ACIT, New Delhi V. M/s. Educomp Infrastructure & School Management Ltd., Gurgaon

ITA 6894/DEL/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3759 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 31-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Keywords: Capital asset; Business income; Depreciation; Search and seizure; Opportunity of being heard; Corroborative evidences; Documents seized; Revenue expenditure
• Section: 142(1); 201; 32; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B, NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.6894/DEL/2015 ASSESSMENT YEAR: 2012-13 ACIT, CENTRAL CIRCLE-2, NEW DELHI VS. EDUCOMP INFRASTRUCTURE & SCHOOL MANAGEMENT LTD., 514, UDYOG VIHAR, PHASE-III, GURGAON PAN :AABCE6852E (APPELLANT) (RESPONDENT) AND ITA NO.545/DEL/2016 ASSESSMENT YEAR: 2013-14 AND ITA NO.193/DEL/2017 ASSESSMENT YEAR: 2014-15 ACIT, CENTRAL CIRCLE-2, NEW DELHI VS. EDUCOMP INFRASTRUCTURE & SCHOOL MANAGEMENT LTD., 1211, PADMA TOWER-1, 5, RAJENDRA PLACE, NEW DELHI PAN :AABCE6852E (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI G. JOHNSON, SR.DR; ASSESSEE BY SHRI V.K. AGGARWAL, AR MS. SHWETA BANSAL, CA DATE OF HEARING 03.09.2019 DATE OF PRONOUNCEMENT 29.11.2019 2 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 ORDER PER O.P. KANT, AM: THESE THREE APPEALS BY THE REVENUE ARE DIRECTED A GAINST THREE SEPARATE ORDERS DATED 07/10/2015; 03/11/2015 AND 10/11/2016 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-23 , NEW DELHI, FOR ASSESSMENT YEARS 2012 -13 ; 2013-14 AND 2014-15 RESPECTIVELY. AS COMMON ISSUE IN DISPUT E PERMEATING FROM SAME SET OF FACTS IS INVOLVED IN AL L THE THREE APPEALS, SAME WERE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND TO AVO ID REPETITION OF FACTS. ITA NO.6894/DEL/2015 ASSESSMENT YEAR 2012-13 2. FIRST WE TAKE UP THE APPEAL HAVING ITA NO. 6894/DE L/2015 FOR ASSESSMENT YEAR 2012-13. THE GROUNDS RAISED BY THE REVENUE ARE REPRODUCED AS UNDER: 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW A ND ON FACTS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION MADE ON A CCOUNT OF DISALLOWANCE OF EXCESSIVE DEPRECIATION OF 2,10,53 ,292/- CLAIMED BY THE ASSESSEE COMPANY, BY IGNORING THE ADMITTED F ACT THAT THE CONTRACTORS WHO HAD CONSTRUCTED THE BUILDING FOR TH E ASSESSEE COMPANY INFLATED THE COST OF CONSTRUCTION AND THERE BY INCREASED THE VALUE OF CAPITAL ASSETS WHICH HAD RESULTED IN EXCES SIVE CLAIM OF DEPRECIATION. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/AL L THE GROUND OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF TH E APPEAL. 3 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS ONE OF THE GROUP COMPANY OF M/S EDUCOMP GROUP AND WAS INCORPORATED ON 02/09/2006. IT WAS ENGAGED IN BUSINESS OF PROVIDING INFRASTRUCTURAL FACILITIES TO EDUCATIO NAL INSTITUTION OF THE EDUCOMP GROUP. A SEARCH AND SEIZURE ACTION UNDE R SECTION 132 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ) WAS CARRIED OUT ON 18/08/2011 IN THE CASE OF EDUCOMP GROUP I NCLUDING THE ASSESSEE AND ITS CONTRACTORS. FOR THE YEAR UNDER CO NSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 29/09/2012 D ECLARING TOTAL INCOME OF 4,58,60,417/-. THE STATUTORY NOTICES FOR COMMENCIN G SCRUTINY PROCEEDINGS WERE ISSUED AND COMPLIED BY TH E ASSESSEE. THE ASSESSING OFFICER CONFRONTED THE CONTENTS OF SE IZED MATERIAL FOUND DURING THE COURSE OF SUCH PROCEEDING AT THE P REMISES OF M/S EDUCOMP GROUP, INCLUDING THE ASSESSEE AND ITS C ONTRACTORS. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IN IT S BOOKS OF ACCOUNT HAS SHOWN CAPITAL WORK-IN-PROGRESS IN RESPE CT OF BUILDING CONSTRUCTION, BUT ITS CONTRACTORS, NAMELY, M/S JUB ILANT DEVELOPERS AND MANAGEMENT SERVICES PVT. LTD AND M/S OSN INFRASTRUCTURE AND PROJECT LTD. HAS ADMITTED CLAIMI NG OF BOGUS EXPENDITURE ON BUILDING CONSTRUCTION FOR THE ASSESS EE WITHOUT INCURRING ACTUAL EXPENSES ON CONSTRUCTION. THE ASS ESSING OFFICER HAS NOTED THAT AGGREGATE AMOUNT OF 75 CRORES HAD BEEN DISCLOSED BY THOSE TWO CONTRACTORS AS THEIR UNDISCL OSED INCOME. THE ASSESSING OFFICER HAS SUMMARIZED THE FACTUAL OB SERVATION BASED ON THE SEIZED MATERIAL AS UNDER: 4. DURING THE COURSE OF SEARCH ACTION AT THE BUSIN ESS PREMISES OF THE ASSESSEE COMPANY SITUATED AT 308, UDYOG VIHAR, PHASE-LL, GURGAON, VARIOUS DOCUMENTS WERE FOUND AND SEIZED WH ICH INSINUATED THAT THE ASSESSEE COMPANY HAS COLLUDED W ITH THE VARIOUS 4 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 CONTRACTORS TO INFLATE THE CARRYING COST OF ITS CAP ITAL ASSETS THROUGH BOOKING OF INFLATED BILLS IN THEIR BOOKS OF ACCOUNT . IT WAS FOUND THAT THE EMPLOYEES OF THE ASSESSEE COMPANY WERE MANAGING /SUPERVISING THE AFFAIRS OF THE COMPANIES OR BUSINESS ENTITIES O F ITS CONTRACTORS TO WHOM FUNDS WERE GIVEN IN THE FORMS OF ADVANCES FOR CONSTRUCTION/DEVELOPMENT WORK. 5. DURING THE SEARCH & SEIZURE OPERATION AT 308, UD YOGVIHAR, PHASE- LI, GURGAON IN THE CASE OF THE ASSESSEE COMPANY ON 18.08.2011 CERTAIN PAPERS WERE FOUND & SEIZED WHICH REFLECTED THAT THE BUSINESS ACTIVITIES OF THE CONTRACTORS OF THE ASSES SEE COMPANY NAMELY M/S. OSN INFRASTRUCTURE & PROJECTS PVT. LTD WERE IN FACT PRIMA FACIE MANAGED BY THE PERSONNEL OF THE ASSESSE E COMPANY. IT, IS PERTINENT TO MENTION THAT ENTIRE BUSINESS OF THE SAID CONTRACTOR WAS ALLOTTED BY THE ASSESSEE COMPANY. IT WAS ALSO R EVEALED THAT THE RELATIVES/ADVISORS OF THE SAID CONTRACTOR ALSO PERF ORMED VARIOUS SERVICES FOR THE ASSESSEE COMPANY. CERTAIN PAPERS W ERE FOUND & SEIZED FROM THE BUSINESS PREMISES OF THE ASSESSEE C OMPANY PERTAINING TO ITS CONTRACTOR GROUP WHICH WERE SIGNE D BY SH. SHALABH RAIZADA, SR. EXECUTIVE AND BRIG (RETD.) VIKRAM SING H, VICE PRESIDENT OF THE ASSESSEE COMPANY IN THE CAPACITY OF THE AUTH ORIZED SIGNATORY OF SUCH CONTRACTOR. ANNEXURES A-3, A-4, A-5 AND A-8 SEIZED FROM THE SAID PREMISES CONTAIN DETAILS OF THE NATURE OF WORK CONTRACTS GIVEN TO THE SAID CONTRACTOR AND SUB CONTRACTORS ALLOTTED BY SUCH CONTRACTOR TO ITS OWN PARTIES AT MEAGER RATE. THUS, SUBSTANTIAL E VIDENCE WAS FOUND AND SEIZED WHICH REFLECTED THAT VARIOUS CONTR ACTORS ARE ACTING IN COLLUSION WITH THE ASSESSEE COMPANY TO ENABLE IT TO RAISE ITS COST OF CAPITAL ASSET IN ORDER TO CLAIM ENHANCED DEPRECI ATION AND EVADE TAX. 3.1 THUS, ACCORDING TO THE ASSESSING OFFICER, THE ASSE SSEE HAS CLAIMED EXCESS EXPENDITURE ON CONSTRUCTION OF THE B UILDING THROUGH THESE TWO CONTACTORS, AND THUS CLAIMED EXCE SS CAPITALIZATION OF ASSET OF BUILDING AND CONSEQUENTL Y CLAIMED EXCESS DEPRECIATION ON BUILDING, WHICH THE ASSESSEE WAS NOT ENTITLED FOR. 3.2 THE ASSESSING OFFICER ISSUED A DETAILED SHOW CAUSE NOTICE TO THE ASSESSEE, THE REPLY OF WHICH HAS BEEN REPRODUCE D BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSE SSEE EXPLAINED THAT VARIOUS ADVANCES ARE GIVEN TO CONTRACTORS ON A CCOUNT OF 5 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 CONSTRUCTION CONTRACT ON A PROGRESSIVE BASIS AND TH OSE CONTRACTORS FURNISHED THE VARIOUS RUNNING BILLS AGA INST WHICH THE PAYMENT WAS RELEASED BY THE ASSESSEE. REGARDING BOO KING OF BOGUS BILLS BY CONTACTORS AND INFLATED COST OF CONS TRUCTION OF THE PROJECTS OF THE ASSESSEE, IT WAS SUBMITTED THAT THE ASSESSEE WAS NEITHER AWARE NOR COLLUDED IN THEIR MISDEMEANORS. I T WAS EXPLAINED BY THE ASSESSEE THAT NONE OF THE PROCEEDS OF THEIR MISDEMEANORS WERE EITHER RECEIVED OR UTILIZED BY TH E ASSESSEE OR THE ASSESSEE IS BENEFITED IN ANY MANNER FROM THE AC TS OR MISDEED OF THEIR CONTACTORS. THE ASSESSEE SUBMITTED THAT IT HAD ACTED IN THE MOST BONAFIDE MANNER AND GIVEN THE IMPUGNED ADV ANCES UNDER TRUST AND COST OF IMPROVEMENT/CONSTRUCTION OF ITS CAPITAL ASSETS CAN NEITHER BE REDUCED NOT DISTURBED. ACCORD INGLY, THE ASSESSEE CLAIMED THAT NO DEPRECIATION CAN BE DISALL OWED TO THE EXTENT OF SUCH ABORTIVE EXPENDITURE IN THE CASE OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER REJECTED THE CONTENT ION OF THE ASSESSEE AND ASKED THE ASSESSEE TO FILE DETAILS OF BILLS RAISED BY THE ABOVE REFERRED TWO CONTACTORS AND THE CORRESPON DING EXPENDITURE CAPITALISED IN BOOKS OF ACCOUNTS. ON TH E BASIS OF THE DETAILS SUBMITTED, THE ASSESSING OFFICER WORKED OUT EXCESS DEPRECIATION OF 2,10,53,292/- CLAIMED BY THE ASSESSEE. THE FINDING OF THE ASSESSING OFFICER REPRODUCED IN PARA 12 OF THE ASSESSMENT ORDER IS EXTRACTED AS UNDER: 12. IN VIEW OF THE ABOVE, THE CAPITAL COST OF ASSE TS AS MENTIONED IN THE FINANCIAL RESULTS OF THE ASSESSEE COMPANY IS IN EXC ESS TO THE EXTENT OF RS. 21,05,32,916/-. THEREFORE, A SUM OF RS. 21,05,32,91 6/- IS HEREBY REDUCED FROM THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS BEING 'BUILDING' WHICH IS ELIGIBLE FOR DEPRECIATION AT TH E RATE OF 10% AS PER THE INCOME TAX ACT, 1961. CONSEQUENTLY, DEPRECIATION AM OUNTING TO RS. 2,10,53,292/- IS HEREBY DISALLOWED AND ADDED BACK T O THE INCOME OF THE ASSESSEE FOR THE F.Y. 2011-12 RELEVANT TO THE A.Y. 2012-13. SINCE THE 6 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IT S INCOME, PENALTY PROCEEDINGS U/S. 271(L)(C) OF THE ACT IS BEING SEPA RATELY INITIATED. (ADDITION: RS. 2,10,53,292/-) 3.3 ON FURTHER APPEAL, THE LD. CIT(A) DELETED THE DISA LLOWANCE OBSERVING AS UNDER: 4.2.3 DURING THE APPELLATE PROCEEDINGS IT HAS BEEN SUBMITTED THAT THE DIRECTORS OF THE CONTRACTORS ARE DIFFERENT PERS ONS WHO ARE NOT RELATED TO THE DIRECTORS OF THE APPELLANT COMPANY, AND THAT THE ALLEGATIONS OF THE AO THAT THE ACTIVITIES OF SUB-CO NTRACTORS WERE BEING MANAGED BY THE PERSONNEL OF APPELLANT IS AGAINST TH E MATERIAL ON RECORD, AND THAT NEITHER ANY DOCUMENT NOR ANY EVIDE NCE WAS FOUND TO ESTABLISH THE FACT THAT THE APPELLANT HAD AUTHOR IZED ITS PERSONNEL TO MANAGE OR SUPERVISE THE AFFAIRS OF SUBCONTRACTOR S, NOR ANY BENEFIT IN THE FORM OF SALARY OR OTHERWISE WAS DERIVED BY T HE PERSONNEL OF THE APPELLANT FROM THE CONTRACTORS WHICH MAY SUGGES T IN ANY MANNER THAT THE OPERATIONS OF THE SUB-CONTRACTOR COMPANIES WERE BEING USED TO INFLATE CAPITAL COST OF ASSETS. IT HAS ALSO BEEN SUBMITTED THAT THE TOTAL RECEIPTS OFFERED BY THE SUB-CONTRACTORS IS SA ME AS THE COST OF ASSETS ACCOUNTED FOR BY THE APPELLANT AND THE APPEL LANT ACCOUNTED FOR AS THE COST OF ASSETS THE AMOUNT WHICH WAS PAID TO THE SUB- CONTRACTORS AND IT IS NOT THE CASE OF THE AO THAT T HE COST OF ASSETS IS MORE THAN THE EXPENDITURE INCURRED BY THE APPELLANT , NOR HAS THE AO BROUGHT ON RECORD ANY MATERIAL TO ESTABLISH THAT TH E COST OF ASSETS ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS IS MORE THAN THE EXPENDITURE INCURRED, AND THAT THE SUB-CONTRACTORS OFFERED THE INFLATED EXPENDITURE IN THEIR ACCOUNTS AS THEIR INCOME IN TH EIR CASES AND THEY HAVE BEEN ASSESSED ACCORDINGLY, AND THEREFORE THE Q UESTION OF ALLEGED INFLATION OF COST OF ASSETS BY THE APPELLAN T DOESNT ARISE. THEY HAVE ALSO SUBMITTED COPIES OF THEIR AUDITED AC COUNTS FOR F.YS. 2009-10, 2010-11 AND 2011-12. IT HAS BEEN ALSO SUBM ITTED THAT THE AMOUNT OF RS.147,51,91,619/- TAKEN BY THE AO AS THE CUMULATIVE CAPITALIZATION OF ASSETS BY THE APPELLANT IS INCORR ECT IN AS MUCH AS IT INCLUDES RS.21,35,32,916/- RELATED TO WORK CONTRACT S GIVEN TO COMPANIES/PERSONS OTHER THAN THE ABOVE TWO CONTRACT ORS, AND AFTER REDUCING THIS' AMOUNT OF RS.213532916/- FROM THE FI GURE ADOPTED BY THE AO, THE BALANCE AMOUNT IS RS,126,16,58,703/-. T HE DATE WISE INVOICE AMOUNTS OF WHICH HAVE BEEN SUBMITTED, AND I S SUMMARIZED HEREUNDER: S.NO. NAME OF PERSON AMOUNT (RS.) 1 3 S & COMPANY 524741 2 CHETTINADU CONSTRUCTIONS 5648879 3 DATTA STEEL MART 4649946 4 H20 TECHNOLOGIES 1800000 7 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 5 MACRO DEVELOPERS PVT. LTD. 47333261 8 NICE PROJECTS PVT. LTD. 19196420 7 R.S. BUILDERS 6936636 8 RAMA SANJAY BUILDERS & CONTRACTORS PVT. LTD. 3680790 9 RAMCONS ENGINEERS & BUILDERS 12756906 10 RAMTECH ENGINEERS AND CONTRACTORS P. LTD. 18612482 11 RELIABLE POWERTECH PVT. LTD. 2576312 12 S.R. BROTHERS 7363496 13 S.S. ENTERPRISES 2882516 14 SHRI JI PROJECTS 11491533 15 SHRISTHI CONSTRUCTIONS 21589334 16 TANU CONSTRUCTIONS 4728399 17 THOMAS & COMPANY PVT, LTD. 10386437 18 RAM SINGH 6706500 19 KAMDHENU ISPAT LTD 1456798 20 LE QUALITAS 1134448 21 DESIGN PLUS 110300 22 THE CLIMATE MAKERS 559338 23 GOLD STAR REALTORS LTD 14546982 24 BLUES DEVELOPERS PVT. LTD. 254998 25 ASRA REAL ESTATE ADVISORY SERVICES 1705000 26 TRIMURTI CONCAST PVT. LTD. 1893683 27 FORTUNE METALS LTD. 1698612 28. AIRCARE ENGINEERS 1307869 TOTAL 213532916 4.2.4 ON CONSIDERATION OF THE ABOVE FACTS, FOLLOWIN G THE METHOD ADOPTED BY THE AO AND UTILIZED FOR ARRIVING AT THE IMPUGNED DISALLOWANCE OF DEPRECIATION AT PAGE-5 PARA-8 OF TH E ASSESSMENT ORDER, BY ADOPTING THE FIGURES AS PER THE BALANCE S HEETS OF THE ABOVE MENTIONED THREE FINANCIAL YEARS, THE COMPUTATION FO R EXCESS CAPITALIZATION OF ASSETS BY THE APPELLANT IS AS UND ER: S.NO. NAME OF CONTRACTOR AMOUNT PAID (IN RS.) FY 2009-10 FY 2010-11 FY 2011-12 (A) JUBILANT DEVELOPERS & MANAGEMENT SERVICES PVT. LTD. I. TOTAL ADVANCE GIVEN 158,59,85,370 180,71,91,299 (5,96,49,496) II. CUMULATIVE CAPITALIZATION BY EISML (101,77,25,278) ( 126,16,58,703) III. LESS: CUMULATIVE INFLATED EXPENSES OFFERED 10,00,00,000 15,00,00,000 IV. NET CAPITAL WORK-IN-PROGRESS (91,77,25,278) (111,16,58,703) V. INVOICES RAISED BY JDMS 101,77,25,278 24,39,33,425 8 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 VI. CUMULATIVE INVOICES RAISED BY JDMS 32,73,66,279 126,16,58,703 126,16,58,703 VII. EXCESS OF INVOICES VS CAPITALIZATION BY EISML (IV - VI) (34,39,33,425) (15,00,00,000) VIII. DEPRECIATION ON EXCESS CAPITALIZATION (B) OSN INFRASTRUCTURE & PROJECTS PVT. LTD. I. TOTAL ADVANCE GIVEN 138,84,99,263 7,05,29,978 II. CUMULATIVE CAPITALIZATION BY EISML 23,22,34,166 III. LESS: CUMULATIVE INFLATED EXPENSES OFFERED 14,70,00,000 IV. NET CAPITAL WORK-IN-PROGRESS (8,12,34,166B V. INVOICES RAISED BY JDMS 23,22,34,166 4,02,07,799 VI. CUMULATIVE INVOICES RAISED BY JDMS 27,24,41,965 VII. EXCESS OF INVOICES VS CAPITALIZATION BY EISML (19,12,07,799) VIII. DEPRECIATION ON EXCESS CAPITALIZATION FROM THE ABOVE DATA IT WOULD BE SEEN THAT THERE IS NO EXCESS CAPITALIZATION OF ASSET RELATABLE TO THE COST OF CO NSTRUCTION. HENCE, NO DISALLOWANCE ON ACCOUNT OF ANY EXCESS DEPRECIATION CLAIMED BY THE APPELLANT IS CALLED FOR. 4.2.5 IT IS ALSO WORTH MENTIONING THAT THE AO HAS A DOPTED TWO DIFFERENT PRINCIPLES TO MAKE THE DISALLOWANCE ON AC COUNT OF DEPRECIATION ON THE ALLEGED EXCESS CAPITALIZED ASSE TS - FOR JDMS THE AO REDUCED THE CUMULATIVE INVOICES RAISED BY JDMS F ROM THE , NET CAPITAL WORK-IN-PROGRESS AFTER REDUCING THE ALLEGED INFLATED EXPENSES OF JDMS FROM THE CAPITALIZED OF THE APPELLANT (THOU GH THE FIGURE OF THE LATTER ADOPTED BY AO WAS INCORRECT AS MENTIONED ABOVE) SINCE THE RESULTANT FIGURE WAS POSITIVE; AND FOR 01 PPL T HE AO SIMPLY ADOPTED THE FIGURE OF THE INFLATED EXPENSES OF OIPP L SINCE HAD HE FOLLOWED SAME METHOD AS FOR JDMS THE RESULTANT FIGU RE WOULD HAVE BEEN NEGATIVE. THE AO CANNOT ADOPT DIFFERENT METHOD S FOR COMPUTING SIMILAR ACCOUNTS AS WOULD SUIT HIS INTENTION. DISAL LOWANCES, AND ADDITIONS, CANNOT BE MADE ON SUCH DEFECTIVE COMPUTA TION BUT THE ACCOUNTS HAVE TO BE APPRECIATED IN PERSPECTIVE WITH A HOLISTIC APPROACH. 4. IN SUPPORT OF GROUNDS RAISED, THE LD DR SUBMITTED THAT THE LEARNED CIT(A) HAS IGNORED THE INCRIMINATING MATERI AL REFERRED BY THE ASSESSING OFFICER SUBSTANTIATING COLLUSION OF T HE EMPLOYEES OF THE ASSESSEE WITH THE CONTRACTORS AND SUBCONTRACTOR S. HE 9 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 SUBMITTED THAT IT WAS FOUND FROM THE PAPERS SEIZED FROM THE PREMISES OF THE ASSESSEE THAT TWO OF ITS EMPLOYEE SH. SHALABH RAIZADA , SENIOR EXECUTIVE AND BRIG. (RETIRED) VI KRAM SINGH, VICE PRESIDENT OF THE ASSESSEE COMPANY, ACTED IN THE CAP ACITY OF AUTHORISED SIGNATORY OF THOSE CONTRACTOR COMPANIES. HE SUBMITTED THAT THE CONTRACTORS HAS FURTHER SUBCONTRACTED THE WORK AND COMPUTED THE ACTUAL RATE OF THE CONSTRUCTION WORK, WHICH IS VERY SMALL AS COMPARED TO THE PAYMENTS MADE TO THOSE SUB CONTRACTORS AND THE CONTRACTORS HAVE ACCEPTED IN THEIR ASSESSME NT, THE RECEIPT OF THE MONEY BY WAY OF CASH FROM THOSE SUBC ONTRACTORS. ACCORDING TO THE LD. DR, THE DOCUMENTS SEIZED IN AN NEXURES A-3, A-4, A-5 AND A-8 SEIZED FROM THE PREMISES OF THE AS SESSEE, WHEREIN THE ACTUAL LOW RATE OF THE WORK IS MENTIONE D, CLEARLY INDICATED THAT THE ASSESSEE WAS AWARE OF THE ACTUAL RATE OF WORK AND MONEY WHICH FLOWED BACK TO THE CONTRACTORS. ACC ORDING TO THE LEARNED DR, IT IS APPARENT THAT THE MONEY HAS ACTUA LLY ROUTED BACK TO THE ASSESSEE AS FLOW OF CASH BACK FROM THE SUBCONTRACTOR TO THE CONTRACTOR WAS WITHIN THE KNOWLEDGE OF THE A SSESSEE. IN VIEW OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS AGAINST HUMAN PROBABILITY THAT ASSESSEE WOULD ALLOW SUCH BO GUS PAYMENT TO THE CONTRACTOR KNOWINGLY THAT ACTUAL RAT E OF THE WORK IS VERY LOW AND MONEY IS ROUTED BACK FROM THE SUBCO NTRACTOR TO THE CONTACTOR. REGARDING THE COMPUTATION OF THE DEP RECIATION BY THE LD. CIT(A), THE LEARNED DR SUBMITTED THAT IN CA SE OF JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PRIVATE LIMITED, THE AMOUNT OF EXCESS CAPITALISATION HAS BEEN COMPUTED A T 15 CRORESS, WHEREAS IT SHOULD HAVE BEEN THE AMOUNT OF 25 CRORES, I.E., THE AMOUNT WHICH HAS BEEN OFFERED BY THE CONT ACTOR AS 10 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 UNDISCLOSED INCOME. THE LD. DR ALSO FILED COPY OF T HE ASSESSMENT ORDER IN THE CASE OF TWO CONTRACTOR COMPANIES. 5. THE LD. COUNSEL OF THE ASSESSEE, ON THE OTHER HAND , FILED TWO PAPER-BOOKS CONTAINING PAGE 1 TO 74 AND 1 TO 104 RE SPECTIVELY. HE RELIED ON THE FINDING OF THE LEARNED CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENTS TO THE CONTRACTORS A CCORDING TO THE INVOICES RAISED BY THEM FOR THE WORK DONE AND THERE ARE NO EVIDENCE THAT THE ASSESSEE HAS RECEIVED CASH-BACK F ROM THE CONTRACTORS. THE LD. COUNSEL SUBMITTED THAT NO DISA LLOWANCE CAN BE MADE IN RESPECT OF THE DEPRECIATION IN THE CASE OF THE ASSESSEE BASED ON THE UNDISCLOSED INCOME ACCEPTED BY THE TWO CONTRACTORS. ACCORDING TO HIM, THIS WILL AMOUNT TO DOUBLE TAXATION OF THE INCOME, FIRSTLY, AS UNDISCLOSED INCOME IN HA NDS OF THE CONTRACTOR AND SECONDLY DISALLOWANCE OF DEPRECIATIO N IN THE CASE OF THE ASSESSEE ON THE SAME AMOUNT INCLUDED IN THE CAPITAL ASSET OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION THAT SAME INCOME CANNOT BE TAXED TWICE, HE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. SSIPL LUXURY FASHION PRIVATE LIMIT ED REPORTED IN ITA NO.5368/DEL/2012 FOR ASSESSMENT YEARS 2009-1 0. HE ALSO REFERRED TO THE JUDGMENT DATED 18/02/2013 OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS DISCOVERY HOLDING PRIVATE LIMITED IN ITA NO. 1089 & 1090/2011 TO HIGHLIGHT TH AT NO ADDITION CAN BE MADE MERELY ON SUSPICION AND SURMIS ES OR BY TAKING NOTE OF NOTORIOUS PRACTICE PREVAILING IN T RADE CIRCLES OF REAL ESTATE. 6. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE PAPER -BOOK FILED BY THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS FILED BALANCE 11 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 SHEET ALONG WITH THE DETAILS OF FIXED ASSETS FOR TH E YEAR ENDING ON 31/03/2012, WHICH ARE AVAILABLE ON PAGE 59 AND 71 O F THE PAPER BOOK CONTAINING 104 PAGES. ACCORDING TO THE DETAIL OF FIXED ASSETS AS PER THE BOOKS MAINTAINED BY THE ASSESSEE, BUILDI NG WAS HAVING GRASS BLOCK VALUE AS ON 31.03.2012 OF 314,90,38,122/- AND AFTER CLAIMING DEPRECIATION OF 20,71,79,834/-, THE NET BLOCK OF THE BUILDING STOOD AT 294,18,58,288/-. THE ASSESSEE CLAIMED DEPRECIATION ON THE CAPITAL COST OF ASSET BEING BUI LDING IN THE RETURN OF INCOME FILED AS PER THE INCOME-TAX PROVIS IONS AND RATES PRESCRIBED IN INCOME-TAX RULES, 1962. OUT OF THE DE PRECIATION CLAIMED ON BUILDING IN THE INCOME-TAX RETURN, THE A SSESSING OFFICER HAS DISALLOWED DEPRECIATION TO THE EXTENT O F 2,10,53,292/-BEING DEPRECIATION ON ACCOUNT OF NO AS SETS CREATED IN RESPECT OF THE CONTRACTS GIVEN TO M/S OSN INFRAS TRUCTURE AND PROJECT PRIVATE LIMITED (IN SHORT OSN) AND M/S JU BILANT DEVELOPERS AND MANAGEMENT SERVICES PRIVATE LIMITED ( IN SHORT JDMS) TO THE EXTENT OF AMOUNT ACCEPTED BY THEM IN THE RETURN OF INCOME AS EXPENDITURE NOT INCURRED ACTUALLY. THUS, THE ASSESSING OFFICER HAS EXCLUDED OUT OF COST OF BUILDING, THE A MOUNT WHICH HAS BEEN ADMITTED BY THE TWO CONTRACTORS AS NOT ACT UALLY INCURRED. IN FACTS OF THE CASE, THE ISSUE IN DISPUT E IS WHAT SHOULD BE THE DEPRECIATION WHICH THE ASSESSEE SHOULD HAVE BEEN ALLOWED. IN TERMS OF SECTION 32 OF THE ACT AND RULE 5(1) OF INCOME-TAX RULES 1962, THE DEDUCTION OF DEPRECIATION IS ALLOW ED ON BUILDING OWNED, WHOLLY OR PARTLY BY THE ASSESSEE , AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION AT THE RATE OF 10 % OF THE WRITTEN DOWN VALUE OF THE CAPITAL ASSET OF BUILDING . THE TERM WRITTEN DOWN VALUE HAS BEEN DEFINED IN SECTION 43 (6) OF THE ACT 12 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 MEANS IN THE CASE OF ASSETS ACQUIRED IN THE PREVIOU S YEAR, THE ACTUAL COST TO THE ASSESSEE. THE TERM ACTUAL COST HAS FURTHER BEEN DEFINED IN SECTION 43(1) AS ACTUAL COST TO THE ASSESSEE DEDUCED BY THE PORTION OF THE COST WHICH HAS BEEN M ET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR THE AUTHORITY. IN THE FACTS OF THE CASE, WE HAVE THUS, TO EXAMINE WHAT IS THE ACTUAL C OST IN RESPECT OF THE BUILDING, ON WHICH, THE ASSESSEE HAS CLAIMED DEPRECIATION. 6.1 REGARDING THE CLAIM OF ASSESSING OFFICER AS NO CAP ITAL ASSET CAME INTO EXISTENCE CORRESPONDING TO THE EXPENDITUR E NOT INCURRED ACTUALLY BY THOSE TWO CONTRACTORS, THE ASS ESSING OFFICER IN THE CASE OF OSN INFRASTRUCTURE & PROJECTS PVT. L TD. HAS BROUGHT ON RECORD THE FACTS IN DETAILS. FOR READY REFERENCE , THE RELEVANT PART OF THE ASSESSMENT ORDER IN THE CASE OF OSN INF RASTRUCTURE & PROJECTS PVT. LTD. FOR ASSESSMENT YEARS 2012-13 IS REPRODUCED AS UNDER: 5.1 INITIALLY, SURVEY ACTION WAS CONDUCTED AT THE BUSINESS PREMISES OF ASSESSEE COMPANY SITUATED AT 301/18, UD YOG VIHAR, GURGAON. VARIOUS EVIDENCES WERE FOUND AND IMPOUNDED WHICH RAISED SUFFICIENT DOUBT ABOUT THE GENUINENESS OF VA RIOUS EXPENDITURES CLAIMED BY THE ASSESSEE COMPANY. IT WA S ALSO FOUND DURING THE COURSE OF SEARCH ACTION AT EDUCOMP GROUP THAT ONE ROOM AT THE PREMISES SITUATED AT H 35/1, DLF PHASE 1, BE ING THE OFFICE PREMISES OF MR. ASHISH MITTAL, THE ADVISOR OF THE A SSESSEE COMPANY WAS ALSO UTILIZED BY THE ASSESSEE COMPANY FOR ITS B USINESS. VARIOUS INCRIMINATING DOCUMENTS WERE ALSO FOUND AND SEIZED FROM THE SAID PREMISES, THE DETAILS OF WHICH ARE BEING NARRATED A T LENGTH IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER 5.2 IN RESPONSE TO SUMMONS U/S. 131 OF THE INCOME T AX ACT, STATEMENT OF SH. SANJAY SAINI, D RECTOR, M/S. OSN I NFRASTRUCTURE & PROJECTS PVT. LTD. (OIPPLJ WAS ALSO RECORDED ON OAT H ON 25 08.2011 AT THE OFFICE OF M/S. EDUCOMP SOLUTIONS LIMITED SIT UATED AT 514, UDYOG VIHAR, PHASE-LLL, GURGAON. AFTER DETAILED QUE STIONING AND CONFRONTATION OF VARIOUS PAPERS AND EVENTS WHICH OC CURRED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS, HE OFFERED AN UNDISCLOSED INCOME OF RS.75 CRORES TO TAX, OUT OF WHICH RS. 59. 25 CRORES WAS 13 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 OFFERED TO TAX IN THE HANDS OF THE ASSESSEE COMPANY . RELEVANT EXTRACTS OF HIS STATEMENT ARE AS FOLLOWS: Q.NO.3 DURING THE COURSE OF SURVEY AT YOUR OFFICE P REMISES ON 18.8.2011, ON VERIFICATION, IT WAS FOUND AND ASSERT ED BY YOU THAT NO GENUINE ACTIVITIES HAVE BEEN CONDUCTED BY YOUR GROU P. IT WAS A ISO FOUND THAT CORROBORATIVE EVIDENCES OF VARIOUS EXPEN SES CLAIMED IN YOUR COMPANIES WERE ALSO MISSING. YOU HAD ALSO STAT ED THAT SH. ASHISH MITTAL IS AT HELM OF THE AFFAIRS. VARIOUS RE CORDS AND OTHER DOCUMENTS PERTAINING TO YOUR ACTIVITIES WERE ALSO N OT PRODUCED AND NO SATISFACTORY EXPLANATION TO THE QUARRIES RAISED WERE RENDERED BY YOU AND OTHER OFFICE BEARERS OF YOUR GROUP. DO YOU AGREE ON THE SAID STATE OF AFFAIRS? EXPLAIN THE SAME? ANS. I AGREE THAT CERTAIN CORPORATIVE EVIDENCES TO ESTABLISH THE GENUINENESS WERE MISSING AT THE TIME OF SURVEY. TO COVER THE STATED DISCREPANCIES, WE IN CONSULTATION WITH SH. ASHISH M ITTAL, THE PERSON SUPERVISING THE ACCOUNTING/COMPLIANCE/OTHER BUSINES S ACTIVITIES, AGREE TO OFFER RS. 75 CRORE AS INCOME OF THE OSN GR OUP, ITS PRINCIPALS WHO HAVE ALLOTTED CONTRACTS/ JOBS OTHER VENDORS/CON TRACTORS WHO HAVE PERFORMED WORK FOR AS OR OUR PRINCIPALS OR OUR SUB-CONTRACTORS FOR THE RELEVANT PERIOD I.E. FY 2010-11 AND 2011-12 WITH THE UNDERSTANDING THAT NEITHER ANY PENALTY NOR ANY PUNI TIVE ACTION OF ANY NATURE., WHATSOEVER SHALL EITNER BE INITIATEO/I MPOSED AGAINST AIL THE ENTITIES/CONCERNS, INDIVIDUALS WHO HAVE BEEN CO VERED IN THE ACTION CONDUCTED BY THE DEPARTMENT/'S. 132 AND 133 A OF THE ACT. THE BIFURCATION OF THE ABOVE SAID OFFERED INCOME FO R THE RELEVANT PERIOD IN THE HANDS OF DIFFERENT ENTITIES/INDIVIDUA LS WILL BE PROVIDED AFTER VERIFICATION OF THE CONTENTS OF THE SEIZED/IM POUNDED MATERIAL WITHIN NEXT THREE WORKING DAYS. NECESSARY TAX DUE T HEREON WILL BE INFORMED TO BE DEPOSITED IN THE DIFFERENT ENTITIES AFTER SUCH VERIFICATION...' 5.3 DURING .THE COURSE OF SEARCH AT THE PREMISES LOCATED AT H-35/1, DLF PHASE-1, GURGAON BE ING THE OFFICE PREMISE OF MR. ASHISH MITTAL, THE ADVISOR OF THE AS SESSEE COMPANY ON 18.08.2011, IT WAS LEARNT THAT ONE OF THE ROOMS WAS BEING USED BY THE ASSESSEE COMPANY FOR ITS OWN BUSINESS. RESTR AINTS WERE TEMPORARILY PLACED ON 18.08.2011 AT THE OFFICE PREM ISES OF SH. ASHISH MITTAL AND ON THE ROOM ADJACENT TO THE OFFIC E OF THE SH. ASHISH MITTAL, WHICH WASBELNG USED BY THE ASSESSEE COMPANY. 5.4 ON LIFTING OF RESTRAINT FROM THE SAID PREMISES ON 13.09.2011, VARIOUS MATING DOCUMENTS WERE FOUND AND SEIZED WHIC H ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE COMPANY WAS BOOKING INFLATED/BOGUS EXPENDITURE IN ITS PROFITS AND LOSS ACCOUNT ON ONE HAND AND WAS RECEIVING CASH BACK ON SALE OF CERTAIN LANDS FROM THE VENDORS OF SAID LANDS. THE LANDS WERE ACQUIRED UNDE R THE 14 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 AGREEMENT TO SELL FOR AND ON BEHALF OF EDUCOMP GROU P AND WERE TRANSFERRED TO THEM FOR A CONSIDERATION IN THE FORM OF COMMISSION. IN THE PROCESS OF ACQUIRING SUCH LAND ON BEHALF OF ITS PRINCIPAL, I.E. EDUCOMP GROUP, THE ASSESSEE COMPANY RECEIVED CERTAI N FUNDS IN CASH FROM THE VENDORS OF SUCH LAND OUTSIDE THE BOOK S OF ACCOUNT IN A CLANDESTI LE MANNER TO THE EXCLUSION OF THE EDUCOMP GROUP. 5.5 DURING THE COURSE OF VACATING OF RESTRAINTS ON 13.09.2011 FROM THE ABOVE PREMISES, VARIOUS INCRIMINATING DOCU MENTS WERE FOUND AND SEIZED VIDE ANNEXURE AA-1 TO AA 3 OF THE PARICHNAMA DATE 13.09.11. 5.6 ANNEXURE AA-1 PAGES 1 TO 129 AND ANNEXURE AA-2 PAGES 1 TO 36 ARE THE COPIES OF THE LEDGER ACCOUNTS OF VARI OUS SUB-CONTRACTORS IN THE BOOKS OF ACCOUNT OF M/S. OSN INFRASTRUCTURE & PROJECTS PVT. LIMITED, COPIES OF_ THEIR RUNNING BILLS, CHEQUES IS SUED TO THEM, GENERAL CORRESPONDENCE, ETC FOR THE FINANCIAL YEAR 2010-11, RELEVANT TO ASSESSMENT YEAR 2011-12. 5.7 THESE PAPERS ARE AN INDUBITABLE AND CONCRETE RE CORD OF THE TRANSACTIONS UNDERTAXEN BY M/S. OSN INFRASTRUCTURE & PROJECTS PVT. LIMITED. PAGE NO 128 & 129 OF ANNEXURE AA-1 AND PAG E NO. 36 OF ANN.AA-2 ARE SUMMARY SHEETS HIGHLIGHTING THE FOLLOW ING DETAILS: A) VALUE OF TOTAL CONTRACTS OBTAINED BY OSN INFRA FROM EISML, B) BILLING FOR WORK TO BE DONE DURING THE FINANCIA L YEAR 2010-11 AND 2011-12 C) AMOUNT OF COST OF WORK AND BILLS ISSUED BY VARI OUS SUB CONTRACTORS ALONG WITH THEIR NAMES FOR FY 2010-11 & 2011-12. D) ACTUAL COST INCURRED FOR THE WORK AND E) THE DIFFERENCE RECEIVED IN CASH BY M/S. OSN INF RASTRUCTURE & PROJECTS PVT. LIMITED FROM SUCH SUB CONTRACTORS. F) DETAILS OF BROKERAGE RECEIVED FROM THE SELLERS OF LAND NOT BOOKED IN THE BOOKS OF ACCOUNTS OF M/S. OSN INFRAST RUCTURE & PROJECTS PVT. LIMITED. G) DETAILS OF CASH RECEIVED BACK FROM SELLERS OF LA ND AT DISTT. ALWAR, RAJASTHAN AND HYDERABAD NOT BOOKED IN THE BO OKS OF ACCOUNTS OF M/S. OSN INFRASTRUCTURE & PROJECTS PVT. LIMITED. 5.8 SCANNED COPIES OF PAGEDS 128 AND 129 OF ANNEXUR E AA-1 AND PAGE 36 OF ANNEXURE AA-2 RESPECTIVELY ARE REPRO DUCED HEREIN 15 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 16 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 5.9 THE CONTENTS OF THE ABOVE SHEET WERE COMPARED W ITH THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY. ON THE RE CONCILIATION OF THE TRANSACTIONS AS RECORDED IN ANNEXURE AA-1, PAGE NO. 129 AND PAGE NO. 35 OF ANNEXURE AA-2, IT IS SEEN THAT M/S. OSN INFRASTRUCTURE & PROJECTS PVT. LIMITED ALLOTTED CON TRACT OF RS 25 CRORE FOR THE RESTORATION OF HILL FOR MUSSOORIE INTERNATI ONAL SCHOOL, MUSSOORIE TO M/S. DHARAMRAJ CONTRACT INDIA PVT. LIM ITED, DDA COMMERCIAL COMPLEX, NEW DELHI SUBJECT TO THE ESCALA TION COST. THE SAID SUB-CONTRACTOR HAS BILLED M/S. OSN INFRASTRUCT URE & PROJECTS PVT. LIMITED FOR RS 20.79 CRORES AND RS. 3.72 CRORE S IN FY 2010-11 AND 2011- 12 RESPECTIVELY. HOWEVER, ON THE PERUSAL OF PAGE NUMBER 25 TO 48 OF ANN. AA-1 IT IS SEEN THAT OUT OF BILLED AMOUNT OF RS. 20.79 CRORES, THE ACTUAL COST OF THE WORK WAS ONLY FOR RS . 6.09 CRORES AND THE BALANCE AMOUNT OF RS. 14.70 CRORES WAS RECEIVED BACK IN CASH OUTSIDE THE BOOKS BY THE ASSESSEE COMPANY. 5.10 OTHER RELEVANT DOCUMENTS LIKE THE COPY OF ACCO UNT OF M/S. DHARAMRAJ CONTRACTS INDIA PVT LIMITED, A COPY OF DE TAILS OF COSTING OF THE WORK AND AGREEMENT WITH M/S. DHARAMRAJ CONTRACT S INDIA PVT. LIMITED WITH THE ASSESSEE WERE ALSO FOUND AND SEIZE D AS PAGE 25 TO 48 OF ANNEXURE AA-1 AND PAGES 12 TO 25 OF ANNEXURE AA-2. 17 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 5.11 IN THESE PAGES THE VARIOUS COMPONENTS OF THE B ILL AMOUNTING TO RS. 17.40 CRORES FOR WHXH BILLS HAVE BEEN OBTAIN ED AND NO WORK HAS BEEN DONE SRE HIGHLIGHTED WITH THE MARKER. ON T HE PERUSAL OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE, IT IS FOUND THAT THAT IT HAS DEBITED THE PROFIT & LOSS ACCOUNT BY RS 20.79 CRORES FOR F. Y. 2010-11 ON ACCOUNT OF WORK DONE BY M/S. DHARAMRAJ CONTRACTS IN DIA PVT. LIMITED. HOWEVER, THE ACTUAL EXPENDITURE WAS RS 6.0 9 CRORES FOR F.Y.2010-11. THEREFORE IT HAS OVER BOOKED THE REVEN UE EXPENDITURE IN ITS BOOKS OF ACCOUNT BY OBTAINING EXCESS/INFIATI NG OF BILLS AND THUS SUPPRESSED ITS PROFIT ON THIS ACCOUNT BY RS. 14.70 CRORES FOR FY 2010-11. 5.12 SIMILARLY, INCRIMINATING MATERIAL WAS FOUND WI TH RESPECT TO CONTRACT GIVEN FOR EXCAVATION, LEVELING OF AGRICULT URAL LAND AT DISTT. HANUMANGARH, RAJASTHAN TO M/S. ARSS INFRASTRUCTURE PROJECTS LIMITED, MANCHESHWAR INDUSTRIAL ESTATE, BHUVANESHWA R. A PART OF THIS WORK WAS GIVEN TO M/S. OM BUILDERS ALSO THE DE TAILS OF THESE TWO SUB-CONTRACTS ARE AVAILABLE ON PAGE 5 TO 13 OF ANNEXURE AA-1 THE DETAILS OF BOGUS BILLING PERTAINING TO THIS CON TRACTOR ARE AVAILABLE ON PAGES 128 &129 OF ANNEXURE AA-1 AND IT WAS SEEN THAT OUT OF TOTAL BILLS OF RS. 8.01 CRORES ON ACCOUNT OF HANUMANGARH WORK, THE ACT UAL COST WAS FOR RS. 0.91 CRORES AND THE BALANCE AMOUNT OF R S 7 10 CRORES REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE FOR THE RELEVANT PERIOD UNDER CONSIDERATION. 5.13 INCRIMINATING DOCUMENTS WERE ALSO FOUND AND SE IZED PERTAINING TO THE CONTRACT ALLOTTED FOR CLEARING, L EVELING, FILLING, REMOVAL OF BOULDERS, ROCK EXCAVATION, BLASTING, STA CKING, CONSOLIDATION OF SOIL, KUCHHA ROAD ETC. OF AGRICULT URE LAND AT VILLAGE PATA, TEHSIL RAMGARH, DISTT. ALWAR, RAJASTHAN TO SU BCONTRACTOR M/S. PATEL ENGINEERING LIMITED. A PART OF THIS WORK WAS ALSO PERFORMED BY M/S. ORRIS INFRASTRUCTURE PVT. LIMITED. THE DETAILS OF THESE TWO SUB- CONTRACTS ARE AVAILABLE ON PAGE 14 TO 24 OF ANNEXUR E AA-1. ON PAGE NUMBER 128 & 129 OF ANNEXURE AA-1 IT IS SHOWN THAT OUT OF TOTAL BILLS OF RS. 9 CRORES ON ACCOUNT OF ALWAR WORK, THE ACTUAL COST WAS FOR RS. 1 25 CRORES AND THEREFORE, AMOUNT OF RS. 7. 75 CRORES REPRESENTED EXCESS/BOGUS BILLING. 5.14 IN ADDITION TO THE ABOVE THERE WERE OTHER SMAL L WORKS WHICH WERE HANDLED BY THE ASSESSEE COMPANY AND ALLOTTED T O OTHER SUB- CONTRACTS DETAILS OF WHICH ARE AVAILABLE AT PAGE NO . 49 TO 127 OF ANNEXURE AA-1 SEIZED FROM PREMISES NO. H-35/1, DLF, PHASE-1, GURGAON. ON A COMPOSITE PERUSAL OF SUCH PAPERS ALON GWITH SEIZED PAPERS MARKED AS PAGES 127 TOL29, IT IS CRYSTAL CLE AR THAT BOGUS BILLING FROM ALL OTHER PETTY SUB-CONTRACTORS WAS TO THE EXTENT OF RS. 26 LAKH FOR THE F.Y 2010-11, RELEVANT TO A.Y. 2011- 12. 18 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 5.15 THE SEIZED PAPERS MARKED AS PAGES 129 OF ANNEX URE AA-1 AND 36 OF ANNEXURE AA-2 ALSO 'EVEALED THAT THE ASSE SSEE COMPANY HAS RECEIVED BROKERAGE FROM VARIOUS LAND DEALS OUTS IDE THE BOOKS OF ACCOUNT FROM THE LAND TRANSACTIONS IN ALWAR AND HYD ERABAD THE ASSESSEE COMPANY GAVE CERTAIN LAND ADVANCES TO VARI OUS OTHER PERSONS FOR THE PURCHASE OF LAND AT ALWAR AND HYDER ABAD. THE LAND AT HYDERABAD WAS REGISTERED IN FAVOUR OF THE EDUCOM P GROUP WHEREAS AGREEMENT WAS ENTERED WITH THE LAND OWNERS AT ALWAR, RAJASTHAN FOR AND ON BEHALF OF THE EDUCOMP GROUP AS DISCUSSED ABOVE. THE DETAILS OF SUCH BROKERAGE BEING RECEIVED OUTSIDE THE BOOKS OF ACCOUNT AGGREGATING TO RS. 4.53 CRORES IS AVAILABLE AT PAGE 129 OF ANNEXURE AA-1 OUT OF WHICH A SUM OF RS 3.03 WAS RECEIVED DURING THE F.Y. 2010-11, RELEVANT TO A.Y. 2011-12. 5.16 IT WAS ALSO NOTICED ON PERUSAL OF PAGE 36 OF A NNEXURE AA-2 THAT THE ASSESSEE COMPANY ALSO RECEIVED BACK CERTAI N CASH OUTSIDE ITS BOOKS OF ACCOUNT FROM LAND DEALS IN ALWAR AMOUN TING TO RS. 20.8 CRORES DURING THE IN F.Y. 2011-12, RELEVANT TO A.Y. 2012 13 THE DETAILS OF THESE CASH RECEIVED BACK OUTSIDE THE BOO KS ARE FURTHER RECORDED ON FROM PAGE NUMBER 26 TO 35 OF ANNEXURE A A-2. 5.17 THUS, A PERUSAL OF THE CONTENTS OF THE SEIZED MATERIA! CLEARLY REVEALED THAT THE ASSESSEE COMPANY WAS INVARIABLY E ARNING INCOME OUTSIDE THE BOOKS OF ACCOUNT FROM ITS ACTIVITY OF C ONSTRUCTION AS WELF AS TRADING IN LAND. 6. THE STATEMENT OF MR. SANJAY SAINI WAS RECORDED O N OATH AT THE TIME OF LIFTING OF RESTRAINT AT THE PR EMISES LOCATED AT H35/1, DLF PHASE-1 GURGAON WHICH IS BEIN G REPRODUCED AS UNDER: Q. NO. 23 I AM SHOWING YOU PAGES 1 TO 129 OF ANNEXU RE AA-1 OF THE MATERIAL FOUND AND SEIZED/IMPOUNDED DURING THE COUR SE OF LIFTING OF RESTRAINTS PLACED AT THE PREMISES OF YOURCONSUITANT , MR. ASHISH MITTAL WHO HAS STATED TO BELONG TO YOU. PLEASE IDEN TIFY THE PAPERS ANDEXPLAIN THE CONTENTS THEREOF. ANS. THE SAID PAPERS PERTAIN TO THE VARIOUS BILLS R AISED BY THE SUB CONTRACTORS OF OSN INFRASTRUCTURE AND PROJECTS PVT LTD, THEIR LEDGER ACCOUNTS AND A SUMMARY SHEET OF 1) CONTRACT VALUE 2 ) AMOUNT OF TOTAL BILLS RAISED 3) COST OF BILLS 9) THE ACTUAL C OST INCURRED AND 5) THE DIFFERENCE RECEIVED BY US IN CASH FROM THE SAID SUB CONTRACTORS ON ACCOUNT OF INFLATED/EXCESSIVE EXPENDITURE CHARGED B Y US IN OUR BOOKS OF ACCOUNT. AS APPARENT FROM THE PAPERS, THE SAID EXCESSIVE/INFLATED EXPENDITURE AGGREGATES TO RS. 30 CRORES (APPROX) FOR THE FINANCIAL YEARS 2010-11 WHICH IS APPEARING IN A SUMMARIZED MANNER ON PAGE 129 OF THE ABOVE STATED ANNEXURE AA1 . 19 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 THE SAME MAY KINA'IV BE TREATED AS PART OF THE TOTA L INCOME OFFERED BY US TO THE EXTENT OF RS. 75CR IN THE COURSE OF MY STATEMENT RECORDED ON OATH DATED 25/08/11. Q. 2A I AM SHOWING YOU PAGES 1 TO 36 OF ANNEXURE AA -2 OF THE MATERIAL FOUND AND SEIZED/IMPOUNDED DURING THE COUR SE OF LIFTING OF RESTRAINTS PLACED AT THE PREMISES OF YOUR CONSULTAN T, MR. ASHISH MITTAL WHO HAS STATED TO BELONG TO YOU. KINDLY IDEN TIFY THE PAPERS AND EXPLAIN THE CONTENTS THEREOF. ANS. THE SAID PAPERS/DOCUMENTS PERTAIN TO THE BILLS RAISED BY ONE OF THE SUB CONTRACTORS ON OSN INFRASTRUCTURE AND PROJE CTS PVT LTD, ITS LEDGER ACCOUNTS AND A SUMMARY SHEET OF 1) CONTRACT VALUE 2) AMOUNT OF TOTAL BILLS RAISED 3) COST OF BILLS 4) TH E ACTUAL COST INCURRED AND 5) THE DIFFERENCE RECEIVED BY US IN CASH FROM T HE SAID SUB CONTRACTOR ON ACCOUNT OF INFLATED/EXCESSIVE EXPENDI TURE CHARGED BY US IN OUR BOOKS OF ACCOUNT. AS APPARENT FROM THE PA PERS, THE SAID EXCESSIVE/INFLATED EXPENDITURE AGGREGATES TO RS. 2. 70 CRORES (APPROX) FOR THE FINANCIAL YEARS2011- 12 WHICH IS A PPEARING IN A SUMMARIZED MANNER ON PAGE 36 OF THE ABOVE STATED AN NEXURE AA 2. A/SO, PAGE 36 OF ANNEXURE AA 2 OF THE MATERIAL HAS MENTION OF CASH RECEIVED BACK AGGREGATING TO RS. 20.80 CRORES FROM THE VENDORS OF LANDS AT A/WAR. COPIES OF THEIR LEDGER ACCOUNTS AND SUMMARY OF CASH RECEIVED AGAINST VARIOUS CHEQUES ARE ALSO AVAI LABLE AT PAGES 25TO 36 OF AA 2. THE SAID CASH WAS RECEIVED BY US W ITH A TACIT UNDERSTANDING WITH THE SAID VENDORS WHICH WAS OVER AND ABOVE THE BROKERAGE PAYABLE BY THEM TO US. THE SAID CASH WAS WITHDRAWN BY THE SAID CONSOLIDATORS EITHER OUT OF THEIR OWN ACCO UNTS OR FROM TRANSFER OF FUNDS TO THE ACCOUNT OF OTHER COLLECTIO N AGENTS/LAND CONSOLIDATORS AS PER MY INSTRUCTIONS TO THEM. THE S AID CASH RECEIVED FROM THE VENDORS MAY BE TREATED AS OUR INCOME FOR T HE FINANCIAL YEAR 2011-12. THEREFORE, THE CASH RECEIVED FROM THE SUB CONTRACTORS AMOUNTING TO RS. 2.70 CRORES ALONG WITH CASH BACK F ROM THE LAND DEALS TO THE EXTENT OF RS. 20.80 CRORES MAY ALSO BE TREATED AS PART OF THE TOTAL INCOME OFFERED BY US TO THE EXTENT OF RS. 75 CRORES IN THE COURSE OF MY STATEMENT RECORDED ON OATH DATED 25/08 /2011. Q. 25 1 AM SHOWING YOU PAGES 36 AND 129 OF ANNEXURE AA2 AND AA1 RESPECTIVELY OF THE MATERIAL SEIZED DURING THE COURSE OF LIFTING OF RESTRAINTS AT THE PREMISES LOCATED AT H-35/I, DLF, PHASE I, GURGAON. ON THE SAID PAGES, MENTION OF CERTAIN BROKERAGE TO THE EXTENT OF 2.5% OF LAND VALUES IS APPEARING. EXPLAIN WHETHER THE SA ME IS REFECTED IN YOUR BOOKS OF A/C'S OR NOT? ANS. IT IS CLARIFIED THAT PAGE NO. 129 AND 36 OF AN NEXURE AA 1 AND AA 2 RESPECTIVELY HAVE CALCULATIONS OF CASH RECEIVE D BY US ON ACCOUNT OF BROKERAGE FROM SALE OF ALWAR LANDS FROM THE SELLERS WHICH 20 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 HAS NOT BEEN ACCOUNTED FOR IN OUR BOOKS OF ACCOUNT THE SAID BROKERAGE WAS RECEIVED BY US FROM THE VENDORS OF TH E SAID LAND OUTSIDE THE BOOKS OF ACCOUNT AMOUNTING TO RS.3.00 C RORES AND RS. 1.50 CRORES DURING THE FINANCIAL YEARS 2010-11 AND 2011-12 RESPECTIVELY. THE SAID VENDORS AGREED TO PAY THE BR OKERAGE TO BE COMPUTED AT THE RATE OF 2.5 % OF THE VALUE OF SALES CONSIDERATION, TO BE PAID 2/3RD DURING THE FINANCIAL YEAR 2010-11 AND THE BALANCE 1/3*DURING THE FINANCIAL YEAR 2011-12. THE SAME WAS ACCORDINGLY RECEIVED TO THE EXTENT OF RS. 3CRORES AND RS. 1.5 C RORES DURING THE FINANCIAL YEAR 2010-11 AND 2011-12 RESPECTIVELY. TH E SAMEMAY KINDLY BE TREATED AS PART OF THE TOTAL INCOME OFFER ED BY US TO THE EXTENT OF RS. 75 CRORES INTHE COURSE OF MY STATEMEN T RECORDED ON OATH DATED 25/08/2011 Q. 26 YOU HAVE STARED THAT CERTAIN BOGUS/INFLATED E XPENSE HAS BEEN CHARGED BY YOU TO THE PROFIT AND LOSS ACCOUNT OF OS N GROUP COMPANIES THROUGH THE AID OF VARIOUS SUB CONTRACTOR S. PLEASE STATE WHETHER ANY OTHER EXPENSES OVER AND ABOVE THE PAYME NT TO SUB CONTRACTORS OF SIMILAR NATURE ALSO EXIST OR NOT? ANS. WE ARE NOT ABLE TO VERIFY THE SAME AT THIS MOM ENT HOWEVER, TO COVER UP THE SAME, WE HEREBY OFFER AMOUNTS OF RS. 1 8 LAKHS AND RS. 50 LAKHS FOR THE FINANCIAL YEARS 2010-11 AND 20 11- 12 TO COVER ANY OTHER DISALLOWANCES ON ACCOUNT OF OTHER EXCESSI VE OR UNREASONABLE EXPENDITURE OR OTHER UNACCOUNTED INCOM E ETC. THE SAME MAY ALSO BE TREATED AS PART OF THE TOTAL INCOM E OFFERED BY US TO THE EXTENT OF RS. 75 CRORES IN THE COURSE OF MY STA TEMENT RECORDED ON OATH DATED25/08/2011...' 7. IN VIEW OF THE ABOVE, THE ASSESSEE GROUP DECLARE D AN AGGREGATE AMOUNT OF RS. 75 CORES INCLUDING A SUM OF RS, 15 CRORES FOR AND ON BEHALF OF ITS ASSOCIATE M/S, JUBILANT DE VELOPERS & MANAGEMENT SERVICES PVT. LTD IN FACT THE OSN GROUP DECLARED AN AMOUNT OF RS 33.60 CRORES AND RS 25.65 CRORES FOR T HE F.Y. 2010-11 AND 2011-12 RESPECTIVELY AGGREGATING TO RS. 59.25 C RORES OUT OF THE TOTAL DISCLOSURE OF RS. 75 CRORES. THE AMOUNT OFFER ED WAS ALSO CONFIRMED TO HAVE BEEN EARNED BY THE AFOREMENTIONED COMPANY OUTSIDE THE BOOKS OF ACCOUNT AND WAS OFFERED TO TAX BY ITS DIRECTOR, MR. ARUN KUMAR, THE DETAILED DISCUSSION IN RESPECT WHEREOF HAS BEEN MADE IN THE ASSESSMENT ORDERS PASSED IN THE CA SE OF THE SAID COMPANY BEING ASSESSED IN THIS CHARGE. 8. IN FACT, THE ASSESSEE OFFERED UNDISCLOSED INCOME OF RS. 33.60 CRORES AND RS. 25.65 CRORES FOR THE F.Y 2010-11 AND 2011-12 RESPECTIVELY TO TAX. OUT OF THE TOTAL DISCLOSURE OF RS. 75 CRORES. AGGREGATE AMOUNT OF RS. 59.25 CRORES WAS OFFERED IN THE HANDS OF THE ASSESSEE COMPANY AND THE BALANCE IN CASE OF M/S . JUBILANT DEVELOPERS & MANAGEMENT SERVICES PVT. LTD. 21 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 6.2 SIMILAR FINDING HAS BEEN RECORDED BY THE ASSESSING OFFICER IN THE CASE OF JDMS IN THE OFFICE NOTE APPENDED TO THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2012-13. THE RELEVANT PART OF THE OFFICE NOTE IS REPRODUCED AS UNDER: 1. DURING THE COURSE OF SEARCH OPERATION AT THE PR EMISES LOCATED AT FI-35/1, DLF PHASE-1, GURGAON CERTAIN INCRIMINAT ING PAPERS MARKED AS ANNEXURE AA 3 HAVING PAGES 1 TO 79 WERE F OUND AND SEIZED PERTAINING TO THE ASSESSEE COMPANY. IT WAS C ATEGORICALLY ADMITTED BY MR. SANJAY SAINI, DIRECTOR OF M/S OIPPL THAT THE SAID PAPERS PERTAINED TO THE BUSINESS OPERATIONS OF THE ASSESSEE COMPANY. IT WAS ALSO REVEALED BY HIM THAT HE WAS IN TRODUCED TO THE EDUCOMP GROUP BY THE DIRECTOR OF THE ASSESSEE COMPA NY, MR. ARUN KUMAR WHO WAS ENGAGED IN EXECUTING OF VARIOUS CONST RUCTIONS CONTRACTS FOR AND ON BEHALF OF THE SAID GROUP IN PA ST. SINCE, THE SAID GROUP REQUIRED ADDITIONAL RESOURCES TO EXECUTE THEI R CONSTRUCTION ACTIVITY, MR. ARUN KUMAR INTRODUCED HIM TO THE EDUC OMP GROUP. MR. SANJAY SAINI ALSO CONFIRMED THAT THE SAID PAPERS WE RE INADVERTENTLY LEFT BY MR. ARUN KUMAR DURING ONE OF HIS VISITS TO HIS OFFICE AT THE ABOVE STATED PREMISES. MR. SANJAY SAINI ALSO CONFIR MED THAT THE IMPUGNED PAPERS CONTAINED DETAILS OF BOGUS EXPENDIT URE BOOKED BY THE ASSESSEE COMPANY AND ACCORDINGLY AFTER CONSULTA TION WITH THE DIRECTOR OF THE ASSESSEE COMPANY, HE OFFERED AMOUNT S OF RS. 10 CRORES AND RS. 5 CRORES FOR THE F.Y. 2010-11 AND 20 11-12 RESPECTIVELY AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 1.1 THE STATEMENT OF SH. ARUN KUMAR, DIRECTOR OF M/ S. JUBILANT DEVELOPERS & MANAGEMENT SERVICES PVT. LIMITED (JDMS ) WAS RECORDED ON OATH ON 13.09.2011. IN HIS STATEMENT RE CORDED ON OATH ON 13.09.2011 HE ADMITTED THAT THE PAPERS SEIZED VI DE ANN. AA-3 WERE CONTAINING DETAILS OF TRANSACTION TAKEN BY HIS COMPANY WITH VARIOUS SUBCONTRACTORS FOR FY 2010-11 & 2011-12. IN HIS STATEMENT HE ADMITTED OF HAVING RECEIVED BACK THE CASH FROM M /S. STARTREKBUILDCON PVT. LIMITED DURING FY 2010-11 & 2 011-12 AGAINST VARIOUS CHEQUES ISSUED FOR RS. 9.45 CR. & 4.90 CROR E FOR FY 2010-11 & 2011-12 RESPECTIVELY. HE EXPLAINED THAT THESE AMO UNT WERE IN THE NATURE OF EXCESS EXPENDITURE CHARGED, THEREFORE, IT HAS OVER BOOKED THE REVENUE EXPENDITURE IN ITS BOOKS OF ACCOUNT BY OBTAINING EXCESS/INFLATING OF BILLS AND THUS SUPPRESSED ITS P ROFIT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY. IN THE STATEMEN T HE ADDITIONALLY DISCLOSED AMOUNT OF RS. 55 LAKH & RS. 10 LAKH FOR FY 2010- 11 & 2011-12 RESPECTIVELY TO COVER ANY OTHER DISCREPANCY 22 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 ARISING OUT OF BOOKS OF ACCOUNT. THE RELEVANT PART OF THE STATEMENT OF SH. ARUN KUMAR IS REPRODUCED AS UNDER:- .. Q. 19: - WHAT WERE THE TOTAL VALUE OF WORKS ALLOTTE D TO STARTREKBUI/DCONPVT LTD AND HOW MUCH CASH WAS RECEI VED AGAINST PAYMENTS MADE TO THEM BY YOUR COMPANY M/S J DMS DURING THE FINANCIAL YEAR2010-11 AND 2011-12? ANSWER: - DURING THE FINANCIAL YEAR 2010-11 AND 201 1- 12CONTRACTS WORTH RS. 10 CRORES AND RS. 5 CRORES RE SPECTIVELY WERE ALLOTTED TO M/S STARTREKBUILDCONPVT LTD WHICH COULD NOT BE FULLY EXECUTED BY THEM. THE SAID SUB CONTRACTOR PAI D BACK CERTAIN FUNDS GIVEN TO THEM IN RETURN IN CASH. HOWE VER, THE PAYMENT TO THE SAID SUB CONTRACTOR STANDS REFLECTED AS EXPENDITURE IN OUR BOOKS OF ACCOUNT. THEREFORE, ON ACCOUNT OF SUCH EXCESSIVE EXPENDITURE, WE OFFER TO TAX AN AMOU NT OF RS. 9.45 CRORES AND RS. 4.90 FOR THE FINANCIAL YEARS 20 10-11 AND 2011-12 RESPECTIVELY. ADDITIONALLY WE OFFER AN AMOU NT OF RS. 55 LACS AND RS. 10 LACS FOR THE FINANCIAL YEARS 2010-1 1 AND 2011- 12 TO COVER ANY OTHER DISALLOWANCE ON ACCOUNT OF EX CESSIVE EXPENDITURE, INVESTMENT, INCOME OR ISSUES OF ANY OT HER NATURE IN THE HANDS OF JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD. THUS, IN AGGREGATE, WE HEREBY OFFER AN AMO UNT OF RS. 10 CRORES AND RS. 5 CRORES FOR THE FINANCIAL YEARS 2010-11 AND 2011-12 RESPECTIVELY, AS INCOME WITH AN UNDERSTANDI NG THAT NEITHER ANY PENALTY NOR ANY PUNITIVE PROCEEDINGS OF ANY NATURE WILL EITHER BE INITIATED OR IMPOSED AGAINST OUR COM PANIES OR INDIVIDUALS OF OUR GROUP IN FUTURE. Q. NO. 20: - DURING THE COURSE OF RECORDING OF YOUR STATEMENT IN THE OFFICE OF THE UNDERSIGNED ON05/09/2011, YOU HAD OFFERED AN AGGREGATE AMOUNT OF RS. 15 CRORES TO TAX IN THE HANDS OF JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD . EXPLAIN THE BASIS OF THE SAME. ANSWER: -. AS STATED ABOVE, IT IS FACT THAT OUR COM PANY, M/S JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD WAS EXECUTING VARIOUS CONSTRUCTION CONTRACTS AS ALLOTTE D BY EDUCOMP INFRASTRUCTURE AND PROJECTS LTD SINCE MAY/JUNE 2009 . IN FACT WE INTRODUCED SH. SANJAY SAINI AND HIS GROUP COMPAN IES, M/S OSN INFRASTRUCTURE AND PROJECTS PVT. LTD FOR MEETIN G THE ADDITIONAL REQUIREMENTS OF EXECUTION OF THE CONSTRU CTION CONTRACTS OF THE ABOVE SAID EDUCOMP GROUP IN THE MO NTH OF JUNE 2010. VARIOUS CONSTRUCTIONS CONTRACTS WERE ALL OTTED TO THEM BY THE EDUCOMP GROUP ON OUR RECOMMENDATION AND THE SAME ARE BEING EXECUTED BY SH. SANJAY SAINI AND HIS COMPANIES TILL DATE. I OFTEN USED TO VISIT THE BUSI NESS PREMISES 23 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 OF SH. SANJAY SAINI AND HIS CONSULTANT, SH. ASHISH MITTAL IN ORDER TO DISCUSS VARIOUS ASPECTS OF THE COMMON CONS TRUCTION BUSINESS. DURING THE COURSE OF SURVEY/SEARCH OF SH. SANJAY SAINI AND HIS GROUP COMPANIES, HE DISCUSSED THE MAT TER WITH ME AND AFTER DUE CONSULTATION WITH HIM, I ADVISED H IM TO INCLUDE AN AMOUNT OF RS. 15 CRORES AS INCOME OF JUB ILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD ALSO. IT WAS ON THIS BASIS THAT I REITERATED AND CONFIRMED THE OFFE R OF RS. 15 CRORES IN THE HANDS OF M/S JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD. IN MY STATEMENT ON 05/ 09/2011. I HEREBY RECONFIRM THAT OUT OF THE TOTAL AMOUNT OF RS. 15 CRORES, RS. 10.00 CRORES WILL BE OFFERED TO TAX FOR THE FIN ANCIAL YEAR 2010-11 AND RS. 5.00 CRORES FOR THE FINANCIAL YEAR 2011-12 WITH AN UNDERSTANDING THAT NEITHER ANY PENALTY NOR ANY PUNITIVE PROCEEDINGS OF ANY NATURE WILL EITHER BEIN ITIATED OR IMPOSED AGAINST OUR COMPANIES OR INDIVIDUALS OF OUR GROUP.' 1.2 THUS, THE ASSESSEE COMPANY OFFERED UNDISCLOSED INCOME TO THE EXTENT OF RS. 10 CRORES FOR THE RELEVANT PERIOD UNDER CONSIDERATION. THE RELEVANT AMOUNT OF SUCHINCOME WA S DIRECTLY OFFERED IN THE COMPUTATION OF ASSESSABLE INCOME AND TAX LIABILITY DUE THEREON WAS DISCHARGED BY THE ASSESSEE COMPANY. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE QUESTIONNAIRE U/S. 142(1) OF THE ACT DATED 27.01.2014 WAS ASKED THE DETAILS OF SURRENDER OF RS. 15 CRORES AND HOW THE SAME IS REFLECTED IN YOUR BOOKS OF ACCOUNTS. THE RE LEVANT EXTRACT IS REPRODUCED AS UNDER: 2. DURING THE COURSE OF SEARCH PROCEEDINGS, STATEME NT U/S. 132(4) OF THE ACT OF SHRIARUN KUMAR, DIRECTOR OF YO UR COMPANY WAS RECORDED, WHERE HE ADMITTED A SURRENDER OF RS. 10 CRORES AND RS. 5 CRORES AS ADDITIONAL BUSINESS INCOME OF Y OUR COMPANY FOR THE F.Y. 2010-11 AND 2011-12, RESPECTIV ELY ON ACCOUNT OF 'CASH RECEIVED BACK OUT OF LAND DEVELOPM ENT CONTRACTS, LAND DEALS, OTHER DISALLOWANCES AND MISC ELLANEOUS HEADS'. THE RELEVANT EXTRACT OF STATEMENT IS AS UND ER: Q. 19: - WHAT WERE THE TOTAL VALUE OF WORKS ALLOTTE D TO STARTREKBUILDCONPVT LTD AND HOW MUCH CASH WAS RECEI VED AGAINST PAYMENTS MADE TO THEM BY YOUR COMPANY M/S JDMS DURING THE FINANCIAL YEAR 2010-11 AND 2011-12? ANSWER- DURING THE FINANCIAL YEAR 2010-11 AND 2011- 12, CONTRACTS WORTH RS. 10 CRORES ANDRS. 5 CRORES RESPE CTIVELY WERE ALLOTTED TO M/S STARTREKBUILDCONPVT LTD WHICH COULD NOT BE FULLY EXECUTED BY THEM. THE SAID SUB CONTRACTOR PAID BACK CERTAIN 24 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 FUNDS GIVEN TO THEM IN RETURN IN CASH. HOWEVER, THE PAYMENT TO THE SAID SUB CONTRACTOR STANDS REFLECTED AS EXPENDI TURE IN OUR BOOKS OF ACCOUNT. THEREFORE, ON ACCOUNT OF SUCH EXC ESSIVE EXPENDITURE, WE OFFER TO TAX AN AMOUNT OF RS. 9.45 CRORES AND RS. 4.90 FOR THE FINANCIAL YEARS 2010-11 AND 2011-1 2 RESPECTIVELY. ADDITIONALLY WE OFFER AN AMOUNT OF RS . 55 LACS AND RS. 10 LACS FOR THE FINANCIAL YEARS 2010-11 AND 201 1-12 TO COVER ANY OTHER DISALLOWANCE ON ACCOUNT OF EXCESSIV E EXPENDITURE, INVESTMENT, INCOME OR ISSUES OF ANY OT HER NATURE IN THE HANDS OF JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD. THUS, IN AGGREGATE, WE HEREBY OFFER ON AMO UNT OF RS. 10 CRORES AND RS. 5 CRORES FOR THE FINANCIAL YEARS 2010-11 AND 2011-12 RESPECTIVELY, AS INCOME WITH AN UNDERSTANDI NG THAT NEITHER ANY PENALTY NOR ANY PUNITIVE PROCEEDINGS OF ANY NATURE WILL EITHER BE INITIATED OR IMPOSED AGAINST OUR COM PANIES OR INDIVIDUALS OF OUR GROUP IN FUTURE. Q. NO. 20: - DURING THE COURSE OF RECORDING OF YOUR STATEMENT IN THE OFFICE OF THE UNDERSIGNED ON 05/09/2011, YOU HA D OFFERED AN AGGREGATE AMOUNT OF RS.15 CRORES TO TAX IN THE H ANDS OF JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD . EXPLAIN THE BASIS OF THE SAME. ANSWER: - AS STATED ABOVE, IT IS FACT THAT OUR COMP ANY, M/S JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD WAS EXECUTING VARIOUS CONSTRUCTION CONTRACTS AS ALLOTTE D BY EDUCOMP INFRASTRUCTURE AND PROJECTS LTD SINCE MAY/JUNE 2009 , IN FACT WE INTRODUCED SH. SANJAY SAINI AND HIS GROUP COMPAN IES, M/S OSN INFRASTRUCTURE AND PROJECTS PVT. LTD FOR MEETIN G THE ADDITIONAL REQUIREMENTS OF EXECUTION OF THE CONSTRU CTION CONTRACTS OF THE ABOVE SAID EDUCOMP GROUP IN THE MO NTH OF JUNE 2010. VARIOUS CONSTRUCTIONS CONTRACTS WERE ALL OTTED TO THEM BY THE EDUCOMP GROUP ON OUR RECOMMENDATION AND THE SAME ARE BEING EXECUTED BY SH. SANJAY SAINI AND HIS COMPANIES TILL DATE. I OFTEN USED TO VISIT THE BUSI NESS PREMISES OF SH. SANJAY SAINI AND HIS CONSULTANT, SH. ASHISH MITTAL IN ORDER TO DISCUSS VARIOUS ASPECTS OF THE COMMON CONS TRUCTION BUSINESS. DURING THE COURSE OF SURVEY/SEARCH OF SH. SANJAY SAINI AND HIS GROUP COMPANIES, HE DISCUSSED THE MAT TER WITH ME AND AFTER DUE CONSULTATION WITH HIM, I ADVISED H IM TO INCLUDE AN AMOUNT OF RS. 15 CRORES AS INCOME OF JUB ILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD. ALSO. I T WAS ON THIS BASIS THAT I REITERATED AND CONFIRMED THE OFFE R OF RS. 15 CRORES IN THE HANDS OF M/S JUBILANT DEVELOPERS AND MANAGEMENT SERVICES PVT LTD. IN MY STATEMENT ON 05/ 09/2011. I HEREBY RECONFIRM THAT CUT OF THE TOTAL AMOUNT OF RS. 15 CRORES, RS. 10.00 CRORES WILL BE OFFERED TO TAX FOR THE FIN ANCIAL YEAR 2010-11 AND RS. 5.00 CRORES FOR THE FINANCIAL YEAR 2011-12 25 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 WITH AN UNDERSTANDING THAT NEITHER ANY PENALTY NOR ANY PUNITIVE PROCEEDINGS OF ANY NATURE WILL EITHER BE I NITIATED OR IMPOSED AGAINST OUR COMPANIES OR INDIVIDUALS OF OUR GROUP. IN VIEW OF THE ABOVE, YOU ARE REQUIRED TO FURNISH T HE DETAILS OF INCOME AGGREGATING TO RS. 15 CRORES SURRENDERED AND ADMITTED BY SHRI ARUN KUMAR DURING THE SEARCH AND H OW THESE INCOME ARE REFLECTED IN YOUR BOOKS OF ACCOUNT S.' 2.1 IN RESPONSE TO SAME, THE A.R. OF THE ASSESSEE V IDE LETTER DATED 07.02.2014 REPLIED THE FOLLOWING: . IN REPLY TO YOUR QUESTIONNAIRE VIDE LETTER NO. F.NO .. DCIT/CC- 7/2013-14/1324 DATED 27/01/2014, UNDER INSTRUCTIONS OF THE ASSESSEE, IT IS CLARIFIED AT THE ONSET THAT NO SEAR CH OR SURVEY PROCEEDINGS WERE CONDUCTED AGAINST THE ASSESSEE COM PANY. HOWEVER, CERTAIN DOCUMENTS WERE FOUND AND SEIZED FR OM RHJJ BUSINESS PREMISES OF THIRD PARTY ON THE BASIS OF WH ICH ADDITIONAL INCOME WAS OFFERED BY THE DIRECTOR, MR. ARUN KUMAR IN HIS STATEMENT RECORDED IN RESPONSE TO NOTICE ISS UED UNDER SECTION 131 OF THE ACT. IT IS TO REITERATE THAT ADDITIONAL INCOME TO THE EX TENT OF RS. 5 CRORES WAS OFFERED FOR THE CAPTIONED ASSESSMENT YEA R ON THE BASIS OF VARIOUS PAPERS FOUND, ESPECIALLY PAGES 1 T O 79 OF ANNEXURE AA3 FOUND AND SEIZED FROM THE PREMISES AS MENTIONED SUPRA. IT MAY ALSO BE APPRECIATED THAT THE ASSESSEE COMPAN Y HAS DULY COMPLIED WITH ITS OFFER OF ADDITIONAL INCOME AND HA S INCORPORATED THE SAME IN ITS RETURN OF INCOME DULY FILED WITH THE DEPARTMENT. A COPY OF THE COMPUTATION OF ASSESSABLE INCOME FILED FOR THE RELEVANT PERIOD IS ENCLOSED TO SUBSTA NTIATE THAT THE RELEVANT ADDITIONAL INCOME TO THE EXTENT OF RS. 5 C RORES STANDS DULY INCLUDED IN ADDITION TO THE REGULAR INCOME FOR THE SAID PERIOD. NECESSARY TAX LIABILITY DUE THEREON HAS ALR EADY BEEN DISCHARGED WHICH IS APPARENT FROM THE SAID RETURN F ILED. IT IS ALSO CLARIFIED THAT THE SAID ADDITIONAL INCOM E HAS BEEN OFFERED IN ADDITION TO THE INCOME DERIVED ON THE BA SIS OF THE BOOKS OF ACCOUNT. THEREFORE, NO ADVERSE INFERENCE M AY KINDLY BE DRAWN AGAINST THE SAME. NO FRESH CONTRACTS WERE ENTERED DURING THE RELEVANT PERIOD. A CONFIRMED COPY OF THE LEDGER ACCOUNT OF M/S EISML A S PER OUR BOOKS OF ACCOUNT IS ENCLOSED. NO FRESH CONTRACTS WE RE ALLOTTED TO ANY SUB CONTRACTOR DURING THE RELEVANT PERIOD.' 26 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 THE ASSESSEE HAS ALREADY FURNISHED DETAILED REPLY R EGARDING THE MANNER OF INCLUSION OF ADDITIONAL INCOME OFFERED OF RS. 5 CRORES FOR THE RELEVANT PERIOD UNDER CONSIDERATION. KEEPING IN VIEW THE ABOVE SAID FACTS, NO ADVERSE COGNIZANCE IS TAKEN IN THIS REGARD. 6.3 ON PERUSAL OF THE ABOVE FINDING IN THE CASE OF OSN AND JDMS, IT IS EVIDENT THAT OSN AND JDMS IN THEIR BOOK S OF ACCOUNT HAD SHOWN RECEIPT FROM THE ASSESSEE AND EXPENDITURE TOWARDS CONSTRUCTION OF THE BUILDING FOR THE ASSESSEE AND C LAIMED THAT THEY FURTHER PAID TO SUBCONTRACTORS FOR SUCH CONSTR UCTION EXPENDITURE BY CHEQUE. HOWEVER, AS A RESULT OF DOCU MENTS FOUND AND INVESTIGATION DURING SEARCH AND SURVEY PROCEEDI NG ON THE PREMISES OF EDUCOMP GROUP AND THOSE CONTRACTORS, T HEY ADMITTED THAT NO SUCH CONSTRUCTION WORK WAS ACTUALL Y DONE OR VALUE OF SUCH CONSTRUCTION DONE WAS ACTUALLY VERY L ESS AND THE PAYMENT MADE TO THE SUBCONTRACTORS BY WAY OF CHEQUE WAS RETURNED BACK IN CASH TO THEM. 6.4 IN THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT EMPLOYEES OF THE ASSESSEE SH. SHALABH RAIZADA (SENIOR EXECUTIVE) AND BRIG (RETIRED) VIKRAM SINGH (VICE PRESIDENT OF THE ASSESSEE COMPANY) HAS SIGNED DOCUMENTS IN TH E CAPACITY OF AUTHORISED SIGNATORY OF THOSE CONTRACTORS, NAMELY, OSN AND JDMS. HE ALSO NOTED THAT THE FACT OF ACTUAL VALUE O F THE CONSTRUCTION BEING LESS AS COMPARED TO THE VALUE SH OWN BY CONTRACTORS IN THEIR BOOKS OF ACCOUNTS AS PAID TO T HE SUBCONTRACTOR AND THIS FACT WAS WITHIN THE KNOWLEDG E OF THE ASSESSEE. BASED ON THESE FACTS, THE ASSESSING OFFIC ER CONCLUDED THAT THE ASSESSEE WAS IN COLLUSION WITH THE CONTRAC TORS FOR 27 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 ARTIFICIALLY RAISED OR INFLATING CAPITAL COST OF TH E BUILDING IN ORDER TO CLAIM ENHANCED DEPRECIATION. 6.5 THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THER E IS NO EVIDENCE ON RECORD THAT ASSESSEE AUTHORISED ITS PER SONAL TO MANAGE OR SUPERVISE THE AFFAIRS OF THE CONTRACTOR A ND NO BENEFIT IN THE FORM OF SALARY OR OTHERWISE DERIVED BY THE P ERSONNEL OF THE ASSESSEE FROM SAID CONTACTORS. IN OUR OPINION, THE PERSONNEL OF THE ASSESSEE SHALL NOT ACT FOR THE CONTRACTORS IN T HEIR OWN SWEET WILL WITHOUT ANY REMUNERATION BY THE CONTRACTORS AN D THEY CAN ACT WITHOUT REMUNERATION ONLY ON THE IMPLIED DIRECT ION OF THE ASSESSEE FOR MANAGING THE ENTIRE GAME OF CLAIMING E XCESS DEPRECIATION FOR REDUCING THE TAX LIABILITY OF THE ASSESSEE. WHEN DOCUMENTARY EVIDENCE OF MANAGING AFFAIRS OF THE CON TRACTOR BY THE PERSONNEL OF THE ASSESSEE ARE FOUND DURING SEAR CH ACTION AND THE ASSESSING OFFICER DULY NOTIFIED THE ASSESSEE RE GARDING THOSE EVIDENCES TO SUGGEST THAT THE ASSESSEE HAS ACTED IN COLLUSION WITH THE CONTRACTORS FOR ENHANCING COST OF CONSTRUCTION OF THE BUILDING, THE ONUS WAS ON THE ASSESSEE TO PRODUCE THOSE PERSO NNEL BEFORE THE ASSESSING OFFICER TO BRING THE TRUTH AS ON WHOS E DIRECTION THEY SIGNED DOCUMENT AS AUTHORISED SIGNATORY OF THE CONTACTORS. THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS AND C ANNOT SHIFT THE BURDEN ON THE REVENUE THAT NO DOCUMENT AUTHORISING THOSE PERSONS TO MANAGE THE AFFAIRS OF THE CONTRACTOR WAS FOUND DURING THE COURSE OF THE SEARCH. THE ASSESSEE CONTENDED TH AT THE COST OF THE ASSETS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS NOT MORE THAN THE RECEIPT OFFERED BY THE CONTRAC TORS IN THEIR BOOKS OF ACCOUNTS. THIS ARGUMENT IS ALSO OF NO HELP TO THE ASSESSEE, AS THE CONTACTORS HAVE ALREADY ACCEPTED T HE FACT OF 28 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 OBTAINING BOGUS BILLS FROM THE SUBCONTRACTORS AND R OUTING OF THE MONEY BACK IN THE FORM OF CASH, WITHOUT DOING ACTUA L WORK OR DOING WORK LESS THAN BILLED FOR. 6.6 IN VIEW OF THE ABOVE FACTUAL OBSERVATIONS, IT IS B EYOND DOUBT THAT THE RELEVANT CAPITAL ASSET IN THE FORM OF THE BUILDING OF THE ASSESSEE CORRESPONDING TO THE EXPENDITURE NOT INCUR RED ACTUALLY BY THOSE TWO CONTRACTORS MENTIONED ABOVE, DID NOT C OME INTO EXISTENCE AND THUS THE ASSESSEE CANNOT BE ENTITLED FOR DEPRECIATION IN RESPECT OF THE CAPITAL ASSET WHICH HAS NEVER COME INTO EXISTENCE. THE BILLS RAISED BY THE CONTRACTORS ON THE ASSESSEE ARE INFLATED ONE AND NOT OF ACTUAL AMOUNT OF THE WO RK DONE FOR THE ASSESSEE. CONSEQUENTLY, THE COST DEBITED BY THE ASS ESSEE IN RESPECT OF THE BUILDING, WHICH HAS BEEN CAPITALIZED IS INFLATED AND NOT THE ACTUAL COST. THE RELIANCE PLACED BY THE LD. COUNSEL OF THE ASSESSEE IN THE CASE OF M/S SSIPL LUXURY FASHION PR IVATE LIMITED (SUPRA) AND DISCOVERY ESTATE PRIVATE LIMITED (SUPRA ) IS OF NO ASSISTANCE AS FACTS AND CIRCUMSTANCES OF THOSE CASE ARE DIFFERENT FROM THE CASE OF THE ASSESSEE. IN THE CASE OF SSIPL LUXURY FASHION PRIVATE LIMITED (SUPRA) A PARTICULAR RECEIP T WAS ALREADY TAXED IN THE HANDS OF THE HOLDING COMPANY AND THUS THE ASSESSEE CONTESTED THAT IT SHOULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE, WHEREAS THE LEARNED DR CONTESTED THAT RE CEIPT SHOULD BE TAXED IN THE HANDS OF THE CORRECT PERSON. THE TR IBUNAL HELD THAT SAME INCOME CANNOT BE TAXED TWICE UNLESS SO PR OVIDED IN THE ACT. IN THE CASE OF DISCOVERY ESTATE PRIVATE LIMIT ED (SUPRA) , THE OBSERVATION OF THE HONBLE HIGH COURT ARE REGARDING THAT NO ADDITION SHOULD BE MADE ON THE BASIS OF THE SUSPICI ON OR SURMISES OR BY TAKING NOTE OF NOTORIOUS PRACTICE PR EVAILING IN THAT 29 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 TRADE CIRCLES. THE RELEVANT PARAGRAPH OF THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DISCOVERY E STATE PRIVATE LIMITED (SUPRA) IS REPRODUCED AS UNDER: 17. IT ONLY REMAINS FOR US TO REFER TO THE OBSERVA TIONS OF THE ASSESSING OFFICER TO THE EFFECT THAT NO ONE MAKES A LOSS IN REAL ESTATE BUSINESS AND THAT THE MARKET PERCEPTIONS INDICATE T HAT THE PRICES OF THE IMMOVEABLE PROPERTIES ARE ALWAYS ON THE UPWARD TREND. THESE OBSERVATIONS HAVE, INTER ALIA, FORMED THE BASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. IT WAS EVEN SUGGESTED BEF ORE US ON BEHALF OF THE REVENUE THAT IT IS A 'NOTORIOUS PRACTICE' PR EVAILING IN REAL ESTATE CIRCLES THAT IN ALL PROPERTY TRANSACTIONS THERE IS NON-DISCLOSURE OF THE TULL CONSIDERATION. AS POINTED OUT EARLIER, THIS CA NNOT PER SE CONSTITUTE THE BASIS OF THE ADDITION, THOUGH WE MUS T HASTEN TO ADD THAT IT CAN VERY WELL BE A STARTING POINT FOR FURTH ER INVESTIGATION. IN LALCHAND BHAGAT AMBICA RAM VS. CIT: (1959) 37 ITR 2 88, THE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING AD DITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAK ING NOTE OF THE 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. I T WAS OBSERVED AS UNDER: 'ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIET Y FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENG AL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIE TY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COM MODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPEL LANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEH ALF.' 6.7 THUS, FACTS AND CIRCUMSTANCES OF THE CASES RELIED UPON BY THE ASSESSEE BEING DISTINGUISHABLE, THE RATIO OF TH OSE DECISIONS CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE. IN T HE FACTS OF THE CASE THE PREPONDERANCE OF THE PROBABILITY SUGGESTS THAT RAISING OF BOGUS BILLS BY THE SUBCONTRACTORS TO THE CONTACTORS AND THEN ROUTING BACK OF THE MONEY IN THE FORM OF THE CASH D EFINITELY MUST HAVE BEEN DONE ON THE DIRECTION OF THE ASSESSEE AS ASSESSEE IS THE ULTIMATE BENEFICIARY BY WAY OF EXCESS DEDUCTION OF DEPRECIATION ON THE CAPITAL ASSET IN THE FORM OF BUILDING. 30 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 6.8 IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED A BOVE, IN PRINCIPLE WE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEPRECIATION ON THE INFLATED PORTION OF THE COST OF CAPITAL ASSET SHOWN BY THE ASSESSEE AS INCURRED THROUGH TWO CONTR ACTORS, NAMELY, OSN AND JDMS. 6.9 AS FAR AS THE QUANTUM OF DEPRECIATION IS CONCER NED, WE FIND THAT WHILE COMPUTING THE CUMULATIVE INFLATED EXPENS ES IN THE THE CASE OF JDMS, THE LEARNED CIT(A) HAS MISSED THE UND ISCLOSED INCOME OF RS.10 CRORE DECLARED BY THE JDMS FOR FINA NCIAL YEAR 2010-11 AND THE NET CAPITAL WORK-IN-PROGRESS HAS BE EN SHOWN THAT RS.111,16,58,703/- INSTEAD OF RS.101,16,58,703 /-. SIMILARLY, IN THE CASE OF OSN ALSO THE UNDISCLOSED INCOME DECLARED BY THE SAID PARTY IN RESPECT OF BUILDING C ONSTRUCTED FOR THE ASSESSEE HAS NOT TAKEN INTO ACCOUNT FOR REDUCIN G THE CAPITAL COST OF THE BUILDING. THE AO WAS REQUIRED TO EXAMIN E RELEVANT BILLS OF THE TWO CONTRACTORS, WHERE THE VALUE OF CO NSTRUCTION WORK HAS BEEN INFLATED. AS THE QUANTUM OF DEPRECIATION T O BE DISALLOWED ON THE ACCOUNT OF INFLATION OF CAPITAL A SSET OF BUILDING HAS NOT BEEN COMPUTED CORRECTLY BY THE LOWER AUTHOR ITIES, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE OF COMPUTATION OF DISALLOWANCE OF DEPRECIATION IN THE CASE OF THE ASSESSEE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING IN VIEW OF OUR OBSER VATION MADE ABOVE. IT IS NEEDLESS TO MENTION THAT ASSESSEE SHAL L BE AFFORDED ADEQUATE OPPORTUNITY OF BEING HEARD. 6.9 THE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDI NGLY ALLOWED PARTY FOR STATISTICAL PURPOSES. 31 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 ITA NOS.545/DEL/2016 & 193/DEL/2017 ASSESSMENT YEARS: 2013-14 & 2014-15 7. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE HAVING I TA NO. 545/DEL/2016 AND ITA NO. 1931/DEL/2017 FOR ASSESSME NT YEAR 2013-14 AND 2014-15 RESPECTIVELY. IDENTICAL GROUNDS HAVE BEEN RAISED IN BOTH THESE APPEALS EXCEPT THE CHANGE OF T HE AMOUNT, WHICH IN ASSESSMENT YEAR 2013-14 IS 1,89,47,963/- AND IN ASSESSMENT YEAR 2014-15 IS 1,70,53,166/-. THE GROUND OF THE APPEAL FOR ASSESSMENT YEAR 2013-14 IS REPRODUCED AS UNDER: 1. THE OF THE LEARNED CIT(A) IS NOT CORRECT IN LAW AND ON FACTS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.1,89,47,963/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESSIVE DEPRECIATION. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. 8. THE LEARNED CIT(A) IN ASSESSMENT YEAR 2013-14 DELE TED THE DISALLOWANCE OF DEPRECIATION IN VIEW OF HIS FINDING IN ASSESSMENT YEAR 2012-13 OBSERVING AS UNDER : 4.2.2 THIS MATTER EMANATE FROM THE DISALLOWANCES I N THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHEREIN THE A O HAD, BASED ON HIS OBSERVATION THAT THE CONTRACTORS, M/S JUBILI ANT DEVELOPERS & MANAGEMENT SERVICES PVT. LTD. (JDMS) AND M/S OSN IN FRASTRUCTURE & PROJECTS PVT. LTD. (OIPPL), HAD DISCLOSED CERTAIN EXPENSES ON ACCOUNT OF THE CONTRACT WORK OF CONSTRUCTION AWARDE D TO THEM BY THE APPELLANT, HELD THAT THE APPELLANT HAS INFLATED COS T OF CAPITAL ASSETS THROUGH BOOKING OF INFLATED BILLS RAISED BY THESE C ONTRACTORS AND HAD WORKED OUT THE EXCESS INVOICES AGAINST WORK DONE BY THE CONTRACTORS VIS-A-VIS THE CAPITALIZATION OF ASSET BY THE APPELL ANT AFTER CONSIDERING THE EXPENSES ON CONTRACT ALLEGEDLY INFLATED BY THE CONTRACTORS, AND HAD DISALLOWED COMMENSURATE DEPRECIATION. AFTER DET AILED DISCUSSION IN THE APPELLATE ORDER DATED 07.10.2015 IN APPEAL NO.81/14-15 IN THE CASE OF THE SAME ASSESSEE FOR AY 2012-13 I HAVE HELD THAT THERE IS NO CASE OF EXCESS CAPITALIZATION AND THEREFORE THE 32 ITA NOS.6894/DEL/2015; 545/DEL/2016 &193/DEL/2017 DEPRECIATION DISALLOWED BY THE AO WAS DELETED. THE DISALLOWANCE OF DEPRECIATION IN THIS YEAR HAS BEEN MADE BY THE AO B Y ADOPTING THE WDB AS ON 31.03.2012 AS PER HIS FINDINGS IN THE ASS ESSMENT ORDER FOR AY 2012-13 WHICH STANDS MODIFIED BY MY ABOVE OR DER DATED 07.10.2015, AND THEREFORE THERE IS NO CASE FOR DISA LLOWANCE ON ACCOUNT OF DEPRECIATION ON THE ALLEGED EXCESS CAPIT ALIZED ASSETS. THE ADDITION OF RS. 1,89,47,963/- IS THEREFORE DELETED. 9. AS THE ISSUE IN DISPUTE IN BOTH THE YEARS UNDER CONSIDERATION IS DEPENDENT ON THE OUTCOME OF ASSESS MENT YEAR 2012-13, WHICH WE HAVE RESTORED TO THE ASSESSING OF FICER FOR DECIDING THE QUANTUM OF THE DEPRECIATION, WE FEEL I T APPROPRIATE TO RESTORE THE GROUNDS RAISED IN ASSESSMENT YEARS 2013 -14 AND 2014-15 FOR DECIDING THE QUANTUM OF THE DEPRECIATIO N ON THE BASIS OF THE WRITTEN DOWN VALUE OF THE CAPITAL ASSE T OF THE BUILDING DETERMINED FOR ASSESSMENT YEAR 2012-13. IT IS NEEDL ESS TO MENTION THAT THE ASSESSEE SHALL BE AFFORDED ADEQUAT E OPPORTUNITY OF BEING HEARD. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED PARTLY FOR STATISTICAL PURPOSES. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENU E ARE ALLOWED PARTLY FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2019. SD/- SD/- (SUDHANSHU SRIVASTAVA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH NOVEMBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI