Backbone Construction Pvt. Ltd., RAJKOT-GUJARAT V. The Dy. Commr. Of Income Tax, Cen.Cir.-2, RAJKOT-GUJARAT

ITA 707/RJT/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1104 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Search and seizure; Wrong claim; Retraction
• Section: 44AD; 40A(3); 234B; 132; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT SHRI SHAILENDRA KR. YADAV, JUDICIAL MEMBER AND BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER ./ ITA NO. 707, 708, 709 AND 710/RJT/2014 / ASSTT YEARS: 2008-09, 2009-10, 2010-11 AND 2011-12 BACKBONE CONSTRUCTION P. LTD. EKTA HOUSE 2, JALARAM, UNIVERSITY ROAD RAJKOT. VS DCIT, CC-2 RAJKOT. ./ ITA NO.09, 20 AND 21/RJT/2015 / ASSTT.YEARS: 2009-10, 2008-09 AND 2011-12 DCIT, CC-2 RAJKOT. VS BACKBONE CONSTRUCTION P. LTD. EKTA HOUSE 2, JALARAM, UNIVERSITY ROAD RAJKOT. / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI M.L. MEENA, CIT - DR ASSESSEE(S) BY : SHRI M.K. PATEL, ADVOCATE / DATE OF HEARING : 21/05/2015 / DATE OF PRONOUNCEMENT: 29/05/2015 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: 1. ITA NO.707/RJT/2014 AND ITA NO.20/RJT/2015 ARE T HE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR T HE ASSTT.YEAR 2008- 09. ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 2 ITA NO.708/RJT/2014 AND ITA NO.09/RJT/2015 ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR T HE ASSTT.YEAR 2009- 10. ITA NO.709/RJT/2014 IS THE APPEAL FILED BY THE ASSE SSEE AGAINST THE ORDER OF THE CIT(A) FOR THE ASSTT.YEAR 2010-11. ITA NO.710/RJT/2014 AND ITA NO.21/RJT/2015 ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR T HE ASSTT.YEAR 2011- 12. THE APPEALS FOR THE ASSTT.YEARS 2008-09, 2009-10 A ND 2010-11 ARE FILED AGAINST THE CONSOLIDATED ORDER OF THE CIT (A)-IV, AHMEDABAD DATED 31.10.2014 AND THE APPEAL FOR THE ASSTT.YEAR 2011-12 ARE FILED AGAINST THE ORDER OF THE CIT(A)-IV, AHMEDABAD DATED 21.10.2014. ASSESSMENT YEAR 2008-2009 2. IN THE ASSESSEES APPEAL, THE GROUND NO.1 READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN ESTIMATING NET PROFIT AT 16% OF THE CONTRACT RECEIPT AND MAKING ADDITION OF DIFFERENCE AMOUNT OF RS.7,41,65,209 (I.E. NP @ 16% RS.138882330 LESS NP SHOWN BY THE APPELLANT RS.64717221) IS UNJUSTIFIED, UNWAR RANTED AND BAD IN LAW. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND OF A PPEAL, WHICH READS AS UNDER: THE LD.CIT(A)-IV, AHMEDABAD HAS ERRED IN DISMISSI NG THE APPEAL WHEREBY THE ADDITION MADE BY THE ASSESSING OFFICER HAS DISALLOWANCE U/S.40A(3) MADE AN ADDITION OF RS.5,47 ,500/- IS UNWARRANTED, UNJUSTIFIED AND BAD IN LAW. SINCE THE DR HAD NO OBJECTION FOR ADMISSION THIS A DDITIONAL GROUND OF APPEAL OF THE ASSESSEE, THE SAME WAS ADMI TTED AND PARTIES WERE ALLOWED TO MAKE THEIR SUBMISSIONS THEREON. ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 3 IN THE REVENUES APPEAL FOR THE ASSTT.YEAR 2008-09, SOLE GROUND TAKEN IN THE APPEAL READS AS UNDER: 1. THELD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION MADE OF RS.1,25,00,000/- MADE ON ACCOUNT O F DISALLOWANCE OF BOGUS EXPENDITURE MADE TO M/S.JAYSH REE BUILDERS, ADDITION OF RS.60,00,000/- MADE ON ACCOUNT OF DISAL LOWANCE U/S.40(A)(IA) AND ADDITION ON ACCOUNT OF BOGUS CLAI M OF TRANSPORT EXPENSES. 3. AS FACTS GIVING RISE TO THE ABOVE GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE REVENUE ARE COMMON, AND THE ISSUES I NVOLVED ARE INTER- CONNECTED, THEREFORE, BOTH GROUNDS ARE CONSIDERED A ND DECIDED TOGETHER. 4. AFTER HEARING RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE IS ENGAGED IN CONSTRUCTION OF WIDENING AND DEEPENING OF MITHI RIVER FROM MAHIM CAUSEWAY TO DHARAVI BRIDGE. THE ASSESSEE WAS AWARDED CONTRACT BY MUMBAI METROPOLITAN REGION DEVE LOPMENT AUTHORITY ON 25.4.2007. THE ASSESSEE WAS REQUIRED T O WIDEN AND DEEPEN OF MITHI RIVER FROM MAHIM CAUSEWAY TO DHARAV I BRIDGE. THE WORK DONE WAS TO BE MEASURED BY ENGINEER-IN-CHARGE OF MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY. ON THE BASIS OF SUCH MEASUREMENT, IT IS NOT IN DISPUTE THAT THE ASSESSEE DURING THE YEAR HAS DONE WORK OF RS.86,80,15,187/-. THE ASSESSEE IN IT S RETURN OF INCOME DISCLOSED TOTAL INCOME AT RS.6,17,32,938/- AGAINST THE ABOVE WORK OF RS.86,80,15,187/- WHICH WORKED OUT TO 7.46% OF THE TURNOVER. THE AO DISALLOWED VARIOUS EXPENSES ON THE GROUND OF LACK O F PROPER EVIDENCES, AND THEREAFTER, WORKED OUT THE TOTAL INCOME AT RS.1 8,65,26,818/-. 5. ON APPEAL, THE CIT(A) AFTER CALLING REMAND REPOR T IN RESPECT OF VARIOUS FRESH EVIDENCES PRODUCED BEFORE HIM, CAME T O CONCLUSION THAT ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 4 THE BOOKS OF ACCOUNTS OF THE ASSESSEE CONTAIN CERTA IN DISCREPANCIES, AND THEREFORE, THE BOOK RESULTS IS NOT ACCEPTABLE. THE REAFTER, THE CIT(A) PROCEEDED TO ESTIMATE THE NET INCOME OF THE ASSESSE E, WHICH WAS ESTIMATED BY HIM AT THE RATE OF 16% OF THE TURNOVER . 6. AGAINST THE ESTIMATE OF INCOME AT THE RATE OF 16 %, CONFIRMATION OF ADDITION OF RS.5,47,500/- UNDER SECTION 40A(3) T HE ASSESSEE IS IN APPEAL BEFORE US, WHEREAS, AS PER THE REVENUES APP EAL, THE CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF RS.1,25 ,00,000/- MADE BY THE AO ON THE GROUND THAT THE EXPENDITURE WAS NOT G ENUINE, AND RS.60,00,000/- ON ACCOUNT OF SECTION 40(A)(IA) OF T HE ACT. 7. WE FIND THAT THE ASSESSEE HAS NOT DISPUTED THE R EJECTION OF THE BOOK RESULT BY THE CIT(A). THUS, WE FIND THAT TH E REJECTION OF THE BOOK RESULTS, AND THEREFORE, ESTIMATION OF NET INCOME BY THE CIT(A) IS NOT IN DISPUTE BEFORE US. THE ONLY GRIEVANCE OF THE ASSES SEE IS THAT AFTER REJECTION OF THE BOOKS OF ACCOUNTS, THE CIT(A) WAS NOT JUSTIFIED IN ARBITRARILY ESTIMATING THE NET INCOME AT THE RATE O F 16%, WHICH IS EXCESSIVE AND UNREALISTIC CONSIDERING THE NATURE AN D VOLUME OF THE BUSINESS OF THE ASSESSEE. 8. ON THE OTHER HAND, THE DR SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ESTIMATION OF NET PROFIT AT THE RATE OF 16% BY THE CIT(A) WAS JUSTIFIED. 9. WE FIND THAT NO BASIS FOR MAKING ESTIMATION OF N ET INCOME AT THE RATE OF 16% WAS BROUGHT ON RECORD BY THE CIT(A). I N RESPECT OF NET INCOME OF THE PRECEDING YEAR DISCLOSED BY THE ASSES SEE AT THE RATE OF 12.41%, THE ASSESSEE POINTED OUT THAT THE SAID RATE CANNOT BE ADOPTED DURING THE YEAR UNDER CONSIDERATION, BECAUSE THE NA TURE OF WORK IN THAT YEAR WAS QUITE DIFFERENT FROM THE NATURE OF WORK UN DERTAKEN DURING THE YEAR. IT IS EXPLAINED THAT THE WORK EXECUTED DURIN G THE PRECEDING YEAR ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 5 WAS NOT OF UNDER-SEA PROJECT, WHEREAS, THE WORK INV OLVED DURING THE YEAR WAS OF UNDER-SEA PROJECT. IN RESPECT OF TEND ER DOCUMENTS, IT WAS EXPLAINED THAT THE NET PROFIT EMBEDDED IN THE PROJE CT WAS 11.11% AS WELL AS LOSS OF 22.20%, WHICH WAS VERIFIED FROM WOR K ORDER NO.ED/C.E./MRW/WORK-4/07/220 DATED 25.4.2007 AND WO RK ORDER NO.ED/C.E./MRW/WORK-1/07/218 DATED 25.4.2007 RESPEC TIVELY. 10. THE DR HAS NOT DISPUTED THE ABOVE EXPLANATION O F THE ASSESSEE. 11. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ESTIMATE OF NET INCOME FROM THE CONTR ACT WORK AT THE RATE OF 16% OF THE TURNOVER WAS WITHOUT ANY BASIS. WE F IND THAT AS PER THE PROVISIONS OF SECTION 44AD OF THE INCOME TAX ACT, N ET PROFIT FROM CONTRACT WORK DECLARED BY THE ASSESSEE AT THE RATE OF 8% OF THE TURNOVER WOULD BE ACCEPTED IF THE TURNOVER OF THE A SSESSEE IS LESS THAN THE LIMIT SPECIFIED IN THAT SECTION. THOUGH THE SA ID SECTION IS NOT APPLICABLE IN THE INSTANT CASE, AS THE TURNOVER OF THE ASSESSEE IS MORE THAN THE TURNOVER SPECIFIED IN THAT SECTION, HOWEVE R, TAKING A CUE FROM THE PROVISION OF THIS SECTION AND TAKING INTO CONSI DERATION NORMAL TREND THAT THE PERCENTAGE OF NET PROFIT IS GENERALLY LESS WHEN THE TURNOVER IS HIGHER, IN OUR CONSIDERED VIEW, IT SHALL MEET ENDS OF JUSTICE, IF THE NET PROFIT IS ESTIMATED AT 8% OF ITS TURNOVER. 12. FURTHER, IN RESPECT OF REVENUES GROUND, WE FIN D THAT WHEN THE CIT(A) HAS ESTIMATED THE NET PROFIT, QUESTION OF AL LOWING OR DISALLOWING OF ANY SPECIFIC EXPENDITURE DOES NOT ARISE. THE DR COULD EXPLAIN AS TO WHY AFTER ESTIMATION OF NET PROFIT, STILL THE DISAL LOWANCE OF CERTAIN EXPENSES OF RS.1,25,00,000/- AND RS.60,00,000/- WAS WARRANTED, AND HOW IT CAN BE HELD THAT SUCH EXPENSE WAS ALLOWED BY THE CIT(A). AS WE HAVE ALREADY ESTIMATED THE NET INCOME OF THE ASSESS EE OF THE CONTRACT WORK EXECUTED BY THE ASSESSEE, QUESTION OF ANY FURT HER DISALLOWANCE ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 6 DOES NOT ARISE. THUS, THE GROUND OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AND THE GROUND OF THE REVENUE IS DISMISSED . 13. THE GROUND NO.2 OF THE ASSESSEES APPEAL FOR TH E ASSTT.YEAR 2008- 09 READS AS UNDER: 2. THE CIT(A) HAS ERRED IN UPHOLDING DECISION OF T HE AO IN IMPOSING PENALTY U/S.271(1)(C)/271AAA OF THE ACT IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 14. THIS GROUND OF APPEAL IS PREMATURE, AND THEREFO RE, THE SAME IS DISMISSED. 15. THE GROUND NO.3 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 3. THE LD.CIT(A) HAS ERRED IN UPHOLDING DECISION O F THE AO IN CHARGING INTEREST U/S.234A, 234B, 234C IS UNJUSTIFI ED, UNWARRANTED AND BAD IN LAW. 16. NO ARGUMENTS WERE MADE ON THIS GROUND OF APPEAL BY THE AR OF THE ASSESSEE. WE HOLD THAT CHARGING OF INTEREST UN DER SECTION 234A, 234B AND 234C IS CONSEQUENTIAL IN NATURE, AND ACCOR DINGLY, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. ASSESSMENT YEAR 2009-2010 17. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN DISMISSING THE APPEA L WHEREBY UPHOLDING THE ADDITION MADE BY THE AO OF RS.1,74,19 4/- ON THE ALLEGED GROUND OF UNEXPLAINED INTEREST ON CASH LOAN IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 18. BECAUSE OF SMALLNESS OF THE AMOUNT, THE AR OF T HE ASSESSEE MADE NO SPECIFIC SUBMISSION IN RESPECT OF THIS GROUND OF APPEAL, AND THEREFORE, THE SAME IS DISMISSED FOR LACK OF PROSEC UTION. 19. IN THE ASSESSEES APPEAL, THE GROUND NO.2 READS AS UNDER: ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 7 2. THE LD.CIT(A) HAS ERRED IN ESTIMATING NET PROFIT AT 16% OF THE CONTRACT RECEIPT AND MAKING ADDITION OF DIFFERE NCE AMOUNT OF RS.6,59,28,523/- (I.E. NP @ 16% RS.119242720 LESS N P SHOWN BY THE APPELLANT RS.53314197) IS UNJUSTIFIED, UNWARRAN TED AND BAD IN LAW. IN THE REVENUES APPEAL FOR THE SAME ASSESSMENT YEA R, THE GROUND TAKEN IN THE APPEAL READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CSE THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.35,45,89,920/- AND RESTRICTING THE PROFIT @ 16% OF GROSS PROFIT ON ACCOUNT OF BOGUS CLAIM OF EXPENDITURE. 20. AFTER HEARING RIVAL SUBMISSIONS, WE FIND THAT T HE FACTS AND ISSUES INVOLVED IN THE ABOVE GROUNDS OF APPEAL ARE EXACTLY THE SAME, AS WAS INVOLVED IN THE GROUND NO.1 OF THE APPEAL OF THE AS SESSEE AND THE GROUND NO.1 OF THE APPEAL OF THE REVENUE IN THE ASS TT.YEAR 2008-09, EXCEPT FOR CHANGE IN FIGURES. 21. DURING THE YEAR UNDER CONSIDERATION ALSO THE AS SESSEE WAS ENGAGED IN THE CONTRACT WORK OF WIDENING AND DEEPEN ING OF MITHI RIVER. QUANTITY OF WORK DONE WAS MEASURED AND CERTIFIED BY THE ENGINEER-IN- CHARGE APPOINTED BY THE MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY. DURING THIS YEAR, THE ASSESSEES TURNOV ER FROM SUCH CONTRACT WAS RS.74,52,67,004/- AND THE ASSESSEE DISCLOSED IN COME AT RS.5,04,42,677/- IN THE RETURN OF INCOME WHICH WORK ED OUT TO 7.15% OF THE TURNOVER. AS THE FACTS AND ISSUES INVOLVED ARE SIMILAR, WE FOLLOWING THE DECISION IN THE CASE OF THE ASSESSEE IN THE ASS TT.YEAR 2008-09, DIRECT THE AO TO ESTIMATE THE NET PROFIT OF THE ASS ESSEE OF THE YEAR AT THE RATE OF 8% OF THE TURNOVER FROM CONTRACT WORK. 22. THUS, AFTER ESTIMATION OF NET PROFIT FROM CONTR ACT WORK, THE QUESTION OF ALLOWANCE OR DISALLOWANCE OF SPECIFIC E XPENDITURE DOES NOT ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 8 ARISE. CONSEQUENTLY, THE GROUND OF APPEAL OF THE A SSESSEE IS PARTLY ALLOWED AND THE GROUND OF THE REVENUE IS DISMISSED. 23. THE GROUND NO.3 OF THE ASSESSEES APPEAL FOR TH E ASSTT.YEAR 2009- 10 READS AS UNDER: 3. THE CIT(A) HAS ERRED IN UPHOLDING DECISION OF T HE AO IN IMPOSING PENALTY U/S.271(1)(C)/271AAA OF THE ACT IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 24. THIS GROUND OF APPEAL IS PREMATURE, AND THEREFO RE, THE SAME IS DISMISSED. 25. THE GROUND NO.4 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 3. THE LD.CIT(A) HAS ERRED IN UPHOLDING DECISION O F THE AO IN CHARGING INTEREST U/S.234A, 234B, 234C IS UNJUSTIFI ED, UNWARRANTED AND BAD IN LAW. 26. NO ARGUMENTS WERE MADE ON THIS GROUND OF APPEAL BY THE AR OF THE ASSESSEE. WE HOLD THAT CHARGING OF INTEREST UN DER SECTION 234A, 234B AND 234C IS CONSEQUENTIAL IN NATURE, AND ACCOR DINGLY, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. ASSESSMENT YEAR 2010-2011 27. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE R EADS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN DISMISSING THE APPEA L WHEREBY UPHOLDING THE ADDITION MADE BY THE AO OF RS.1,78,00 ,000/- ON THE ALLEGED GROUND OF RETRACTION OF INCOME ADMITTED DURING THE SEARCH IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 28. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT PRE MISES OF THE ASSESSEE AND IN THE PREMISES OF OTHER PERSONS ON 24 .6.2010. ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 9 29. FURTHER, A LOCKER OF SHRI DINESH JAKASANIA, DIR ECTOR OF THE ASSESSEE-COMPANY MAINTAINED WITH HDFC BANK, POWAI, MUMBAI WAS SEARCHED ON 10.8.2010 AND STATEMENT OF SHRI DINESH J. JAKASANIA WAS RECORDED UNDER SECTION 132(4) OF THE ACT, WHEREIN, IN REPLY TO QUESTION NO.6, THE SAID DEPONENT DISCLOSED UNDISCLOSED INCOM E OF VARIOUS PERSONS INCLUDING RS.1,78,00,000/- ON ACCOUNT OF AS SESSEE-COMPANY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, AND RS.7,0 0,00,000/- FOR THE ASSTT.YEAR 2011-12. THEREAFTER, THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 4.12.201 2, SHOWING TOTAL INCOME OF RS.53,63,900/-. THE ASSESSEE ALSO FILED A LETTER OF RETRACTION DATED 31.1.2013 WHEREIN THE ASSESSEE RETRACTED THE AFORESAID DISCLOSURE OF INCOME OF RS.1,78,00,000/-. 30. THE AO IN THE ASSESSMENT ADDED RS.1,78,00,000/- TO THE INCOME OF THE ASSESSEE ON THE BASIS OF DISCLOSURE MADE IN THE STATEMENT DATED 10.8.2010 UNDER SECTION 132(4) OF THE ACT, AND TREA TED THE RETRACTION MADE BY THE ASSESSEE AS UNACCEPTABLE, ON THE GROUND THAT THE ASSESSEE COULD NOT LEAD ANY EVIDENCE TO SHOW THAT THE DISCLO SURE WAS MADE UNDER ANY COERCION OR THREAT AND THE RETRACTION LET TER WAS FILED AFTER ABOUT TWO-AND-HALF YEARS OF DATE OF DISCLOSURE. 31. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF T HE AO AND ALSO PLACED RELIANCE ON THE DECISIONS OF VARIOUS HIGH CO URTS, NONE OF WHICH IS JURISDICTIONAL HIGH COURT, IN SUPPORT OF HIS DECISI ON. 32. BEFORE US, THE AR OF THE ASSESSEE SUBMITTED THA T ABSOLUTELY NO INCRIMINATING MATERIAL RELATING TO THE ASSESSEE-COM PANY WAS FOUND DURING THE COURSE OF SEARCH. HE POINTED OUT THAT APART FROM THE STATEMENT OF SHRI DINESH J. JAKASANIA, WHICH WAS DU LY RETRACTED BY THE SAID PERSON, NO CORROBORATIVE MATERIAL FOUND DURING THE COURSE OF ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 10 SEARCH COULD BE BROUGHT ON RECORD BY THE REVENUE TO SUPPORT THE ADDITION OF RS.1,78,00,000/- MADE BY THE AO. 33. THE AR PLACED ON RELIANCE ON THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT, (2010) 328 ITR 411 (GUJ), AND THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF PARMANANDA PEGU, (2004) 7 SCC 779 (SC), PYARE LAL BHARGAVA, AIR 1963 (SC) 1094 AND CHIKKAM KOTESW ARA RAO, AIR 1971 (SC) 1542. 34. ON THE OTHER HAND, THE DR SUPPORTED THE ORDER O F THE CIT(A) AND SUBMITTED THAT THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT ON 10.8.2010 WAS VOLUNTARY STATEMENT, AND THEREFORE , THE ADDITION MADE WAS JUSTIFIED. 35. WE FIND THAT IN THE STATEMENT RECORDED UNDER SE CTION 132(4) ON 10.8.2010 WHILE DISCLOSING UNDISCLOSED INCOME OF RS .1,78,00,000/- FOR THE ASSESSEE-COMPANY OF THE YEAR UNDER CONSIDERATIO N SHRI DINESH J. JAKASANIA STATED THAT WITHIN THIS SHORT SPAN OF ON E HOUR IT WAS HERCULES TASK FOR ME TO GO THROUGH ALL THE SEIZED PAPER AND BOOKS OF ACCOUNTS. HOWEVER, ON PRIMA FACIE I DO HEREBY OFFER FOLLOWING DISCLOSURES IN THE F.Y.2009-10 & 2010-11.. THUS, THE ABOVE STATEMEN T SHOWS THAT THE DISCLOSURE WAS MADE WITHOUT FULLY GOING THROUGH THE SEIZED MATERIAL AND ON THE PRIMA FACIE BASIS. 36. FURTHER, WE FIND THAT THE STATEMENT RECORDED UN DER SECTION 132(4) DOES NOT SHOW HOW THE ABOVE UNDISCLOSED INCOME OF R S.1,78,00,000/- OF THE ASSESSEE STANDS UTILIZED ON THE DATE OF SEAR CH, IT WAS REPRESENTED BY WHICH ASSETS, OR WAS UTILIZED FOR WHICH EXPENDIT URE. STILL FURTHER, WE FIND THAT DR COULD NOT CONTROVERT THE SUBMISSION OF THE ASSESSEE THAT NO INCRIMINATING MATERIAL RELATING TO THE ASSESSEE-COM PANY WAS FOUND DURING THE COURSE OF SEARCH, AND EVEN THE LOWER AUT HORITIES COULD NOT BRING ANY CORROBORATIVE MATERIAL, WHICH WAS FOUND D URING THE COURSE OF ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 11 SEARCH, WHICH COULD SUPPORT THE DISCLOSURE OF INCOM E OF RS.1,78,00,000/- FOR THE YEAR UNDER CONSIDERATION, OR WHICH COULD POINT OUT THAT THE ASSESSEE ACTUALLY EARNED ANY INCOME EI THER OF RS.1,78,00,000/- OR ANY PART THEREOF, WHICH WAS NOT DISCLOSED PRIOR TO THE DATE OF SEARCH. 37. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT (SUPRA) HELD A S UNDER: THE ASSESSEE WAS A PARTNER OF A FIRM AND DURING TH E SEARCH CONDUCTED UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961AT THE PREMISES OF THE FIRM AND THE PARTNERS A STATEMENT O F THE ASSESSEE UNDER SECTION 132(4) WAS RECORDED. THE ASSESSEE DIS CLOSED AN UNACCOUNTED INVESTMENT IN HOUSE PROPERTY AT RS. 4 L AKHS, UNACCOUNTED CASH OF RS. 1 LAKH, UNACCOUNTED INVESTM ENT IN FURNITURE OF RS. 1 LAKH, UNACCOUNTED INVESTMENT IN GOLD ORNAMENTS OF RS. 1 LAKH. AFTER A LAPSE OF TWO MONTHS THE ASSE SSEE RETRACTED THE STATEMENT MADE AND STATED THAT THE DISCLOSURE O F RS. 7 LAKHS WAS MADE UNDER PRESSURE AND COERCION. HOWEVER, THE ASSESSEE ACCEPTED THE ADDITION OF RS. 1 LAKH ON ACCOUNT OF U NACCOUNTED CASH FOUND DURING THE SEARCH. THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE DID NOT HAVE ANY REASONS TO RETRACT TH E STATEMENT MADE UNDER SECTION 132 , ADDED RS. 7 LAKHS TO THE I NCOME DECLARED BY THE ASSESSEE. THE COMMISSIONER (APPEALS ) AS WELL AS THE TRIBUNAL UPHELD THE ORDER OF THE ASSESSING OFFI CER. ON A REFERENCE : HELD, THAT THE STATEMENT OF THE ASSESSEE WAS RECORD ED UNDER SECTION 132(4) OF THE ACT AT MIDNIGHT. IN NORMAL CI RCUMSTANCES, IT WAS TOO MUCH TO GIVE ANY CREDIT TO THE STATEMENT RE CORDED AT SUCH ODD HOURS. THE PERSON WOULD NOT BE IN A POSITI ON TO MAKE ANY CORRECT OR CONSCIOUS DISCLOSURE IN A STATEMENT IF SUCH STATEMENT WAS RECORDED AT SUCH ODD HOURS. THE ASSES SEE HAD GIVEN PROPER EXPLANATION FOR ALL THE ITEMS UNDER WH ICH DISCLOSURE WAS SOUGHT TO BE OBTAINED FROM THE ASSESSEE. WITH R EGARD TO THE INVESTMENT IN HOUSE PROPERTY HE HAD STATED THAT HE TOOK THE PLOT IN 1964 FROM THE HOUSING SOCIETY WHICH WAS CONSTRUC TING THE BUNGALOW FOR WHICH THE ASSESSEE MADE CONTRIBUTION F ROM TIME TO TIME AND TOOK POSSESSION IN 1974 WHEN ONLY ONE GROU ND FLOOR WAS CONSTRUCTED. HE HAD BEEN LIVING THERE AND DURING 19 86 TO 1988 HE HAD CONSTRUCTED THE FIRST FLOOR AND HAD INCURRED EX PENSES OF RS. 2,03,185.65 AND THIS AMOUNT HAD BEEN WITHDRAWN FROM THE ACCOUNT OF THE FIRM WHICH HE WAS A PARTNER. THE DEP ARTMENTAL ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 12 VALUER HAD ACCEPTED THE COST OF CONSTRUCTION AND TH ERE WAS NO REASON TO MAKE ADDITION OF RS. 4 LAKHS ON THE BASIS OF THE DISCLOSURE MADE BY THE ASSESSEE. THE REVENUE HAD NO T BROUGHT ANY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD IN FACT INCURRED RS. 4 LAKHS AND THAT AMOUNT WAS INVESTED OUT OF UND ISCLOSED INCOME. THE ADDITION ON ACCOUNT OF GOLD ORNAMENTS C OULD NOT BE SUSTAINED SINCE LOOKING INTO THE QUANTUM OF HOLDING AND THE ASSESSEES EXPLANATION THIS WAS A NORMAL HOLDING WH ICH COULD BE FOUND IN ANY MIDDLE CLASS INDIAN FAMILY. THE FURNIT URE ON THE GROUND FLOOR WAS 15 YEARS OLD AND THE ASSESSEE HAD SPENT RS. 25,000 FOR RENOVATION AFTER MAKING WITHDRAWAL FROM THE FIRMS ACCOUNT. WITH RESPECT TO FURNITURE IN THE FIRST FLO OR A DETAILED SOURCE OF INVESTMENT OF FURNITURE PURCHASED WITH DU E CONFIRMATION FROM THE PARTY CONCERNED HAD BEEN FILED BY THE ASSE SSEE BEFORE THE ASSESSING OFFICER. SINCE NO PAYMENT FOR THIS AD DITIONAL FURNITURE WAS MADE BY THE ASSESSEE TILL THE DATE OF SEARCH, NO ADDITION COULD BE MADE ON THIS COUNT. THE EXPLANATI ON OF THE ASSESSEE WAS CONVINCING BUT NOT BEEN CONSIDERED BY THE AUTHORITIES BELOW. MERELY ON THE BASIS OF THE ADMIS SION OF THE ASSESSEE THE ADDITIONS COULD NOT BE MADE UNLESS AND UNTIL SOME CORROBORATIVE EVIDENCE WAS FOUND IN SUPPORT OF SUCH ADMISSION. THE STATEMENT RECORDED AT SUCH ODD HOURS COULD NOT BE CONSIDERED TO BE A VOLUNTARY STATEMENT, IF IT WAS S UBSEQUENTLY RETRACTED AND NECESSARY EVIDENCE WAS LED CONTRARY T O SUCH ADMISSION. THE TRIBUNAL WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 6 LAKHS. 38. THUS, WE FIND THAT THE HONBLE JURISDICTIONAL H IGH COURT HAS CATEGORICALLY HELD THAT MERELY ON THE BASIS OF ADMI SSION OF THE ASSESSEE, THE ADDITIONS CANNOT BE MADE UNLESS AND UNTIL SOME CORROBORATIVE EVIDENCE WAS FOUND IN SUPPORT OF SUCH ADMISSION. T HEREFORE, IN OUR CONSIDERED VIEW, IN THE ABSENCE OF ANY CORROBORATIV E MATERIAL TO SUPPORT THE ADMISSION MADE DURING THE COURSE OF SEA RCH UNDER SECTION 132(4) OF THE ACT ADDITION CANNOT BE SUSTAINED, ESP ECIALLY WHEN SUCH ADMISSION WAS LATER ON RETRACTED BY THE ASSESSEE BY FILING THE RETURN OF INCOME AS WELL AS BY FILING A SEPARATE RETRACTION L ETTER ALSO. WE, THEREFORE, DELETE THE ADDITION OF RS.1,78,00,000/- AND ALLOW THIS GROUND OF THE APPEAL OF THE ASSESSEE. 39. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE R EADS AS UNDER: ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 13 2. THE LD.CIT(A) HAS ERRED IN MAKING DISALLOWANCE OF RS.20,00,000/- U/S.40(A)(IA) AND ENHANCING THE SAME AMOUNT IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 40. WE FIND THAT IN THE INSTANT CASE, THE INCOME OF THE YEAR UNDER CONSIDERATION WAS ASSESSED BY THE CIT(A) ON ESTIMAT E BASIS BY ASSUMING NET INCOME AT THE RATE OF 16% OF THE TURNO VER. THUS, IT IS OBSERVED THAT THE BUSINESS INCOME OF THE ASSESSEE W AS NOT COMPUTED AS PER THE NORMAL COMPUTATION PROVISION CONTAINED I N SECTIONS 28 TO 43AC OF THE INCOME TAX ACT, BUT THE NET INCOME WAS ESTIMATED AFTER REJECTING THE BOOK RESULTS. ONCE THIS ALTERNATIVE METHOD OF ESTIMATING THE NET INCOME WAS UTILIZED, QUESTION OF MAKING ALL OWANCE OR DISALLOWANCE AS PER PROVISION OF SECTIONS 28 TO 43A C DOES NOT ARISE. IN THE INSTANT CASE, WE HAVE UPHELD THE COMPUTATION OF BUSINESS INCOME ON THE BASIS OF ESTIMATION IN GROUND NO.3 OF THE AP PEAL OF THE ASSESSEE, THOUGH, AT THE RATE OF 8% OF THE TURNOVER IN REPLAC E OF 16%, AND THEREFORE, THE QUESTION OF FURTHER DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DOES NOT ARISE. FOR THIS WE FIND SUPPORT FROM THE DECISION OF THE HONBLE ALLAH ABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR, 229 ITR 229 (ALL.) ACCORDINGLY, WE DELETE THE DISALLOWANCE OF RS.20,00 ,000/- AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 41. THE GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UNDER: 3. THE LD.CIT(A) HAS ERRED IN ESTIMATING NET PROFI T AT 16% OF THE CONTRACT RECEIPT AND MAKING ADDITION OF DIFFERE NCE AMOUNT OF RS.2,81,13,426/- (I.E. NP @ 16% RS.40142146 LESS NP SHOWN BY THE APPELLANT RS.12028710) IS UNJUSTIFIED, UNWARRAN TED AND BAD IN LAW. 42. AFTER HEARING RIVAL SUBMISSIONS, WE FIND THAT T HE FACTS AND ISSUES INVOLVED IN THE ABOVE GROUNDS OF APPEAL ARE EXACTLY THE SAME, AS WAS ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 14 INVOLVED IN THE GROUND NO.1 OF THE APPEAL OF THE AS SESSEE IN THE ASSTT.YEAR 2008-09, EXCEPT FOR CHANGE IN FIGURES. 43. DURING THE YEAR UNDER CONSIDERATION ALSO THE AS SESSEE WAS ENGAGED IN THE CONTRACT WORK OF WIDENING AND DEEPEN ING OF MITHI RIVER. QUANTITY OF WORK DONE WAS MEASURED AND CERTIFIED BY THE ENGINEER-IN- CHARGE APPOINTED BY THE MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY. DURING THIS YEAR, THE ASSESSEES TURNOV ER FROM SUCH CONTRACT WAS RS.25,08,88,413/- AND THE ASSESSEE DISCLOSED IN COME AT RS.53,63,900/- IN THE RETURN OF INCOME WHICH WORKED OUT TO 4.57% OF THE TURNOVER. AS THE FACTS AND ISSUES INVOLVED ARE SIMILAR, WE FOLLOWING THE DECISION IN THE CASE OF THE ASSESSEE IN THE ASS TT.YEAR 2008-09, DIRECT THE AO TO ESTIMATE THE NET PROFIT OF THE ASS ESSEE OF THE YEAR AT THE RATE OF 8% OF THE TURNOVER FROM CONTRACT WORK. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 44. THE GROUND NO.4 OF THE ASSESSEES APPEAL FOR TH E ASSTT.YEAR 2010- 11 READS AS UNDER: 4. THE CIT(A) HAS ERRED IN UPHOLDING DECISION OF T HE AO IN IMPOSING PENALTY U/S.271(1)(C)/271AAA OF THE ACT IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 45. THIS GROUND OF APPEAL IS PREMATURE, AND THEREFO RE, THE SAME IS DISMISSED. 46. THE GROUND NO.5 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 5. THE LD.CIT(A) HAS ERRED IN UPHOLDING DECISION O F THE AO IN CHARGING INTEREST U/S.234A, 234B, 234C IS UNJUSTIFI ED, UNWARRANTED AND BAD IN LAW. 47. NO ARGUMENTS WERE MADE ON THIS GROUND OF APPEAL BY THE AR OF THE ASSESSEE. WE HOLD THAT CHARGING OF INTEREST UN DER SECTION 234A, 234B AND 234C IS CONSEQUENTIAL IN NATURE, AND ACCOR DINGLY, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 15 ASSTT.YEAR 2011-12 48. THE FOLLOWING GROUNDS ARE RAISED BY THE REVENUE IN THE APPEAL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.35,45,89,920/- AND RESTRICTING THE PROFIT @ 16% OF GROSS PROFIT ON ACCOUNT OF BOGUS CLAIM OF EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF T HE AO ON THE ISSUE OF ADDITION OF RS.35,45,89,920/- ON ACCOUNT O F BOGUS CLAIM. 49. THE ABOVE GROUND OF APPEAL DOES NOT ARISE OUT O F THE ORDER OF THE CIT(A), AND THEREFORE, THEY ARE DISMISSED. ASSESSEES APPEAL 50. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE F OR THE ASSTT.YEAR 2011-12 READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN RESTRICTING THE ADDI TION MADE BY THE AO OF RS.7,00,00,000/- TO RS.2,35,00,000/- (I.E . RS.7,00,00,000 RS.2,35,00,000) ON THE ALLEGED GRO UND OF UNACCOUNTED INCOME EARNED BY THE APPELLANT OF RS.7, 00,00,000/- IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. THE APPELLANT MADE RETRACTION OF INCOME ADMITTED DURING THE COURSE OF SEARCH. HOWEVER, THE AO HELD THAT TH E RETRACTION MADE BY THE APPELLANT WAS AN AFTERTHOUGHT AND NOT A CCEPTABLE AND ADDED RS.7,00,00,000/- TO BE INCOME OF THE APPE LLANT. 51. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE ISSUE INVOLVED IN THIS GROUND OF THE APPEAL IS SIMILAR TO THE ISSU E INVOLVED IN THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE FOR THE A SSTT.YEAR 2010-11. THE FACTS ARE ALSO SIMILAR EXCEPT THAT THE INCOME D ISCLOSED DURING THE COURSE OF SEARCH FOR THE YEAR UNDER CONSIDERATION W AS RS.7,00,00,000/- AND THE CIT(A) HAS SUSTAINED THE ADDITION OF RS.2,3 5,00,000/- ONLY AND ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 16 DELETED THE BALANCE AMOUNT OF RS.4,65,00,000/- OF T HE ADDITION MADE BY THE AO ON THE BASIS OF ADMISSION MADE BY THE ASS ESSEE. 52. THE CIT(A) OBSERVED THAT SEARCH WAS CARRIED OUT ON 24.6.2010 I.E. WITHIN THREE MONTHS FROM THE COMMENCEMENT OF T HE RELEVANT PREVIOUS YEAR, AND THEREFORE ASSUMING THAT THE ADMI SSION WAS FOR 12 MONTHS, SUSTAINED PROPORTIONATE ADDITION FOR THE PE RIOD UPTO 24.6.2010 OF THE PREVIOUS YEAR AND DELETED THE BALANCE AMOUNT OF ADDITION. FURTHER, THE REVENUE THOUGH FILED APPEAL FOR THE AS STT.YEAR 2011-12, BUT HAS NOT CHALLENGED THE ABOVE DELETION OF ADDITI ON OF RS.4,64,00,000/- MADE BY THE CIT(A). ONLY THE ASSE SSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION TO THE EXTE NT OF RS.2,35,00,000/- MADE ONLY ON BASIS OF STATEMENT RE CORDED UNDER SECTION 132(4) OF THE ACT, WITHOUT ANY CORROBORATIV E MATERIAL. SUCH ADMISSION WAS RETRACTED BY THE ASSESSEE BY FILING R ETURN OF INCOME AS WELL AS BY A SEPARATE RETRACTION LETTER ALSO. 53. THE ARGUMENTS OF BOTH THE PARTIES WERE EXACTLY SIMILAR AS WAS MADE FOR THE ASSTT.YEAR 2010-11. THEREFORE, WE FOL LOWING OUR DECISION FOR THE ASSTT.YEAR 2010-11, FOR THE SAME REASONS, D ELETE THE ADDITION OF RS.2,35,00,000/- FOR THE YEAR UNDER CONSIDERATION, AND THUS ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 54. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE R EADS AS UNDER: 2. THE CIT(A) HAS ERRED IN UPHOLDING DECISION OF T HE AO IN IMPOSING PENALTY U/S.271(1)(C)/271AAA OF THE ACT IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 55. THIS GROUND OF APPEAL IS PREMATURE, AND THEREFO RE, THE SAME IS DISMISSED. 56. THE GROUND NO.4 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: ITA NO. 707, 708, 709 AND 710/RJT/2014 ITA NO.09, 20 AND 21/RJT/2015 17 4.THE LD.CIT(A) HAS ERRED IN UPHOLDING DECISION OF THE AO IN CHARGING INTEREST U/S.234A, 234B, 234C IS UNJUSTIFI ED, UNWARRANTED AND BAD IN LAW. 57. NO ARGUMENTS WERE MADE ON THIS GROUND OF APPEAL BY THE AR OF THE ASSESSEE. WE HOLD THAT CHARGING OF INTEREST UN DER SECTION 234A, 234B AND 234C IS CONSEQUENTIAL IN NATURE, AND ACCOR DINGLY, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 58. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PART LY ALLOWED, AND THAT OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 29 TH MAY, 2015 AT RAJKOT. SD/- SD/- ( SHAILENDRA KR. YADAV) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER