 MAINTAINED TWO SETS OF BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION, NAMELY, THE ONE WHICH WAS FOUND RECORDED IN COMPUTERS AT THE TIME OF SEARCH DRAWN UP TO FEBRUARY, 2006 AND TH E OTHER WHICH WAS PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE FOUND DIFFERENCE BETWEEN SEVERAL ITEMS OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET RECORDED IN TWO SETS OF ACCOUNTS. THE AO HAS MADE OUT A COMPARATIVE TABULATION ON PAGE 28 OF HIS ORDER INDICATING THE AMOUNT OF TOTAL RECEIPTS INCLUDING CONTRACT RECEIPTS ALONG WITH THE DIRECT AND INDIRECT EXPENSES, AS DECLARED IN THE RETURN OF INCOME AND AS FOUND IN THE SEIZED CD. ON SUCH ANALYSIS, THE AO FOUND A PERCENTAGE OF EXPE NSES TO CONTRACT RECEIPTS AS PER THE PROFIT AND LOSS ACCOUNT FILED BY THE ASSESSEE WITH THE RETURN OF INCOME AT RS.89.77% AS AGAINST THE SIMILAR PERCENTAGE IN THE PROFIT AND LOSS ACCOUNT AS FOUND IN SEIZED CD AT 75.04%. THE DIFFERENCE BETWEEN THE TWO AT 1 4.73% WAS ADDED TO THE ASSESSEES DECLARED PERCENTAGE OF PROFIT AT 7.49%, WHICH RESULTED INTO AN ADDITION OF RS.5,85,75,235/ - . WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A), HE OBSERVED THAT THE ASSESSEE SUCCEEDED IN RECONCILING THE FIGURES IN TWO SETS OF ACCOUNTS AS DISCUSSED ABOVE. HE HAS DISCUSSED SUCH RECONCILIATIONS ON PAGE 39 ONWARDS OF THE IMPUGNED ORDER. THEREAFTER, HE HELD THAT THE VIEW POINT OF THE AO IN MAKING ADDITION @14.73%, BEING, THE DIFFERENCE IN EXPENSES IN TWO SETS OF BOOKS OF ACCOUNT, WAS NOT APPROPRIATE. CONSIDERING THE ORDER PASSED BY THE MUMBAI BENCHES OF THE TRIBUNAL IN ACIT VS. VIJAY MHATRE, HE ESTIMATED THE INCOME AT 10% OF THE TURNOVER AT RS.9.41 CRORE. BOTH THE SIDES ARE IN APPEAL ON THEIR RESPECTIVE STANDS. WHEREAS THE CLAIM OF THE ASSESSEE IS THAT THE ENTIRE ADDITION OUGHT TO HAVE BEEN DELETED, THE REVENUE HAS MADE OUT A CASE THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN REDUCING THE AOS ESTIMATION OF NET PROFIT TO 10% OF THE TOTAL RECEIPTS. 12. HAVING HEARD BOTH THE SIDES AND GO NE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT THE SEARCH AND SEIZURE ACTION CONDUCTED ON THE ASSESSEE REVEALED THE EVIDENCE OF THE ASSESSEE HAVING INFLATED EXPENSES UNDER THE HEADS TRANSPORT CHARGES, MACHINERY HIRE CHARGES, LABOUR CHARGES AND SUB - CONTRACT EXPENSES. IT WAS FURTHER SEEN THAT THE ASSESSEE HAD MAINTAINED TWO SETS OF BOOKS OF ACCOUNT FOR THE A.YS. 2006 - 07 AND NEXT ASSESSMENT YEAR. VARIOUS BLANK SIGNED LETTER HEADS WERE ALSO FOUND AND SEIZED FROM THE OFFICE OF THE ASSESSEE. WHEN AS KED TO EXPLAIN, SH. PARESH THAKUR IN HIS STATEMENT RECORDED U/S 131 ON MARCH, 2008 STATED THAT : `THESE ARE BLANK LETTER HEADS OF SUB CONTRACTORS, SOME OF WHICH ARE SIGNED. THESE SUB - CONTRACTORS LEFT THE LETTER HEAD IN OUR OFFICE IN THE COURSE OF WORKING. WHEN THE SAME QUESTION WAS ASKED TO SH. ANIL BHAGAT, HE STATED THE REASON OF THE SAME ON BEHALF OF HIS WIFE, PROPRIETOR OF ROHIT CONSTRUCTION, WHOSE BLANK SIGNED LETTER HEADS WERE SEIZED. HE EXPLAINED THAT : `THESE SIGNED LETTER HEADS HAVE BEEN PROVIDED BY US TO THEM AS PER THEIR INSTRUCTIONS FOR PREPARATION OF OUR CONTRACT BILLS TO BE PREPARED BY M/S S.C. THAKUR & BROS/SC THAKUR INFRAPROJECT, PANVEL. IT WAS FURTHER REVEALED DURING THE COURSE OF SEARCH THAT THE VOUCHERS OF EXPENSES UNDER THE ABOVE HEA DS WERE PREPARED IN THE OFFICE COMPUTER ONLY BUT THE ORIGINAL RECORDS CONTAINING SIGNATURE OF SUPERVISOR AND ENGINEERING PERSON WERE DESTROYED. THIS FACT WAS ALSO CONFIRMED BY THE PARTNER IN HIS STATEMENT U/S 132(4) OF THE ACT. THE ABOVE DISCUSSION INDICAT ES THAT THE DEPARTMENT CAME ACROSS SEVERAL INSTANCES OF INFLATION OF EXPENSES AND UNSUBSTANTIATED EXPENSES ALONG WITH DIFFERENCE IN RECEIPTS AND EXPENSES IN THE SETS OF ACCOUNTS AS FOUND IN THE COURSE OF SEARCH IN THE COMPUTER OF THE ASSESSEE AND THE ONE T HAT WAS ACTUALLY PRODUCED FOR THE PURPOSES OF ASSESSMENT. THIS INDICATES THAT EVIDENCE OF THE ASSESSEE HAVING INFLATED EXPENSES FOR THE YEAR UNDER CONSIDERATION WAS ACTUALLY FOUND DURING THE COURSE OF SEARCH. IN THAT VIEW OF THE MATTER, THE MANNER IN WHICH THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) HAS BEEN DELETED BY US SUPRA, CANNOT BE APPLIED IN SO FAR AS THE INSTANT ADDITION ON ACCOUNT OF PROFIT RATE IS CONCERNED. 17 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 13. NOW WE TAKE UP THE MERITS OF ADDITION. IT IS SEEN THAT THE AO SIMPLY PROCEEDED TO FIND OUT THE DIFFERENCE BETWEEN THE EXPENSES AS RECORDED IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE RETURN OF INCOME AND THE PROFIT AND LOSS ACCOUNT FOUND IN THE SEIZED CD AT 14.73% AND MADE ADDITION FOR THE SAME. THE LD. CIT(A) FOUND RECONCIL IATION BETWEEN THE FIGURES. HE, HOWEVER, RESTRICTED THE ADDITION TO 10%. WE HAVE NOTED ABOVE THAT THE DISCREPANCIES WERE ACTUALLY OBSERVED IN THE RECORDING OF EXPENSES DURING THE COURSE OF SEARCH BUT THEIR MAGNITUDE IS NOT PRECISELY ASCERTAINABLE FROM TH E ORDERS OF THE AUTHORITIES BELOW. THE AO MADE ONE ESTIMATE ABOUT A PARTICULAR PERCENTAGE OF NET PROFIT AND THE LD. CIT(A) WENT AHEAD WITH ANOTHER ESTIMATE. IN THE GIVEN CIRCUMSTANCES, WE NEED TO FIND OUT THE AMOUNT OF ADDITION LIABLE TO BE MADE. ORDINARI LY, WE WOULD HAVE GONE WITH THE EVIDENCE ACTUALLY FOUND AT THE TIME OF SEARCH FOR MAKING ADDITION, BUT, THE POSITION AS INSTANTLY PREVAILS IS THAT ALBEIT THERE IS EVIDENCE OF INFLATION OF EXPENSES, BUT ITS PRECISE QUANTIFICATION IS NOT AVAILABLE. 14. SEC TION 44AD OF THE ACT, AT THE MATERIAL TIME, WITH THE CAPTION SPECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS OF BUSINESS OF CIVIL CONSTRUCTION ETC. STARTS WITH A NON - OBSTINATE CLAUSE AND PROVIDES THAT IN THE CASE OF AN ASSESSEE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION ETC. A SUM EQUAL TO 8% OF THE GROSS RECEIPTS OR A SUM HIGHER THAN THAT DECLARED IN THE RETURN OF INCOME SHALL BE DEEMED TO BE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD `PROFIT AND GAINS FROM BUSINESS OR PROF ESSION. THOUGH THE SECTION STRICTLY APPLIED ONLY WHERE THE GROSS RECEIPTS DID NOT EXCEED AN AMOUNT OF RS.40.00 LAKH, BUT AT ANY RATE, IT GAVE HINT ABOUT THE APPROPRIATE PERCENTAGE OF PROFIT IN THE BUSINESS OF CIVIL CONSTRUCTION. EVEN THOUGH THIS SECTION TECHNICALLY DOES NOT APPLY TO THE ASSESSEE BECAUSE OF THE AMOUNT OF GROSS RECEIPTS EXCEEDING RS.40.00 LAKH, STILL WE CAN FIND OUT A REASONABLE NET PROFIT PERCENTAGE TO BE APPLIED IN THE GIVEN CIRCUMSTANCES AT 8%. WE, THEREFORE, HOLD THAT A NET PROFIT RAT E OF 8% BE APPLIED TO THE TOTAL RECEIPTS AS AGAINST 7.49% DECLARED BY THE ASSESSEE AND 10% ESTIMATED BY THE LD. CIT(A). 15. HOWEVER, IN APPLYING THIS PERCENTAGE, INCOME IN THE NATURE OF INTEREST RECEIVED ON INCOME - TAX AMOUNTING TO RS.6,994/ - AND OFFIC E RENT RECEIVED AMOUNTING TO RS.1,75,500/ - WHICH ARE ITEMS OF SUBJECT MATTER OF GROUND NO.1 OF THE REVENUES APPEAL, SHOULD BE EXCLUDED. INTEREST RECEIVED ON INCOME - TAX SHOULD BE SEPARATELY INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCO ME FROM OTHER SOURCES. OFFICE RENT OF RS.1,75,500/ - SHOULD BE CONSIDERED FOR THE PURPOSES OF COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THESE TWO AMOUNTS OF RECEIPTS, HOWEVER, ARE DIRECTED TO BE EXCLUDED WHILE APPLYING THE PERCEN TAGE OF NET PROFIT AT 8% ON THE GROSS CONTRACT RECEIPTS. THE OTHER TWO ITEMS IN GROUND NO.1 OF THE REVENUES APPEAL, NAMELY, DISCOUNT RECEIVED AMOUNTING TO RS.2,59,815/ - AND MISCELLANEOUS RECEIPTS OF RS.1,05,043/ - ARE RELATED TO THE CONTRACT RECEIPTS OF T HE ASSESSEE WHICH CANNOT BE SEPARATELY EXCLUDED. 2 4 . FROM THE ABOVE, FOR THE IMMEDIATE LY PRECEDING ASSESSMENT YEAR 2006 - 07, IT IS EVIDENT THAT THE TRIBUNAL ALREADY CONSIDERED THE REVENUES MANNER OF MAKING ITEMISED ADDITIONS AND NOT APPRECIATED THE PRIN CIPLE OF MAKING SUCH 18 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 ADDITIONS DUE TO PROBLEMS OF PRECISE QUANTIFICATION OF INFLATION OF EXPENSES . HOWEVER, THE TRIBUNAL APPRECIATED THE FACT OF INFLATION OF EXPENSES BY THE ASSESSEE . HOWEVER, CONSIDERING THE REVENUES FAILURE TO GIVE PRECISE QUANTIFICAT ION OF SUCH INFLATION OF EXPENSES, THE TRIBUNAL DID NOT APPRECIATE UNUSUALLY GP RATES THAT EMANATES FROM THE SEIZED MATERIAL AND FOUND IT PROPER TO APPLY THE ESTIMATION IN LINE WITH THE PROVISIONS OF SECTION 44AD OF THE ACT , WHICH IS OTHERWISE APPLIED TO T HE LOW TURNOVER BUSINESS CASES ONLY . IN EFFECT, THE TRIBUNAL MADE ADDITIONAL PROFITS APPLYING THE 0.51% OF THE GROSS RECEIPTS OF THE ASSESSEE FOR THE A.Y. 2006 - 07. 2 5 . CORRECTNESS OF ADDITIONAL PROFITS AT 0.61% AS DETERMINED BY THE CIT(A) QUA THE ADDITIO NAL PROFITS AT 0.51% BY THE TRIBUNAL FOR ASSESSMENT YEAR 2006 - 07 REGARDING : ON THE FACTS OF THE ISSUE OF DETERMINATION OF PROFITS OF THE PROJECT, RELYING ON THE STRENGTH OF THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07, WE HOLD THAT ITEMISE D ADDITION IS NOT APPROPRIATE DUE TO LACK OF DETAILS FOR THE PRECISE QUANTIFICATION OF THE INFLATION OF EXPENSES ENTIRE FOR YEAR AND ALTERNATIVELY THE ESTIMATION IS THE ONLY AVAILABLE ALTERNATIVE FOR DETERMINING THE REASONABLE PROFITS. REGARDING ESTIMA TION OF PROFITS FOR THE YEAR UNDER CONSIDERATION, WE FIND THAT THE ASSESSEE REPORTED THE PROFITS AT 9.37% ON THE GROSS RECEIPTS OF RS.137.13 CRORES. BY I NCREASING GP RATE TO 10 % , THE CIT(A) CONFIRMED THE ADDITIONAL PROFITS @ 0.61% OF THE TURNOVER. IT IS AN ALTERNATIVE ARGUMENT OF THE ASSESSEE BEFORE US THAT , THE FINDING OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07, I.E. BRING ADDITIONAL PROFIT TO TAX @ 0.51% OF THE TURNOVER, NEED TO BE FOLLOWED FOR THE YEAR UNDER CONSIDERATION AS THE SAME IS BINDING DU E TO 19 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 COMMONNESS OF THE FACTS , THE PROJECT AND MODE OF INFLATION OF EXPENSES . THEREFORE, WE HAVE TWO RATES FOR QUANTIFYING THE ADDITIONAL PROFITS I.E. 0.61% OF CIT(A) AND 0.51% OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07. THE TURNOVER IS FOUND INCREAS ED FOR THE ASSESSMENT YEAR 2007 - 08. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE ADDITIONAL PROFITS AT 0.51% NEEDS TO BE REVISED MARGINALLY. IF THE SAME IS DONE, WE FIND THE DECISION OF THE CIT(A) WITH 0.61% OF ADDITIONAL PROFITS SHOULD BE CONSID ERED PROPER AND APPROPRIATE. IN SUMMARY, WE PROCEED TO HOLD THAT THE ORDER OF CIT(A) WITH 10% SHOULD BE FAIR AND REASONABLE ON THIS ISSUE OF QUANTIFICATION OF THE BUSINESS PROFITS. THEREFORE, WE PROCEED TO CONFIRM THE MANNER OF QUANTIFICATION OF BUSINESS PROFITS AT THE RATE OF 10%. ACCORDINGLY, SINCE WE CONFIRMED THE ORDER OF THE CIT(A), THE RELEVANT GROUNDS/ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. ACCORDINGLY, WE ORDER THE ASSESSING OFFICER TO QUANTIFY THE PROFITS OF THE BUSINESS AND DE LETE ALL THE BUSINESS LINKED ITEMISED ADDITIONS. B . FINDING OF THE TRIBUNAL ADDITIONS U/S 40(A)(IA) (GROUND NO.1 AND 2) 2 6 . AFTER CONSIDERING THE BUSINESS LINKED ADDITIONS WHICH GETS SUBSUMED IN THE ABOVE ESTIMATION OF THE PROFITS, THE ONLY ISSUE ON MERITS FOR ADJUDICATION BEFORE US RELATES TO THE ADDITION MADE U/S 40(A)(IA) OF THE ACT . DURING THE ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER ADDED RS.37,73,903/ - ON THIS ACCOUNT . AS ALREADY DISCUSSED IN THE EARLIER PARAGRAPHS THAT THIS ADDITION , IT HAS TWO SEGMENTS NAMELY (I) RS.18,52,908/ - , WHICH IS NOT PRESSED BY THE LD. COUNS EL FOR THE ASSESSEE BEFORE US. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. IT GOES IN FAVOUR OF THE REVENUE. 20 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 THE OTHER (11) SEGMENT RELATES TO THE DISALLOWANCE OF RS.19,20,995/ - U/S 40(A)(IA) OF THE ACT I.E. THE TRANSPORT CHARGES INCURRED RELATED TO THE PURCHASE OF EARTH (MURUM). IN THIS REGARD, LD. AR FILED THE WRITTEN SUBMISSION BEFORE US . WE FIND IT RELEVANT TO EXTRACT THE SAME HERE TO KNOW THE LINE OF THE LD. ARS ARGUMENT AND THE SAME ARE EXTRACTED HEREUNDER : - 7 (A) DISALLOWANCES OF RS. 18,52,908/ - U/S 40(A)(IA) ON THE BASIS NOTE IN THE TAX AUDIT REPORT THAT TDS HAS NOT BEEN DEDUCTED FROM THIS AMOUNT COMMENTS OF THE ASSESSEE. ASSESSEE IS NOT PRESSING THE PAR T OF THE GROUND RELATING TO THIS DISALLOWANCES, ON ITS MERITS. HOWEVER IT IS SUBMITTED THAT THE DISALLOWANCE U/S 40(A)(IA) IS NOT TO BE MADE SEPARATELY WHEN THE INCOME OF THE ASSESSEE IS ESTIMATED ON CERTAIN % AGE OF TOTAL TURNOVER. (B) DISALLOWANCES OF R S.19,20,995/ - U/S 40(A)(IA) ON THE BASIS OF NON - DEDUCTION OF TDS ON ESTIMATED TRANSPORT CHARGES. ASSESSING OFFICER - THE ASSESSEE HAS INCURRED EXPENSES OF RS.76,83,980/ - ON PURCHASED OF EARTH /' MURRUM' FROM VARIOUS PARTIES FOR RESURFACING THE ROADS THE PARTY SUPPLYING EARTH/'MURRUM' SEND THE EARTH/ MURRUM IN TRUCK/TROLLEY. THE ASSESSING OFFICER HAS ESTIMATED THAT 25% OF THE PURCHASE PRIZE REPRESENT THE TRANSPORTATION CHARGES/EARTH/MURRUM AND HAS MADE A DISALLOWANCES OF RS.19,20,995/ - U/S 40(A)(IA) OF TH E ACT AS THE ASSESSEE HAS NOT DEDUCTED ANY TDS FROM THIS AMOUNT. CIT(A) THE CIT(A) HAS CONFIRMED THE DISALLOWANCE BECAUSE OF THE FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TDS. COMMENTS OF THE ASSESSEE. IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS O NLY ESTIMATED THAT 25% OF THE PURCHASED COST OF EARTH/MURRUM REPRESENT TRANSPORTATION CHARGES OF THE EARTH/MURRUM PURCHASE BY THE ASSESSEE. AS SUCH THE DISALLOWANCES U/S 40(A)(IA) IS BASIS ONLY ON ESTIMATE. IN THEIR JUDGEMENT IN THE CASE OF M/S J.M. MHATRE ITA NO. 2345/MUM/2011 THE HON'BLE BOMBAY J BENCH OF THE TRIBUNAL HAVE HELD IN PARA 6 OF THE ORDER HAS HELD THAT THE DISALLOWANCES CANNOT BE UPHELD U/S 40(A)(IA) OF THE ACT WHEN THE INCOME WAS ESTIMATED. THE DISALLOWANCES MADE BY THE ASSESSING OFFICER TH EREFORE NOT SUSTAINABLE. THE HON'BLE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DHANVARSHA BUILDERS & DEVELOPERS (P.) LTD 102 ITD 375 (PUNE) HAVE ALSO HELD THAT THE DISALLOWANCES CANNOT BE MADE U/S 40(A)(IA) OF THE ACT WHEN THE INCOME HAS BEEN ASSESSED BY E STIMATE. IT IS FURTHER SUBMITTED THAT SECTION 194C OF THE ACT REQUIRES TDS TO BE DEDUCTED FROM PAYMENT OF TRANSPORTATION CHARGES ONLY WHEN THERE IS A CONTRACT BETWEEN THE PRAYER AND THE PAYEE FOR TRANSPORTATION OF SOME MATERIAL. IN THE PRESENT CASE THERE I S NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTATION AS THE SUPPLIERS OF THE EARTH/MURRUM ENGAGED/DEPLOYMENT RANDOM VEHICLE OWNERS AS PER THE 21 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 AVAILABILITY OF THE VEHICLE. FOR THIS REASON ALSO DISALLOWANCES MADE BY THE DEPARTMENT IS NOT JUSTIFIED. RE LIANCE IN THIS REGARD IS PLACED ON THE JUDGEMENT OF THE HONBLE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF GOVIND DEORAO PATIL ITA NO.127/PUN/2017. 2 7 . FROM THE ABOVE, IT IS THE CASE OF THE ASSESSEE THAT THIS MATTER NEEDS TO BE REMANDED TO THE FILE OF T HE ASSESSING OFFICER FOR FRESH ADJUDICATION OF ISSUE IN THE LIGHT OF THE SAID DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. J.M. MHATRE VIDE ITA NO.2345/MUM/2011 FOR THE ASSESSMENT YEAR 2005 - 06 ORDER DATED 07.05.2012 AND THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DHANVARSHA BUILDERS AND DEVELOPERS PVT. LTD. VS. DCIT, 102 ITD 375. 2 8 . AFTER HEARING BOTH THE SIDES, WE FIND THERE IS NEED FOR UNDERTAKING THE COMPARATIVE ANALYSIS OF FACTS OF THE CASES CITED ABOVE. FOR T HE SAID REASON, WE FIND IT RELEVANT TO REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL DECIDED THE ISSUE AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. THUS, GROUND NO.1 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. GROUNDS NO.2 TO 7 ARE PARTLY ALLOWED. 29 . GROUND NO.8 RELATES TO THE REQUEST FOR TELESCOPIC BENEFITS. THIS GROUND DOE S NOT EMANATE FROM THE ORDERS OF THE LOWER AUTHORITIES. AS SUCH, WE FIND THE INCOME OF THE SUBSEQUENT YEARS RS.6.5 CRORES WAS DISCLOSED FOR A.Y. 2008 - 09 C ANNOT BE AVAILABLE FOR TELESCOPIC FOR THIS YEAR. ACCORDINGLY, THE GROUND NO.8 IS DECIDED AS ABOVE. 22 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 3 0 . ADJUDICATING OF ADDITIONAL GROUNDS : REGARDING THE ADDITIONAL GROUNDS NO.1, 2 AND 3 , ON HEARING THE PARTIES, WE FIND THEY ARE LEGAL GROUNDS AND THEY ARE NOT INSISTED BY THE LD. AR FOR THE ASSESSEE. CONSEQUENTLY, THEY ARE DISMISSED AS ACADEMIC. RE GARDING ADDITIONAL GROUND NO.3, WE FIND THE SAME DOES NOT EMANATE FROM THE ORDERS OF THE LOWER AUTHORITIES. THEREFORE, THE SAME ARE DISMISSED. REGARDING THE ADDITIONAL GROUNDS NO.4 AND 5, WE FIND THAT OUR FINDING ON GROUNDS NO.3 AND 7 OF THE ASSESSEES A PPEAL TAKES CARE. ACCORDINGLY, THESE GROUNDS ALSO STAND DISMISSED. 3 1 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.4169/MUM/2011 FOR THE ASSESSMENT YEAR 2007 - 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.5002/MUM/2011 A.Y. 2007 - 08 BY REVENUE 3 2 . IN THIS APPEAL, THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,00,486/ - STATING THAT IT PERTAINS TO OUTSTANDING EXPENSES WHEREAS NO OUTSTANDING EXPENSES WOULD HAVE VOUCHER NUMBER. THE VERY FACT THAT VOUCHER NUMBERS WERE GIVEN PROVES THAT EXPENSES WERE NOT PAYABLE BUT PAID, THEREBY GRANTING EXCESSIVE RELIEF OF RS.11,00,486/ - . 2. IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.23,51,272/ - ON ACCOUNT OF INSURANCE CLAIM, IGNORING THE FACT THAT NET PROFIT WAS ESTIMATED @ 10% AFTER THE NETTING OF INSURANCE CLAIM WHICH IS NOT PERMISSIBLE. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ADDING THE TECHNICAL DISALLOWANCE TO NET PROFIT OF RS.12.35 CRORES IN PLACE OF CORRECT ESTIMATED INCOME OF RS.13.71 CRORES. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING A.O. TO ESTIMATE INCOME FOR A.Y. 2007 - 08 AND A.Y. 2008 - 09 FOR NASHIK PROJECT AT RATE OF 10% OF CONTRACT RECEIPTS WHEREAS CIT(A) HIMSELF HAS ESTIMATED SUCH PROFIT AT OF 14% OF CONTRACT RECEIPTS IN A.Y. 2008 - 09. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED I N ESTIMATING THE NET PROFIT @ 10% OF THE TURNOVER WHEREAS IN IDENTICAL CASE 23 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 M/S THAKUR INFRA PROJECT PVT. LTD. FOR THE A.Y. 2008 - 09, THE NET PROFIT HAS BEEN ESTIMATED @ 14% OF THE TURNOVER. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN INCLUDING THE FOLLOWING ITEMS AS PART OF CONTRACT TURNOVER WHEREAS THESE ITEMS REPRESENTS INCOME WHICH NEEDS TO BE TAXED OVER AND ABOVE CONTRACT INCOME. A) DISCOUNT RECEIVED : RS.1,03,250/ - B) INTEREST ON FDR : RS.67,55,549/ - C) PROFIT ON SALE OF MACHINERY : RS.12,99,900/ - D) MISCELLANEOUS RECEIPTS : RS.1,98,514/ - E) PROFIT SCT/ENCEE RAIL J.V. : RS.2,24,550/ - F) PROFIT ON TMU : RS.3,13,570/ - BALANCE RS.88,95,333/ - 7. THE APPELLANT PRAYS THAT ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3 3 . NARRATING THE ABOVE FACTS, LD. DR SUMMARIZED THE SAID GROUNDS AND SUBMITTED THAT THE CIT(A) ERRED IN NOT UPHOLDING THE DECISION OF THE ASSESSING OFFICER ENTIRELY. REVENUE IS ALSO AGGRIEVED WITH DECISION OF CIT(A) ON 10%, THE GP RATE ADOPTED BY THE CIT(A). FURTHER, REVENUE IS AGGRIEVED WITH THE DECISION OF THE CIT(A) FOR HIS FAILURE TO TAX THE OTHER RECEIPTS (RS.88,95,333/ - ) FULLY BY EXCLUDING THEM FROM THE GROSS RECEIPTS. REVENUE OPINES THAT SUCH RECEIPTS NEED TO BE TAXED FULLY AND NOT MERELY AT THE RATE OF 10% AS HELD BY THE CIT(A) INADVERTENTLY. 3 4 . BEFORE US, FURTHER , LD. DR SUBMITTED THAT , ONE WAY OR OTHER, THE ISSUES RAISED IN THE GROUNDS NO.1 TO 5 ARE CONNECTED TO T HE ESTIMATION OF GP OF THE BU S IN E SS OF THE ASSESSEE. THIS IS A CASE OF THE COUNSELS THAT IF THE GROUNDS NO. 2 TO 7 OF THE ASSESSEES APPEAL ARE DECIDED IN THE SPIRIT OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 (SUPR A), THE REVENUES GROUNDS NO.1 TO 5 STAND COVERED BY THE SAID DECISION (I.E. GP ESTIMATION) AS WELL. FURTHER, LD. DR FOR THE REVENUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND THE MANNER OF COMPLETION OF ASSESSMENT. 24 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 DECISION OF THE TRIBUNAL GRO UND NOS.1 TO 5 3 5 . REGARDING GROUND NO.1 TO 5, WE FIND THAT ALL OF THEM ARE RELATABLE TO THE QUANTIFICATION OF THE BUSINESS PROFITS OF THE ASSESSEE FOR A.Y. 2007 - 08 AS WELL AS THE GP ESTIMAT ION AS DONE BY THE CIT(A). ESSENTIALLY, THESE GROUNDS ARE RAISED FOR UPHOLDING THE ASSESSING OFFICERS APPROACH OF THE ITEM - WISE ADDITION S AND DISAPPROVING THE CIT(A) MANNER OF ESTIMATION OF THE PROFITS OF THE ASSESSEE ADOPTING THE GP RATE OF 10% OF THE GROSS RECEIPTS . WE FIND THIS ASPECT OF ESTIMATION OF PROFITS HAS BEEN DISCUSSED ELABORATELY WHILE DEALING WITH THE GROUNDS NO.2 TO 7 OF THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08. IN THE SAID ORDER (SUPRA) , WE HAVE FOLLOWED THE PRECEDENT IN ASSESSEES OWN CASE FOR A.Y. 2006 - 07 AND REJECTED THE ASSESSING OFFICERS APPROACH OF THE ITEM - WISE ADDITIONS AND RELIED HEAVILY ON THE ORDER OF THE TRIBUNAL DATED 17.09.2019 FOR THE ASSESSMENT YEAR 2006 - 07. FURTHER, WE ALSO APPROVED THE ESTIMATION OF PROFITS AT A PERCENTAGE OF PROFITS. WE HAVE ALSO APPROVED THE REQ UIREMENT OF TAXING THE ADDITIONAL PROFITS APPLYING THE RATE OF 0. 6 1% ON THE TOTAL TURNOVER OF RS.137.13 CRORES OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08. IN THE PROCESS, WE SLIGHTLY DEVIATED FROM THE 0.51% FOR ASSESSMENT YEAR 2006 - 07. IN EFFECT, TH E SAID GROUNDS NO.1 TO 5 OF THE REVENUE SHOULD BE CONSIDERED AS ADJUDICATED WHILE DEALING WITH THE GROUNDS NO.2 TO 7 OF THE ASSESSEES APPEAL. ACCORDINGLY, WE ORDER. ACCORDINGLY , GROUNDS NO.1 TO 5 OF THE REVENUES APPEAL ARE DISMISSED AS PROTANTO . 25 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 OTHER RECEIPTS OF RS.88,95,333/ - - GROUND NO.6 3 6 . REGARDING GROUND NO.6, LD. DR MENTIONED THAT THE ASSESSEE EARNED OTHER RECEIPTS AMOUNTING TO RS.88,95,333/ - UNDER VARIOUS SOURCES AND ARE INCLUDED IN THE GROSS RECEIPTS OF RS.137.13 CRORES. STRICTLY STU DIED, T HIS ISSUE DOES NOT EMANATE FROM THE ORDER OF THE ASSESSING OFFICER/CIT(A). THE OTHER RECEIPTS INCLUDE : (A) DISCOUNT RECEIVED; (B) INTEREST ON FDR; (C) PROFIT ON SALE OF MACHINERY; (D) MISCELLANEOUS RECEIPTS; (E) PROFIT SCT/ENCEE RAIL J.V.; AND, (F ) PROFIT ON TMU . 3 7 . WHEN THE QUESTION IS ASKED ON THE FINDING OF THE ASSESSING OFFICER/CIT(A) ON THIS ISSUE OF TAXATION OF THE OTHER RECEIPTS INDEPENDENTLY, LD. DR SUBMITTED THAT CIT(A) ERRED IN NOT DEALING WITH THE ISSUE AND EXCLUSION OF THE SAME FROM THE GROSS RECEIPTS. OTHERWISE, THERE IS NO FINDING OF FACT ON HOW THESE RECEIPTS SHOULD SUFFER TAX AT THE RATE OF 10% OF IT ONLY. FURTHER, ALTERNATIVELY T HERE IS NO FINDING OF FACT ON HOW THESE RECEIPTS OF INCOME CONSTITUTE THE NON - BUSINESS RECEIPTS OF THE ASSESSEE . 3 8 . PER CONTRA, LD. AR FOR THE ASSESSEE SUBMITTED THAT THE GROUND NO.6 DOES NOT EMANATE FROM THE ORDERS OF THE LOWER AUTHORITIES AT ALL. HE BROUGHT OUR ATTENTION TO THE CONTENTS OF THE ORDER OF THE ASSESSING OFFICER/CIT(A) TO DEMONSTRATE THE SAME. 26 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 DECISION OF THE TRIBUNAL ON GROUND NO.6 39 . THE GROUND NO.6 RELATES TO THE INCLUSION OF CERTAIN MISCELLANEOUS RECEIPTS AMOUNTING TO RS.88,95,333/ - AS PART OF THE CONTRACT TURNOVER AND TAXING THE SAME @ 10% INSTEAD OF TAXING THE ENTIRE SHAPE OF SUCH RECEIPTS. WE HEARD BOTH THE PARTIES ON THIS ISSUE AND FIND THIS ISSUE IS RAISED BEFORE US FOR THE FIRST TIME IN THIS SHAPE. THE ARGUMENT OF THE LD. COUNSEL IS THAT THIS ISSUE IS RAISED BY THE REVENUE FOR THE FIRST TIME AND, THEREFORE, THE SAME S HOULD NOT BE ADMITTED AND ADJUDICATED. THEREFORE, THE GROUND NO.6 SHOULD BE DISMISSED. 40 . NOTWITHSTANDING THE ABOVE ARGUMENT, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RELEVANT DETAILS RELATING TO THE MISCELLANEOUS RECEIPTS OF RS.88,95,333/ - WERE ALREADY CALLED FOR BY THE AUTHORITIES AND THE SAME ARE AVAILABLE ON RECORD. ALTHOUGH, THE DETAILS WERE AVAILABLE ON RECORD, THE ASSESSING OFFICER DID NOT FIND IT RELEVANT TO ADJUDICATE THIS ISSUE AS THE ASSESSMENT WAS MADE IN THE LIGHT OF THE INCRIMINATIN G MATERIAL SEIZED DURING THE SEARCH ACTION AND THE ASSESSMENT RESULTED IN ITEMISED ADDITIONS AND NOT BASED ON THE ESTIMATION OF GROSS PROFITS. FURTHER, LD. COUNSEL MENTIONED THAT THE CIT(A) REJECTED THE ABOVE MANNER OF ASSESSMENT BY THE ASSESSING OFFICER AND RESORTED THE ESTIMATION OF PROFITS AT THE RATE OF 10% OF THE GROSS RECEIPTS. AT THIS STAGE, THE CIT(A) DID NOT UNDERSTAND THAT THE SAID GROSS RECEIPTS OF RS.137.13 CRORES INCLUDES RS.88,95,333/ - OF THE MISCELLANEOUS RECEIPTS WHICH ARE GETTING TAXED BY HIS DECISION OF 10% OF THE GROSS RECEIPTS. IDLY , THE CIT(A) SHOULD HAVE EXAMINED THE TURNOVER OF THE ASSESSEE ALSO, IF ANY OF RECEIPTS WHICH FORMED PART OF THE TURNOVER OR REQUIRED TO BE TAXED AND THEIR ENTIRETY 27 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 AND NOT RESTRICTING TO 10%. THIS IS THE D EFICIENCY IN THE ORDER OF THE CIT(A). CONSIDERING THE BONAFIDES, LD. COUNSELS FAIRLY SUBMITTED THAT THIS ISSUE CAN BE REMANDED TO THE FILE OF THE CIT(A) FOR REMOVAL OF THE DEFICIENCY AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4 1 . PER CONTRA , LD. DR FOR THE REVENUE DEBA TED ON THE MANNER OF ITEMISED ADDITIONS MADE BY THE ASSESSING OFFICER AND STRONGLY SUPPORTED THE SAME. AGGRIEVING WITH THE LD. COUNSELS PROPOSITION, LD. DR SUBMITTED THAT THE ESTIMATION OF PROFITS, THE MANNER ADO PTED BY THE CIT(A) GAVE RISE TO THIS ISSUE OF TAXATION OF GROSS RECEIPTS AT THE RATE OF 10% OR AT THE RATE OF 100%. IN ANY CASE, BOTH THE COUNSELS AGREED WITH THE FACT THAT THIS ISSUE WAS SKIPPED ATTENTION OF THE AUTHORITIES. 42 . CONSIDERING THE ABOVE STAND OF THE COUNSELS, WE FIND RELEVANT TO ADMIT THIS ISSUE FOR ADJUDICATION. ON PERUSAL OF THE CHART FURNISHED BEFORE US ON THE GROSS RECEIPTS MENTIONED AT SL. NO. (A) TO (F) OF THE CHART, WE FIND SOME OF THE RECEIPTS SHOULD BE TAXED AT THE RATE OF 10% A S DONE BY THE CIT(A) AND OTHERS NEED TO BE TAXED AT THE RATE OF 100 % . KEEPING THE PRIMA - FACIE OPINION TO THE SCRUTINY OF THE AUTHORITIES, WE FIND IT RELEVANT TO REMAND TO THE FILE OF THE ASSESSING OFFICER AS REQUESTED BY THE COUNSELS. FURTHER, WE DISMISS THE ARS CONTENTION NOT ADMITTING THE SAID GROUND SINCE THE ISSUE CANNOT BE SAID TO BE USED FOR THE FIRST TIME CONSIDERING THE FINDING OF THE ASSESSING OFFICER IN HIS ODDER AND THE MANNER OF MAKING OF ADDITIONS BY WAY OF ITEMISED ADDITIONS. THEREFORE, RE JECTING THE LEGAL JURISDICTIONAL ISSUE RAISED BY THE LD. AR, WE ARE OF THE CONSIDERED OPINION THAT THIS ASPECT OF THE TAXATION ON SUCH RECEIPTS 28 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 REQUIRES TO BE REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION OF THE ISSUE AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSES. 4 3 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.5002/MUM/2011 FOR THE ASSESSM ENT YEAR 2007 - 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.4171/MUM/2011 A.Y. 2008 - 09 BY ASSESSEE ITA NO.5003/MUM/2011 A.Y. 2008 - 09 BY REVENUE 4 4 . WE SHALL NOW TAKE UP THE CROSS APPEALS FOR A.Y. 2008 - 09 (ITA NO.4171/MUM/2011 - APPEAL B Y ASSESSEE AND ITA NO.5003/MUM/2011 APPEAL BY REVENUE). THE DETAILS OF ADDITIONS AND GROUNDS AS WELL AS THE ADDITIONAL GROUNDS OF THE ASSESSEE ARE ALREADY EXTRACTED IN PARA 11 OF THIS ORDER ABOVE. THE BACKGROUND FACTS ARE MORE OR LESS SAME AS THAT OF A .Y. 2007 - 08 SO FAR AS SEIZED MATERIAL, DETAILS AND ADDITIONS - THE REASONS THEREOF , ETC. HOWEVER, THE A.Y. 2008 - 09 IS RELEVANT ASSESSMENT YEAR FOR SEARCH ACTION (SEARCH ACTION TOOK PLACE ON 07.02.2008). AS DISCUSSED IN THE PRECEDENT PARAGRAPHS, THE ASSE SSEE DISCLOSED SUM OF RS.6.5 CRORES AND THE SAME IS OFFERED WHILE FILING THE RETURN OF INCOME. THE SAME IS PART OF THE TOTAL TURNOVER OF THE ASSESSEE I.E. PART OF RS.146,76,65,391/ - FOR A.Y. 2008 - 09 . THIS AMOUNT IS CREDITED IN THE PROFIT & LOSS ACCOUNT O F THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, THE DETAILS OF ADDITIONS ARE EXTRACTED IN THE FOLLOWING TABLE. THE TOTAL INCOME DETERMINED BY THE ASSESSEE BY VIRTUE OF ITEM IZ E ADDITION IS 29 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 RS.33,01,50,750/ - . THE DETAILS AS GIVEN AT PAGE 46 OF THE ASSESSMENT ORDER IN PAGE 46 ARE EXTRACTED AS UNDER : - SL. NO. ADDITION UNDER THE HEAD RS. INCOME FROM BUSINESS 188174700 1 ADDITION ON ACCOUNT OF PUNE EXPENSES 80,00,000 2 ADDITION ON ACCOUNT OF NASHIK PANCHAVATI EXPENSES 26929993 3 ADDITION ON ACCOUNT OF INF LATION OF EXPENSES 104269175 4 ADDITION ON ACCOUNT OF FUEL ACCOUNT 1183413 5 ADDITION U/S 40(A)(IA) 580399 6 ADDITION ON ACCOUNT OF AMOUNTS INADMISSIBLE 391877 7 ADDITION U/S 40A(3) 16951 8 ADDITION U/S 14A 604242 TOTAL ASSESSED INCOME 330150750 4 5. FROM THE ABOVE TABLE, IT IS EVIDENT THAT THE ASSESSING OFFICER NOT ONLY MADE ITEM IZE ADDITIONS RELATING TO THE BUSINESS EXPENDITURE BUT ALSO MADE CERTAIN ADDITIONS U/S 37(1) OF THE ACT (RS.80 LAKHS) , U/S 40(A)(IA) OF THE ACT (RS.5,80,399/ - ) AND U/S 40A( 3) OF THE ACT, ETC. 4 6 . BEFORE US, T HE ABOVE ADDITIONS WERE EXPLAINED ONE BY ONE BY THE LD. COUNSEL FOR THE ASSESSEE. ACCORDING TO HIM, THE ADDITIONS ON ITEM NO.4 TO 8 ARE EITHER NOT AGITATED /NOT PRESSED BY THE ASSESSEE. THEREFORE, THERE IS NO DISPUTE I N APPEAL ABOUT THE ADDITION AT ITEM NOS.4 TO 8 OF THE TABLE ABOVE. ACCORDINGLY, RELEVANT GROUNDS ARE DISMISSED . THAT LEAVES ONLY THE ADDITION S AT ITEM NOS.1 TO 3 FOR ADJUDICATION IN THE APPEAL AND THEY ARE PART OF THE GROUNDS IN ONE FORM OR OTHER. 30 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 A. BUSINESS RELATED ISSUES 47. REFERRING TO THE GROUNDS RAISED BY THE ASSESSEE, LD. COUNSEL SUBMITTED THE GROUND NOS.2, 3 AND 6 AND SOME OF THE ADDITIONAL GROUNDS RELATE TO PROFITS OF BUSINESS AND THE INCOME THEREFROM. DEVIATING FROM THE GROUNDS, LD. AR FIL ED WRITTEN SUBMISSIONS AND REQUESTED FOR CONSIDERING THE FOLLOWING ADDITIONAL PROFITS OVER AND ABOVE RS.6.5 CRORES. IN CONNECTION WITH ABOVE GROUNDS AND GROUND NO.6 RELATING TO THE OFFER OF UNDISCLOSED INCOME OF RS.6.5 CRORES, LD. COUNSEL FILED THE FOLLOW ING WORKING AND THE SAME IS EXTRACTED AS UNDER: - SR. NO. PARTICULARS AMOUNT (RS.) REFERENCE (A) PROFIT AS PER PROFIT AND LOSS A/C LESS - AMOUNT SURRENDERED IN SEARCH CREDITED TO PROFIT AND LOSS A/C NET PROFIT 18,81,74,700 6,50,00,000 13,31,74,700 PAP ER BOOK PAGE 20 PB PAGE 18 (B) GROSS TURNOVER INCLUDING THE AMOUNT OF RS.6 , 50 , 00 , 000/ - AS PER PROFIT AND LOSS A/C LESS - AMOUNT SURRENDERED IN SEARCH OPERATION : NET TURNOVER 1,46,76,65,391 6,50,00,000 1,40,26,65,391 PB PAGE 18 (C) TOTAL INCOME NET PROFIT AT (A) ADD - 0.51 % OF NET TURNOVER (B) ADD - AMOUNT DISCLOSED DURING SEARCH 13,31,74,700 71,53,593 14,03,38,293 6,50,00,000 NOTE - % OF NET PROFIT (A) TO NET TURNOVER AT (B) 8.78% SD/ - 48. AT THE END OF THE ARGUMENTS LD. COUN SEL MENTIONED IF THE PROFITS OF BUSINESS ARE ESTIMATED ON THE NET TURNOVER OF RS.140,26,65,391/ - @ 0.51% 31 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 ADHERING TO DISCLOSURE OF ADDITIONAL INCOME OF RS.6.5 CRORES, THE ADDITIONAL PROFIT [THE 0.51% AS ALREADY APPROVED BY THE TRIBUNAL IN THE APPEAL FOR A. Y. 2006 - 07 IN ASSESSEES OWN CASE (SUPRA)], THE NET ADDITION WORKS OUT TO RS.71,53,593/ - . ON THE OTHER HAND, LD. DR HEAVILY RELIED ON THE ORDER OF AO AND SUBMITTED THAT RS.6.5 CRORES ADDITION OFFERED BY THE ASSESSEE SHOULD BE UNALTERED. REGARDING PERCENT AGE OF PROFITS I.E. 0.51% IT IS THE CASE OF REVENUE THAT ITEMIZED ADDITION SHOULD BE UPHELD NOTWITHSTANDING THE ORDER OF TRIBUNAL FOR THE A.Y. 2006 - 07. DECISION OF THE TRIBUNAL ON ESTIMATION OF PROFITS FOR A.Y. 2008 - 09 49. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. REVENUE IS OF THE OPINION THE ITEM IZE ADDITION SHOULD BE APPROVED WITHOUT ANY AMENDMENT. ON THE OTHER HAND, CASE OF ASSESSEE IS THAT ASSESSING OFFICERS MANNER OF MAKING ADDITIONS IS ALREADY DISAPPROVED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006 - 07. IN THAT APPEAL THE TRIBUNAL FELT ESTIMATION OF PROFITS @ 0.5% IS FAIR AND REASONABLE CONSIDERING THE INADEQUACY AND INCOMPLETENESS OF SEIZED MATERIAL RELATING TO ALLEGATION OF INFLATION OF EXPENSES. WE FIND WITH THE ITEMIZED A D DITIONS A S DONE BY THE AO, THE AFORESAID GP RATE IS EXTRAORDINARILY VERY HIGH TO THIS INDUSTRY FOR THE YEAR UNDER CONSIDERATION . ADOPTING THE SIMILAR REASONING, WE ARE OF THE OPINION THE ASSESSING OFFICER SHOULD BE DIRECTED TO RESTRICT ADDITION RELATING TO THE BUS INESS TO THE ADDITIONAL PROFIT OF 0.51% OF THE NET TURNOVER. AS SUCH, 0.51% OF ADDITIONAL PROFITS IS ALREADY APPROVED BY THE TRIBUNAL. WE FIND NO REASON TO DEVIATE FROM THE SAME. THIS BROUGHT TO TAX OVER AND ABOVE THE DISCLOSURE AMOUNT OF RS.6.5 CRORES. THE PROFIT PERCENTAGE 32 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 WILL BE MUCH HIGHER WITH THE SAID SUM OF RS.6.5 CRORES FOR THIS YEAR UNDER CONSIDERATION. 50. REGARDING THE ISSUE RELATING TO TAXATION OF SUM OF RS.6.5 CRORES, IT IS THE UNDISTURBED OFFER OF THE ASSESSEE THAT RS.6.5 CRORES REMAINS OFFERED TO TAX AND THERE IS NO RETRACTION IN THIS REGARD. THE WORKING SUPPLIED BY THE LD. AR FOR ASSESSEE EXTRACTED IN PARA 47 CONFIRMS THE SAME. THEREFORE, ADDITION OF RS.71,53,593/ - DECIDED BY THE TRIBUNAL NOW IS OVER AND ABOVE THE SAID OFFER OF SUM OF RS.6.5 CRORES. IN OUR OPINION, THE SAME SHOULD MEET BOTH ENDS OF JUSTIC E. TO THAT EXTENT, THE ITEMIZED ADDITIONS MADE BY ASSESSING OFFICER WITH REFERENCE TO GROUND NOS.2 , 3 & 6 ALONG WITH RELEVANT ADDITIONAL GROUNDS ARE DECIDED AS ABOVE. 51 . WE SHALL N OW TAKE UP THE GROUND NO.1 FOR ADJUDICATION AND IT RELATES TO THE ADDITION OF RS.80 LAKHS. THE CIT(A) GAVE RELIEF TO THE EXTENT OF RS.5 LAKHS. B . ADDITION OF RS.80 LAKHS (GROUND NO.1) 52 . REGARDING THE ADDITION OF RS. 80 ,00,000/ - MADE BY THE ASSESSING OFF ICER U/S 69C OF THE ACT, THE RELEVANT FACTS INCLUDE THAT THE SEIZED PAPERS GAVE RISE TO THE CASH PAYMENTS OF RS.80,00,000/ - TO THE GOVERNMENT AUTHORITIES, COMMISSIONER, MLA BALANCE, AJIT GAVANE . THESE TRANSACTIONS EMANATE FROM THE SEIZED PAPERS AND WERE C ONSIDERED AS BRIBE PAID WHICH IS NOT ALLOWABLE U/S 37 OF THE ACT . THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT MADE THE ADDITION OF RS.80,00,000/ - . IN THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE G O T PART RELIEF TO THE EXTENT OF RS.5,00,000/ - AND 33 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 BALANCED OF RS.75,00,000/ - STANDS CONFIRMED BY THE CIT(A). IN THIS REGARD, THE RELEVANT DISCUSSION GIVEN BY THE CIT(A) IN HIS ORDER IN PARA 6.3 AT PAGE 15 AND THE SAME ARE EXTRACTED HEREUNDER : - 6.3 FROM THE NARRATION MLA BALANCE, IT COULD BE SEEN THAT, THIS AN AMOUNT PAYABLE AS ON DATE AND, THEREFORE, IT COULD NOT BE HELD TO BE AN EXPENDITURE ALREADY INCURRED. THE ADDITION OF RS.5,00,000/ - BEING UNWARRANTED IS DIRECTED TO BE DELETED. HOWEVER, AS REGARDS THE OTHER ITEMS OF EXPENSE S, I FIND THE EXPLANATION OF THE ASSESSEE TO BE UNCONVINCING. SUBSTANCE IS LACKING IN THE ARGUMENT OF THE AR. THE NARRATION COMMISSIONER 50,00,000 AND AJIT GAVANE 25,00,000 ACCORDING TO ME ARE REPRESENTATIVE OF ILLEGAL EXPENSES INCURRED IN CONNECTION OF BUSINESS. IN OTHER WORDS, THE PAYMENTS OF RS.50 LACS MADE TO COMMISSIONER, PUNE AND RS.25 LACS TO AJIT GAVANE ARE NOTHING BUT ILLEGAL PAYMENTS WHICH ARE ABSENT IN REGULAR BOOKS. 53 . AGGRIEVED WITH THE SAME, THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 5 4 . IN THIS REGARD, LD. COUNSELS ARGUMENT BEFORE US IN WRITING IS THAT THE AMOUNTS DO NOT REFLECT PAYMENTS ALREADY MADE. THERE ARE ONLY PAYABLE AT THE TIME OF SEIZED OF THE PAPERS. 5 5 . ON THE OTHER HAND, IT IS THE CASE OF THE REVENUE THAT THE BAL ANCE PAYABLE AMOUNT ONLY REFERS TO MLA BALANCE AMOUNTING TO RS.5,00,000/ - AND NOT TO OTHERS. HE FURTHER MENTIONED THAT THE CIT(A) ALREADY GRANTED RELIEF ON THAT ACCOUNT. THEREFORE, RS.75,00,000/ - HAS TO BE CONFIRMED BY THE CIT(A) SHOULD BE CONFIRMED. 5 6 . ON HEARING BOTH THE SIDES, WE FIND MERIT IN THE DRS ARGUMENT. ACCORDINGLY, THE DECISION TAKEN BY THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THUS, THE RELEVANT GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS DISMISSED. 34 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 5 7 . IN THE RESULT, THE APPE AL OF THE ASSESSEE IN ITA NO.4171/MUM/2011 FOR THE ASSESSMENT YEAR 2008 - 09 IS PARTLY ALLOWED AS ABOVE . ITA NO.500 3 /MUM/2011 A.Y. 200 8 - 0 9 BY REVENUE 5 8 . IN THIS APPEAL, THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. IN THE FACTS AND CIRCUMS TANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.5,00,000/ - BEING ILLEGAL EXPENDITURE STATED AS MLA BALANCE IMPLYING BALANCE AMOUNT PAID, AS SAME IS CLUBBED WITH OTHER PAID ILLEGAL EXPENSES, WHICH WERE CONFIRMED BY CIT(A). 2. IN TH E FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IS NOT ADDING THE ILLEGAL EXPENDITURE OF RS.75 LAKHS OVER AND ABOVE ESTIMATED INCOME OF RS.20.61 CRORE WHEREAS IN IDENTICAL CASE OF M/S. S.C. THAKUR & BROTHERS FOR A.Y. 2007 - 08 THE ILLEGAL EXPE NSES HAVE BEEN ADDED TO THE ESTIMATED INCOME. 3. IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING A.O. TO ESTIMATE INCOME AT RATE OF 10% OF CONTRACT RECEIPT FOR NASHIK PROJECT FOR A.Y. 2008 - 09 WHEREAS CIT(A) HIMSELF HAS DIRE CTED TO ESTIMATE SUCH INCOME FOR ENTIRE BUSINESS AT RATE OF 14% OF ENTIRE CONTRACT RECEIPTS. 4. IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN INCLUDING THE FOLLOWING ITEMS AS PART OF CONTRACT TURNOVER WHEREAS THESE ITEMS REPRESENTS INCOME WHICH NEEDS TO BE TAXED OVER AND ABOVE CONTRACT INCOME. A) MISCELLANEOUS RECEIPTS : RS. 62,68,372/ - B) PROFIT FROM TMU - JV : RS.9,01,440/ - C) DISCOUNT RECEIVED : RS.4,17,164/ - D) INTEREST ON FDR : RS.88,75,229/ - E) DISCLOSURE DURI NG SEARCH : RS.6,50,00,000/ - F) INTEREST ON UNSECURED LOAN : RS.6,18,715/ - G) INSURANCE CLAIM RECEIVED : RS.14,08,914/ - BALANCE RS. 8,34,89,834/ - 5 . THE APPELLANT PRAYS THAT ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER BE RESTORED. GROUNDWISE ADJUDICATION 5 9 . REFERRING TO THE GROUND NO S .1 AND 2 , LD. DR SUBMITTED THAT THIS PART OF 80 LAKHS, THE ASSESSING OFFICER ADDED BASED ON THE SEIZED PAPERS. NARRATING THE BACKGROUND FACTS, LD. DR MENTIONED THA T THE SEIZED PAPERS CONTAINED A 35 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 REFERENCE TO THE ILLEGAL PAYMENTS. THE CIT(A) GRANTED PART RELIEF OUT OF RS.80 LAKHS AND MADE ADDITION TO THE EXTENT OF RS.5 LAKHS. MENTIONING THAT THE SAID AMOUNT IS MENTIONED AS AGAINST THE MLA BALANCE, THE REVENUE AGG RIEVED WITH THIS PART RELIEF AND THE ASSESSEE AGGRIEVED WITH THE CONFIRMATION OF RS.75 LAKHS. 60 . ON HEARING BOTH THE SIDES AND PERUSING OF THE RECORDS PLACED BEFORE US, WE FIND IT IS ESCAPABLE DISCRETION THAT THE WORD USED AS MLA BALANCE. IN OUR CONSI DERED VIEW THAT THE EXPRESSION BALANCE CANNOT BE DESCRIBED AS PAYMENT MADE IN THIS REGARD. WE PERUSED THE RELEVANT DISCUSSION GIVEN BY THE CIT(A) ON THIS ISSUE AND FIND THE DECISION OF THE CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTER FERENCE. ACCORDINGLY, GROUND NO S .1 AND 2 OF THE REVENUE ARE DISMISSED. 61 . REFERRING TO THE GROUND NO.3, LD. DR SUBMITTED THAT IF THE PROFITS OF THE ASSESSEE BUSINESS IS ESTIMATED AT PARTICULAR PERCENTAGE OF GP INCOME, THIS GROUND BECOMES AN ACADEMIC ISS UE. 6 2 . ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 (SUPRA) IS RELEVANT TO BRING THE LITIGATION TO THE ENTIRE INCREASING THE ADDITION BY ADDITIONAL GP O F 0.51% OVER AND ABOVE GP OFFERED BY THE ASSESSEE SHOULD BE REASONABLE. ACCORDINGLY, GROUND NO.3 OF THE REVENUE IS DECIDED PROTANTO . 6 3 . REGARDING GROUND NO.4 OF THE REVENUE, LD. DR BROUGHT ANALOGY TO THE ISSUE RAISED IN GROUND NO.6 OF THE REVENUES APPE AL FOR IMMEDIATELY PRECEDING 36 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 ASSESSMENT YEAR. ALTHOUGH THERE ARE CERTAIN ADDITIONAL RECEIPTS ENLISTED IN THE PRESENT GROUND NO.4, LD. DR SUBMITTED THE DECISION GIVEN BY TRIBUNAL IN THE SAID GROUND NO.6 OF THE REVENUES APPEAL FOR A.Y. 2007 - 08 IS RELEVANT TO THE PRESENT GROUND NO.4 AS WELL. REFERRING TO GROUND NO.6, LD. DR SUBMITTED THE ARGUMENTS FROM BOTH SIDES BECOME COMMON FOR THE PRESENT GROUND NO.4 AS WELL. 64. ON THE SAID GROUND NO.6 WE HAVE DECIDED CONSIDERING CONFUSION AMONG THE OFFICERS, THIS I SSUE WAS NOT TAKEN UP FOR SCRUTINY IN ITS REAL SENSE. THEREFORE, CONSIDERING THE INTEREST OF JUSTICE, WE FIND RELEVANT TO REMAND THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. PARA 42 OF THIS ORDER IS RELEVANT HERE. WITH SIMILAR DIR ECTIONS, WE PROCEED TO ALLOW THIS GROUND NO.4 FOR STATISTICAL PURPOSES. 6 5 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.5003/MUM/2011 FOR THE ASSESSMENT YEAR 2008 - 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.766/PUN/2015 A.Y. 2007 - 08 REVENUE 6 6 . THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - 2 , THANE DATED 10 .0 2 .201 5 FOR THE ASSESSMENT YEAR 20 07 - 08 . 67 . BEFORE US , AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT IN TERMS OF LATEST CBDT CIRCULAR NO.17/2019 [F.NO.279/MISC.142/2007 - ITJ (PT)] DATED 08 TH AUGUST, 2019 READ WITH CIRCULAR NO.3 OF 2018 DATED 11.07.2018. 37 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVENUE I N APPEAL RAISED GROUNDS ASSAILING THE FINDINGS OF CIT(A) IN DELETING THE ADDITIONS. THUS, THE TAX EFFECT ON THE SAID ADDITIONS IS LESS THAN RS.50 LAKHS. 68 . THE LD. DR FOR THE REVENUE FAIRLY ADMITTED THAT IN THE PRESENT APPEAL BY THE REVENUE THE TAX E FFECT IS LESS THAN RS.50 LAKHS. 69 . BOTH SIDES HEARD. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITIONS. UNDISPUTEDLY, THE TAX EFFECT INVOLVED IN APPEAL IS LESS THAN THE MONETARY LIMIT PRESCRIBED BY THE RECENT CBDT CIRCUL AR NO.17/2019 [F.NO.279/MISC.142/2007 - ITJ (PT)] DATED 08 TH AUGUST, 2019 READ WITH CIRCULAR NO.3 OF 2018 DATED 11.07.2018 FOR FILING OF APPEALS BEFORE THE TRIBUNAL BY THE DEPARTMENT. THE CBDT VIDE CIRCULAR DATED 08 - 08 - 2019 (SUPRA) HAS AMENDED PARA 3 OF CIR CULAR NO.3 OF 2018 DATED 11 - 07 - 2018 THEREBY ENHANCING MONETARY LIMIT OF TAX EFFECT FROM RS.20 LAKHS TO RS.50 LAKHS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL. THUS, WITHOUT GOING INTO MERIT OF THE ISSUES RAISED IN THE APPEAL, IN VIEW OF T HE CBDT CIRCULAR (SUPRA) THE PRESENT APPEAL OF THE REVENUE IS DISMISSED ON ACCOUNT OF LOW TAX EFFECT. 70 . BEFORE PARTING, WE CLARIFY HERE THAT THE REVENUE SHALL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR RESTORATION OF APPEAL, WITH THE REQUISITE MATERIAL TO SHOW THAT THE APPEAL IS PROTECTED BY THE EXCEPTIONS PRESCRIBED IN PARA 10 OF THE CIRCULAR DATED 11 - 07 - 2018 AND ITS AMENDMENT DATED 20 - 08 - 2018. 38 ITA NO S . 4169 & 4171 / MUM /201 1 ITA NOS.5002 & 5003/MUM/2011 ITA NO.766/PUN/2015 71 . IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.766/PUN/2015 FOR THE ASSESSMENT YEAR 2007 - 08 IS DISMIS SED. 72 . RESULTANTLY, BOTH THE SET OF CROSS APPEALS OF THE ASSESSEE AND THE REVENUE ARE DISPOSED OFF AS ABOVE AND THE APPEAL OF THE REVENUE IN ITA NO.766/PUN/2015 FOR THE ASSESSMENT YEAR 2007 - 08 IS DISMISSED ON ACCOUNT OF LOW TAX EFFECT . ORDER PRONOUNCED ON THIS 28 TH DAY OF FEBRUARY , 20 20 . SD/ - SD/ - ( PARTHA SARATHI CHAUDHURY ) ( D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 28 TH FEBRUARY , 20 20 SUJEET / GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A) - 1 , THANE . 4. THE CIT ( CENTRAL ) , PUNE. 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE .