DCIT CC 47, MUMBAI V. THE PHOENIX MILLS LTD, MUMBAI

ITA 7422/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100776 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-03-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 14-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Depreciation; Business expenditure; Search and seizure; Document seized; Opportunity of cross examination; Earning of tax free income; Additional evidence; Bad and doubtful debts; Accommodation entries; Surrender of tenancy right; Documents seized; Reassessment proceedings
• Section: 69C; 143(3); 80HHC; 153A; 14A; 132

Judgement Text

M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . . , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , J UDICIAL MEMBER ITA NO. : 7 2 69 /MUM/20 1 2 ( ASSESSMENT YEAR: 200 2 - 0 3 ) ITA NO. : 7270 /MUM/20 12 (ASSESSMENT YEAR: 2008 - 09) ITA NO. : 7271 /MUM/20 12 (ASSESSMENT YEAR: 200 7 - 0 8 ) M/S THE PHOENIX MILLS LTD , 462, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400 0 13 .: PAN: AA A C P 33 25 J VS DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 47, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI DEEP KANT PRASAD I TA NO. : 74 2 2 /MUM/20 12 (ASSESSMENT YEAR: 200 2 - 0 3 ) ITA NO. : 7423 /MUM/20 12 (ASSESSMENT YEAR: 200 6 - 0 7 ) ITA NO. : 7424 /MUM/20 12 (ASSESSMENT YEAR: 200 7 - 0 8 ) ITA NO. : 7425 /MUM/20 12 (ASSESSMENT YEAR: 2008 - 09) DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 47, M UMBAI VS M/S THE PHOENIX MILLS LTD, 462, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400 0 13 .: PAN: AA A C P 33 25 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEP KANT PRASAD RESPONDENT BY : SHRI VIJAY MEHTA /DATE OF HEARING : 06 - 07 - 201 5 / DATE OF PRONOUNCEMENT : 19 - 08 - 201 5 M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 2 ORDER , . . : PER AMIT SHUKLA, AM : THE A FORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE AS WELL BY THE REVENUE AGAINST IMPUGNED COMMON ORDER DATED 28.09.2012 PASSED BY CI T(A) - 30, MUMBAI FOR THE QUANTUM OF ASSESSMENT P ASSED U/S 153A R.W.S. 143(3) FOR THE ASSESSMENT YEAR 2002 - 03, 2006 - 07, 2007 - 08 & 2008 - 09. SINCE MOST OF THE ISSUES INVOLVED ARE COMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE THE SAME WERE HEARD TOGET HER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. ASSESSMENT YEAR 2002 - 03 ITA NO 726 9/M/2012 ( ASSESSEE S APPEAL ) : ITA NO. 742 2 /MUM/2012 ( R EVENUE S APPEAL ) : 2. IN THE ASSESSEES APPEAL, VIDE GROUND NO.1, THE ASSESSEE HAS CHAL LENGED THE ADDITIONS/DISALLOWANCE S MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) ON THE GROUND THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF THE SEARCH & SEIZ UR E ACTION PERTAINING TO THE ASSESSMENT YEAR 2002 - 03 FOR WHICH ASSESSM ENT STOOD COMPLETED AND WAS UNABATED AND, THEREFORE, THE ADDITIONS MADE THEREIN ARE BEYOND THE SCOPE OF SECTION 153A. IN OTHER WOR DS TH E ASSESSMENT FOR THE ASSESSMENT YEAR 2002 - 03 S TOOD FINALIZED BEFORE THE DATE OF SEARCH AND, THEREFORE, IT WAS A NON - ABA TE D ASSESSMENT AND NO ADDITION OR DISALLOWANCE COULD HAVE BEEN MADE UNLESS SOME INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH FOR MAKING THE ADDITION OR DISALLOWANCES. 3. THE BRIEF FACTS QUA THE AFORESAID GROUND IS THAT ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE AY 2002 - 03 ON 30.10.2002 , U/S 139(1) DECLARING TOTAL LOSS OF RS. 1,51,95,901/ - . T HE T IME LIMIT FOR ISSUANCE OF NOTICE U/S 143(2) HA D EXPIRED ON 31 ST OCTOBER, 2003. M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 3 SINCE THE ASSESSEES CASE WAS NOT SELECTED FOR SCRUTINY, HENCE, TH E RETURNED INCOME STOOD ACCEPTED BY THE DEPARTMENT AND AS SUCH, AN ASSESSMENT ATTAINED FINALITY . POST THIS EVENT, A SEARCH AND SEI ZURE ACTION WAS CARRIED OUT ON PHOENIX GROUP ON 20.02.2008 AND THE ASSESSEE BEING THE FLAGSHIP COMPANY OF THE GROUP WAS AL SO COVERED UNDER THE SEARCH. AT THE TIME OF SEARCH ALL THE PENDING ASSESSMENTS GOT ABATED, HOWEVER, FOR THE ASSESSMENT YEAR 2002 - 03, WHICH WAS COVERED WITHIN THE PERIOD OF SIX YEARS AS PER THE NOTICE ISSUED U/S 153A, ALREADY STOOD FINALIZED WAS NOT PENDING AT THE TIME OF SEARCH, HENCE, SUCH A N ASSESSMENT WAS NOT ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A 4. BEFORE US, TH E LD. COUNSEL, SHRI VIJAY MEHTA SUBMITTED THAT NONE OF THE ADDITIONS OR DISALLOWANCES MADE BY THE ASSESSING OFFICER HA S ANY CORRELA TION OR LIVE - LINK - NEXUS WITH ANY INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH. THIS IS EVIDENT FROM THE PLAIN READING OF THE ASSESSMENT ORDER AND ALSO FROM THE ADDITIONS MADE BY THE ASSESSING OFFICER WHO HAS NOT REFERRED TO ANY MATERIAL, EXCEPT FOR W HAT WAS ALREADY ON RECORD . THUS, N O ADDITION DEHORS ANY INCRIMINATING MATERIAL CA N BE MADE WITHIN THE SCOPE OF SECTION 153A . IN SUPPORT OF HIS CONTENTION, HE STRONGLY RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ALL - CARGO GLOBAL LOG ISTIC LTD, REPORTED IN 374 ITR 645. 5. ON THE OTHER HAND, THE LD. DR STRONGLY RELYING UPON THE ORDER OF THE CIT(A), SUBMITTED THAT ONCE NOTICE U/S 153A HAS BEEN ISSUED , THEN THE ASSESSING OFFICER IS DUTY BOUND TO MAKE THE ASSESSMENT OR REASSESSMENT AND SC RUTINIZED EVEN THOSE ISSUES WHICH HAS BEEN ALREADY SHOWN IN THE RETURN OF INCOME, BECAUSE THE ASSESSING OFFICER IS REQUIRED TO MAKE A FRESH ASSESSMENT OR REASSESSMENT . 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE RELEVANT MATERIALS ON RECO RD. IT IS AN ADMITTED FACT THAT AT THE TIME OF SEARCH U/S 132 ON 20.02.2008, THE ASSESSMENT FOR THE M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 4 ASSESSMENT YEAR 2002 - 03 WAS NOT PENDING IN TERMS O F SECOND PROVISO TO SECTION 153A AND THEREFORE, SUCH AN ASSESSMENT DOES NOT GET ABATED. THE RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2002 - 03 WAS FILED ON 30.10.2002 , WHICH HAD ATT AI N E D FINALITY AS NO NOTICE U/S 143(2) WAS ISSUED FOR VERIFYING /SCRUTINIZING THE RETURNED INCOME. ONCE THE ASSESSMENT IS NOT PENDING ON THE DATE OF S E ARCH AND DOES NOT GET ABATED IN T ERMS OF SECOND PROVISO TO SECTION 153A , THEN NO ADDITION CAN BE MADE OVER AND ABOVE THE ALREADY ASSESSED INCOME UNLESS THERE IS ANY INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH F O R WHICH THE ADDITIONS/DISALLOWANCES CAN BE MADE. NOW AS PER THE VARIOUS JUDICIAL PRECEDENCE, ESPECIALLY SETTLED IN THE JURISDICTION OF BOMBAY HIGH COURT, T HE SCOPE OF ADDITION IN THE NON - ABATED ASSESSMENT IS LIMITED TO THE MATERIALS FOUND DURING THE SEARCH HAVING LIVE - LINK - NEXUS WITH SUCH ADDITIONS OR DISALLOWANCES. IF WE ANALYSE THE PRO V I S ION S OF SECTION 153A, IT IS APPARENT THAT, WHERE SEARCH HAS BEEN INITIATED U/S 132 OR REQUISITION HAS BEEN MADE UNDER SECTION 132A, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO ISSUE NOTICES REQUIRING THE PERSON SEARCHED TO FILE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR IN WHICH SEARCH IS CONDUCTED. THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS. THUS, IT IS STATUTORY MANDATE UPON THE ASSESS ING OFFICER TO ASSESS OR REASSESS THE TOTAL INCOME ON WHICH A PERSON CAN BE SAID TO BE ASSESSABLE UNDER THE PROVISIONS OF THE A CT. THE FIRST PROVISO TO SECTION 153A COVERS TH E INCOME WHICH IS TO BE ASSESSED I.E. EMANATING NOT ONLY, FROM THE DECLARED SOURCES BUT ALSO FROM ANY MATERIAL FOUND DURING THE COURSE OF SEARCH. HOWEVER IF THE ASSESSMENT HAS ALREADY BEEN MADE OR FINALIZED BEFORE THE DATE OF SEARCH, THEN THE AO CAN REASSE SS THE TOTAL INCOME ON THE BASIS OF MATERIAL FOUND OR GATHERED DURING THE COURSE OF SEARCH M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 5 OVER AND ABOVE THE INCOME WHICH ALREADY STOOD ASSESSED. HOWEVER, THE SECOND PROVISO CARVES OUT EXCEPTION/LIMITATION THAT, PENDING ASSESSMENT OR REASSESSMENT RE LATING TO ANY ASSESSMENT YEAR FOLLOWING WITHIN THE PERIOD OF SIX YEARS ON THE DATE OF SEARCH, THE SAME GETS ABATED. IN OTHER WORDS, THE ASSESSMENTS WHICH HAVE NOT ATTAINED FINALITY AND ARE PENDING ON THE DATE OF SEARCH, THEN THE SAME DOES NOT GETS ABATED. THE ASSESSMENTS WHICH HAVE ABATED, FRESH DETERMINATION OF TOTAL INCOME WOULD BE REQUIRED WHICH CAN BE MADE ON THE BASIS OF MATERIAL ALREADY ON RECORD AS WELL AS MATERIAL GATHERED DURING THE COURSE OF SEARCH. HOWEVER, THE ASSESSMENTS WHICH HAVE ALREADY ATTA INED FINALITY AND DOES NOT GET ABATED, THEN THEY HAVE TO BE ASSESSED ON THE SAME INCOME AND CANNOT INCLUDE ANY TIME OF INCOME FOR WHICH NO INCRIMINATING MATERIAL HAS BEEN FOUND. THE REASON BEING THAT THE ASSESSMENTS WHICH ARE PENDING AND GET ABATED, THE EN TIRE INCOME HAS TO BE DETERMINED WHICH INCLUDES MATERIAL ALREADY ON RECORD AND ALSO THE MATERIAL FOUND AS A RESULT OF SEARCH. HOWEVER, STATUTE HAS CARVED OUT THE EXCEPTION TO THOSE ASSESSMENTS WHICH HAVE ATTAINED FINALITY, BECAUSE THOSE ASSESSMENTS DOES NO T GET ABATED. IN SUCH A SITUATION, THE INCOME WHICH HAS ALREADY BEEN ASSESSED, THE SAME CANNOT BE DISTURBED UNLESS SOME INCRIMINATING INFORMATION OR MATERIAL IS FOUND SUGGESTING THAT THE INCOME WHICH ALREADY STOOD ASSESSED REQUIRES TO BE REASSESSED ON THE BASIS OF NEW MATERIAL FOUND. THIS PROPOSITION HAS BEEN UPHELD AND CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MURLI AGRO PRODUCTS LTD. IN THE FOLLOWING MANNER: - 10). THUS ON A PLAIN READING OF SECTION 153A OF THE INCOME - TAX ACT, IT BECOMES CLEAR THAT ON INITIATION OF PROCEEDINGS UNDER SECTION 153A, IT IS ONLY THE ASSESSMENT/REASSESSMENT PROCEEDINGS THAT ARE PENDING ON THE DATE OF CONDUCTING SEARCH UNDER SECTION 132 OR MAKING REQUISITION UNDER SECTION 132A OF THE ACT STAND ABATED AND NOT THE ASSESSMENTS/REASSESSMENTS ALREADY FINALIZED FOR THOSE ASSESSMENT YEARS COVERED' UNDER M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 6 SECTION 153A OF THE ACT. BY A CIRCULAR NO.8 OF 2003 DATED 18 - 9 - 2003 (SEE 263 ITR (ST) 61 AT 107) THE CBDT HAS CLARIFIED THAT ON / INITIATION OF PROCEEDINGS UNDER SECTION 153A, THE PROCEEDINGS PENDING IN APPEAL, REVISION OR RECTIFICATION PROCEEDINGS FINALIZED ASSESSMENT/ AGAINST REASSESSMENT SHALL NOT ABATE. IT IS ONLY BECAUSE, THE FINALIZED ASSESSMENTS/REASSESSMENT DO NOT ABATE, THE APPEAL, REVISION OR RECTIFICATIO N PENDING AGAINST FINALIZED ASSESSMENTS/REASSESSMENTS WOULD NOT ABATE. THEREFORE, THE ARGUMENT OF THE REVENUE, THAT ON INITIATION OF PROCEEDINGS UNDER SECTION 153A, THE ASSESSMENTS/REASSESSMENTS FINALIZED FOR THE YEARS COVERED UNDER SECTION 153A OF THE INC OME - TAX ACT STAND ABATED CANNOT BE ACCEPTED. SIMILARLY ON ANNULMENT OF ASSESSMENT MADE UNDER SECTION 153A (1) WHAT STANDS REVIVED IS THE PENDING ASSESSMENT/ REASSESSMENT PROCEEDINGS WHICH STOOD ABATED AS PER SECTION 153A(1). 11) IN THE PRESENT CASE, AS CONT ENDED BY SHRI MANI, LEARNED COUNSEL FOR THE ASSESSEE, THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998 - 99 WAS FINALISED ON 29 - 12 - 2000 AND SEARCH WAS CONDUCTED THEREAFTER ON 3 - 12 - 2003. THEREFORE, IN THE FACTS OF THE PRESENT CASE INITIATION OF PROCEEDINGS UNDER S ECTION 153A WOULD NOT AFFECT THE ASSESSMENT FINALISED ON 29 - 12 - 2000. 12) ONCE IT IS HELD THAT THE ASSESSMENT FINALISED ON 29.12.2000 HAS ATTAINED FINALITY, THEN THE DEDUCTION ALLOWED UNDER SECTION 80HHC OF THE INCOME - TAX ACT AS WELL AS THE LOSS COMPUTED UN DER THE ASSESSMENT DATED 29 - 12 - 2000, WOULD ATTAIN FINALITY. IN SUCH A CASE, THE AO WHILE PASSING THE INDEPENDENT ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTION 143 (3) OF THE I.T. ACT COULD NOT HAVE DISTURBED THE ASSESSMENT/ REASSESSMENT ORDER WHICH HAS ATTAINED FINALITY, UNLESS THE MATERIALS GATHERED IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 153A OF THE INCOME - TAX ACT ESTABLISH THAT THE RELIEFS GRANTED UNDER THE FINALISED ASSESSMENT/REASSESSMENT M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 7 WERE CONTRARY TO THE FACTS UNEARTHED DURING THE C OURSE OF 153 A PROCEEDINGS. 13) IN THE PRESENT CASE, THERE IS NOTHING ON RECORD' TO SUGGEST THAT ANY MATERIAL WAS UNEARTHED DURING THE SEARCH OR DURING THE 153A PROCEEDINGS WHICH WOULD SHOW THAT THE RELIEF UNDER SECTION, 80HHC WAS ERRONEOUS. IN SUCH A CASE , THE A.O. WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTION 143(3) COULD NOT HAVE DISTURBED THE ASSESSMENT ORDER FINALIZED ON 29.12.2000 RELATING TO SECTION 80 HHC DEDUCTION AND CONSEQUENTLY THE CIT COULD NOT HAVE INVOKED JURISDICTIO N UNDER SECTION 263 OF THE ACT. THE PRINCIPLE AND THE RATIO REITERATED IN PARA 12 OF THE AFORESAID ORDER MAKES IT ABUNDANTLY CLEAR THAT, THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER U/S 153A CANNOT DISTURB THE ASSESSMENTS/REASSESSMENT ORDER W HICH HAD ATTAINED FINALITY, UNLESS MATERIAL GATHERED IN THE COURSE OF SEARCH ESTABLISHES THAT THE EARLIER ASSESSMENT FINALIZED IS CONTRARY TO THE FACT. 7 . THIS PRINCIPLE HAS AGAIN BEEN REITERATED BY THE HONBLE RAJASTHAN HIGH COURT, WHEREIN LORDSHIPS AFTE R ANALYZING THE ENTIRE PROVISION OF SECTION 153A, HELD AND CONCLUDED AS UNDER : - 22. THE UNDERLYING PURPOSE OF MAKING ASSESSMENT OF TOTAL INCOME UNDER S. 153A OF THE ACT IS, THEREFORE, TO ASSESS INCOME WHICH WAS NOT DISCLOSED OR WOULD NOT HAVE BEEN DIS CLOSED. THE PURPOSE OF SECOND PROVISO IS ALSO VERY CLEAR, IN AS MUCH AS ONCE AN ASSESSMENT OR REASSESSMENT IS 'PENDING' ON THE DATE OF INITIATION OF SEARCH OR REQUISITION AND IN TERMS OF S. 153A A RETURN IS FILED AND THE AO IS REQUIRED TO ASSESS THE SAME, THERE CANNOT BE TWO ASSESSMENT ORDERS DETERMINING THE TOTAL INCOME OF THE ASSESSEE FOR THE SAID ASSESSMENT YEAR AND THEREFORE, THE PROVISO PROVIDES FOR ABATEMENT OF SUCH PENDING ASSESSMENT AND REASSESSMENT PROCEEDINGS AND IT IS ONLY THE M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 8 ASSESSMENT MADE UND ER S. 153A OF THE ACT THAT WOULD BE THE ASSESSMENT FOR THE SAID YEAR. 23. THE NECESSARY COROLLARY OF THE ABOVE SECOND. PROVISO IS THAT THE ASSESSMENT OR REASSESSMENT PROCEEDINGS, WHICH HAVE ALREADY BEEN 'COMPLETED' AND ASSESSMENT ORDERS HAVE BEEN PASSED DETERMINING THE ASSESSEE'S TOTAL INCOME AND SUCH ORDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS MADE, THERE IS NO QUESTION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN SUCH CASES, WHERE THE ASSESSMENT ALREADY STANDS COMPLE TED, THE AO CAN REOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE WITHOUT FOLLOWING THE PROVISIONS OF SS. 147, 148 AND 151 OF THE ACT AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. 24. THE ARGUMENT RAISED BY THE COUNSEL FOR THE APPELLANT TO THE EFFECT THAT ONCE A NOTICE UNDER S. 153A OF THE ACT IS ISSUED, THE ASSESSMENTS FOR SIX YEARS ARE AT LARGE BOTH FOR THE AO AND ASSESSEE HAS NO WARRANT IN LAW. 25. IN THE FIRM OPINION OF THIS COURT FROM A PLAIN READING OF THE PROVISION ALONG WITH THE PURPOSE AND P URPORT OF THE SAID PROVISION, WHICH IS INTRICATELY LINKED WITH SEARCH AND REQUISITION UNDER SS. 132 AND 132A O F THE ACT, IT IS APPARENT THAT : - (A) THE ASSESSMENTS OR REASSESSMENTS, WHICH STAND ABATED IN TERMS OF SECOND PROVISO TO S. 153A OF THE ACT, THE AO ACTS UNDER HIS ORIGINAL JURISDICTION, FOR WHICH, ASSESSMENTS HAVE TO BE MADE; (B) REGARDING OTHER CASES, THE ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL AND (C) IN ABSENC E OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 9 8. EARLIER, THE ITAT SPECIAL BENCH IN THE CASE OF ALL - CARGO GLOBAL LOGISTIC LTD, REPORTED IN [2012] 18 ITR (TRIB) 106 HAS R E ITERATED THIS PROPOSITION . NOW, T HIS DECISION OF THE SPECIAL BENCH HAS NOW BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT SINCE REPORTED IN [2015] 374 ITR 645 , WHEREIN, THE HONBLE BOMBAY HIGH COURT HELD THAT IF THERE WAS NO INCRIMINATING MATERIAL FOUND DUR ING THE COURSE OF SEARCH , THEN WITHIN THE SCOPE OF SECTION 153A NO ADDITION CAN BE MADE WH ERE THE ASSESSMENT ARE NOT ABAT ED AND ONLY PENDING ASSESSMENT ARE OPEN FOR ALL KIND OF ADDITIONS INCLUDING THE MATERIALS FOUND DURING THE COURSE OF SEARCH AND ALSO OT HERWISE. THUS , RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT NONE OF THE ADDITIONS AND DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) CAN BE SUSTAINED, BECAUSE ADMITTEDLY, NO INCRI MINATING MATERIAL HAS BEEN FOUND QUA THE ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR . ACCORDINGLY, GROUND NO. 1 RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. IN VIEW OF THE FINDING GIVEN ABOVE, ALL THE OTHER GROUNDS RAISED ON MERITS OF TH E ADDITION BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT HAVE BECOME PURELY ACADEMIC AND, THEREFORE, SAME ARE TREATED AS DISMISSED AS INFRUCTUOUS. 9 . IN THE RESULT, AP PEAL OF THE ASSESSEE IS ALLOWED, WHEREAS THE APPEAL OF THE REVENUE STANDS DISMISSED. A SSESSMENT YEAR 200 6 - 0 7 - ITA NO 7 4 23/M/2012 (REVENUES APPEAL) : 10 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO NOT TO REDUCE MU NICIPAL TAXES AMOUNTING TO RS.2,18,64,717/ - FROM ANNUAL LETTING VALUE, IGNORING THE FACT THAT SECTION 23(1) WAS AMENDED W.E.F. 1 - 4 - 2002 AND THE ANNUAL VALUE IS TO BE DETERMINED AFTER DEDUCTION THE M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 10 MUNICIPAL TAXES PAID BY THE OWNER.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT RS13,81,420/ - BEING 62.60% OF LEGAL AND PROFESSIONAL EXPENSES OF RS.22,06,740 / - ARE ALLOWABLE EXPENSES AGAINST BUSINESS INCOME, WITHOUT APPRECIATING THE FACT THAT THE EXPENDITU RE HAS BEEN INCURRED ON DEVELOPMENT OF PROPERTY TO BE LET OUT ON RENT OR THE PROPERTY THAT HAS ALREADY TO THE SERVICE CHARGES INCOME AGAINST WHICH THE CLAIM WAS DIRECTED TO BE ALLOWED .' 3 . 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING FOREIGN TRAVEL EXPENSES OF RS.30 , 43,980/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE CLAIM WITH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS BUSINESS PURPOSE AND JUSTIFICATION.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT RS.1,25,342/ - BEING 62.60% OF COMMISSION AND BROKERAGE PAYMENT OF RS.2,00,226/ - ARE ALLOWABLE EXPENSES AGAINST BUSINESS INCOME WITHOUT APPRECIATING THAT COMMISSION IS ALWAYS PAI D TOWARDS THE INTRODUCTION OF NEW CLIENTS AND NOT TOWARDS RENDERING SERVICE CHARGES.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WHILE CONFIRMING THE REDUCTION IN THE WIP, ERRED IN DELETING ADDITION OF RS. 1,12,87,068 / - MADE BY THE ASSESSING OFFICER UNDER THE HEAD 'INCOME FROM OTHER SOURCES' ON ACCOUNT M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 11 OF UNDISCLOSED INCOME BY WAY OF CASH RECEIVED BACK IN RESPECT OF THE TRANSACTIONS RELATING TO ACCOMMODATION BILLS . 11. BEFORE US, THE LD. COUNSEL SHRI VIJAY MEHTA SUBMI TTED THAT SO FAR AS ISSUE RAISED V I DE GROUND NO. 1 TO 4 THE SAME ARE COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RIGHT FROM THE ASSESSMENT YEAR S 1997 - 98 TO 2005 - 06. ONLY GROUND NO. 5 IS T O BE ARGUED AFRESH. 1 2 . BEFORE US, THE LD. DR ALSO ADMITTED THAT THE ISSUE S RAISED IN GROUND NO. 1, 2, 3 & 4 ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE EARLIER YEARS . 1 3 . AFTER HEARING THE PARTIES AND ALSO FROM THE PERUSAL OF THE IMPUGNED ORDER AND ORDER OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS, WE FIND THAT THE FOLLOWING ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE , WHICH ARE BEING DISCUSSED IN BRIEF BELOW: 1 4 . ADDITION OF R S. 2,18,64,717/ - ON A C COUNT OF DEDUCTION OF MUNICIPAL TAXES FROM THE ANNUAL LETTING VALUE. THE ASSES S EE HAS DEBITED MUNICIPAL TAXES IN THE PROFIT AND LOSS ACCOUNT FOR ALL THE ASSESSMENT YEARS IN QUESTION AND CLAIMED IT AS ALLOWABLE BUSINESS EXPENDITURE. THE ASSESSING OFFICER NOTED THAT W HILE COM PUTING THE ANNUAL LETTING VALUE ( ALV ) THE ASSESSEE HAS NOT REDUCED THE MUNICIPAL TAXES PAID WHICH HAS RESULTED IN CLAIMING HIGHER AMOUNT OF DEDUCTION U/S 24(A). SINCE THE ASSESSEE ITSELF HAS DISALLOWED DEPRECIATION ON LET OUT PROPERTY BY CONSIDERING THE 70 % OF THE TOTAL PR OPERTIES TO BE LET OUT , THEREFORE, FOR THE PURPOSE OF ASCERTAINING THE MUNICIPAL TAXES ON THE LET OUT PROPERTY, THE ASSESSING OFFICER CONSIDERED A HIGHER RATIO OF 80% OF MUNICIPAL TAXES DEBITED TO THE PROFIT AND LOSS ACCOUNT INCURRED F O R T HE PURPOSE OF LET OUT PROPERTY. ACCORDINGLY, HE DISALLOWED 80% OF THE MUNICIPAL TAXES FROM THE COMPUTATION OF BUSINESS INCOME AND M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 12 ALLOWED THE SAME WHILE COMPUTING THE ALV OF THE LET OUT PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BEFORE US , THE L D. COUNSEL SUBMITTED THAT APART FROM THE FACT THAT THIS ISSUE IS COVERED BY THE DECISION OF HONBLE CALCUTTA HIGH COURT DECISION IN THE CASE OF GILLARDERS AIRBHTROT AND CO. LTD., REPORTED IN 142 ITR 598, IT IS ALSO COVERED BY SERIES OF TRIBUNAL DECISIONS I N THE CASE OF THE ASSESSEE , RIGHT FROM THE ASSESSMENT YEAR 199 7 - 9 8 TO ASSESSMENT YEAR 2005 - 06. THE LD. CIT(A), FOLLOWING THE EARLIER ORDER S OF THE CIT(A) AS WELL AS OF THE TRIBUNAL DIRECTED THE ASSESSING OFFICER NOT TO REDUCE THE AMOUNT OF MUNICIPAL TAXES FROM THE ALV FOR THE PURPOSE OF COMPUTING THE INCOME UNDER THE HEAD HOUSE PROPERTY . 1 5 . WE FIND THAT THE TRIBUNAL IN ITS CONSOLIDATED ORDER DATED 27.04.2012 FOR THE ASSESSMENT YEAR 1997 - 98 TO 2005 - 06, H AS DECIDED THE AFORESAID ISSUE IN THE FOLLOWING MA NNER : - WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS FOUND BY THE LEARNED CIT(APPEALS) ON PERUSAL OF RELEVANT LEASE AGREEMENT, THE BURDEN OF MUN ICIPAL TAXES IN RESPECT OF PROP ERTIES LET O UT BY THE ASSESSEE WAS BORNE BY THE TENANTS AND THERE IS NOTHING BROUGHT ON RECORD BEFORE US TO CONTROVERT OR REBUT THIS FINDING OFF ACT RECORDED BY THE LEARNED C I T(APPEALS). PROVISO TO SECTION 23 LAYS DOWN IN VERY CLEAR TERMS THAT IF THE PROPERTY IS IN OC CUPATION OF THE TENANTS, THEN THE TAX LEVIED BY LOCAL AUTHORITY IN RESPECT OF THAT PROPERTY SHALL BE DEDUCTED IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY ONLY TO THE EXTENT SUCH TAXES ARE BORNE BY THE OWNER. IN THE PRESENT CASE, ALL THE MUNICIPAL TAXES HAVING BEEN BORNE BY THE TENANTS AND NOT BY THE ASSESSEE AS A OWNER, WE ARE OF THE VIEW THAT THE LEARNED CIT (APPEALS) WAS FULLY JUSTIFIED IN DIRECTING THE A 0 NOT TO REDUCE THE AMOUNT OF MUNICIPAL TAXES FROM ANNUAL LETTING VALUE FOR THE PURPOSE OF COMPUTI NG INCOME OF THE ASSESSEE FROM HOUSE PROPERTY. THE IMPUGNED ORDER OF THE LEARNED M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 13 CIT(APPEALS) ON THIS ISSUE IS, THEREFORE, UPHELD DISMISSING GROUND NO.2 OF THE REVENUE'S APPEAL. 1 6 . THUS, FOLLOWING THE EARLIER YEARS PRECEDENCE, WE AFFIRM THE ORDER OF CI T(A) AND ACCORDINGLY , GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 1 7 . AS REGARDS DISALLOWANCE OF RS. 13,81,420/ - OUT OF TOTAL LEGAL AND PROFESSIONAL EXPENSES OF RS. 22,06,740/ - AS RAISED IN GROUND NO.2, THE RELEVANT FACTS ARE THAT THE ASSESSEE HAS CL AIMED THESE EXPENSES INCURRED IN CONNECTION WITH THE IMMOVABLE PROPERTIES FOR THE VARIOUS ASSESSMENT YEARS. THE ASSESSING OFFICER HELD THAT THESE EXPENSES HAVE BEEN INCURRED I N CONNECTION WITH T HE PROPERTIES, WHICH HAVE BEEN DEVELOPED AND INTENDED FOR DERI VING THE RENTAL INCOME AND THEREFORE , SAME CAN NOT BE SAID TO BE INCURRED FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, H E DISALLOWED THESE EXPENSES ON THE GROUND THAT IT IS NOT ALLOWABLE U/S 24. THE LD. CIT(A) T H OUGH UPHELD THE CONTENTION OF THE ASSESSING OFFI CE IN PRINCIPLE THAT CLAIM OF THE ASSESSEE IS NOT ADMISSIBLE U/S 24 , H OWEVER, HE AGREED WI TH THE ALTERNATE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT THE PROFESSIONAL EXPENSES HAVE TO BE ALLOCATED IN RATIO OF RENT RECEIVED AND RECEIPT OF SERVICE CHARGES WHICH ARE TO BE ALLOWED AS DEDUCTION ON PROPORTIONATE BASIS . WHILE COMING TO THIS CONCLUSION, HE REFERRED TO THE EARLIER DECISIONS OF THE CIT(A) AND ALSO THE ORDER OF THE TRIBUNAL, WHEREIN, THE FINDINGS OF THE CIT(A) HAVE BEEN CONFIRMED ON THIS KIND OF AN ALLOCATION. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO DISALLOW THE EXPENSES BASED ON THE PERCENTAGE OF INCOME A ND ALLOW ONLY TO THE EXTENT OF PERCENTAGE OF SERVICE CHARGES. THE RELEVANT WORKING GIVEN BY THE CIT(A) FOR VARIOUS ASSESSMENT YEARS FOR THE DISALLOWANCE ARE AS UNDER: AY RENTAL INCOME SERVICE CHARGES % OF RENTAL INCOME TO THE TOTAL RECEIPTS % OF SERVICE CHARGES TO THE TOTAL RECEIPTS 2002 - 03 8,31,18,071 8,06,42,717 50.76% 49.24% 2006 - 07 20,09,99,756 33,67,02,897 37.40% 62.60% 20 07 - 08 24,44,69,390 32,69,41,304 46.53% 53.47% 2008 - 09 46,62,41,058 25,04,66,319 65% 35% M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 14 ACCORDINGLY, HE REWORK ED OUT THE DISALLOWANCES IN ACCORDANCE WITH THE ABOVE DIRECTIONS, AS UNDER: AY RENTAL INCOME SERVICE CHARGES % OF RENTAL INCOME TO THE TOTAL RE CEIPTS % OF SERVICE CHARGES TO THE TOTAL RECEIPTS 2002 - 03 2,18,268 50.75% 1,10,792 1,07,476 2006 - 07 22,06,740 37.40% 8,25,320 13,81,420 2007 - 08 2,25,030 46.53% 1,04,706 1,20,324 2008 - 09 1,02,82,794 65% 66,83,816 35,98,978 1 8 . THE AFORESAID VIEW OF THE CIT(A) HAS BEEN AFFIRMED BY THE TRIBUNAL IN THE FOLLOWING MANNER: 19. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE DETAILS OF LEGAL AND PRO FESSIONAL CHARGES PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WERE FURNISHED BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(APPEALS) AND AFTER ANALYZING THE NATURE AND PURPOSE OF THE SAID EXPENDITURE, IT WAS HELD BY THE AO AS WELL AS BY THE LEARN ED CIT(APPEALS) THAT THE SAME TO THE EXTENT OF RS.9,2 1,120/ - WAS NOT INCURRED FOR THE PURPOSE OF ASSESSEE'S BUSINESS. THE SAME WAS INCURRED MAINLY IN RELATION TO IMMOVABLE PROPERTIES OF THE ASSESSEE WHICH WAS GIVEN ON RENT OR WHICH WAS TO BE GIVEN ON RENT AFTER COMPLETION OF DEVELOPMENT. THE SAID EXPENDITURE THUS WAS INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF RENTAL INCOME WHICH WAS CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND SINCE THERE WAS NO DEDUCTION ALLOWABLE ON ACCOUNT O F THE SAID EXPENDITURE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS PER THE RELEVANT PROVISIONS OF SECTION 24, WE ARE OF THE VIEW THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES TO THE EXTENT OF RS.9,21,120/ - WAS RIGHTLY DISALLOWED BY THE AUTHORITIES BELOW. AS REGARDS THE RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 15 TRIBUNAL ON THE SIMILAR ISSUE IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2001 - 02, IT IS OBSERVED THAT THE EXPENDITUR E INCURRED BY THE ASSESSEE ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES IN THAT YEAR WAS FOUND TO BE FOR THE PURPOSE OF ASSESSEE'S BUSINESS AND ACCORDINGLY THE SAME WAS ALLOWED BY THE TRIBUNAL. AS ALREADY NOTED, THE FACTS INVOLVED IN THE YEAR UNDER CONSI DERATION, HOWEVER, ARE DIFFERENT AND THERE BEING NOTHING BROUGHT ON RECORD TO SHOW THAT THE LEGAL AND PROFESSIONAL CHARGES PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION TO THE EXTENT OF RS.9,21,120/ - WERE THE EXPENDITURE INCURRED FOR THE PURPOSE OF ASSESSEE'S BUSINESS, WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE. THE S E IS, THEREFORE, UPHELD DISMISSING GROUND NO.9 OF THE ASSESSEE'S APPEAL . 1 9 . SINCE THERE IS NO CHANGE OF FACTS, THEREFORE, CONSISTENT WITH THE EARLIER YEARS PRECEDENCE AND RESPECTFULLY FOLLOWING THE SAME, WE UPH O LD THE WORKING OF THE CIT(A) FOR ALLOWING THE LEGAL AND PROFESSIONAL CHARGES AND ACCORDINGLY , GROUND NO. 2 RAISED BY TH E REVENUE IS DISMISSED. 20 . THE NEXT ISSUE RELATES TO DISALLOWANCE OF RS. 30,43,988/ - ON ACCOUNT OF FOREIGN TRAVEL EXPENSES , RAISED VIDE GROUND NO. 3. 21 . THE ASSES S EE HAS DEBITED DIRECTORS FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE IN VARIOUS ASS ESSMENT YEARS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF FOREIGN TRAVELLING EXPENSES AND JUSTIFICATION OF THE CLAIM. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE CLIENTELE FROM WHOM THE RENTAL INCOME ARE BEING RECEIVED ARE FOREI GN BASED C OMPANIES AND HENCE IN ORDER TO F ETCH MORE BUSINESS AND ALSO TO RETAIN EXISTING FOREIGN CLIENTELE, THE DIRECTOR S OF THE COMPANY NEED TO UNDERTAKE FOREIGN TRAVEL TO LEASE AND NEGOTIATE WITHIN FOREIGN COMPANIES . M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 16 HOWEVER, THE ASSESSING OFFICER DID NO T ACCEPT THE ASSESSEES CONTENTION AND DISALLOWED THE FOREIGN TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE. 22 . BEFORE THE CIT(A), THE ASSE S SEE HAS FILED DETAILED SUBMISSIONS AND ALSO POINTED OUT THAT THE SIMILAR DISALLOWANCE HAVE BEEN DELETED BY THE CIT( A) IN THE EARLIER YEARS AND ALSO AFFIRMED BY THE TRIBUNAL. THE LD. CIT(A) AFTER NOTING DOWN THE ENTIRE FACTS, HELD THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE CIT(A) AND THE TRIBUNAL FOR THE EARLIER YEARS. 2 3 . WE FIND THAT THE ASSES S EE IS IN THE BUSINESS OF DEVELOPMENT OF PROPERTY AND ANCILLARY SERVICES. IT HAS ESTABLISHED A HUGE RETAIL MALL WHICH KNOWN AS HIGH STREET PHOENIX MALL , WHEREIN LARGE NUMBER OF FOREIGN BRAND SHOPS HAVE BEEN OPEN ED . IT HAS COME UP WITH THE MALL KNOWN AS PALLADIUM IN HIGH STREET PHO E NIX, WHICH CONSIST S OF VARIOUS FOREIGN BRAND SHOPS. FOR GETTING SUCH KIND OF FOREIGN CLIENTELE, THE DIRECTORS OF THE COMPANY HAVE BEEN REGULARLY VISITING FOREIGN COUNTRIES. IN EARLIER YEARS, SUCH A CLAIM OF EXPENSES HAS BE EN ALLOWED FROM THE STAGE OF THE TRIBUNAL AFTER DETAIL EXAMINATION AND DISCUSSION, THEREFORE, CONSISTENT WITH THE VIEW TAKEN IN THE EARLIER YEARS, WE ALSO ALLOW THE FOREIGN TRAVELLING EXPENSES. ACCORDINGLY , ORDER OF THE CIT(A) ON THIS SCORE IS AFFIRMED AND G ROUND NO. 3 IS DISMISSED. 2 4 . THE NEXT ISSUE PERTAINS TO DISALLOWANCE OF RS. 1,25,342/ - OUT OF TOTAL COMMISSION AND BROKERAGE EXPENSES OF RS. 2,00,226/ - , RAISED VIDE GROUND NO. 4 . 2 5 . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED COMMISSIO N AND BROKERAGE EXPENSES IN ALL THE ASSESSMENT YEARS. ON QU E RY RAISED , THE ASSESSEE SUBMITTED THAT THE PARTIES WH O BRING CLIENTS FOR RENTAL WERE PAID BROKERAGE AND COMMISSION EXPENSES AND SINCE THE ASSESSEE WAS IN RECEIPT OF SERVICE CHARGES ALSO FORM M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 17 THE P ARTIES, TO WHOM THE BUSINESS PREMISES WAS LET OUT , THEREFORE, THE CLAIM OF THE ASSES S EE IS ALLOWABLE UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OFFICER, HOWEVER, REJECTED THE ASSESSEES CONTENTION AND DISALLOWED ENTIRE PAYMENT OF COMMISSION AND BROKER AGE. THE LD. CIT(A), FOLLOWING THE EARLIER YEAR ORDER OF THE CIT(A) AS WELL AS THE TRIBUNAL ORDER DELETED PART OF THE SAID ADDITION BASED ON PROPORTIONATE BASIS. 2 6 . AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER, WE FIND THAT SO FAR A S THE GENUINENESS OF THE PAYMENT TO VARIOUS PA R TIES IS CONCERNED , THE SAME IS NOT DISPUTED, HO W EVER THE ONLY ISSUE IS , WHETHER SUCH A PAYMENT IN THE CASE OF THE ASSESSEE IS ALLOWABLE OR NOT OR IS ALLOWABLE IN PART . THE LD. CIT(A) THOUGH AGREED IN PRINCIPLE THAT THE DISALLOWANC E MADE BY THE ASSESSING OFFICER IS CORRECT, HOWEVER, AGREED WITH TH E ALTERNATE CONTENTION OF THE ASSESSEE THAT THE BROKERAGE AND COMMISSION EXPENSES WHICH ARE ALLOCATED IN RATIO OF RENT AND SERVICE PAYMENT ARE TO BE ALLOWED TO THE EXTE NT THEY ARE ALLOCATED FOR THE EARNING OF THE SERVICES CHARGES. THIS ALLOCATION IS IN TUNE WITH THE FINDINGS GIVEN IN THE EARLIER YEARS BY THE CIT(A) AND SUCH A METHODOLOGY OF ALLOCATION HAS ALSO BEEN APPROVED BY THE TRIBUNAL. THE LD. CIT(A) HAS DIRECTED TH E ASSESSING OFFICER TO DISALLOW IN THE RATIO OF RENTAL AND SERVICE CHARGES, WHICH H AS BEEN DEALT AT PAGE 16 OF THE APPELLATE ORDER. SINCE THIS METHODOLOGY IS CONFORMITY WITH THE EARLIER YEARS, APPROVED BY THE TRIBUNAL , A CCORDINGLY , WE ALSO AFFIRM THE SAME THAT THE BROKERAGE AND COMMISSION WHICH IS ALLOCABLE TO EARNING OF SERVICE CHARGES IS ALLOWABLE AND WHICH IS ALLO W E D TO RENTAL INCOME IS TO BE DISALLOWED. GROUND NO. 4 AS RAISED BY THE REVENUE IS THUS, DISMISSED. 27 . IN G ROUND NO. 5, THE REVENUE HAS CHALL ENGED DELETION OF ADDITION OF RS. 1,12,87,068/ - MADE BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES ON ACCOUNT OF UNDISCLOSED INCOME IN RESPECT OF TRANSACTION IN RELATI ON TO ACCOMMODATION M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 18 BILLS , WHICH CIT(A) THOUGH HAS CONFIRMED THE AC TION OF THE ASSESSING OFFICER THAT IT IS TO BE ADDED HOWEVER HAS DIRECTED THE ASSESSING OFFICER TO REDUCE IT FROM THE WORK - IN - PROGRESS AS THESE ARE R ELATED TO COST OF THE PROJECT. BRIEFLY STATED THE RELEVANT FACTS ARE THAT, T HE ASSESSING OFFICER OBSERVED T HAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION CERTAIN INCRIMINATING DOCUMENTS IN THE F O RM OF BOGUS BILLS WERE FOUND AND WHEN THESE BILLS WERE CONFRONTED WITH THE DIRECTORS OF THE GROUP COMPANIES, THE ASSESSEE COMPANY CLAIMED THAT THE MATERIALS WERE PURCHASED FROM THE FOLLOWING THREE CONCERNS IN DIFFERENT ASSESSMENT YEARS, THE DETAILS OF WHICH ARE AS UNDER: NAME OF THE PARTY AY 2006 - 07 AY 2007 - 08 AY 2008 - 09 TOTAL (RS) M/S GURUKRUPA ENTERPRISE 58,11,988 1,30,94,744 -- 1,89,06,226 M/S YASHOBHUMI TRADERS PVT LTD -- 1,04,34,793 1,90,40,433 2,70,23,178 M/S MANJU ENTERPRISE 54,75,080 -- 2,15,48,098 2,70,23,178 TOTAL (RS.) 1,12,87,068 2,35,29,537 4,05,88,531 7,54,05,136 28 . THE STATEMENT OF THE KEY PERSONS WHO WERE HANDLING THE AFFAIRS O F THESE CONCERNS WERE ALSO RECORDED ON OATH BY THE AUTHORIZED OFFICERS , WHO ADMITTED THAT THEY WERE PRO V I DI NG ACCOMMODAT I ON ENTRIES . THE RELEVANT EXTRACT OF THE STATEMENT OF THE TWO SUCH PERSONS HAVE ALSO BEEN INCORPORATED BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDER , IN WHICH IT WAS SPECIFICALLY MENTIONED THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES WHICH HAS OBTAINED ACCOMMODATION BILLS FROM THEM. THESE STATEMENTS WERE CONFRONTED TO THE DIRECTOR OF THE ASSESSEE, HOWEVER, THE SAME WAS CATEGORICALLY DE NIED THAT THEY HAD NOT BOOKED ANY BOGUS PURCHASES FROM THESE ENTITIES RATHER THEIR ENTIRE PURCHA S ES ARE GENUINE . THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION ON THE GROUND THAT THESE ENTITIES DID NOT HAVE INFRASTRUCTURE AVAILABLE WHICH ARE NEED ED FOR THE BUSINESS OF BUILDING MATERIAL LIKE IRON AND STEEL. THE INVESTIGATION WING HAD NOTED THAT IN THE BANK ACCOUNTS OF THE SAID CONCERNS, THE CASH HAS BEEN WITHDRAWN M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 19 IMMEDIATELY AFTER DEPOSITING OF THE CHEQUE. THE SAID CASH WITHDRAWN HA S BEEN ADMITTED TO BE GIVEN BACK TO THE PERSONS/CUSTOMERS WHO HAS GIVEN THE CHEQUE AFTER DEDUCTING HIS COMMISSION. THE ASSESSEES CONTENTION ON THE OTHER HAND WAS THAT THE ABOVE PARTIES HAVE IN FACT PROVIDED ALL THE MATERIALS FOR WHICH THE ASSESSEE HAS MADE THE PAYMENTS AND THERE IS NO INGENUITY IN THE TRANSACTIONS WITH THESE PARTIES AND NO CASH WAS RECEIVED BACK . FURTHER VERY IMPORTANT , THE ASSESSEE SUBMITTED THAT NO BENEFIT IS DERIVED TO THE ASSESSEE , BECAUSE IT HAS NEITHER CLAIMED THESE AMOUNTS AS EXPENDITURE NOR HAS C LAIMED ANY DEPRECIATION. TH E SE PURCHASES IN FACT, FORMED PART OF THE CAPITAL WORK - IN - PROGRESS , T HEREFORE, THE ASSESSEE HAS NEITHER INFLATED ANY EXPENSES NOR HAS UNDER - STATED THE TAXABLE INCOME AND NO BENEFIT WOULD HAVE ARRIVED TO THE ASSESSEE FOR TAKING SU CH ACCOMMODATION BILLS. THE ASSESSING OFFICER HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AFTER DETAIL DISCUSSION AND REASONS GIVEN IN THE ORDER , ADDED THE AMOUNT ON ACCOUNT OF ALLEGED ACCOMMODATION ENTRY TO BE TAXABLE AS INCOME FROM OTHER SOURCES . A FTER MAKING THE ADDITION IN THE AFORESAID MANNER T HE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE IS CONSTRUCTING MALL AT LOWER PAREL, WHICH IS LET OU T ON RENTALS AND S UCH MATERIAL PURCHASED INCREASE S THE CAPITAL WORK - IN - PROGRESS BY WAY OF INTRODUC TION OF BOGUS BILLS FOR PURCHASES AND FURTHER THE CAPITAL WIP IS PART OF THE NET BLOCK OF THE ASSESSEE AND THEREFORE, NET WIP TO THE EXTENT OF BOGUS BILLS IS REDUCED FROM THE RELEVANT PREVIOUS YEAR AND THE ASSESSE E WAS REQUIRED TO CARRIED FORWARD THE MODIF IED NET WIP IN THE FOLLOWING MANNER: AY 2006 - 07(RS.) 2007 - 08 (RS.) 2008 - 09 (RS.) THE NET CAPITAL WIP AS PER BALANCE 26,06,36,296 96,96,39,053 178,16,91,793 THE REDUCTION IN CAPITAL WIP DUE TO BOGUS BILLS AS DISCUSSED 1,12,87,068 2,35,29,537 4,05,88,531 THE REVISED CAPITAL WIP THE A.Y. 24,93,49,228 94,61,09,516 174,11,03,262 2 9 . BEFORE THE CIT(A), THE ASSESSEE HAD MADE DETAILED SUBMISSIONS AND ALSO PRODUCED VARIOUS CORROBORATIVE MATERIAL IN M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 20 SUPPORT OF THE CONTENTION THAT IT HAS NOT TAKEN ANY ACCOMMODA TION ENTRY FOR THE PURCHASE OF MATERIALS. THE RELEVANT SUBMISSIONS OF THE ASSESSEE HAS BEEN INCORPORATED BY THE CIT(A) FROM PAGES 24 TO 28 OF THE APPELLATE ORDER. THE LD. CIT(A), AFTER EXAMINING THE ENTIRE FACTS HELD THAT THE PURCHASE TRANSACTIONS OF MATER IALS AS PER THE BILLS TAKEN FROM TH ESE THREE PARTIES WERE NOT GENUINE AS THESE CONCERNS WERE FOUND TO BE PROVIDING ACCOMMODATION ENTRIES BY THEIR OWN ADMISSION. THE ASSESSEE COULD NOT DISCHARGE I T S ONUS OF PROVING TH AT ALL THE MATERIALS PURCHASE BY THE SE A LLEGED VENDORS WERE ACTUALLY GENUINE . THE ASSESSEE ALSO DID NOT AVAIL ANY OPPORTUNITY OF CROSS EXAMINATION DESPITE BEING OFFERED TO THE ASSESSEE. THUS, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND HELD THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN REDUCING THE WORK - IN - PROGRESS BY THE QUANTUM OF BOGUS PURCHASE. ACCORDINGLY, THE CAPITAL WIP AS WORKED OUT BY THE ASSESSING OFFICER HAS BEEN AFFIRMED BY THE CIT(A). 30 . THE ASSESSEE FURTHER RAISED THE OBJECTION THAT ONCE THE EFFECT OF BOGUS PURCHASES HAS BEEN MADE BY REDUCING THE WIP, THEN AGAIN THE SAME AMOUNT OF PURCHASES HAS BEEN ADDED BY THE ASSESSING OFFICER , SEPARATELY UNDER THE HEAD INCOME FROM OTHER SOURCES FOR ALL THE ASSESSMENT YEARS , VIZ. , RS. 1,12,87,068/ - , RS. 2,35,29,537/ - , 4,05,88,531/ - FOR THE ASSESSMENT YEARS 2006 - 07, 2007 - 08 & 2008 - 09 RESPECTIVELY. THE REASON GIVEN BY THE ASSESSING OFFICER WAS THAT THE ASSESSEE MU S T HAVE RECEIVED EQUIVALENT CASH ON SUCH BOGUS PURCHASES. THE ASSESSEES SUBMISSION IN THIS REGARD BEFORE CIT(A) HAS BEEN D EALT BY THE CIT(A) IN PARA 18 FROM PAGES 30 TO 32 OF THE APPELLATE ORDER. SUM AND SUBSTANCE OF THE ASSESSEES SUBMISSION IS THAT THE EFFECT OF BOGUS PURCHASES HAS ALREADY BEEN GIVEN BY THE ASSESSING OFFICER BY REDUCING THE WIP IN RESPECTIVE ASSESSMENT YEAR S, THEREFORE, THERE CANNOT BE DOUBLE ADDITION OF SAME AMOUNT AS UNDISCLOSED INCOME. IF THE STAND OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS RECEIVED THE CASH BACK, IS ACCEPTED OR HELD TO BE CORRECT , THEN IT M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 21 WAS ASSESSEES OWN MONEY GONE FROM THE BOOKS WHICH WAS NOT IN THE CHARACTER OF UNDISCLOSED MONEY , WHICH SHOULD BE TAXED UNDER THE PROVISIONS OF THE INCOME - TAX ACT . I F T HE ASSESSEE HAS RECEIVED THE CASH BACK, THE THEN SOURCE OF IT WAS ALREADY PART OF THE BOOKS OF ACCOUNT . FURTHER, ONCE THE ASSESSING OFFICER HAS ADJUSTED THE BOGUS PURCHASES BY REDUCING THE WIP THEN EFFECT OF BOGUS PURCHASE HAS ALREADY BEEN GIVEN BY THE ASSESSING OFFICER. THERE IS NO QUESTION OF FURTHER ADDING THE SAID AMOUNT AS UNDISCLOSED INCOME, BECAUSE IT AMOUNTS TO DOUBLE TAXATIO N. RELIANCE WAS PLACED ON VARIOUS DECISIONS IN THIS REGARD, IN SUPPORT OF HIS CONTENTION. THE LD. CIT(A) AGR EE D WITH THE CONTENTION OF THE ASSESSEE THAT , IF THE ASSESSING OFFICER HAS REDUCED THE WORK - IN - PROGRESS (WIP) TO THE EXTENT OF BOGUS PURCHASES, WHI CH ACTION TOO HAS BEEN CONFIRMED BY HIM , THEN FURTHER ADDITION OF THE SAME CANNOT BE MADE AS INCOME FROM OTHER SOURCES. NO EVIDENCE OF RECEIPT OF THE CASH OR AVAILABILITY OF THE CASH WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS. THUS, HE HELD THAT NO FURTHER ADDITION O F THIS KIND SHOULD BE MADE IN THE FORM OF INCOME FROM OTHER SOURCES. THE RELEVANT FINDING OF CIT(A) IN THIS REGARD READS AS UNDER: 19.0 THE REASONS STATED BY THE AO IN THE ASSESSMENT ORDER FOR MAKING ADDITIONS UNDER THE HE AD 'OTHER SOURCES' EQUIVALENT TO THE VALUE OF BOGUS PURCHASES AND THE CONTENTIONS OF THE APPELLANT AS CAPTURED IN THE FOREGOING PARAGRAPHS ARE CAREFULLY EXAMINED. THE ACTION OF THE A.O IN REDUCING THE WIP TO THE EXTENT OF BOGUS PURCHASES IS UPHELD IN THE F OREGOING PARAGRAPHS OF THIS APPELLATE ORDER. A.O HAS MADE ANOTHER ADDITION TO THE RETURNED INCOMES ON THE GROUND THAT THE BOGUS PURCHASES HAVE RESULTED IN CASH RECEIPTS IN THE HANDS OF THE APPELLANT. APPELLANT HAS CONTENDED THAT THERE IS NO EVIDENCE TO PRO VE THAT THE APPELLANT HAS RECEIVED CASH ON ACCOUNT OF THE BOGUS PURCHASE TRANSACTIONS. IT M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 22 IS ALSO CONTENDED THAT NO EVIDENCE OF THE RECEIPT OF CASH OR THE AVAILABILITY OF CASH WAS FOUND DURING THE SEARCH & SEIZURE PROCEEDINGS. APPELLANT HAS VEHEMENTLY CONT ENDED IN THE ALTERNATIVE SUBMISSION THAT THE ALLEGED BOGUS PURCHASES RESULTING IN CASH RECEIPTS CANNOT BE TAXED AS INCOMES ACCRUED IN THE HANDS OF THE APPELLANT SINCE SUCH ALLEGED RECEIPTS OF CASH REPRESENT THE MONEY BELONGING TO THE APPELLANT ITSELF AND T HE SOURCES OF SUCH CASH ARE THE BOOKS OF ACCOUNTS OF THE APPELLANT ITSELF. FURTHER, THE APPELLANT HAS CONTENDED THAT ONLY REAL INCOME CAN BE BROUGHT TO TAX, WHILE A.0 HAS SOUGHT TO ASSESS CERTAIN AMOUNTS WHICH HAVE NEITHER ACCRUED NOR RECEIVED AS INCOMES B Y THE APPELLANT. 19.1 I FIND THAT THERE IS ADEQUATE FORCE IN THE CONTENTIONS OF THE APPELLANT. ON THE ISSUE OF BOGUS PURCHASES, I HAVE UPHELD REDUCTIONS IN THE WIP TO THE EXTENT OF BOGUS PURCHASES IDENTIFIED BY THE DEPARTMENT. AS REGARDS ASSESSING THE QU ANTUM OF BOGUS PURCHASES AS ALSO THE INCOMES OF THE APPELLANT IS CONCERNED, SUCH AN ACTION DOES NOT PASS THE TEST OF REAL INCOME. AS CONTENDED BY THE APPELLANT, THE SOURCES OF SUCH ALLEGED CASH RECEIPTS ARE NOTHING BUT THE BOOKS OF ACCOUNT OF THE APPELLANT ITSELF. IT IS HEREBY HELD THAT THE ISSUE OF BOGUS PURCHASES IS ADEQUATELY DEALT WITH BY REDUCING THE WIP TO THE EXTENT OF BOGUS PURCHASES IDENTIFIED BY THE DEPARTMENT. IN VIEW OF THE ABOVE, THE ADDITIONS MADE BY THE A.0 UNDER THE HEAD 'OTHER SOURCES' ARE HEREBY DELETED. 3 1 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS. SO FAR AS THE FACTUM OF ALLEGED BOGUS PURCHASES FROM 3 CONCERNS, THE SAME HAS NOT BEEN DISPUTED B EFORE US BY THE ASSESSEEE. T HE LD. CIT(A) HAS M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 23 ALREADY CONFIRMED THE ACTION OF THE ASSESSING OFFICER THAT THE ALLEGED PURCHASE TRANSACTION OF THE MATERIALS HAS BEEN FOUND TO BE NOT GENUINE AS THESE PARTIES HAVE ADMITTED THAT THEY WERE PROVIDING ACCOMMODATION ENTRIES. THEREFORE, WHETHER THE PURCHASES ARE GENUINE OR NOT THE SAME IS NOT THE SUBJECT MATTER OF DISPUTE OR ISSUE BEFORE US. THE ASSESSEE HAS CONSTRUCTED A MALL AT LOWER PAREL IN RELATION TO WHICH H UG E PURCHASE OF BUILDING MATERIALS WERE MADE. SOME OF THE BILLS FOR THE PURCHASE OF MATE RIALS HAVE BEEN HELD TO BE BOGUS ON THE GROUND THAT THESE WERE TAKEN FROM THE PARTIES WHO ARE PROVIDING ACCOMMODATION ENTRIES. THE ASSESSING OFFICER HAS REDUCED THE CAPITAL WORK - IN - PROGRESS BY QUANTUM OF SUCH ALLEGED BOGUS PURCHASE IN THE FOLLOWING MANNER: AY 2006 - 07(RS.) 2007 - 08 (RS.) 2008 - 09 (RS.) THE NET CAPITAL WIP AS PER BALANCE 26,06,36,296 96,96,39,053 178,16,91,793 THE REDUCTION IN CAPITAL WIP DUE TO BOGUS BILLS AS DISCUSSED 1,12,87,068 2,35,29,537 4,05,88,531 THE REVISED CAPITAL WIP THE A.Y. 2 4,93,49,228 94,61,09,516 174,11,03,262 SUCH REDUCTION OF WIP HAS BEEN CONFIRMED BY THE CIT(A) , AGAINST WHICH, THE ASSESSEE HAS NOT PREFERRED ANY APPEAL OR RAISED ANY OBJECTIONS BEFORE US IN ANY OF THE ASSESSMENT YEARS. AFTER MAKING THE ADDITION IN THE AFORESAID MANNER I.E. BY REDUCING THE WIP BY THE QUANTUM OF ALLEGED BOGUS PURCHASE, THE ASSESSING OFFICER HAS FURTHER MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE MUST HAVE RECEIVED THE EQUIVALENT AMOUNT OF CASH FR O M THE BOGUS PURCHASES. WE ARE UNABL E TO APPRECIATE AS TO HOW SUCH AN ADDITION CAN BE MADE AGAIN. F IRSTLY, EVEN GOING BY THE VERSION OF THE ASSESSING OFFICER IF THE ASSESSEE HAS PAID CHEQUE TO THE PARTIES FOR THE PURCHASE OF MATERIAL THEN SUCH A CHEQUE IS DULY REFLECTED IN THE CASH BOOK / BO OKS OF ACCOUNT OF THE ASSESSEE. FURTHER IF THE ASSESSEE HAS RECEIVED BACK THE EQUIVALENT AMOUNT OF CASH , THEN HOW AN ADDITION CAN BE MADE FOR THE SAME AMOUNT AGAIN AS UNDISCLOSED INCOME OR OUTSIDE THE BOOKS BECAUSE , IT IS THE SAME M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 24 MONEY WHICH HAS BEEN RECE IVED BACK; S ECONDLY, THERE IS NO ACTUAL EVIDENCE TO PROVE THAT ASSESSEE HAS RECEIVED CASH ON ACCOUNT OF BOGUS PURCHASE TRANSACTION, AT LEAST NOTHING HAS BEEN BROUGHT ON RECORD EVEN AFTER EXTENSIVE SEARCH AND SEIZURE ACTION AND ENQUIRY BY THE D EPARTMENT. NO AVAILABILITY OF CASH WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS. THUS, NO ADDITION ON ACCOUNT OF ALLEGED RECEIPTS OF CASH IN THE HANDS OF THE ASSESSEE CAN BE MADE . EVEN OTHERWISE ALSO, IF THE ADDITION HAS ALREADY BEEN UPHELD BY CIT(A) O N ACCOUNT OF BOGUS PURCHASES BY REDUCTION IN WIP , THEN AGAIN ADDING THE SAME AMOUNT AS ALLEGED CASH RECEIPTS WOULD AMOUNT TO DOUBLE ADDITION AND DOUBLE TAXATION WHICH CANNOT BE SUSTAINED AT ALL . THE FINDING OF THE CIT(A) AS RECORDED ABOVE, IS NOT ONLY FACTUALLY CORRECT BUT ALSO IN ACCORDANCE WITH THE PROVISIONS OF THE LAW AND ACCORDINGLY , SUCH A FINDING OF THE CIT(A) IS AFFIRMED AND THUS THE GROUND NO. 5 AS RAISED BY THE REVENUE IS DISMISSED. 32. IN THE RESULT, APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2006 - 07 IS DISMISSED. ASSESSMENT YEAR 200 7 - 0 8 - ITA NO 7424/M/2012 (REVENUES APPEAL) : - 33. THE DEPARTMENT IN ITS APPEAL HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO NOT TO REDUCE MUNICIPAL TAXES AMOUNTING TO RS.2,47,43,775/ - FROM ANNUAL LETTING VALUE, IGNORING THE FACT THAT SECTION 23(1) WAS AMENDED W.E.F. 1 - 4 - 2002 AND THE ANNUAL VALUE IS TO BE DETERMINED AFTER DEDUCTION THE MUNICIPAL TAXES PAID BY T HE OWNER.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT RS. 1,20,324/ - BEING 53.47% OF LEGAL AND PROFESSIONAL EXPENSES OF RS.2,25,030! - ARE ALLOWABLE EXPENSES M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 25 AGAINST BUSINESS INCOME, WITHOUT APPRECI ATING THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED ON DEVELOPMENT OF PROPERTY TO BE LET OUT ON RENT OR THE PROPERTY THAT HAS ALREADY TO THE SERVICE CHARGES INCOME AGAINST WHICH THE CLAIM WAS DIRECTED TO BE ALLOWED.' 3. 'ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING FOREIGN TRAVEL EXPENSES OF RS.44,65,498/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE CLAIM WITH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS BUSINESS PURPOSE AND JUS TIFICATION.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WHILE CONFIRMING THE REDUCTION IN THE WIP, ERRED IN DELETING ADDITION OF RS.2,35,29,537/ - MADE BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES' ON ACCOUNT OF UNDISCLOSED INCOME BY WAY OF CASH RECEIVED BACK IN RESPECT OF THE TRANSACTIONS RELATING TO ACCOMMODATION BILLS'. 34. AT THE OUTSET BOTH THE PARTIES ADMITTED THAT THESE GROUNDS ARE EXACTLY SIMILAR TO THE GROUND S RAISED BY THE DEPARTMENT IN T HE ASSESSMENT YEAR 2006 - 07 AND, THEREFORE, THE FINDING GIVEN THEREIN WILL APPLY THIS YEAR ALSO. FROM THE PERUSAL OF THE GROUNDS RAISED AND ALSO THE IMPUGNED ORDER, WE FIND THAT THE LD. CIT(A) HAS DECIDED THE ISSUE FOR ALL THE YEARS IN THE CONSOLIDATED MANN ER. IN AY 2006 - 07, WE HAVE ALREADY GIVEN OUR FINDING WITH REGARD TO EACH AND EVERY GROUND AND THEREFORE , SUCH A FINDING GIVEN THEREIN , WILL APPLY MUTATI S MUTANDIS IN THIS YEAR ALSO. ACCORDINGLY, GROUND NO. 1 TO 4 AS RAISED BY THE REVENUE IN AY 2007 - 08 IS T REATED AS DISMISSED. ASSESSMENT YEAR 200 7 - 0 8 - ITA NO 727 1 /M/2012 ( ASSESSEE S APPEAL) : - 35. THE ASSESSEE IN ITS APPEAL HAS RAISED FOLLOWING TWO GROUNDS: M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 26 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED I N CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS. 4,00,00,000/ - U/S 69C OF THE INCOME TAX ACT, 1961. THE APPELLANT DENIES MAKING ANY CASH PAYMENTS TO M/S AMRUT HOTELS PVT LTD. AND NATHMAL SHARMA (PROP. MARUTI MISTHAN BHANDAR) AT RS. 2,00,00,000/ - EACH. T HE APPELLANT PRAYS THAT THE ADDITION OF RS. 4,00,00,000/ - SUSTAINED BY THE CIT(A) MAY KINDLY BE DELETED. 2. WITHOUT PREJUDICE TO GROUND 1, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT GRANTING SET OFF OF ALLEGED CASH RECEIVED ON ACCOUNT OF ALLEGED BOGUS PURCHASES AGAINST THE ADDITIONS MADE BY LEARNED AO U/S 69C OF THE ACT ON ACCOUNT OF ALLEGED CASH PAYMENTS OF RS. 4 CRORE TO M/S AMRUT HOTELS PVT LTD AND NATHMAL SHARMA (PROP. MARUTI MISTHAN BHANDAR) AT RS. 2 CRORE S EACH. THE APPELLANT PRAYS THAT THE CIT(A) OUGHT TO HAVE ALLOWED THE SAID SET OFF FOLLOWING THE THEORY OF TELESCOPY. 36. THE BRIEF FACTS QUA THE ISSUE INVOLVED IS THAT DURING THE COURSE OF SEARCH AND SEIZURE ACTION, A PAPER WAS FOUND AND SEIZED , WHICH WAS IN THE FORM OF A PRINT OF A EMAIL DATED 17.05.2006 WRITTEN BY MR. SIVA TO MR. BHARAT BAJORIA, WHICH CONTAIN S TRANSACTION WITH ONE MR. NATHU MAHARAJ FOR VACATION OF PROPERTIES . IN THE SAID PAPER IT WAS STATED THAT THE DEAL WITH MR. NATHU MAHARAJ FOR THE VACATION OF TWO PREMISES O N LEASE , M/S AMRUT HOTELS PVT. LTD. & MR. NATH M AL SHARMA, PROPRIETOR MARUTI MISTHAN BHANDAR, WAS FINALIZED FOR AN AMOUNT OF RS. 8 CRORES. HOWEVER, THE ASSESSEE HAS RECORDED THE PAYMENT OF RS. 4 CRORES PAID TO THESE TWO CONCERNS I N THE BOOKS OF ACCOUNT . ACCORDINGLY, THE ASSESSING OFFICER INFERRED THAT RS. 4 CRORES MUST HAVE BEEN PAID IN CASH TO MR. NATHMAL SHARMA. THE ASSESSEE COMPLETELY DENIED THE TRANSACTION OF CASH OF RS. 4 CRORES WITH MR. NATHU MAHARAJ AND SUBMITTED THAT THE AS SESSEE HAD AUTHORIZED MR. SIVA TO NEGOTIATE WITH MR. NATHU MAHARAJ FOR VACATING HIS PREMISES. THE FINAL DEAL M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 27 WAS STRUCK ON RS. 4 CRORES ONLY. IN THE E - MAIL PAPER MR. SIVA IS MERELY INFORM ING TO MR. BHARAT BAJORIA, THE TERMS PROPOSED BY MR. NATHU MAHARAJ IN ITIALLY . ON SUCH PROPOSAL MR. BHARAT BAJORIA, DIRECTOR OF THE ASSESSEE COMPANY HAS PUT H IS REMARK THAT IF THE DEAL IS TO BE FINALISED THEN PAY RS. 8 CRORES IN CHEQUE ONLY . H OWEVER, LATER ON, THIS AMOUNT WAS FOUND TO BE TOO HIGH AND EXCESSIVE PARTICULAR L Y LOOKING TO THE MARKET RATE, THEREFORE , MR. SIVA RE - NEGOTIATE D THE PROPOSAL AT THE A LOWER PRICE OF RS. 4 CRORES IN CHEQUE, WHICH WAS FULL AND FINAL SETTLEMENT FOR THE SURRENDER OF THE TENANCY RIGHTS. THERE CANNOT BE ANY INFERENCE OF PAYMENT OF CASH, WHIC H I S NEITHER BORNE OUT FROM THE SEIZED DOCUMENT NOR HAS BEEN FOUND FROM THE POSSESSION THESE PERSONS. FURTHER, THE TERMS STATED IN THE EMAIL WERE JUST A PROPOSAL AND IS ONLY A STAGE OF NEGOTIATION WHEREAS, THE FINAL DEAL ONLY TOOK PLACE AFTER TWO MONTHS TH AT T OO AFTER GREAT DELIBERATION. THE LD. ASSESSING OFFICER RE JEC TED THE ASSESSEES CONTENTION AND STATED THAT THE EMAIL CONTAINS A STATEMENT THAT FINALLY THEY HAVE AGREED AT RS. 8 CRORES AND CONCLUDED THE TRANSACTION AND THEY WERE WORKING ON THE PROCEDURAL PART TO GET POSSESSION OF THE PREMISES: FINALLY, THEY HAVE AGREED AT 8 CRORES. WE HAVE CONCLUDED THE TRANSACTION AND ARE WORKING ON THE PROCEDURAL PART TO GET POSSESSION OF THE PREMISES HE FURTHER OBSERVED THAT SIMILAR CASH PAYMENT AMOUNTING TO RS. 3. 85 CRORES MADE TO M/S RUNIT CREATION AND M/S PA RI DHI UDYOG HAVE BEEN OFFERED FOR DISCLOSURE BY THE DIRECTOR OF THE ASSESSEE - COMPANY IN THE RETURN FILED U/S 153A FOR THE ASSESSMENT YEAR 2007 - 08 . THE SAID PAYMENT TOO WAS MADE TO THE TENANT S FOR SURRENDER OF TENANCY RIGHTS. THUS, IT CAN BE INFERRED THAT RS. 4 CRORES MUST HAVE BEEN PAID BY THE ASSESSEE IN CASH, OVER AND ABOVE THE CHEQUE AMOUNT OF RS. 4 CRORES. ACCORDINGLY, ADDITION OF RS. 4 CRORES W A S ADDED U/S 69C BY THE ASSESSING OFFICER. M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 28 37. BEFORE THE CIT (A), THE DETAILED SUBMISSIONS WERE MADE, WHICH HAS BEEN INCORPORATED IN THE APPELLATE ORDER FROM PAGES 36 TO 51. BESIDES THIS, THE ASSESSEE HAS ALSO TAKEN A ALTERNATIVE PLEA FOR TELESCOPING THE ADDITION OF RS. 4 CRORES U/S 69C FOR THE INCOME TO BE SET OFF ON ACCOUNT OF ADDITION OF BOGUS PURCHASES MADE FOR THE ASSESSMENT YEARS 200 5 - 06 TO 2008 - 09. THE LD. CIT(A), UPH E LD THE ACTION OF THE ASSESSING OFFICER AFTER NOTING DOWN THE AMOUNT OF OVERALL COMPENSATION PAID AND RATE PER SQ. FT. OF THE PROPERTY . THOUGH HE ADMITTED THAT PER SQ. FT. RATE PAID TO THESE TWO PARTIES IS ON A HIGHER SIDE, HOWEVER, BUSINESS EXPEDIENCY HAS TO BE SEEN IN SUCH CIRCUMSTANCES . THE SAID TABLE OF COMPARATIVE RATES AS INCORPORATED BY THE CIT(A) IS AS UNDER: S. N O TENANT D A T E OF AGREEM ENT AREA (SQ.FT.) COMPEN S ATION AGREEMENT CASH CO MPENSATION TOTAL COMPENSA TION RATE PER SQ. F T . 1 PRADHI UDYOG 29.5.2007 2227 26000000 14000000 40000000 17961 2 RUNIT CREATION 29.5.2007 4085 45500000 24500000 70000000 17135 3 AMRUT HOTELS 3.7.2006 21 41 20000000 20000000 40000000 13683 4 MARUTI MISTAN BHANDAR 3.7.2006 1532 20000000 20000000 40000000 26110 FURTHER, HE OBSERVED THAT, IF THE CASH COMPENSATION PAID TO M/S PA RI DHI UDYOG AND M/S RUNIT CREATION HAS BEEN ADMITTED BY THE ASSES S EE , THEN THE SIMILAR NATURE OF PAYMENT OF CASH OF RS. 4 CRORES TO THESE TWO PARTIES CANNOT BE RULED OUT AND ACCORDINGLY , HE CONFIRMED THE SAID ADDITION. 38. BEFORE US, THE LD. COUNSEL , SHRI VIJAY MEHTA, SUBMITTED THAT THE ONLY EVIDENCE RELIED UPON BY THE ASSESSING OFFICER IS THE EMAIL PRINT - OUT WHICH FIRSTLY, SUGGEST S NEGOTIATION BETWEEN THE PARTIES AND NOT FINAL SETTLEMENT AND THE AMOUNT OF RS 8 CRORES HAVE BEEN MENTIONED AS A GROSS AMOUNT. THE LANDLORD SHARE WAS APPROXIMATELY 33.33% WHICH WAS TO BE DED UCTED TO ARRIVE AT NET PAYABLE AMOUNT . THEREFORE, THE NET PROPOSAL IF AT ALL WAS FOR 5.34 CRORES AND SINCE SAME WAS ON A MUCH HIGHER SIDE THE DEAL WAS CLOSED FINALLY AT RS. 4 CRORES WHICH WAS PAID IN CHEQUE . S ECONDLY, HE SUBMITTED THAT, IF THE PRINT - OUT OF THE EMAIL IS TO BE STRICTLY M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 29 CONSTRUED, THEN IT IS CATEGORICALLY MENTIONED IN SAID PAPER ITSELF THAT SUM OF RS. 8 CRORES IS TO BE PAID IN CHEQUE ONLY AND, THEREFORE, THERE CANNOT BE ANY INFERENCE THAT PART OF THE PAYMENT WAS MADE IN CASH OUT OF THE SAID COMPONENT. NEITHER THE BUYER NOR THE RECIPIENT HAS EVER ADMITTED THAT CASH O F SUCH MAGNITUDE HAS BEEN PASSED ON IN THIS DEAL , NOR ANY EVIDENCE HAVE BEEN FOUND DURING THE COURSE OF SEARCH OR HAS BEEN BROUGHT ON RECORD IN THE POST SEARCH ASSESSMENT PROCEEDIN GS TO CORROBORATE THIS FACT. TO REBUT THE OBSERVATION OF THE CIT(A), MR MEHTA SUBMITTED THAT , IF THE PAYMENT MADE TO M/S PA RI DHI UDYOG & M/S RUNIT CREATION IS TAKEN INTO CONSIDERATION , THEN THE TRANSACTION WITH THESE PARTIES HAD TAKEN PLACE IN THE YEAR 20 07 AT MUCH LOWER RATE PER SQ.FT., THEN HOW IN EARLIER YEAR THAT IS, IN THE YEAR 2006 TRANSACTION WITH AMRUT HOTELS AND MARUTI MISTAN BHANDAR CAN BE OF SUCH A HIGH AMOUNT. THIS THEORY ITSELF GOES TO SHOW THAT THE REASONING ON WHICH THE CIT(A) HAS CONFIRMED THE ADDITION IS BASELESS AND NEEDS TO BE DELETED. THUS, NO ADDITION IS CALLED FOR. 39. ON THE OTHER HAND, THE LD. DR STRONGLY RELYING UPON THE ORDER OF THE ASSESSING OFFICER AND CIT(A), SUBMITTED THAT ALL THE SURROUNDING CIRCUMSTANCES AND SEIZED DOCUMENT G O TO SHOW THAT ASSESSEE MUST HAVE PAID SUM OF RS. 4 CRORES IN CASH BECAUSE, D EAL WAS FINALIZED IN RS. 8 CRORES WHEREAS, THE ASSESSEE HAD ONLY SHOWN RS.4 CRORES IN CHEQUE. IF THE ASSESSEE HAD GIVEN CASH AMOUNT TO OTHER TWO PARTIES FOR SURRENDER OF TENANCY R IGHTS ON SIMILAR CIRCUMSTANCES AND HAVE BEEN ADMITTED BY THE ASSESSEE, THEN IN THESE CASES ALSO THE PAYMENT OF CASH CANNOT BE RULED OUT. THEREFORE, FINDING OF THE CIT(A) SHOULD BE AFFIRMED. 40 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FIN DING GIVEN IN THE IMPUGNED ORDERS AND MATERIAL PLACED ON RECORD. THE ADDITION OF RS. 4 CRORES IS FLOWING FROM THE INTERPRETATION OF THE SEIZED DOCUMENT WHICH IS A PRINT OUT OF A E - MAIL DATED 17 TH MAY, 2006. FROM THE PERUSAL OF THE SAID DOCUMENT, IT I S SEEN THAT ONE MR. SIVA HAS COMMUNICATED TO MR. BHARAT JI M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 30 INFORMING HIM THAT MAHARAJ J I WAS ASKING FOR RS. 8 CRORES PLUS A 300 SQ. FT. SHOP, F OR VACATING THE PREMISES AND THEY HAVE AGREED AT RS. 8 CRORES . S OME RELEVANT PORTION OF THE SAID PAPER IS BEING EXTRACTE D : - MAHARAJJI WAS ASKING FOR RS. 8 CRORES PLUS A 300 SQ.FT. SHOP. FINALLY, THEY HAVE AGREED AT RS. 8 CRORES. WE HAVE CONCLUDED THE TRANSACTION AND ARE WORKING ON THE PROCEDURAL PART TO GET POSSESSION OF THE PREMISES. THEY HAVE AGREED TO VACATE THE PREMIS ES BEFORE 30 TH JUNE, 2006. PAYMENT WILL BE 30 - 35% UPFRONT AND BALANCE ON VACATING THE PREMISES. THERE ARE FURTHER HAND WRITTEN JOTTINGS, THAT HOW THE PAYMENT IS TO BE MADE AND HOW MUCH WOULD BE THE SHARE OF LANDLORD AND FINALLY IT MENTIONS THAT RS. 8 CRORES SHOULD BE MADE BY CHEQUE ONLY. THE ASSESSEES CONTENTION IS THAT, FINALLY ONLY RS. 4 CRORES WA S ONLY PAID AND THAT TO BE BY CHEQUE ONLY, WHICH IS RECORDED IN THE BOOKS AND OTHER SUM OF RS. 4 CRORES WAS NOT PAID AT ALL AS AFTER NEGOTIATION THE AMOU NT FINALLY AGREED WAS RS. 4 CRORES. THERE IS NO EVIDENCE FOUND FOR PAYMENT OF CASH. ON THE OTHER HAND, THE REVENUES CASE IS THAT, IN CASE OF OTHER TWO SIMILAR PARTIES, THE ASSESSEE HAS SURRENDERED CASH PAYMENT OF RS. 3.85 CRORES AND, THEREFORE , THE INFERE NCE CAN BE DRAWN THAT ASSESSEE MUST HAVE PAID RS. 4 CRORES IN CASH. 4 1 . WE FIND THAT O THER THAN THIS E - MA I L PRINT - OUT, THERE IS NO EVIDENCE WITH THE DEPARTMENT THAT THE ASSES S EE HAS PAID AN Y A M OUN T OF RS. 4 CRORES IN CASH TO THE PARTIES . HOWEVER STRONG I NFERENCE MAY BE DRAWN BY THE DEPARTMENT ON THIS E - MAIL PRINT OUT, BUT TO MAKE SUCH AN ADDITION ENTIRE ATTENDANT FACTS, CIRCUMSTANCES AND ACTUAL INFERENCE OF THE SEIZED DOCUMENTS HAS TO BE EXAMINED. IF THERE IS A STRONG REBUTTAL, THEN, ONUS SHIFTS UPON THE REVENUE TO CORROBORATE BY FURTHER ENQUIRY. I F CORRECT INTERPRETATION OF THE SEIZED DOCUMENT IS TAKEN INTO ACCOUNT, THEN IT CAN BE INFERRED THAT FIRSTLY, IT WAS PURELY A NEGOTIATION WITH ONE , MR. NATTHU MAHARAJ WHO WAS DEMANDING CERTAIN AMOUNT AND CERTAIN A REA O F SHOP AS A PART OF HIS NEGOTIATION TO SURRENDER TENANCY RIGHTS ; SECONDLY, RS. 8 CRORES WAS THE GROSS AMOUNT M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 31 MENTIONED, OUT OF WHICH LANDLORD S SHARES WAS APPROXIMATELY ESTIMATED AT 30 % TO 35% AND IF SUCH A PAYMENT IS TO BE DEDUCTED T HEN NET PAYABLE AM OUNT WOULD BE MUCH LOWER THAN RS. 8 CRORES (I.E. APPROXIMATELY RS. 5.5 CRORES) ; AND LASTLY, THE AMOUNT OF RS. 8 CRORES HAVE BEEN STATED TO BE PAYABLE IN TERMS OF CHEQUE ONLY AND NOWHERE THERE IS ANY WHISPER ABOUT CASH DEAL. IF STRICTLY GOING BY THE SEIZE D DOCUMENT ALONE, THERE CANNOT BE ANY INFERENCE THAT THE PAYMENT OF RS. 8 CRORE WA S TO BE MADE PARTLY IN CHEQUE AND PARTLY IN CASH OR ANY CASH ELEMENT WA S INVOLVED. DURING THE COURSE OF ENTIRE SEARCH AND SEIZURE ACTION AND POST SEARCH ENQUIRY, NEITHER THE BUYER NOR THE RECIPIENT HAS ADMITTED THAT CASH O F SUCH MAGNITUDE HAS BEEN TRANSACTED. NO MATERIAL OR EVIDENCE HAVE BEEN FOUND EITHER IN THE COURSE OF SEARCH NOR HAS BEEN BROUGHT BY THE ASSESSING OFFICER IN THE POST SEARCH ENQUIRY THAT ASSESSEE HAS PAID ANY CASH AMOUNT . THUS, THERE SEEMS TO BE NO JUSTIFICATION TO MAKE ADDITION WHICH IS PURELY BASED ON PRESUMPTION THAT PART AMOUNT MUST HAVE BEEN PAID IN CASH SANS ANY EVIDENCE OR CORROBORATIVE MATERIAL. EVEN THE SEIZED PAPER ALSO DOES NOT SUGGEST CASH ELEMENT. ONE MOST IMPORTANT ASPECT BROUGHT ON RECORD AT THE FIRST APPELLATE STAGE IS THE RATE OF THE PROPERTIES IN QUESTION FOR WHICH COMPENSATION HAS BEEN PAID FOR VACATING THE PREMISES. IF THE ELEMENT OF CASH IS ADDED , THE N PER SQUARE FEET RATE WOULD BE AS UNDER : - S. NO. TENANT D ATE OF AGREEMENT AREA (SQ.FT.) COMPEN - SATION AGREEMENT CASH COMPENSATION (RS.) TOTAL COMPENSATION (RS.) RATE PER SQ. F T 1 P A RI DHI UDYOG 29.5.2007 2227 26000000 14000000 40000000 17961 2 RUNIT CREATION 29.5.2007 4085 455 00000 24500000 70000000 17135 3 AMRUT HOTELS 0 3.7.2006 2141 20000000 20000000 40000000 1 8 683 4 MARUTI MISTAN BHANDAR 0 3.7.2006 1532 20000000 20000000 40000000 26110 FROM THE ABOVE TABLE IT IS QUITE A GLARING FACT EMERGES THAT , IN THE FIRST TWO CASES, IN THE YEAR 200 7 THE RATE PER SQ. FT. IS 17,000/ - AND MORE PER SQ. FT. , WHEREAS, ONE YEAR PRIOR I.E. IN 2006, THE PER SQUARE FEET RATE IF THE CASH COMPONENT IS TO BE INCLUDED THEN IT COMES TO MORE THAN RS. 18,000/ - AND EVEN GONE UPTO MORE THAN RS. M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 32 26,000/ - , WHICH SEEMS TO BE IMPROBABLE TO BELIEVE THAT THE RATE FOR THE SAME AREA AND SAME LOCATION WOULD BE HIGHER IN THE EARLIER YEAR AND LOWER IN THE SUBSEQUENT YEAR. THIS FACT NOTED BY THE CIT(A) ITSELF , GOES IN FAVOUR OF THE ASSESSEE AND CORROBORA TES THE STAND OF THE ASSESSEE . THUS, IN ABSENCE OF ANY EVIDENCE OR MATERIAL ON RECORD TO PROVE THAT ASSESSEE HAS PAID ANY AMOUNT IN CASH OVER AND ABOVE THE AMOUNT SHOWN IN THE BOOKS OR WITHOUT THERE BEING ANY ENQUIRY , SUCH A N ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) , CANNOT BE SUSTAINED AND ACCORDINGLY, THE AMOUNT OF RS. 4 CRORES ADDED U/S 69C IS DELETED. IN VIEW OF THE FINDING GIVEN ABOVE, GROUND NO. 2 IS PURELY ACADEMIC AND SAME IS TREATED AS INFRUCTUOUS. 42. IN THE RESULT, APP EAL OF THE REVENUE STANDS DISMISSED WHEREAS APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ASSESSMENT YEAR 2008 - 09 - ITA NO 7270/M/2012 (ASSESSEE S APPEAL ) : - 43. IN THE GROUNDS OF APPEAL, THE ASSES S EE HAS RAISED FOLLOWING GROUNDS : - 1. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] ERRED IN PARTLY CONFIRMING THE DISALLOWANCE MADE BY AO TO THE EXTENT OF RS. 66,83,816/ - MAY KINDLY BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN PARTLY CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 14A R.W. RULE 8D TO THE EXTENT OF RS. 66,29,506/ - . THE APPELLANT PRAYS THAT THE ADDITION OF RS. 66,29,506/ - MAY KINDLY BE DELETED. 44. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE, SHRI VIJAY MEHTA, SUBMITTED THAT TH E ISSUE RAISED IN GROUND NO. 1 IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A Y S 1997 - 98 TO 2005 - 06. THE ASSES S EE HAS SHOWN LEGAL AND PRO FESSIONAL EXPENSES OF RS. 4,09,8 5 ,36 3/ - DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 33 JUSTIFY THE PAYMENT OF RS.1, 0 2,8 2 ,794/ - . I N RESPONSE, THE ASSESSEE SUBMITTED THAT PAYMENT WAS MADE TO M/S JONES LANG LASALLE ME G HRAJ PROPERTY CONSULTANT S P LTD. FOR PROPERTY CONSULTANCY. THE ASSESSEE ALSO GAVE DETAIL EXPLANATION STATING THAT IT HAS RECEIVED SERVICE INCOME, WHICH HAS BEEN OFFERED AS BUSINESS INCOME AND THEREFORE , SUCH AN EXPENSE SHOULD BE ALLOWED. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE SAME HAS BEEN INCURRED FOR THE EARNING OF THE RENTAL INCOME, WHICH CANNOT BE ALLOWED U/S 24. THE LD. CIT(A) RELYING UPON THE EARLIER YEARS ORDER OF THE CIT(A) AS WELL AS OF THE TRIBUNAL HAS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 45. WE FIND THAT SIMILAR ISSUE OF DISALLOWANCE OF LEGAL AND PROFESSIONAL CHARGES HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN EARLIER YEARS ALSO , RIGHT FROM ASSESSMENT YEAR 1997 - 98, THE TRIBUNAL HAS DECIDED TH IS ISS UE AGAINST THE ASSESSEE AFTER OBSERVING AND HOLDING AS UNDER: 19. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE DETAILS OF LEGAL AND PROFESSIONAL CHARGES PAID BY THE A SSESSEE IN THE YEAR UNDER CONSIDERATION WERE FURNISHED BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(APPEALS) AND AFTER ANALYZING THE NATURE AND PURPOSE OF THE SAID EXPENDITURE, IT WAS HELD BY THE AO AS WELL AS BY THE LEARNED CIT(APPEALS) THAT THE SAME T O THE EXTENT OF RS.9,21,120/ - WAS NOT INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. THE SAME WAS INCURRED MAINLY IN RELATION TO IMMOVABLE PROPERTIES OF THE ASSESSEE WHICH WAS GIVEN ON RENT OR WHICH WAS TO BE GIVEN ON RENT AFTER COMPLETION OF DEVELOPMENT . THE SAID EXPENDITURE THUS WAS INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF RENTAL INCOME WHICH WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND SINCE THERE WAS NO DEDUCTION ALLOWABLE ON ACCOUNT OF THE SAID EXPENDITURE UNDER THE HEAD INCOME FROM M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 34 HOUSE PROPERTY AS PER THE RELEVANT PROVISIONS OF SECTION 24, WE ARE OF THE VIEW THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES TO THE EXTENT OF RS.9,21,120/ - WAS RIGHTLY DISALLOWED BY THE AUTHO RITIES BELOW. AS REGARDS THE RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE TRIBUNAL ON THE SIMILAR ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001 - 02, IT IS OBSERVED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON AC COUNT OF LEGAL AND PROFESSIONAL CHARGES IN THAT YEAR WAS FOUND TO BE FOR THE PURPOSE OF ASSESSEES BUSINESS AND ACCORDINGLY THE SAME WAS ALLOWED BY THE TRIBUNAL. AS ALREADY NOTED, THE FACTS INVOLVED IN THE YEAR UNDER CONSIDERATION, HOWEVER, ARE DIFFERENT A ND THERE BEING NOTHING BROUGHT ON RECORD TO SHOW THAT THE LEGAL AND PROFESSIONAL CHARGES PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION TO THE EXTENT OF RS.9,21,120/ - WERE THE EXPENDITURE INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS, WE FIND NO JU STIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE. THE SAME IS, THEREFORE, UPHELD DISMISSING GROUND NO.9 OF THE ASSESSEES APPEAL . 46. THIS FINDING HAS BEEN FOLLOWED IN THE S UBSEQUENT YEARS ALSO UPTIL ASSESSMENT YEAR 2005 - 06. THUS, RESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THE DISALLOWANCE UNDER THIS HEAD AND ACCORDINGLY GROUND NO. 1 AS RAISED BY THE ASSESSEE IS DISMISSED. 47. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED TH E DISALLOWANCE U/S 14A R.W. RULE 8D FOR SUMS AGGREGATING TO RS. 66,29,506/ - AS CONFIRMED BY THE CIT(A). THE BRIEF FACTS ARE THAT THE ASSESSEE COMPANY HAD SHOWN DIVIDEND INCOME OF R S. 17,47,45,932/ - , WHICH WAS CLAIMED AS EXEMPT U/S 10(34) OF THE ACT. THE AS SESSING OFFICER OBSERVED THAT THE ASSESSEE HAS INCURRED M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 35 EXPENDITURE, WHICH HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE FOLLOWING HEADS: SR.NO HEADS OF EXPENDITURE RS. I) OPERATING AND OTHER EXPENSES 20,10,19,365 II) EMPLOYEE COST 3,41,8 4,826 III) INTEREST 4,18,08,459 THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS WHY DISALLOWANCE U/S 14A SHOULD NOT BE MADE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT IT HAS ALREADY ALLOCATED THE EXPENSES DISALLOWANCE FOR THE PURPOSE OF SECTION 14A SUO MOT T O AT RS. 78,009/ - AS EXPENDITURE ATTRIBUTABLE FOR EARNING THE DIVIDEND INCOME . A LL OTHER EXPENDITURE S DEBITED WE RE PURELY FOR THE CARRYING O F ITS BUSINESS OR PROFESSION AND IT HAS NOT UNDERTAKEN ANY SPECIFIC INVESTMENT ACTIVITIES IN THE SHARES. FURTHER , T HE ASSESSEE HAS HUGE SURPLUS FUNDS AVAILABLE IN THE BALANCE SHEET FROM WHERE THE INVESTMENTS HAVE BEEN MADE AND NO BORROWED FUNDS HAVE BEEN USED FOR MAKING THE INVESTMENTS , THEREFORE, N O DISALLOWANCE OF INTEREST IS CALLED FOR. THE ASSESSEE ALSO SUBMITTED T HE AVAILABILITY OF OWN FUNDS AND INVEST MENTS MADE IN VARIOUS ASSESSMENT YEARS IN THE FOLLOWING MANNER : - PARTICULARS AY 2008 - 09 AY 2007 - 08 AY 2006 - 07 SHARE CAPITAL 27,13,57,560 12,25,00,000 12,25,00,000 RESERVES & SURPLUS 14,09,65,39,50 0 1,97,33,92,857 37,53,69,773 TOTAL OWN FUNDS AVAILABLE 14,36,78,97,060 2,09,58,92,857 49,78,69,772 INVESTMENTS 5,73,19,57,028 18,73,46,687 6,48,98,444 THUS, THE INVESTMENTS HAVE BEEN MADE ON ACCOUNT OF OWN INTERNAL ACCRUALS AND NOT FROM BORR OWINGS. APART FROM THAT, THE ASSESSEE ALSO GAVE THE DETAILS OF USAGE OF FUNDS IN THE FOLLOWING MANNER : - USAGE OF FUNDS RS. IN CRORES INVESTMENT IN MUTUAL FUNDS 373.55 OTHER INVESTMENTS 180.44 INVESTMENT IN PROJECTS 358.29 INTERCORPORATE DEPOSITS 26.5 REPAYMENT OF BANK LOANS 121 REPAYMENT OF UNSECURED LOANS 45.35 EXPENSES 45.35 LOANS TO SUBSIDIARIES 62.06 CAPITAL WORK IN PROGRESS 80.63 TOTAL 1297.72 M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 36 RELIANCE WAS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES AND POWER LTD., REPORTED IN 313 ITR 340 . REGARDING OPERATING EXPENSES ALSO, THE ASSESSEE GAVE DETAILED SUBMISSION THAT THE EXPENSES DEBITED FOR SUM AGGREGATING TO RS. 23,52,04,191/ - WAS DIRECTLY RELATED TO DAY - TO - DAY BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY AND NON E OF THEM HAVE BEEN INCURRED FOR EARNING OF THE EXEMPT INCOME. THE DETAILS OF SUCH EXPENSES WERE AS UNDER : - PARTICULARS ANT (RS .) ELECTRICITY (NET)/POWER 1,19,38,954 REPAIRS AND M AINTENANCE 64,76,111 INSURANCE 14,54,437 RENT 53,88,556 RATES & TAXES 4,33,85,104 LEGAL AND PROFESSIONAL EXPENSES 4,09,85,363 TRAVELLING EXPENSES 1,30,72 ,967 AUDITORS REMUNERATION 30,25,000 DIRECTORS REMUNERATION AND SITTING FEES 65,17,649 DONATION 332,807 LOSS OF ASSETS DISCARDED 1,09,35,242 PRIOR PERIOD EXPENSES 2,90,141 POSTAGE, STATIONARY & COMMUNICATIO N EXPENSES 60,77,681 ADVERTISEMENT & SALES PROMOTION 2,02,55,679 BAD DEBTS & SUNDRY BALANCES WRITTEN OFF/BACK(NET) 27,75,558 PROVISION FOR DOUBTFUL DEBTS & ADVANCES 86,815 REBATE/SETTLEMENT - OTHER MISC ELLANEOUS EXPENSES 1,66,33,000 SECURITY SERVICES 1,13,88,301 EMPLOYEE COSTS 3,41,84,826 TOTAL 23,52,04,191 BESIDES THIS, THE ASSESSEE HAD GIVEN EXPLANATION ON VARIOUS OTHER AC COUNTS TO SUBSTANTIATE I T S CLAIM THAT NO OTHER EXPENDITURE CAN BE SAID TO BE ATTRIBUTABLE FOR THE PURPOSE OF EARNING OF EXEMPT INCOME . HOWEVER, THE ASSESSING OFFICER THOUGH ACCEPTED THAT INTEREST EXPENDITURE CANNOT BE HELD TO BE ATTRIBUTABLE FOR E AR N ING OF THE DIVIDEND INCOME AS ASSESSEE HAD ITS OWN FUNDS, HOWEVE R WORKED OUT THE DISALLOWANCE UNDER THE FORMULA OF RULE 8D AT RS. 1,47,92,260/ - MAINLY ON ACCOUNT OF CLAUSE 8D (2) (III) , I.E. , 0.5% OF AVERAGE VALUE OF INVESTMENT. 48. THE LD. CIT(A) NOTED THAT SOME OF THE M UTUAL FUNDS AND INVESTMENTS WERE NOT IN THE NATU RE OF EXEMPT INCOME , THEREFORE HELD THAT TO THAT EXTENT THE SAID INVESTMENT CANNOT BE TAKEN FOR THE PURPOSE OF COMPUTATION OF DISALLOWANCE UNDER RULE 8D. THUS, M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 37 HE WORKED OUT THE CALCULATION OF AVERAGE INVESTMENTS AT RS.67,07,515/ - AND AFTER ALLOWING THE DI SALLOWANCE OFFERED BY THE ASSES S EE AT RS. 78,009/ - , CONFIRMED THE NET DISALLOWANCE AT RS. 66,29,506/ - . THE WORKING OF THE DISALLOWANCE CONFIRMED BY THE CIT(A) HAS BEEN GIVEN AT PARA 25 PAGE 49 OF THE APPELLATE ORDER. 49. BEFORE US, THE LD. COUNSEL, SHRI V IJAY MEHTA, SUBMITTED THAT BEFORE RESORTING TO DISALLOWANCE UNDER RULE 8D , ASSESSING OFFICER I S REQUIRED TO RECORD HIS SATISFACTION REGARDING THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE MADE BEFORE HIM WHICH HE HAS NOT DONE SO. ONCE THE CONDITIONS OF SECT ION 14(2) HAS NOT BEEN FULFILLED THEN ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICERS DESERVES TO BE QUASHED AND IN SUPPORT OF HIS CONTENTION, HE RELIED UPON FOLLOWING DECISIONS : - - M/S GRAVISS HOSPITALITY LTD V DCIT IN ITA 3542/M/2013(AY 09 - 10) - 3DPLM SO FTWARE SOLUTIONS LTD. V ITO IN ITA 5736/M/2012(AY 08 - 09) 49.1 SECONDLY, HE SUBMITTED THAT THE MAJOR INVESTMENTS HAVE BEEN MADE IN THE SUBSIDIARY/GROUP COMPANY FOR CONTROLLING INTEREST AND THEREFORE SAME WAS FOR BUSINESS PURPOSE AND HENCE NO DISALLOWAN CE U/S 14A CAN BE MADE TO THAT EXTENT . IN SUPPORT , HE RELIED UPON THE FOLLOWING DECISIONS: (A) M/S GARWARE WALL ROPES LTD VS ADDL. CIT IN ITA 5408/M/2012(AY 09 - 10) ; (B) CIT V ORIENTAL STRUCTURAL ENGINEERS PVT LTD IN ITA 605/2012 (DELHI HIGH COURT) ; (C) M/ S JM FINANCIAL LTD VS ADDL. CIT IN ITA 4521/MUM/2012(09 - 10) 49 .2 AS AN ALTERNATIVE HE SUBMITTED THAT THE DISALLOWANCE IF AT ALL UNDER CLAUSE (III) OF RULE 8D IS TO BE MADE , THEN ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED ON WHICH , DIVIDEND HAS BEEN RECE IVED DURING THE YEAR. IN SUPPORT, HE RELIED UPON FOLLOWING DECISIONS: - ACB INDIA LTD V ACIT REPORTED IN 374 ITR 108 - ACIT V M BASKARAN IN ITA 1717/M/2013(AY 09 - 10) - CIT V CORRTECH ENERGY (P) LTD. REPORTED IN 272 CTR 262 (GUJ) - CIT V HOLCIM INDIA (P) L TD. REPORTED IN 272 CTR 282 (DEL) - CIT V LAKHANI MARKETING INCL. REPORTED IN 272 CTR 265 (P&H) M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 38 49 . 3 LASTLY, W ITHOUT PREJUDICE, HE SUBMITTED THAT LOOKING TO THE NATURE OF EXPENDITURES DEBITED, IT CAN BE SEEN THAT MAJOR EXPENSES DEBITED ARE PURELY FOR THE B USINESS PURPOSE. THE DISALLOWANCE IF AT ALL , SHOULD BE MADE ON REASONABLE BASIS BY ESTIMATING PART OF THE DIRECTORS REMUNERATION AND SALARY OF SUPPORTING STAFF. 5 0 . ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT, HERE IN THIS CASE, THE LD. CIT(A) HAS GIVEN APPROPRIATE RELIEF AND ULTIMATELY FOR THE PURPOSE OF ALLOCATING THE EXPENDITURE OF INDIRECT NATURE HAS ONLY DIRECTED TO DISALLOW 0 .5% OF THE INVESTMENTS ON WHICH ASSESSEE HAS EARNED OR IS CAPABLE OF EARNING AN E XEMPT INCOME. THEREFORE, NO FURTHER RELIEF SHOULD BE GIVEN. 51 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDING GIVEN BY ASSESSING OFFICER AS WELL AS CIT(A) AND MATERIAL PLACED ON RECORD. THE ASSESSEE HAD SHOWN EXEMPT INCOME IN THE FORM OF DIVIDEND INCOME AT RS. 17,47,45,932/ - . THE ASSES S EE HAS COMPUTED PROPORTIONATE DISALLOWANCE OF EXPENSES U/S 14A AT RS. 78,009/ - FOR THE PURPOSE OF ALLOCATING THE EXPENSES ATTRIBUTABLE FOR EARNING OF SUCH A N EXEMPT INCOME. 5 2 . BEFORE THE ASSESSING OFFIC ER, IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE CONTENDED THAT FIRSTLY, NO DISALLOWANCE ON ACCOUNT OF INTEREST CAN BE MADE AS THE ASSESSEE HA D HUGE SURPLUS FUNDS FOR MAKING THE INVESTMENT; SECONDLY, THERE IS NO DIRECT EXPENDITURE RELATING TO EARNING OF THE EXEMPT INCOME; AND LASTLY, ON THE ISSUE OF INDIRECT EXPENSES, THE ASSESSEE HAS GIVEN THE DETAILED BREAK - UP OF OPERATING EXPENSES, WHICH WERE IN THE NATURE OF ADMINISTRATIVE EXPENSES , F ROM W H ICH IT WAS POINTED OUT THAT NONE OF THE EXPENSES DEBITED AND CLAIM CAN BE SAID TO BE ATTRIBUTABLE OR HAVE ANY DIRECT RELATION WITH THE EARNING OF EXEMPT INCOME. THUS, NO DISALLOWANCE OVER AND ABOVE ATTRIBUTED BY THE ASSESSEE CAN BE MADE. LD. ASSESSING OFFICER THOUGH ACCEPTED THAT NO EXPENDITURE IS TO BE DISALLO W ABLE UNDER CLAUSE (I) AND (II) OF RULE M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 39 8D( 2 ), HOWEVER, HA S PROCEEDED TO MAKE DISALLOWANCE ON ACCOUNT OF INDIRECT EXPENDITURE BY APPLYING THE FORMULA GIVEN IN CLAUSE (III) OF RULE 8D( 2 ) , WHICH IS 0.5% OF THE AVERAGE VALUE OF INVESTMENT. BEFORE RESORTING TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D( 2 ), NOWHERE THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION OR EXPRESSED IN ANY TERMS THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE I NCURRED IN RELATION TO THE EXEMPT INCOME, HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE. THE DISALLOWANCE U/S 14A(1) CAN BE MADE ONLY WHEN THE ASSESSEE WHILE COMPUTING THE TOTAL INCOME, CLAIMS ANY EXPENDITURE WHICH IS OR CAN BE SAID TO BE ATTRIBUTABLE F O R EARNING OF THE EXEMPT INCOME I.E. INCOME WHICH DO NOT FORM PART OF THE TOTAL INCOME. SUCH A DISALLOWANCE CAN BE MADE/QUANTIFIED IN ACCORDANCE WITH THE PROVISIONS OF SUB - SECTION (2) OF SECTION 14A. IN OTHER WORDS, DISALLOWANCE U/S 14A(1) CAN ONLY BE TRIGGER ED , ONCE THE CONDITIONS LAID DOWN SUB - SECTION (2) ARE SATISFIED. TO WORK OUT THE DISALLOWANCE UNDER RULE 8D (2) AND FOR ITS QUANTIFICATION, THE ASSESSING OFFICER HAS TO FIRST EXAMINE THE ACCOUNTS OF THE ASSESSEE AND ALSO CORRECTNESS OF THE CLAIM AND THEREAF TER , IF HAVING REGARD TO SUCH ACCOUNTS AND CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER IS NOT SATISFIED EITHER WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE OR BY THE CLAIM THAT NO EXPENDITURE AT ALL HAS BEEN INCURRED, THEN ONLY HE CAN RE SORT TO RULE 8D. THUS, THE SATISFACTION OF THE ASSESSING OFFICER IS A MANDATORY REQUIREMENT TO TRIGGER THE COMPUTATION MECHANISM OF RULE 8D. HERE IN THIS CASE, ONCE THE ASSESSEE HAS GIVEN ALL THE DETAIL OF ITS ACCOUNTS NATURE OF EXPENSES INCURRED ; EXPLAINED THA T THE EXPENSES CLAIMED HAS DIRECT RELATION WITH THE EARNING OF BUSINESS INCOME AND ALSO WHY SUCH AN EXPENDITURE CANNOT BE HELD TO BE ATTRIBUTABLE FOR EARNING OF EXEMPT INCOME, THEN THE ASSESSING OFFICER WAS REQUIRED UNDER THE LAW TO EXAMINE THE CORRECTNESS OF THE CLAIM AND RECORD H IS SATISFACTION THAT HE I S NOT SATISFIED WITH SUCH A CLAIM BY SETTING OUT THE REASONS IN THE ASSESSMENT ORDER. M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 40 HOWEVER, IN THE PRESENT CASE, SUCH A MANDATORY REQUIREMENT AS ENSHRINED IN SUB - SECTION (2) OF SECTION 14A AND RULE 8D( 1 ) HAS NOT BEEN COMPLIED WITH. ONCE THAT IS SO, HE CANNOT PROCEED TO ENHANCE THE DISALLOWANCE U/S 14A OVER AND ABOVE O FFER ED BY THE ASSESSEE. ACCORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND PARTLY SUSTAINED BY THE CIT(A) IS DELETED ON THIS P RELIMINARY GROUND AND THUS , GROUND NO. 2 RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 5 3 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ASSESSMENT YEAR 2008 - 09 - ITA NO 7425/M/2012 (REVENUES APPEAL ) : 5 4 . IN THE GROUNDS, THE REVENUE HAS R AISED FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DIT(A) ERRED IN DIRECTING THE AO NOT TO REDUCE MUNICIPAL TAXES AMOUNTING TO RS.2,28,74,020 / - FROM ANNUAL LETTING VALUE, IGNORING THE FACT THAT SECTION 23(1) WAS AMENDED W.E.F. 1 - 4 - 2002 AND THE ANNUAL VALUE IS TO BE DETERMINED AFTER DEDUCTION THE MUNICIPAL TAXES PAID BY THE OWNER.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT RS.35,98.978/ - BEING 35% OF LEGAL A ND PROFESSIONAL EXPENSES OF RS.1,02,82,794 / - ARE ALLOWABLE EXPENSES AGAINST BUSINESS INCOME, WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE HAS BEEN INCURRED ON DEVELOPMENT OF PROPERTY TO BE LET OUT ON RENT OR THE PROPERTY THAT HAS ALREADY TO THE SERVI CE CHARGES INCOME AGAINST WHICH THE CLAIM WAS DIRECTED TO BE ALLOWED.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING FOREIGN TRAVEL EXPENSES OF RS.29,29,756/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE CLAIM WITH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS BUSINESS PURPOSE AND JUSTIFICATION.' M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 41 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WHILE CONFIRMING THE REDUCTION IN THE WIP, ERRED IN DELETING ADDITION OF RS. 4,05,88,531/ - MADE BY THE ASSESSING OFFICER UNDER THE HEAD 'INCOME FROM OTHER SOURCES' ON ACCOUNT OF UNDISCLOSED INCOME BY WAY OF CASH RECEIVED BACK IN RESPECT OF THE TRANSACTIONS RELATING TO ACCOMMODATION BILLS.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING DISALLOWANCE U/S 14A READ WITH RULE 8D TO RS.66,29,506 / - AS AGAINST RS.1,47,98.260/ - BY CONSIDERING ADDITIONAL EVIDENCE WITHOUT ALLOWING OPPORTUNITY TO THE ASSESSING OFFICER AS REQUIR ED UNDER RULE 46A OF IT RULES. 5 5 . AT THE OUTSET, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT GROUND NO. 1 TO 4 ARE IDENTICAL TO THE GROUND RAISED IN THE DEPARTMENTAL APPEAL S FOR THE ASSESSMENT YEAR S 2006 - 07 AND 2007 - 08. THUS, CONSISTENT WITH THE V IEW AND THE FINDING GIVEN THERE IN IN THOSE APPEALS (AS INCORPORATED ABOVE) , WE HOLD THAT GROUND NO. 1, 2, 3 & 4 AS RAISED BY THE REVENUE ARE DISMISSED AND ORDER OF THE CIT(A) ON TH E S E GROUNDS ARE UPHELD. 5 6 . IN GROUND NO. 5, THE REVENUE HAS CHALLENGED RE STRICTION OF DISALLOWANCE U/S 14A AT RS. 66,29,506/ - BY THE CIT(A) AS AGAINST THE AMOUNT OF RS. 1 , 47,29,600/ - ADDED BY THE ASSESSING OFFICER . SINCE WE HAVE ALREADY DELETED THE ENTIRE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT CONDITIONS OF SECTION 14(2) R.W. RULE 8D( 1 ) HAS NOT BEEN FULFILLED , THEREFORE, IN VIEW OF THE FINDING GIVEN THEREIN THE GROUND RAISED BY THE REVENUE IN THE IMPUGNED APPEAL IS TREATED AS DISMISSED. 57 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. TO SUM UP THE RESULTS: ASSESSEES APPEAL FOR: AYS 2002 - 03 & 2007 - 08 IN ITA NOS. 7269 OF 2012 AND 7271 OF 2012 RESPECTIVELY STANDS ALLOWED AND FOR AY 2008 - 09 IN ITA NO. 7270 OF 2012 STANDS PARTLY ALLOWED M/S THE PHOENIX MILLS LTD ITA NO. 7269 /MUM/20 1 2 ITA NO. 7422/MUM/2012 & 0 5 OTHERS GROUP APPEAL 42 REVENUES APPEAL FOR: AYS 2002 - 03, 2006 - 07, 2007 - 08 & 2008 - 09 IN ITA NOS. 7422 OF 2012, 7423 OF 2012, 7424 OF 2012 AND 7425 OF 2012 RESPECTIVELY STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST , 2015. SD/ - SD/ - ( . . ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19 TH AUGUST , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 38 , MUMBAI. 4) THE CIT CENTRAL - IV , MUMBAI. 5) , , / THE D .R. C BENCH, MUMBAI. 6) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS