JSW STEEL (SALAV ) LTD, MUMBAI V. DCIT CEN CIR 22, MUMBAI

ITA 69/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8587 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 05-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: MITESH SHAH
• Keywords: Unexplained expenditure; Capital asset; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Earning of tax free income; Additional evidence; Fair market value; Bad and doubtful debts; Accommodation entries
• Section: 14A; 132

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./69/MUM/2015, / ASSESSMENT YEAR: 2010-11 ./I.T.A./70/MUM/2015, / ASSESSMENT YEAR: 2011-12 M/S. JSW STEEL (SALAV) LIMITED (FORMERLY KNOWN AS M/S. WELSPUN MAXSTEEL LTD.) WELSPUN HOUSE, 7TH FLOOR KAMALA CITY, SENAPATI BAPAT MARG LOWER PAREL, MUMBAI-400 013. PAN:AACCV 7689 R VS. DCIT, CENTRAL CIRCLE-22 R.NO.465, 4TH FLOOR, AAYAKAR BHAVAN MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) ./I.T.A./394/MUM/2015, / ASSESSMENT YEAR: 2011-12 DCIT, CENTRAL CIRCLE-22 MUMBAI-400 020. VS. M/S. JSW STEEL (SALAV) LIMITED MUMBAI-400 013. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: MS. VIDISHA KALRA-CIT-DR /ASSESSEE BY: SHRI MITESH SHAH -AR / DATE OF HEARING: 14.12.2016 / DATE OF PRONOUNCEMENT: 08/02/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 07/10/2014,OF THE CIT(A )-39,MUMBAI THE ASSESSING OFFICER (AO)AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR T HE AY.2011-12.THE ASSESSEE HAS ALSO FILED APPEAL FOR THE AY.2010-11.AS MOST OF THE ISSUES IN THESE APPEALS ARE COMMON,SO,WE ARE ADJUDICATING THEM BY PASSING A SINGLE ORDER. ITA/69/MUM/2015,AY. 2010-11: BRIEF BACKGROUND- 2. AN ACTION U/S. 132 OF THE ACT WAS CARRIED OUT ON 13 /10/2010 AT THE BUSINESS/RESIDENTIAL PREMISES OF PERSONS OF WELL SPUN GROUP OF AND CER TAIN DOCUMENTS AND LOOSE PAPERS WERE SEIZED.IN RESPONSE TO THE NOTICE U/S.153 C,THE ASSE SSEE FILED ITS RETURN OF INCOME ON 09/09/ 2011,SHOWING TOTAL INCOME OF RS.11.75 CRORES THAT I NCLUDED ADDITIONAL INCOME OF RS.32 CRORES DISCLOSED AND RETURNED BY THE ASSESSEE ON AC COUNT OF SALE OF SCRAP.THE AO COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.153C MAKING CERTIAN ADDITIONS/DISALLOWANCES. 2.1. FIRST EFFECTIVE GROUND IS ABOUT DISALLOWANCE MADE U /S.14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE WAS IN RECEIPT OF EXEMPT INCOME BY WAY OF DIVIDEND OF RS.7.97 LAKHS,THAT IT HAD MADE I NVESTMENT IN SHARES TO THE TUNE OF RS.2.99 CRORES,THAT NO DISALLOWANCE U/S.14A WAS MADE.HE DIR ECTED THE ASSESSEE TO FILE SUBMISSION IN THAT REGARD.THE ASSESSEE SUBMITTED THAT IT HAD MADE INVESTMENT OUT OF ITS OWN FUNDS AND 69/15,70/15-JSW&394/15-WELSPUN 2 ACCRUALS.HOWEVER,THE AO DID NOT AGREE WITH THE ASSE SSEE AND REFERRING TO THE JUDGMENT OF GODREJ & BOYCE MANUFACTURING COMPANY LTD.(328 ITR 8 1)HELD THAT THE ASSESSEE HAD NOT ESTABLISHED THAT ENTIRE INVESTMENT HAD BEEN MADE OU T OF ITS OWN FUNDS,THAT THE INTEREST RELATING TO INVESTMENT HAD TO BE DISALLOWED. APPLYING THE PR OVISIONS OF RULE 8D OF THE RULES,HE MADE A DISALLOWANCE OF RS. 21.80 LAKHS. 2.2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT RELIED UPON THE CASE OF RELIANCE UTILITY AND POWER LTD.(313 ITR 340)AND MADE SUBMISSIONS. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HE LD THAT THE ASSESSEE HAD RECEIVED TAX-FREE DIVIDEND INCOME OF RS.7.97LAKHS,THAT IT HAD CLAIMED THAT NO EXPENDITURE WAS INCURRED FOR EARNING THE EXEMPT INCOME,THAT IT HAD MADE INVESTME NT OF RS. 2.99 CRORES IN SHARES AND HAD SUBMITTED THAT INVESTMENT WAS MADE FOR STRATEGIC PU RPOSES THAT IT HAD NOT ESTABLISHED SATISFACTORILY THAT ENTIRE INVESTMENT HAD BEEN MADE OUT OF INTERNAL ACCRUALS ALONE,THAT NO DETAILS WERE FILED TO PROVE THAT IT HAD SUFFICIENT FUNDS.HE FURTHER OBSERVED THAT THE AO HAD MADE DISALLOWANCE OF RS.2.84 LAKHS ONLY,THAT DISALL OWANCE WAS TO BE MADE OF RS.21.80 LAKHS.ACCORDINGLY,HE ENHANCED THE DISALLOWANCE BY R S.18.95 LAKHS. 2.3. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) ARGUED THAT THE ASSESSEE HAD PURCHASED SHARES OF NMDC FROM WHOM IT WAS PURCHASING RAW MATERIAL, THAT THIS WAS THE ONLY INVESTMENT MADE DURING THE YEAR, THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO MAKE INVESTMENT.ALTERNATIVELY,IT WAS ARGUED THAT REASONABLE DISALLOWANCE SHOULD BE MADE KEEPING IN CONSIDERATION THE EXEMPT INCOME EARNED B Y THE ASSESSEE.THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD AN EXEMPT INCOME TO THE TUNE OF RS.7.97 LAKHS,THAT THE AO MADE DISALLOWANCE OF RS.2.84 LAKHS, INVOKING THE PROVISI ONS OF SECTION 14 A R.W.R. 8D OF THE RULES, THAT THE FAA ENHANCED DISALLOWANCE TO RS.21.80 LAKH S,THAT BOTH THE AUTHORITIES HELD THAT THERE WAS NO PROOF THAT THE ASSESSEE HAD SUFFICIENT OWN F UNDS TO MAKE INVESTMENTS IN SHARES DURING THE YEAR UNDER CONSIDERATION. WE HAVE GONE THROUGH THE BALANCE SHEET OF THE ASSE SSEE AS ON 31.3.2010.WE FIND THAT THE RESERVE AND SURPLUS ALON G WITH THE CAPITAL OF THE ASSESSEE FOR THE YEAR (RS.286 CRORES APPROX.) IS FAR MORE THAN THE I NVESTMENTS MADE(RS.2.99 CRORES). NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE SHARES PURCHASED BY THE ASSESSEE FOR THE YEAR UNDER APPEAL WAS NOT A STRATEGIC INVESTMENT.WE FIND THAT THE AO/FAA HAS NOT MENTIONED ANYTHING ABOUT THE EXPENDITURE INCURRED BY THE ASSE SSEE FOR EARNING EXEMPT INCOME.IN OUR 69/15,70/15-JSW&394/15-WELSPUN 3 OPINION IF THE ASSESSEE DOES NOT CLAIM ANY EXPENDIT URE FOR EARNING EXEMPT INCOME NO DIS - ALLOWANCE CAN BE MADE INVOKING THE PROVISIONS OF SE CTION 14A R.W.R.8D OF THE RULES. CONSIDERING THE ABOVE,FIRST GROUND OF APPEAL IS DEC IDED IN FAVOUR OF THE ASSESSEE. 3. SECOND EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMI NG THE ADDITION OF RS. 84.65 LAKHS UNDER THE HEAD SUNDRY BALANCES WRITTEN OFF.DURING THE ASS ESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD DEBITED ITS P&L A/C.BY SUNDRY BALA NCES WRITTEN OFF OF RS. 84,65,755/-. HE DIRECTED THE ASSESSEE TO FILE COMPLETE DETAILS IN T HAT REGARD AND TO PROVE HOW THE VARIOUS CONDITIONS STIPULATED IN SECTION 36(1)(VII) R.W.S.3 6(2)WERE FULFILLED.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,THE AO HELD THAT THE ASS ESSEE HAD NEITHER SUBMITTED THE DETAILS REQUIRED NOT FURNISHED ANY PROOF TO SHOW THAT THE A MOUNT IN QUESTION HAD BEEN OFFERED FOR TAX IN THE EARLIER YEARS.INVOKING THE PROVISIONS OF SEC TION 36(1) (VII)OF THE ACT,HE MADE A DISALLOWANCE OF RS.84.65 LAKHS. 3.1. DURING THE APPELLATE PROCEEDINGS BEFORE THE FAA, TH E ASSESSEE STATED THAT IT HAD WRITTEN OFF GRANT RECEIVABLE FROM ASIDE (RS. 71.78 LAKHS) A ND SERVICE TAX (RS. 12.87 LAKHS),THAT IT HAD ACQUIRED A SPONGE IRON UNIT AS A GOING CONCERN ON 22/05/2009, THAT IN THE PAST IT WAS GRANTED CENTRAL ASSISTANCE LTD RS. 203.80 LAKHS BY MAHARASHTRA MARITIME BOARD, THAT THE EARLIER ENTITY HAD SHOWN THE GRANT IS ITS INCOME IN THE PROFIT AND LOSS ACCOUNT, THAT OUT OF THE TOTAL GRANT RS. 253.09 LAKHS WAS RECEIVED,THAT THE BALANCE CENTRAL ASSISTANCE WAS NOT RECEIVED AND THAT THEREFORE SAME WAS WRITTEN OFF AS IRRECOVE RABLE ITEM DURING THE YEAR UNDER CONSIDERATION, THAT SERVICE TAX ON VAT WAS DISPUTED BY THE CLIENT OF THE ASSESSEE AND WAS NOT PAID BY IT, THE ASSESSEE WROTE IT OFF.THE ASSESSEE SUBMITTED COPIES OF LETTERS OF MAHARASHTRA MARITIME BOARD WHEREIN IT WAS MENTIONED THAT AND AM OUNT OF RS.253.09 LAKHS WAS RELEASED TO THE ERSTWHILE COMPANY TOWARDS CENTRAL ASSISTANCE SCHEME.THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE,WERE ADMITTED UNDER RULE 4 6A OF THE RULES BY THE FAA AND WERE FORWARDED TO THE AO. AFTER CONSIDERING THE REMAND REPORT OF THE AO AND T HE REJOINDER AND THE SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THE DISPUTED AMOUNT WAS TAKEN OVER FROM THE BOOKS OF EARLIER ENTITY, THAT THE ASSESSEE HAD TAKEN OVER THE BUSINE SS OF THAT ENTITY UNDER A SLUMP SALE,THAT SLUMP SALE CONSTITUTED TRANSFER WITHIN THE MEANING OF SECTION 2 (47) OF THE ACT, THAT IN THE CASE OF SUCH SALE THE IDENTITY OF THE ASSESSEE WOUL D COMPLETELY CHANGE,THAT THE PURCHASER COULD NOT BE ALLOWED TO CORRELATE ANY DEBT TAKEN OV ER TO ANY INCOME OFFERED TO TAX EARLIER BY THE SELLER, THAT THE PROVISIONS OF SECTION 36(2) RE LATED THE CONDITION TO BE FULFILLED BY THE ASSESSEE ITSELF AND NOT BY ANY OTHER PERSON,THAT TH E ASSESSEE HAD TAKEN OVER THE ASSETS AND 69/15,70/15-JSW&394/15-WELSPUN 4 LIABILITIES AT FAIR MARKET VALUE IN CONTRAST TO WRI TTEN DOWN VALUE IN THE BOOKS OF ACCOUNTS OF THE SELLER COMPANY, THAT THE CONDITIONS OF SECTION 36 WERE NOT SATISFIED.FINALLY,HE UPHELD THE DISALLOWANCE MADE BY THE AO. WITH REGARD TO THE ALT ERNATE ARGUMENT,HE OBSERVED THAT IT WOULD TANTAMOUNT TO WRITING OFF AND ASSET TAKEN OVE R UNDER SLUMP SALE,THAT IT WOULD BE A CAPITAL LOSS. 3.2. DURING THE COURSE OF HEARING BEFORE US, THE AR STAT ED THAT THE ASSESSEE HAD PURCHASED A GOING CONCERN DURING THE YEAR ALONGWITH ASSETS AND LIABILITIES OF THAT ENTITY, THAT THE BALANCES WERE NOT RECOVERABLE, THAT THE ASSESSEE WROTE OFF T HE BALANCES DURING THE YEAR UNDER APPEAL. THE DR ARGUED THAT THE INCOME AND EXPENSES FOR THE EARLIER YEARS WAS CONSIDERED BY THE SELLER OF THE ERSTWHILE ENTITY, THAT ONLY NET WORTH WAS CALCULATED FOR SLUMP SALE PURPOSES, THAT ASSESSEE WAS NOT ENTITLED TO CLAIM THE WRITTEN OFF BALANCES FOR THE CLAIM FOR THE YEAR UNDER CONSIDERATION . 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT THE ASSESSEE HAD ACQUIRED M/S.VIKRAM ISPA T (VI)FROM M/S. GRASIM INDUSTRIES DURING THE YEAR UNDER CONSIDERATION AS A GOING CONCERN,THA T VI WAS GRANTED CENTRAL ASSISTANCE BY MAHARASHTRA MARITIME BOARD,THAT OUT OF THE TOTAL GR ANT OF RS.380 LAKHS THE BOARD RELEASED ASSISTANCE OF RS. 253.09 LAKHS ONLY,THAT THE ASSESS EE WROTE OFF THE BALANCE AMOUNT, THAT THE FAA HELD THAT UNDER SCHEME OF SLUMP SALE THE ASSESS EE WAS NOT ENTITLED TO CLAIM THE ASSETS/ LIABILITIES OF THE ERSTWHILE ENTITY, THAT THE LOSS WAS CAPITAL IN NATURE,THAT THE ASSESSEE HAD WRITTEN OFF GRANT RECEIVABLE FROM ASIDE (RS.71.78 L AKHS), SERVICE TAX ON VAT (RS.12.87 LAKHS),THAT THERE IS NO DOUBT ABOUT WRITING OFF OF BOTH THE ITEMS DURING THE YEAR UNDER APPEAL IN THE BOOKS OF ACCOUNT. IN OUR OPINION,THERE IS NO BAR ON MAKING A CLAIM ABOUT THE SUMS WRITTEN OFF IN A SLUMP SALE TRANSACTION.THE ASSESSE E HAD TAKEN OVER THE ASSETS AS WELL AS THE LIABILITIES OF VI. IN THE REMAND REPORT PROCEEDINGS ,THE ASSESSEE HAD SUBMITTED THE EVIDENCES PROVING THAT THE ERSTWHILE ENTITY HAD OFFERED THE INCOME UNDER THE HEAD OTHER INCOME. IT IS FOUND THAT GRANT RECEIVABLE FROM ASIB OF RS.71.78 L AKHS WAS CREDITED IN THE P&L A/C. FOR THE PERIOD ENDED 22.5.2009.THUS, THE AMOUNT WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION WAS ALREADY OFFERED FOR TAXATION.THE FAA WAS NOT JUSTIF IED IN REJECTING THE CLAIM MADE BY THE ASSESSEE. 3.3.A. AS FAR AS VAT ON SERVICE CHARGES PORTION ON NATURAL GAS IS CONCERNED IT IS FOUND THAT THE CLIENTS HAD DISPUTED LEVY OF SERVICES AND FINALLY D ID NOT PAY SUCH TAX.THE LOSS CLAIMED BY THE ASSESSEE WAS DIRECTLY LINKED WITH BUSINESS ACTIVITY AND, THEREFORE,WAS A BUSINESS LOSS. THE WRITING OFF OF THE AMOUNT IS NOT IN DISPUTE.SO, EVE N IF IT COULD NOT BE ALLOWED U/S.36 THE SAME IS ALLOWABLE U/S.28 OF THE ACT.THEREFORE, WE ALLOW GROUND NO.2. 69/15,70/15-JSW&394/15-WELSPUN 5 4. NEXT GROUND OF APPEAL DEALS WITH CONFIRMING THE ADD ITION OF RS.9.37 CRORES UNDER THE HEAD INSURANCE CLAIM WRITTEN OFF.DURING THE ASSESSMENT P ROCEEDINGS,THE AO FOUND THAT THE AO FOUND THAT THE ASSESSEE HAD DEBITED ITS PROFIT AND LOSS ACCOUNT BY INSURANCE CLAIM WRITTEN OFF OF RS. 9.37 CRORES.HE DIRECTED IT TO FILE NECESSARY DETAILS IN THAT REGARD.AFTER CONSIDERING THE SAME,HE HELD THAT THE WRITE-OFFS WERE NOT RELATED T O ANY INCOME OFFERED TO TAX IN EARLIER YEARS,THAT SAME WERE ON ACCOUNT OF INSURANCE CLAIM FOR BARGES,THAT BARGES WERE CAPITAL ASSET OF THE COMPANY, THAT THE LOSS ON THAT ACCOUNT HAD T O BE CONSIDERED AS A CAPITAL LOSS. FINALLY,HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE. 4.1. BEFORE THE FAA,DURING THE APPELLATE PROCEEDINGS, TH E ASSESSEE CONTENDED THAT VI HAD LOST INSURANCE CLAIM OF RS. 9.37 CRORES WITH NEW INDIA A SSURANCE COMPANY LTD. CONSEQUENT UPON AN ACCIDENT THAT TOOK PLACE ON 24/06/2007, THAT VI HAD SHOWN STCG AT RS. 2.09 CRORES AND RS.3.61 CRORES IN THE AY.S 2008-09 AND 2009-10 IN A CCORDANCE WITH THE PROVISIONS OF SECTION 50,THAT THE INSURANCE COMPANY REPUDIATED THE CLAIM ON 25/05/2012,THAT ALL THE CONDITIONS OF SECTION 36 WERE SATISFIED, THAT THE DEBT AROSE IN T HE ORDINARY COURSE OF BUSINESS CARRIED ON BY THE ASSESSEE AND HAD BEEN TAKEN INTO ACCOUNT IN COM PUTING ASSESSABLE INCOME IN THE PAST.THE FAA ORDERED FOR REMAND REPORT FROM THE AO IN THAT R EGARD. AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT, HE HELD THAT BECAUS E OF SLUMP SALE IDENTITY OF THE PURCHASER I.E. THE ASSESSEE HAD CHANGED, THAT IT COULD NOT BE ALLOWED TO CORRELATE ANY DEBTS TAKEN OVER TO ANY INCOME OFFERED TO TAX EARLIER BY THE SELLER ENT ITY,THAT THE CONDITIONS STIPULATED IN SECTION 36 WERE NOT SATISFIED, THAT THE AMOUNT IN QUESTION COULD NOT BE ALLOWED AS A BUSINESS LOSS AS HELD IN THE EARLIER PARAGRAPH OF THE ORDER,THAT IT WAS A CAPITAL LOSS. 4.2. BEFORE US, THE AR CONTENDED THAT WHILE FILING RETUR N OF INCOME FOR AY 2008-09 AND 2009- 10 IT HAD SHOWN STCG OF RS.2.09 CRORES AND RS.3.61C RORES IN ACCORDANCE WITH THE PROVISIONS OF SECTION 50 WITH REGARD TO CLAIM OF INSURANCE MAD E BY IT, THE INSURER I.E. THE NEW INDIA ASSURANCE CO.LTD. REPUDIATED THE CLAIM MADE BY THE ASSESSEE. THE DR RELIED UPON THE ORDER OF THE FAA. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT T HE CLAIM HAD ARISEN AFTER THE SLUMP SALE TOOK PLACE,THAT THE ERSTWHILE COMPANY HAD CLAI MED LOSS WITH THE INSURANCE COMPANY, THAT THE CLAIM WAS REJECTED, THAT THE ASSESSEE DISCARDED THE ASSETS FOR THE YEAR ENDED ON 31.03.2008 AND 31.03.2009. IN THE LIGHT OF THESE DEVELOPMENTS THE ASSESSEE WR OTE OFF THE INSURANCE CLAIM OF RS.9.37 CRORES. WE HAVE GONE THROUGH THE INSURA NCE CLAIM LODGED BY THE ASSESSEE AND WE FIND THAT ALL THE CONDITIONS FOR ALLOWING BAD DEBTS STAND FULFILLED I.E. OFFERING THE INCOME IN 69/15,70/15-JSW&394/15-WELSPUN 6 EARLIER YEAR AND WRITING OFF THE AMOUNT IN THE BOOK S OF ACCOUNT. THEREFORE, REVERSING THE ORDER OF THE FAA, WE DECIDE GROUND NO.3 IN FAVOUR OF THE ASSESSEE. 5. REMAINING TWO GROUNDS,DEAL WITH LEVY OF INTEREST/PE NALTY.GROUND 4 IS CONSEQUENTIAL AND GROUND FIVE IS PREMATURE.SO FOURTH GROUND IS ALLOWE D FOR STATISTICAL PURPOSES AND FIGHT GROUND IS DISMISSED. ITA/70/MUM/2015-AY.2011-12: 6. FIRST EFFECTIVE GROUND OF APPEAL,RAISED BY THE ASSE SSEE,IS ABOUT CONFIRMING THE ADDITION OF RS.13.18 LAKHS MADE BY THE AO U/S.14 A R.W.R. 8D OF THE RULES. 6.1. WHILE DECIDING THE IDENTICAL GROUND FOR THE EARLIER YEAR (AT PARAGRAPH NUMBER 2.4), WE HAVE HELD THAT NO DISALLOWANCE CAN BE MADE IF THE A SSESSEE HAS NOT CLAIMED ANY EXPENDITURE AGAINST THE EXEMPT INCOME.RESPECTFULLY,FOLLOWING TH E ABOVE, WE DECIDE THE FIRST GROUND IN FAVOUR OF THE ASSESSEE,AS FACTS FOR THE AY.S.ARE I DENTICAL. 7. NEXT GROUND IS ABOUT CONFIRMING THE ADDITION MADE B Y THE AO TO THE BOOK PROFIT OF THE ASSESSEE BY WAY OF ADDING BACK DISALLOWANCE MADE U/ S.14A AND ENHANCING THE BOOK PROFIT. 7.1. AS THE GROUND IS DIRECTLY RELATED WITH DISALLOWANCE MADE U/S.14A,SO,FOLLOWING OUR ORDER FOR GROUND NO.1 WE HOLD THAT FAA WAS NOT JUSTIFIED IN ENHANCING THE BOOK PROFIT U/S. 15JB OF THE ACT WITH REGARD TO 14A DISALLOWANCE.SECOND G ROUND STANDS ALLOWED. 8. NEXT TWO GROUNDS,DEAL WITH LEVY OF INTEREST AND PEN ALTIES U/S.271.BOTH THE ISSUES ARE CONSEQUENTIAL/PREMATURE.SO,THIRD GROUND IS ALLOWED FOR STATISTICAL PURPOSES AND LAST GROUND IS DISMISEED. ITA/394/MUM/2015-AY.2011-12: 9. THE SOLITARY GROUND OF APPEAL,RAISED BY THE AO, IS ABOUT DELETING THE ADDITION OF SOME OF RS. 5 CRORES MADE ON ACCOUNT OF BOGUS EXPENDITURE.D URING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD DEBITED EXPENSES,AMO UNTING TO RS.5 CRORES,UNDER THE HEAD LAND DEVELOPMENT IN THE NAME OF M/S.MAGINOT TRADING COMPANY LTD.HE OBSERVED THAT BALAKRISHNA GOENKA(BG),IN HIS STATEMENT ON OATH,REC ORDED DURING THE SEARCH AND SEIZURE PROCEEDINGS,HAD ADMITTED THAT THE EXPENDITURE CLAIM ED BY THE ASSESSEE WAS NOT GENUINE.VIDE HIS NOTICE,DATED 18.10.2012,THE AO ASKED THE ASSESS EE TO EXPLAIN AS TO WHETHER THE INCOME ADMITTED BY IT DURING THE SEARCH PROCEEDINGS HAD BE EN OFFERED TO TAX. IT WAS ALSO DIRECTED TO PRODUCE THE SUPPORTING DOCUMENTS IN THAT REGARD.HE FURTHER ASKED THE ASSESSEE TO EXPLAIN AS 69/15,70/15-JSW&394/15-WELSPUN 7 TO WHY THE DEPRECIATION CLAIMED, IF ANY, SHOULD NOT BE DISALLOWED IN CASE THE EXPENDITURE WAS CAPITALISED.THE ASSESSEE WAS ALSO DIRECTED TO SPECI FY THE END USE OF THE FUNDS RAISED BY MAGINOT TRADING CO.PVT.LTD.IN ITS RESPONSE, DT.3.12 .2012,THE ASSESSEE STATED THAT DISPUTED PAYMENTS HAD BEEN DEBITED UNDER THE HEAD LAND DEVE LOPMENT CHARGEIN THE BOOKS OF ACCOUNT, THAT NO DEPRECIATION HAD BEEN CLAIMED OR WOULD BE C LAIMED, THAT UNPAID TAX WOULD BE PAID IN DUE COURSE OF TIME. 9.1. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,TH E AO HELD THAT BOGUS EXPENSES WERE RECORDED IN THE BOOKS OF ACCOUNT,THAT SAME COULD NO T FORM PART OF COST OF LAND,THAT BOGUS EXPENSES COULD NOT BE ALLOWED AS DEDUCTION UNDER AN Y HEAD OF INCOME IN ANY OF THE ASSESSMENT YEARS.SO,HE TREATED THE EXPENDITURE OF R S.5 CRORES AS UNEXPLAINED EXPENDITURE AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 9.2. DURING THE APPELLATE PROCEEDINGS BEFORE THE FAA,THE ASSESSEE MADE ELABORATE SUBMISSIO- NS IN THAT REGARD.A REMAND REPORT WAS CALLED FROM T HE AO.AFTER CONSIDERING AVAILABLE MATERIAL,THE FAA HELD THAT BG HAD ADMITTED THE ACCO MMODATION ENTRIES AND OFFERED IT FOR TAXATION,THAT DURING APPELLATE PROCEEDINGS IT WAS C LAIMED THAT THE STATEMENT OF BG WERE RECORDED UNDER CONFUSED STATE OF MIND, THAT THERE W AS NO EVIDENCE OF GENUINE DELIVERY OF MATERIAL,THAT STATEMENT OF BG CONSTITUTED SUBSTANTI VE EVIDENCE TO TREAT THE PAYMENT MADE BY THE ASSESSEE AS AN ACCOMMODATION ENTRY.HOWEVER,THE FAA HELD THAT THE ADDITION OF UNACCOUNTED CASH SHOULD NOT BE CONSIDERED IN THE HA NDS OF THE ASSESSEE COMPANY, THAT IT SHOULD BE ASSESSED IN THE HANDS OF BG.FINALLY, THE FAA DELETED THE ADDITION. 9.3. DURING THE COURSE OF HEARING BEFORE US, THE DR REFE RRED TO THE STATEMENT OF BG RECORDED ON THE DATE OF SEARCH AND CONTENDED THAT STATEMENT RECORDED U/S.132(4) WAS NOT RETRACTED,THAT THE FAA HAD NOT UNDERSTOOD THE STATEMENT IN THE RIG HT PERSPECTIVE, THAT THE SURRENDER WAS MADE IN THE HANDS OF TWO CORPORATE ENTITIES AND NOT IN THE INDIVIDUAL HANDS OF THE BG, THAT BY SURRENDERING THE IMPUGNED AMOUNT THE ASSESSEE HAD P REVENTED THE DEPARTMENT FROM MAKING FURTHER INVESTIGATION IN THAT REGARD. HE REFERRED T O PAGE-7 OF THE PB WHEREIN DETAILS OF LAND DEVELOPMENT ACCOUNT WERE AVAILABLE AND STATED THAT THE ASSESSEE HAD PROCUERED ACCOMMODA - TION BILLS AND THAT IT HAD SURRENDERED THE DISPUTED AMOUNT WHEN CORNERED BY THE OFFICERS OF THE DEPARTMENT.THE AR SUPPORTED THE ORDER OF THE FAA. 9.4. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATER IAL BEFORE US. BEFORE PROCEEDING FURTHER WE WOULD LIKE TO REFER TO QUESTION AND ANSW ER NO.14 OF THE STATEMENTS RECORDED ON 14.10.2010: Q.14: NOW I AM SHOWING YOU PAGE NO.46 AND 61 OF AN NEXURE A-1. SN ENQUIRY WAS CONDUCTED AT THE ADDRESS IN THE MEMO, HOWEVER, NO SUCH PARTY WAS FOUND TO BE EXISTING AT EITHER OF THE 69/15,70/15-JSW&394/15-WELSPUN 8 ADDRESSES GIVEN IN THE MEMO. PLEASE FURNISH THE ADD RESS OF THIS PARTY AND EXPLAIN THE TRANSACTIONS WITH THEM. ANS: THE PAYMENTS MADE TO M/S. MAGINOT TRADING CO.P VT. LTD., AMOUNTING TO TOTAL OF RS.5.CRORES, IN THE CURRENT FINANCIAL YEAR, MADE ON ACCOUNT OF SUPPLY OF MURAM AT THE RAIGAD SITE OF M/S. WELSPUN MAXSTEEL LTD., IS NOTHING BUT AN ACCOMMODATION ENTRY ARRANGED BY ONE OF THE BROKER FOR GENERATION OF CASH BY DEBITING BOGUS EXPENSES. I CONFIRM THAT WE HAVE TAKEN AN ACCOMMODATION ENTRY TO GENERATE CASH FOR EXPENDITUR E. I HAVE ALSO TAKEN A SIMILAR ENTRY IN THE ACCOUNTS OF M/S. WELSPUN SYNTEX LTD., FOR AN AMOUNT OF RS.2 CR. IN THE CURRENT FINANCIAL YEAR.I TAKE THIS OPPORTUNITY TO SURRENDER THIS AMOUNT OF R S.7 CR.(RS.5 CR. IN THE HANDS OF M/S. WELSPUN MAXSTEEL LTD., & RS.2 CR. IN THE HANDS OF M /S.WELSPUN SYNTEX LTD.) AS MY UNACCOUNTED INCOME GENERATED BY DEBITING BOGUS EXPE NSES AND OFFER THIS AMOUNT AS MY TAXABLE INCOME, OVER & ABOVE MY REGULAR INCOME, FOR THE CUR RENT FINANCIAL YEAR. IT IS FURTHER FOUND THAT IN ITS LETTER DT.3.12.2012 THE ASSESSEE MADE FOLLOWING SUBMISSIONS BEFORE THE AO: IN ANSWER OF QUESTION NO.14 MR. B.K. GOENKA HAS ST ATED THAT RS.5 CRORES IS AN ACCOMMODATION ENTRY IN THE HANDS OF M/S.WELSPUN MAX STEEL AND RS.2 CRORES IN THE HANDS OF M/S. WELSPUN SYNTEX LTD., IT MAY PLEASE BE NOTED TH AT THE ABOVE REFERRED TWO PAYMENTS HAVE BEEN DEBITED AS LAND DEVELOPMENT CHARGES IN THE B OOKS OF ACCOUNTS OF THE RESPECTIVE COMPANIES. WE CONFIRM THAT NO DEPRECIATION HAS BEEN CLAIMED SO FAR AND NO DEPRECIATION WILL BE CLAIMED BY ANY OF THE ABOVE COMPANIES ON THE ABOVE MENTIONE D AMOUNTS. THE BALANCE TAX, IF ANY, WILL BE PAID BY M/S. WELSP UN MAX STEEL IN DUE COURSE OF TIME. IF WE GO THROUGH THE ABOVE STATEMENT OF BG AND THE LETTER OF THE ASSESSEE DT.3.12.2012, IT BECOMES CLEAR THAT THE BG HAD MADE THE DISCLOSURE O F RS.5 CRORES IN THE CAPACITY OF MD OF THE COMPANY AND THAT THE ASSESSEE HAD PROMISED TO PAY OUTSTANDING TAXES.THE LAND DEVELOP - MENT A/C. CLEARLY PROVES THAT ACCOMMODATION ENTRIES WERE OBTAINED FOR ASSESSEE COMPANY . THEREFORE, IN OUR OPINION THE FAA WAS NOT JUSTIFIED IN REVERSING THE ORDER OF THE AO.IN OUR OPINION, THE AO HAD RIGHTLY MADE THE DISALLOWANCE O F THE IMPUGNED SUM IN THE HANDS OF THE ASSESSEE.CONFIRMING THE ORDER OF THE AO WE DECIDE E FFECTIVE GROUND OF APPEAL IN HIS FAVOUR . AS A RESULT APPEALS FILED BY ASSESSEE STAND PARTLY ALLOWED AND APPEAL OF THE AO IS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH FEBRUARY, 2017. , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :08.02.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 69/15,70/15-JSW&394/15-WELSPUN 9 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.