M/s Sai Apartments & Infrastructure, Panchkula V. DCIT, C-6(1), Mohali

ITA 940/CHANDI/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3729 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 18-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Assessment record; Onus to prove; Retraction; Revised return
• Section: 148; 143(3); 133A; 72; 13; 22

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,च瀃डीगढ़ 瀈यायपीठ च瀃डीगढ़ 瀈यायपीठच瀃डीगढ़ 瀈यायपीठ च瀃डीगढ़ 瀈यायपीठ ‘‘बी बीबी बी.’’, च瀃डीगढ़ च瀃डीगढ़च瀃डीगढ़ च瀃डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’ CHANDIGARH BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर आयकरआयकर आयकर अपील अपीलअपील अपील सं संसं सं./ ITA No. 940/CHD/2019 Assessment Year : 2011-12 M/s Sai Apartments & Infrastructure, House No. 58, Sector – 9, Panchkula. बनाम VS The DCIT-I, Circle 6(1), Mohali. 瀡थायी लेखा सं./PAN /TAN No: ABTFS1260Q अपीलाथ牸/Appellant 灹瀄यथ牸/Respondent िनधा榁琇रती क琉 ओर से/Assessee by : Shri Parikshit Aggarwal, CA राज瀡व क琉 ओर से/ Revenue by : Shri Sarabjit Singh, CIT-DR तारीख/Date of Hearing : 15.03.2022 उदघोषणा क琉 तारीख/Date of Pronouncement : 27.04.2022 HEARING VIA WEBEX AND PHYSICAL HEARING आदेश आदेशआदेश आदेश/ORDER PER DIVA SINGH The present appeal has been filed by the assessee assailing the correctness of the order dated 28.02.2019 of CIT(A)-I, Chandigarh pertaining to 2011-12 assessment year on the following grounds : 1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) in Appeal No. 779/13-14 has erred in passing that order in contravention of the provisions of S. 250(6) of the Income Tax Act, 1961. 2. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action of Ld. AO in initiating, then continuing and then completing the impugned assessment u/s 143(3) r.w.s. 147 of the Act even when the whole proceedings deserves to be declared void ab initio. 3. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action of Ld. AO in making addition of Rs. 5,18,89,786/- on account of alleged difference in opening and closing stocks for FYs 2010-11 & 2011-12 in the books of the appellant maintained at its registered office : (i) even when there was no difference and the Ld. AO failed to appreciate different presentation mechanisms in the ITA 940 /CHD/2019 A.Y. 2011-12 Page 2 of 35 Financial Books, Balance sheet, P&L A/c and ITR filed by the appellant. The Worthy CIT(A) ; (ii) by relying solely the surrender statement of the partner of the appellant recorded at the time of survey u/s 133A when the said statement has no evidentiary value, was tendered on incorrect understanding of facts and law, stands retracted in the ITR. 4. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action of Ld. AO in making addition of Rs. 4,22,767/- u/s 36(l)(iii) by disallowing interest paid on unsecured loans by holding that giving of interest free advances to some parties deserves such disallowance. 5. That on law, facts and circumstances of the case, the orders of Ld. AO as well as Worthy CIT(A) deserves to be set-aside and quashed since the orders have been passed by both of them without granting reasonable opportunity of being heard to the appellant. 6. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.” 2. The hearing in the present case started on a virtual mode via Webex on 22.02.2022, however, could not be concluded on the said date as a result of connectivity due to some ongoing strike of local Electricity Department. On the next date i.e. 24.02.2022 again, there were some connectivity issues at the end of the parties who informed that these were possibly due to electricity restoration still pending in all areas. In the said background, the effective hearings took place on 09.03.2022 and 15.03.2022 in the Court in a physical hearing which had resumed. 3. Before addressing the grievance posed by the assessee in the present appeal, it is appropriate to first refer to certain relevant facts on record. The assessee returned an income of Rs. 7,32,060/- by filing its return on 30.09.2011. After recording of ITA 940 /CHD/2019 A.Y. 2011-12 Page 3 of 35 reasons and issuance of notice u/s 148, the assessment was made wherein certain additions under challenge in the present proceedings were made by the order dated 30.01.2014. 4. The first addition challenged by the assessee is agitated vide ground No. 3 in the present proceedings. The addition was made in view of the fact that in the survey operation carried u/s 133A at the business premises of the assessee on 06.11.2012 the voluntary disclosure of Rs. 5,18,89,786/- made by the assessee was not offered for tax. For the sake of completeness, it may be referred that in 2012-13 assessment year voluntary disclosure of Rs. 10,67,23,500/- was also made and the said disclosure was honored by the assessee and hence not in dispute nor a subject matter of consideration in the present proceedings. Reverting back to the issue at hand, the AO required the assessee to explain why the surrender made during the survey for the year under consideration was not honored by the assessee. The assessee admittedly in response to the notice issued u/s 148 replied that the earlier ITR filed on 30.11.2011 be considered as a return in response to the notice u/s 148 of the Act. The AO show caused the assessee again referring to the surrender letter dated 06.11.2012 filed before the Survey Team. Reply filed by the assessee, though extracted in the order was discarded by the Assessing Officer holding that the assessee had in fact undervalued its closing stock in its P&L Account and ITA 940 /CHD/2019 A.Y. 2011-12 Page 4 of 35 reduced its income accordingly. He further held that the retraction was a bald retraction and made the addition of Rs. 5,18,89,786/- relying on the surrender letter. 5. The next addition challenged by the assessee is agitated vide Ground No. 4 in the present proceedings. The assessing officer made the said addition rejecting the claim of interest paid on unsecured loan. The addition was made holding that the assessee could not prove business exigency for giving interest free advances. 6. Both the issues were carried in appeal before the First Appellate Authority. The submissions of the assessee and the AO by way of a remand and the reply of the assessee to the Remand Report placed on record on the first issue have been extracted in the impugned order in para 6.1 to 6.4 considering which the CIT(A) has confirmed the addition holding as under : “6.5. Held: I have perused the assessment order, remand report, assessment record and reply of the assessee. The brief facts of the case are that a survey u/s 133A of the Act was conducted on 06.11.2012 at business premises of M/s Sal Apartments & Infrastructures. A Trial Balance and Balance Sheet was obtained from the computer of the assessee during Survey Proceedings. In the Balance Sheet of financial year 2010-11 thus obtained by the survey party it is found that Closing Stock of Project Land & Other Land was shown at Rs. 13,55,77,072/-, whereas the closing stock was shown in the P & L A/c just at Rs.8,36,87,287/- which is short by Rs.5,18,89,785/-. The assessee was shown the copy of income tax return form for the AY 2012-13 found during survey, wherein the opening stock as on 01/04/2011 was taken as Rs. 13,55,77,072/-. When confronted with the discrepancies found, the assessee's partner Sh Sumit Garg in his statement accepted this discrepancy, the assessee admitted the fact and promised to revise the return vide surrender letter dated 06.11.2012. Thereafter, on 15.11.2012 by stating that after perusal of audited report Profit & Lost A/c, Balance ITA 940 /CHD/2019 A.Y. 2011-12 Page 5 of 35 Sheet, books of account and income tax returns for AY 2011-12- & 2012- 13 the purchases of Rs.5,18,89,785/- were taken to Balance Sheet directly instead of routing through profit & loss account. Assessee has total purchases of Rs.14.10 Crore and only Rs.8.36 crore was routed through P & L A/c. Hence there is no discrepancy. The arguments of the assessee are not acceptable. The AR during appellate proceedings has submitted that balance amount of purchases are also routed through P & L A/c of Audited Report. This Audit Report is dated 27.09.2011. On perusal of, Income Tax Return e-filed on 30.09.2011 closing stock is again shown at Part-A-P&L Account at Sl.No.4 of the return to the tune of Rs. 8,36,87,287/- only. When the Ld. AR was confronted that if he is claiming that in the audited report the figure of Rs.5,18,89,785/- is routed through P&L Account then how come the original return which was filed subsequent to the audit report is showing the value of closing stock which was found during survey proceedings. Even after issuing notice u/s 148 of the Act on 22.01.2012, the assessee confirmed his earlier stand and requested the AO to consider his ITR already filed on 30.09.2011 as against notice u/s 148 of the Act. The AR has no satisfactory explanation of this discrepancy. It is clear that the partner of the Assessee Sh. Sumit Garag was knowing that they have committed mistake and accepted the discrepancy pointed out by the Survey party and subsequently surrendered the same amount. The retraction letter also talks about the fact that they have perused the audited report, Profit & Lost A/c, Balance Sheet, books of account and income tax -erorns for AY 2011-12- & 2012-13 and there is no discrepancy. The assessees stand is contradictory since the time of survey and during assessment proceedings and even during appellate proceedings. It is in these facts and circumstances, the audited report, cannot be relied. It is held that Ld. AO has rightly made addition of Rs.5,18,89,786/- on detailed findings given in the assessment order and as discussed at Para 6 supra. The arguments of the Ld.AR are not true to the facts and circumstances of the case. AO is right in placing reliance on the case of Avadh Kishore Das v. Ram Gopal AIR 1979 SC 861 wherein it held that 'It was held that evidentiary admissions are not conclusive proof of the facts admitted and may he explained or shown to be wrong, but they do raise an estoppels and shift the burden of proof on to the person making them. The Supreme Court further held that unless shown or explained to be wrong, they are an efficacious proof of the facts admitted.' In the case of Asstt. CIT v. Rameshchandra R. Patel [2004] 89 ITD 203 (Ahd.)(TM) it was held that: 'It was accepted that the assessee had a right to retract but that has to be based on evidence brought on record to the contrary and there must be justifiable reason and material accepting retraction i.e., cogent and sufficient material have to be placed on record for acceptance or retraction. Ail that has to be done by the assessee if he is to retract the statement which was recorded in the presence of witnesses unless there is evidence of pressure or coercion. The facts of each case have to be considered to reach the conclusion whether retraction was possible or not as there can be no universal rule.' In the case of Manharial Kasurchand Chokshs vs. Asstt. CIT [1997] 61 ITD 55 (And.), it was held that: 'Proof of threat or coercion is necessary for valid retraction. The allegation that the assessee was tortured and harassed ITA 940 /CHD/2019 A.Y. 2011-12 Page 6 of 35 by the search team and was forced to make an admission is not enough.' The Ld. AR has failed to establish that there was any coercion while accepting the discrepancy and surrendering the same during survey proceedings. He has also failed to establish his case in the light of facts & circumstances discussed supra. Hence, the assessee has failed to show as to how earlier admission/ statement does not state the true facts or that there was coercion, inducement or threat while getting his earlier statement/ admission. The Ground of Appeal No.2 is dismissed.” 7. The addition made by way of disallowance of interest paid on unsecured loans was also confirmed. Aggrieved by these decisions on merit, the assessee is in appeal before the ITAT. 7.1 It is also relevant to mention that ground No. 2 raised in the present proceedings challenging the validity of the re- opening was also a subject matter of challenge before the First Appellate Authority and the submissions thereon and the reasoning have been extracted in para 5 and 5.2. 8. The ld. AR referring to the respective orders of the AO and the CIT(A) and carrying the Bench through the Paper Book filed on record, addressing the grounds submitted that ground Nos. 1, 5 and 6 may be treated as general in nature and do not require any specific adjudication. 8.1. It was submitted that the assessee seeks adjudication only on ground Nos. 2, 3 and 4. It was further submitted that the challenge posed to the proceedings vide ground No. 2 on facts is inter-linked with the arguments on merits challenged in ground No. 3. Accordingly, it was his submission that for seeking adjudication on ground No. 2, it would be relevant for him to ITA 940 /CHD/2019 A.Y. 2011-12 Page 7 of 35 also simultaneously argue ground No. 3 in the present proceedings. 8.2. Addressing the relevant facts as noted in the assessment order, the ld. AR relied extensively on the detailed arguments advanced before the AO extracted in the order and the detailed submissions also extracted in the impugned order. Carrying the Bench through the respective orders and the Paper Book on record submitted that there is no shred of evidence with the Revenue to support the addition. The case of the Revenue, it was submitted, is entirely built on the incorrect uninformed surrender made by one partner. It was argued that it is not in dispute that the surrender was made without the benefit of relevant and complete records or any financial or legal expert. The entire case of the Department, it was argued is built on the surrender of the assessee. The reasons advanced in detail relied upon on the basis of documents and evidences on record, it was submitted, have not been upset by the department. The retraction, it was submitted ignoring the evidences is held by the tax authorities to be unjustified for no stated reasons. It was his submission that right from the assessment stage the assessee has been repeatedly arguing that the surrender was made on the basis of the computerized tally extracted by the Survey Team at the time of the survey. This fact it was stated is not in dispute. It was also his submission that at the relevant ITA 940 /CHD/2019 A.Y. 2011-12 Page 8 of 35 point of time, the assessee's partner, who is the signatory of the surrender letter did not have the benefit of the Tax Audit Report. This fact also is not in dispute. Referring to the assessment order, it was his submission that there are no statements recorded of any partner or employee to support the surrender made and there is no discrepancy pointed out or noticed by the Survey team or the assessing officer who had the entire record available. The books stand accepted. No discrepancy has been pointed out either therein or the Tax Audit Report always available on record except for the computerized tally which is reportedly stated to be having a clerical error and at best a presentation issue. The impounded documents also support the assessee’s claim and remain ignored. Referring to the assessment order and the impugned order, it was his submission that the assessee has explained in detail repeatedly that it is only a case of method of reporting and even if it is conceded for a moment that it is not the best method for reporting, the fact remains that it does not impact the income. It was argued that the tax authorities are required to consider on facts the income to be brought to tax and not build its case for taxation on the mistakes or surrender letter made on the basis of lack of incorrect facts. Taxes cannot be levied on such mistakes. It was argued that what has to be brought to tax is the income. These arguments have repeatedly been made before the tax ITA 940 /CHD/2019 A.Y. 2011-12 Page 9 of 35 authorities. The lack of relevant facts with the parties is not disputed by the Revenue. Our attention was invited to the specific documents appended in the Paper Book in support of the said submissions. On the basis of these arguments, on facts and submissions, repeatedly advanced on record, it was submitted that the re-opening itself is not maintainable as it is a case of non-application of mind by the AO. 8.3. Our specific attention was invited to Paper Book page 15 to 37 which is the copy of the ITR filed. The ld. A/R carried the Bench through the copy of the acknowledgement of the return filed along with computation of income and ITR Form for the year under consideration. Referring to Page 15, 18 and 19 highlighting the facts reflected qua the respective columns in the Balance Sheet filed, it was submitted that these were reflected in Current Assets and Finished Goods i.e. Closing Stock in the respective columns read with Paper Book page 21. He agreed that the return was filed taking the figures from the very same software tally as considered by the Survey Team. However, time for filing the Revised return was available to the assessee. It was re-iterated that the record referred to by the Survey Team was downloaded from the computer software and the Tax Audit Report was not available there. Based on the downloaded software confronted the assessee's partner made a surrender. It was submitted that it is undisputed that the ITA 940 /CHD/2019 A.Y. 2011-12 Page 10 of 35 assessee's partner made a surrender. However, the law does not require that assessment be made excluding the records relying on a mistaken fact/understanding. The facts when relied upon to retract from the surrender are necessarily required to be looked into by the tax authorities. They cannot repeatedly rely only on the surrender letter ignoring the facts. Attention was invited to the impounded documents of the Survey Team. Specific documents at page 38, 39 and 40 were referred to which is a copy of the balance sheet, Profit & Loss Account and Trial Balance of the assessee impounded by the Survey Team. Paper Book page 40, it was submitted, would show that when Stock of Land (other than projected land) and Purchase Accounts (Purchase of Land [Project Land] ) are totaled, then it can be seen that all facts stand disclosed. The Tax Audit Report available on record is neither faulted with by the Department but relying on surrender letter is repeatedly discarded for unstated reasons. It was argued that these current assets were separate, independent transactions made by separate Purchase Deeds and these were independent transactions and were all shown as current assets to be subsequently allotted to other projects which had not been yet started. It was submitted that all necessary facts stood disclosed. It was clarified on query that the assessee was in the business of real estate. He agreed that this should have been ITA 940 /CHD/2019 A.Y. 2011-12 Page 11 of 35 taken into purchase and routed it through the Profit & Loss Account. In the said background, attention was invited to page 43 which is a retraction dated 15.11.2012 of the surrender made. Same is reproduced hereunder for completeness : The Asstt. Commissioner of Income Tax, 15.11.2012 Range VI, Mohali. Subject: Survey Proceedings under section 133A of the Income Tax Act. Madam, At the time of survey the assessee has given the letter dated 06-11-2012. In this regard it is stated that now we have gone through the audited profit & loss account, balance sheet, books of accounts, income tax return forms and other records for the A.Y. 2011- 12 & 2012-13 and found that the purchases amounting to Rs. 5,18,89,785/- were taken in closing stock directly to balance sheet instead of routing through the same from profit & loss account while filing the income tax return for the year ending 31/03/2011. The assessee has made total purchases of Rs. 14,10,32,635/- out of these purchases the amount of Rs. 8,91,42,850/- was routed through purchase account and the balance amount of Rs. 5,18,89,785/- was directly taken in the balance sheet as closing stock. Hence there is no difference of any kind in the stock. For Sai Apartments & Infrastructures Sd/- (Partner) 8.4 Attention was invited to copy of the audited Financial Statements at pages 44 & 45. It was his submission that it is only a matter of presentation having no impact on the income. Inviting attention to Paper Book page 120 which is also downloaded from the same software by the Department, it was pointed out that it also shows the opening stock of Rs.13,55,77,072.28 as on 01.04.2011 to 31.03.2012. It was his submission that the closing stock for the year under consideration is the opening stock for the next assessment year and thus, merely because of presentation of accounts in the software Tally downloaded by the Department and also initially ITA 940 /CHD/2019 A.Y. 2011-12 Page 12 of 35 relied upon by the assessee while filing the return when seen and read alongwith the Tax Audited Report, it would show that there is no mistake. The opening stock of the subsequent assessment year i.e. 2012-13 assessment year which should have been the closing stock for the year under consideration is only a case of mistake of the assessee explained in detail on record. The explanation has not been rebutted. It has been discarded only on the ground that the assessee had made a surrender. Inviting attention to the relevant provisions of the Act, it was his submission that the assessee having filed its return on 30.09.2011 was very much entitled to file a revised return as the time for filing the revised return had not expired. The mistake, it was filed was rectifiable. It was submitted that he does not want to go into the reason why Revised return was not filed. The fact remains it could have been revised, thus, the addition made in the order u/s 143(3) by issuance of notice u/s 148 was not maintainable and that too ignoring the facts and evidences for no rational reasoning. Thus, in the said background, reverting again to the merits of the addition made which are relevant for considering the jurisdictional issue also, attention was invited to Paper Book page 111. It was his submission that the total land purchased in the year under consideration included the purchases of land amounting to Rs. 5,18,89,785/- which is the subject matter for consideration in ITA 940 /CHD/2019 A.Y. 2011-12 Page 13 of 35 ground No. 3 and has been adequately explained before the tax authorities that it was on account of the purchase of three separate land parcels duly Registered with the Land Revenue Authority. It was submitted that these Purchase Deeds had not been routed through the Profit & Loss Account because these purchases, as per assessee's understanding, since these were not allotted to a specific project, were not required to be routed through it. However, all necessary facts stood disclosed. These separate purchases referred to before the tax authorities have been explained at page 111 of the Paper Book and infact have been extracted in assessee's submissions before the CIT(A) at page 16 also. Documents supporting these three separate Sale Deeds were available on record and with full narrations are referred to at page 70 and 71 as the following narrations : ................................. ................................. + .................................. ITA 940 /CHD/2019 A.Y. 2011-12 Page 14 of 35 .................................. ................................... ................................... 8.5 Attention was invited to Paper Book page 72 to 76, 90 to 94, 95 to 99. Attention was also invited to Paper Book page 131 which is a surrender letter on the basis of which the entire addition has been made. Same is extracted hereunder for ready reference : 8.6 Inviting attention again to Paper Book page 43, it was his submission that the retraction is within a few days. On a reading therefore, it was submitted that infact there is no difference, it is only a presentation issue which has no profit or ITA 940 /CHD/2019 A.Y. 2011-12 Page 15 of 35 financial impact whatsoever. Addition made in the circumstances ignoring the detailed submissions on facts and arguments merely because an incorrect surrender was made on a mistaken belief and retracted within a few days, it was his submission is unfair exercise of power. The notice issued u/s 148 appended at page 132 of the Paper Book and the proceedings in pursuance thereto, it was his prayer may be struck as there is infact no escapement of income whatsoever. Attention was invited to Paper Book page 68 which is a copy of the reasons recorded. Carrying the Bench through the reasons recorded, it was his submission that infact there was no new material before the AO. The addition has purely been made on the basis of the so called surrender letter during the survey. It was his submission that when the assessee had explained that computerized details downloaded from the software confronted to the assessee led to the surrender made and when cross checking these from the Tax Audit Report which admittedly was not available at the business premises during the survey, retraction was made within a few days. In the circumstances, the exercise of power for re-opening the assessment ignoring the facts and submissions on record, it was submitted, was challenged before the CIT(A) also. 8.7 The issues which consequently can arise for consideration, it was his submission would be that if at all there was an excess ITA 940 /CHD/2019 A.Y. 2011-12 Page 16 of 35 stock, then that fact by itself cannot be the subject matter of addition in the year under consideration. At the very best, it was submitted it could have led to enhancement of income in the subsequent year. It was his submission that the assessment for both the years were open before the AO and the fact that the AO has proceeded to consider the addition in the year under consideration itself demonstrates that the AO did not even care to apply his mind as to which year the addition if at all was to be made, the basis of the addition being the surrender letter itself, the same stood well explained before the AO. In the facts of the present case, it was argued there is no allegation of any money having been spent or any undisclosed asset available to the assessee. It is at best a case of presentation of facts. Without conceding the main argument that on facts no addition was maintainable whatsoever either in the year under consideration or the subsequent year, it was his submission that if at all the AO was still inclined to make addition, then the year under consideration was not the right year. Examining this argument, we do not find ourselves in agreement with the ld. AR because if there is a lower closing stock in the year under consideration and a higher opening stock in the subsequent assessment year, then admittedly excess stock is in the year under consideration. So we do not find ourselves in agreement with the without prejudice argument advanced to canvass that ITA 940 /CHD/2019 A.Y. 2011-12 Page 17 of 35 the AO has made an error in selecting the year under consideration for the addition. The ld. AR maintaining his stand submitted that the said argument was without prejudice argument to the main argument and reverting to that it was his submission that in fact no addition was maintainable. The ld. AR submitted that there is no tangible material whatsoever referred to in the assessment order or in the impugned order to hold that there has been an escapement of income. Referring to the reasons recorded, it was submitted, that there is no allegation that purchases have not been booked. There is no allegation that there is an excess stock and there is no allegation that there is a suppression of profits. It was his submission that he would again want to highlight the facts. The survey took place on 06.11.2012. Retraction was made on 15.11.2012 and the reasons recorded were on 22.11.2012. Return filed on 30.03.2011, it was submitted, could have been rectified by filing a Revised Return. 8.8 Referring to un-numbered page 5 of the assessment order and carrying the Bench through the facts as discussed therein, it was his submission that the basis of the surrender was the print out taken from the computer tally. Noticing that in the closing stock of the next year and the opening stock as available in the print out there was a difference, the surrender was made. The audited Financial Report was not available at the time of ITA 940 /CHD/2019 A.Y. 2011-12 Page 18 of 35 survey. Statement of assessee's Director is extracted in the order and on a reading therefrom, it was argued, it can be clearly seen that this is why the surrender was made by mistake and there is no statement recorded of any other person whatsoever and no other fact is referred. 8.9 In the said background, it was his submission that the re- opening was bad in law as all facts were before the AO and there was no occasion or reason to reopen the proceedings which were live and current. The assessee under the Statute had the right to revise the return and since it was merely an issue of presentation of facts ignoring the detailed explanation offered before the AO, the focus of the Department right from the AO and the CIT(A), has been that the addition in terms of the surrender has to be made and no allegation of any income or purchases not recorded is set out in the orders. Referring to pages 6 and 7 of the assessment order, the assessing officer’s allegation that it was an afterthought on the part of the assessee or at page 10 that there is no evidence, it was submitted is contrary to law and facts already available on record. Referring to the settled legal position on these issues, following cases were referred to by way of an illustrative sample of the legal position in the respective case law Paper Books filed on 04.03.2022 and 23.02 .2022: ITA 940 /CHD/2019 A.Y. 2011-12 Page 19 of 35 8.10 Relying upon these, it was his submission that it was incumbent upon the Tax Authorities, the AO as well as ld. CIT(A) to specifically refer to the material supporting the addition. Merely because there is a surrender which stands retracted within 7-8 days ignoring the fact that it is a mere presentation issue wherein no defect has been pointed out, it was submitted is contrary to law and facts. Hence, the addition, it was his prayer, may be deleted. ITA 940 /CHD/2019 A.Y. 2011-12 Page 20 of 35 9. Proceeding to addressing the specific purchases of land parcels which were reflected in “Current Assets” as these were not allotted to any specific Projects in the Software tally extract, on the said understanding/clerical mistake it was not included in the closing stock. However, it stood reflected therein also in Current Assets. It was submitted, that these arguments would also elaborate the normal practice followed when loans advanced for purchasing lands as a business purpose is addressed in Ground No. 4. This practice would show the functioning of the assessee. The assessee, it was submitted, is not giving interest free advances to any one without any purpose. The unsecured loans were taken for commercial expediency and amounts were advanced also for commercial expediency. The disallowance of interest paid accordingly is incorrect in law and on facts. The claim in Ground no. 4 it was submitted can also be well understood from these facts on record. The assessee as per its functioning is required to make advance payments to parties from whom the assessee ultimately purchases lands and the assessee has regularly been purchasing lands from these known parties to whom advance monies are habitually given. The arguments hence would cover both ground numbers 3 and 4. For the said purpose, attention was invited to Paper Book page 109 and 110 read with pages 70 & 71 of the Paper Book. Referring to this, it was his submission, it would show that for purchase ITA 940 /CHD/2019 A.Y. 2011-12 Page 21 of 35 of land from one of his agent Shri Gulzar Inder Singh. He has made cheque payment of Rs. 1.20 lacs on 21.09.2010 and another cheque payment of Rs. 1.75 lacs on 20.01.2011 and made a cash payment of only Rs. 1,34,375/- and again made a cheque payment of Rs. 54 lacs. In the narrations given, it was submitted that the assessee has spelt out the quantity of land purchased vide Registration Deed including Stamp Duty paid thereon etc. For each of these transactions, similarly the entire details are spelt out. None of these facts have been upset by the Revenue, the addition has been arbitrarily made and sustained. Elaborating further, attention was invited to page 110 of the Paper Book. Referring to it, the ld. AR submitted that it would show that there is another agent Shri Harinder Singh Chahal who purchases lands for the assessee, Cheque payment of Rs. 90 lacs and Rs. 90 lacs was made on 27.01.2011 and a cash payment of only Rs. 3,17,200/- was made totaling Rs. 1,83,17,200/-. The payments were made and reflected in a which Sale Deed was registered on a specific Deed. For this cheque of Rs. 27 lacs for purchasing another Land Deed was paid as an advance. It was argued that these are advances made in the regular course of business to his identified agents and this is regular practice of the assessee. Evidence in support of the claim is on record. It has not been upset. Thus, on facts, no addition was maintainable. ITA 940 /CHD/2019 A.Y. 2011-12 Page 22 of 35 10. The ld. DR addressing ground No. 2 submitted that he relies upon the impugned order and the assessment order to argue that the jurisdiction has been correctly assumed by the Assessing Officer. 10.1 Addressing ground No. 3 it was submitted that the addition may be maintained. Attention was invited to the facts on record. The Survey Action of the department on the assessee and the surrender made by the assessee and the findings of the AO and the CIT(A). Specific attention was invited to Paper Book page 70 wherein it was his submission that the assessee mentions that a specific purchase was made vide Registration Deed dated 22.09.2010 from Shri Gulzar Inder Singh and again on 28.01.2011 a specific purchase was made vide Registration Deed dated 28.01.2011 again from Shri Gulzar Inder Singh and from Shri Harinder Singh Chahal vide Registration Deed dated 28.01.2011 which the ld. AR has highlighted so as to explain the addition of Rs. 5 Crore odd, however, it was submitted that for the transaction dated 28.01.2011 at page 71, the narration given is 7 Bigha 14 Biswa 5 Biswashi land parcel being purchased instead of mentioning the Registration Deed to show that land has been purchased. It is written as ‘detail as per Registration Deed’. It was his submission that no Registration Deed in support of the same is available on record for this transaction. ITA 940 /CHD/2019 A.Y. 2011-12 Page 23 of 35 Thus possibly there were some transactions not recorded. Hence he relied on the orders of the CIT (A) and the A.O. 11. The ld. AR addressing the argument for Ground No. 3 advanced by the Revenue, submitted that the arguments so advanced now by the ld. DR is not the case of the Assessing Officer also. Referring to the orders, it was submitted that the AO has not doubted or questioned these transactions. The Paper Book page 71 referred to by ld. CIT-DR it was submitted, is an advance payment for land and since the Sale Deed may not have fructified, the details may not have been available. However, it was emphasized that the exact addition made and under consideration is of Rs. 5 Cr odd which stands explained by the details and transactions referred to at page 70 which have not been referred either by the authorities or by the assessee before the ITAT. 12. The ld. CIT-DR in response submitted that no doubt it is not the case of the AO, however, it addresses the so called practice of the assessee and also casts a doubt on the evidences and supports the addition addressed and hence, relevant for consideration. 13. The ld. AR accordingly sought time to verify the factual positions qua this issue so as to address the query raised by the ld. DR. Accordingly, the case was adjourned. ITA 940 /CHD/2019 A.Y. 2011-12 Page 24 of 35 14. On the next date, ld. AR again invited attention to Paper Book page 70 and 71. Referring to the transaction of purchase questioned by the ld. CIT-DR made from Shri Jagdev Singh which has been explained as an advance against land, it was submitted that this was all along available in the Paper Book. However, by mistake under confusion he could not refer to it on the last date of hearing. Referring to the said document, it was submitted that ultimately these advance payments also resulted in a Deed registered in assessee's favour. In the said factual background it was argued that the addition was not maintainable and the jurisdiction was incorrectly assumed. 15. The ld. CIT DR relied on the respective orders of the tax authorities. 16. We have heard the rival submissions and perused the material available on record. On a consideration thereof, we find on facts that the additions under challenge vide ground No. 3 on merits has to be deleted. The reasons for coming to the said conclusion are being elaborated herein after. However, before proceeding to address the same, we find that the prayer made by the assessee on ground No. 2 in as much as that the order be quashed becomes of academic interest in view of the facts and evidences considered on the merits of the addition. The assumption of jurisdiction challenged when read along in ITA 940 /CHD/2019 A.Y. 2011-12 Page 25 of 35 the factual background of the reasons recorded and the merits of the addition made in the assessment order, we find may on the first blush have an element of justification in the prayer of the assessee. However, considering the macro view on the issue, we leave it open. While so proceeding, we have seen that in the return filed, wherein there was a mistake in as much as the same amount has been taken into consideration as has been found reflected in the computerized tally extracted from the assessee's computer which has been the basis of the surrender letter also. The fact remains that in the Impounded documents itself the reflection in the Trial Balance under Capital Assets for land purchase not collected to specific Project was a fact on record which remains unrebutted. It is also a fact that there was a Tax Audit Report wherein the correct closing stock was found reflected. These facts are not in dispute. It is also a matter of fact that the return filed by the assessee was amenable to rectification by the assessee in as much as time was still available for filing a revised return. However, we are guided by the fact that in the present case, no other assessment order u/s 143(3) has been passed except for the present assessment order which has been passed u/s 143(3) after issuance of notice u/s 148. Accordingly, we leave the said issue open for consideration in case the assessee is prejudiced and proceed to address the grievance posed in Ground No. 3 i.e. on the merits of the ITA 940 /CHD/2019 A.Y. 2011-12 Page 26 of 35 addition. Elaborating the reasons for coming to the conclusion that the addition made in Ground No. 3 was not sustainable, we have given our due consideration to the facts available on record which have already been briefly touched upon in the earlier findings of facts addressed in this para along with the surrender letter dated 06.11.2012 made available on record by the assessee during the survey operation carried u/s 133A which we have extracted in the earlier part of this order. We have also considered the retraction letter filed by the assessee dated 15.11.2011 i.e. filed within a few days also. This has also been extracted in this order. We have also taken into consideration the detailed elaborate arguments advanced on behalf of the assessee before the AO and the CIT (A) and now before us. 16.1 We find on a perusal of the record that the submissions of the assessee that surrender was made on the basis of the position of facts as confronted to the partner which admittedly was the computer tally which incorrectly reflected closing stock as it remained confined to Projects in hand and did not include the purchases of land which had not been allotted to any specific Project. It is also a matter of fact that the Tax Audit Report was not available, either to the assessee or the Survey Team during the survey. It is also a matter of record that in the course of the survey, no statement of any person in regard to ITA 940 /CHD/2019 A.Y. 2011-12 Page 27 of 35 any undisclosed purchase or sale activity of the assessee was recorded. The basis of the surrender was only the computer tally which as we now see, incorrectly recorded the closing stock. It is a consistent argument on fact supported by the record that the closing stock so reflected in the computer tally was on account of the practice followed by the assessee wherein certain purchases of lands made no doubt by way of Registered Deeds, however, had not been allotted to any specific Project, hence, were not routed through the Profit & Loss Account. The fact that these were purchased and reflected in “Current Assets” is not disputed. The fact that these Purchase Deeds were referred to and as seen largely purchased by cheques are facts available on record which also have not been disputed by filing any contrary evidence as assailing the evidence on record. The case of the Revenue is entirely built on the surrender of the assessee. This surrender, we have seen is based on the mistakes on facts. It may be appropriate and relevant to extract the specific reasoning adopted in the assessment order at this stage. The AO has addressed the issues in paras 3 to 5 as under : 3. The voluntary' disclosure of Rs. 5,18,89,786/- which was made for F.Y. 2010-11 (i.e. A.Y. 2011-12) is discussed in detail as under: During the course of Survey Operation, it was found that the books of 1: were maintained by the assessee on the computer in its office. The Balance Sheet and Profit & Loss account for all the years were obtained from the same. On examination of the same, it was seen that the assessee had shown Stock as on 31.03.2011 L at Rs.8,36,87,287/- and Opening Stock as on 01.04.2012 at Rs. 13,55,77,073/-. Thus, it was seen that there was a difference Rs. 5,18,89,786/- {13,55,77,073 - 8,36,87,287) between the two values of Stock shown. While recording the statement of Sh. Sumit Garg, Partner of the assessee Firm, he was confronted on this issue and asked to explain the ITA 940 /CHD/2019 A.Y. 2011-12 Page 28 of 35 difference between the two figures. He was not able to offer any plausible explanation for the same. Accordingly, the assessee offered to surrender an amount of Rs. 5,18,89,786/- on account of difference in Closing Stock and agreed to revise its Income Tax Return for the A.Y. 2011-12 and to raise the Closing Stock as on 31.03.2011 to Rs. 13,55,77,073/-. The surrender letter given the assessee in this regard' is reproduced as under: "During the F.Y. 2010-11, the closing stock has been valued at Rs.8.36 Crores due to clerical and inadvertent error, whereas the closing stock as on 31.03.2011 comes to the tune of Rs. 13.55 Crores. There is difference of Rs.5.19 crores. We hereby agree that to revise the return for A. Y. 2011-12 and raised the closing stock as on 31.03.2011 to Rs. 13.55 Crores. I hereby submit that the above said disclosure to buy peace of mind and subject to no penal action under the Income Tax Act of any other law." 4. On a perusal of the surrender letter, it is seen that a voluntary disclosure of Rs.5,18,89,786/- was made by the assessee firm on account of difference between the Closing Stock of A.Y. 2011-12 (i.e. Rs. 8,36,87,287/-) and Opening Stock of A.Y. 2012-13 (i.e. Rs. 13,55,77,073/-). Further, the assessee had agreed to revise its Return of Income of A.Y. 2011-12 and raise the closing stock as on 31.03.2011 to Rs. 13,55,77,073/-. Since the disclosure was made voluntarily and has made for the assessment year 2011-12 relevant to financial year 2010-11, therefore the assessee was required to revise its ITR and voluntarily increase the value of closing stock to Rs. 13,55,77,073/- thereby raising its Net Profit. 5. However, it was seen that the assessee failed to honour the voluntary disclosure that was made by him vide surrender letter dated 06.11.2012 and did not revise its return. Accordingly, on 22.11.2022 the proceedings in this case were opened u/s 147 of the Income Tax Act, 1961 by the O/o the Income Tax Officer, Ward 6(4), Mohali by recording the reasons which are placed on record and notice u/s 148 was issued to the assessee on 22.01.2012. In reply, the assessee vide his written reply dated 08.04.2012 submitted that his earlier ITR on 30.09.2011 be considered as its return in response to notice u/s 148. Thus, it was seen that even after opening of proceedings u/s 147, the assessee had failed to revise its return. 16.2 The detailed reply of the assessee is extracted and discarded on the ground that disclosure was voluntary. The denial is not on the fact of the force/pressure, the denial/retraction is on the grounds of mistake of partner. These facts stand explained before the AO as well as before the CIT(A) and now before us and have remained unrebutted on record. We have also seen from the Impounded Document of the Survey Team itself (pages 38-42) specifically page 40 that these are ITA 940 /CHD/2019 A.Y. 2011-12 Page 29 of 35 reflected in the Current Assets. We have gone through the details available in the respective Paper Books and find that the mistake which is the basis of the surrender and the very same mistake which is reflected in the return filed also was capable of being rectified and any way stands explained and once these specific Purchase Deeds amounting to Rs.5.18 Cr odd is considered. It would show that infact the opening stock taken in 2012-13 assessment year and the closing stock as per the Tax Audit Report in the year under consideration is the same. Hence, the mistake in the return filed stands addressed. Being satisfied by the detailed explanations on record, we find that addition made in Ground No. 3 by the AO and sustained in appeal by the CIT(A) cannot be upheld. The case law and the position of law as considered in the context of the circulars of the CBDT requiring the Survey Team to support its case on evidences instead of relying solely upon the surrender letters, we find need not be elaborated and stands well addressed in various decisions of the Courts requiring no further specific reference. We further find support from letter No. CIT(A)- 1/CHD/2016-17/712 dated 06.09.2016 at Paper Book page 144 addressed to the AO by CIT(A)-I Chandigarh requiring the AO to file a remand report on the said issue considering which ultimately has been decided against the assessee. We have seen the reply extracted in the impugned order. We find that this ITA 940 /CHD/2019 A.Y. 2011-12 Page 30 of 35 document further supports the order passed. The relevant extract therefrom reads as under : “2. The assessee has filed an appeal against the order of the Assessing Officer whereby he has challenged both the additions. The assessee in the business of purchasing hand, under taking development, constructing flats and selling the same. The Opening & Closing Stock are the assessee of comprises of land and flats/houses. On going through the addition on account of difference in Closing stock, it is seen that the Assessing Officer has not brought out clearly the detail of items on account of which the difference arose. You are requested to give the details of property on account of which difference of Opening & Closing Stock of Ra. 5.18,89,786/- was added to the if of the assessee .” (emphasis supplied) 16.3 We have seen that in the reply ultimately the surrender letter is the sole evidence with the Revenue. The details of payments stand fully explained before the tax authorities. No infirmity is pointed out. Accordingly we find on a consideration of the facts and evidences on record that Ground no. 3 of the assessee for the reasons elaborated hereinabove in detail deserves to be allowed. Orderd accordingly. 17. The facts relatable to Ground No. 4 have been addressed in para 5 to 5.1 in this order. The facts are set out at un-numbered page 10 para 12 of the assessment order. A perusal of the same shows that the AO records that; “During the course of assessment proceedings, on verifications of information/details filed it was seen that the assessee had debited an expenses to the tune of Rs. 4,22,767/- as "Interest Paid on Unsecured Loans'. However, on perusal of the balance sheet of the assessee it was seen that the assessee had given large amounts of interest free loans and advances to various parties. Vide this office questionnaire dated 16.12.2013, the assessee was asked to explain the business exigency of the same along with the relevant documentary ITA 940 /CHD/2019 A.Y. 2011-12 Page 31 of 35 evidences. In response vide written reply dated 03.01.2014, the counsel submitted that, the said advances were given by the assessee as advance against purchase of land and said advances stands adjusted in the next year. The counsel further submitted that since the said amounts were advanced for the purpose of purchasing land for the business of the firm, therefore, the said advances were in the nature of business advance. However, the assessee was not able to furnish any corroboratory documentary evidences to justify its claim. In view of die above, vide this office letter dated 06.01.2014 the assessee was asked to show cause as to why an amount of Rs. 4,22,767/- debited by the assessee as 'Interest Paid on Unsecured Loans' be not disallowed keeping in view the provisions of Section 36(l)(ii) and in light of the judgment of Hon'ble Pb. & Haryana High Court in the case of CIT v Abhishek Industries Limited (288 ITR l).........” 17.1 The reply of the assessee was discarded by the AO holding as under : “12........Thus, the amount of expenditure incurred by the assessee on account of interest paid during the year needs to be disallowed as it is highly improbable that a prudent business concern would take loans on interest and at the same time advance loans to other persons without charging any interest thereon. Such an act on the part of a business concern defies logic. 13. In view of the above, I am of the opinion that an interest amounting b Rs.4,22,767/- debited by the assessee under the head 'Interest Paid on Unsecured Loans' needs to be disallowed in this case. Accordingly, the said amount c Rs.4,22,767/- is hereby disallowed and an addition on this issue is made to the Returned Income of the assessee...........” 17.2. It is seen that considering the facts for the second addition, the CIT(A) after extracting the submissions on behalf of the assessee, considered the remand report of the AO and the reply thereto of the assessee. These have been extracted in paras 7.1 to 7.3 of the order. Considering these the addition ITA 940 /CHD/2019 A.Y. 2011-12 Page 32 of 35 has been confirmed in para 7.4. The CIT(A) considering the legal position on the interest free advances made out of mixed funds held that the onus was upon the assessee to demonstrate business expediency. Considering the arguments and the submissions he held that there was no document produced to show what business purpose or commercial expediency was served by making those advances, hence, confirmed the addition. 18. The ld. AR has reiterated the submissions as advanced before the tax authorities. Apart from pleading business exigencies, it was also submitted that while arguing the earlier ground on merits, he has highlighted the very nature of assessee's business wherein land parcels are purchased for which advance payments have to be made to the owners of the property. It has been submitted that it is a regular ongoing activity of the assessee's business. The specific illustrations referred to at pages 70-71 alongwith supporting evidences, it was submitted, establishes this claim. Attention has also been invited to Paper Book page 144 to 145 which is a letter dated 06.09.2016 addressed by the CIT(A) to the AO requesting a remand report which document itself establishes that there was no specific allegation of non business purpose cited by the AO which the assessee could meet. The relevant part of the letter is extracted hereunder : ITA 940 /CHD/2019 A.Y. 2011-12 Page 33 of 35 “3. The Assessing officer while making addition on account of interest on Borrowed Capital u/s 36(1)(iii) has-hot brought on record specific details of n of borrowed fund for non-business purposes on account of which r st was disallowed. You are requested to provide the details. 18.1 Accordingly, it was his submission that the assessee cannot be required to prove the negative. It is for the AO or the CIT(A) to point out the non-business usage. This is notwithstanding the argument that the assessee had sufficient available funds to advance the loan for business purposes. Accordingly, it was his prayer that the addition be deleted. 19. The ld. DR addressing ground No. 4 submitted that let the issues be remanded back to the AO for consideration. 20. The said prayer was objected to by the ld. A/R in the face of the record and submissions on record. 21. We have heard the rival submissions and perused the material available on record. On a consideration thereof, we find that there is no basis for disallowing the interest paid on unsecured loans. We have gone through the evidences on record and we have seen that in the nature of assessee's business, advancing of loans for purchase of lands is an ongoing activity. We have seen that as a result of these advances, Registered Sale Deeds for purchase of lands have been executed in favour of the assessee. Business exigencies claimed on the facts available, we have seen stand well addressed. Notwithstanding the fact that the assessee has argued ITA 940 /CHD/2019 A.Y. 2011-12 Page 34 of 35 availability of interest from advances to it. The Revenue in the specific facts of the case considering the peculiar business activities of the assessee was required to point out which loan advanced being considered to for non-business purposes. The assessee cannot be required to meet the negative. Hence, we find that the addition made on facts deserves to be deleted. Ordered accordingly, 19. Ground No. 5 stated to be general in nature and has not been argued by the assessee. We find it cannot be regarded as a general ground, however, the assessee has chosen not to argue the said ground. It is dismissed as not pressed. Ground Nos. 1 to 6 being general require no adjudication. 20. In the result, appeal of the assessee is partly allowed. Order pronounced on 27 th April,2022. Sd/- Sd/- (VIKRAM SINGH YADAV) (DIVA SINGH) लेखा लेखालेखा लेखा सद瀡य सद瀡यसद瀡य सद瀡य/ Accountant Member 瀈याियक 瀈याियक瀈याियक 瀈याियक सद瀡य सद瀡यसद瀡य सद瀡य/ Judicial Member “Poonam/Das* ITA 940 /CHD/2019 A.Y. 2011-12 Page 35 of 35 आदेश क琉 灹ितिलिप अ灡ेिषत/ Copy of the order forwarded to : 1. अपीलाथ牸/ The Appellant 2. 灹瀄यथ牸/ The Respondent 3. आयकर आयु猴/ CIT 4. आयकर आयु猴 (अपील)/ The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय आिधकरण, च瀃डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड榁 फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar 1. Draft dictated 21.03.2022,28.03.2022, 19.04.2022 Sr.PS 2. Draft first placed before author 23.03.2022 3. Approved draft comes to Sr.PS/PS 30.03.2022, 19.04.2022,20.04.2022, 27.4.22 4 Final draft placed before author 5. Order signed and pronounced on 6 File sent to the Bench Clerk 27.04.2022 Sr.PS 7. Date on which file goes to the AR