DCIT, C.C - XXII, Kolkata V. M/s. Howrah Mills Co; Ltd., Howrah

ITSSA 16/KOL/2008

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3073 (ITAT-KOLKATA)
• Duration Of Justice: 9 year(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 06-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVINASH MISHRA
• Assessee Lawyers: B C JAIN
• Keywords: Search and seizure; Document seized; Block assessment; Documents seized
• Section: 43B; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER IT (SS) A NO. 16 / KOL / 2008 ASSESSMENT YEAR :2004-05 DCIT, CENTRAL CIRCLE- XXII, 18, RABINERA SARANI, PODDAR COURT, 5TH FLOOR, KOLKATA-1 V/S . M/S HOWRAH MILLS CO. LTD. 135, FORE SHORE ROAD, HOWRAH-711 102 [ PAN NO.AAACH 7509 J ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI AVINASH MISHRA, CIT-DR /BY RESPONDENT SHRI B.C. JAIN, FCA /DATE OF HEARING 21-02-2017 /DATE OF PRONOUNCEMENT 22 -03-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-III, KOLKATA DATED 03.01.2008. ASSESSMENT WAS FRAMED BY ACIT, CC-XXII, KOLKATA U/S 143(3)/153A OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 20.03.2006 FOR ASSESSMENT YEAR 2004-05. SHRI AVINASH MISHRA, LD. DEPARTMENTAL REPRESENTATIV E REPRESENTED ON BEHALF OF REVENUE AND SHRI B.C. JAIN, LD. AUTHORIZED REPRE SENTATIVE APPEARED ON BEHALF OF ASSESSEE. 2. THE DEPARTMENT HAS FILED THE REVISED GROUNDS, FO R WHICH GROUND NO. 1, 2 AND 3 ARE REPRODUCED BELOW:- IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIONS OF UNDISCLOSED CASH OF RS.7488/- MADE BY THE ASSESSING OFFICER DUE TO THE DIFFERENCE OF C ASH FOUND AND AS THAT AS PER CASH BOOK. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIONS OF UNDISCLOSED SALE PROCEED OF RS.1,24,99,520/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF RECEIPT OF UNDISCLOSED AMOUNT ON THE BASIS OF ENTRIES AS PE R SEIZED DOCUMENTS PAGE-34 OF HM/10 AND AFTER DEDUCTING EXPENDITURE @ 53.36% AVAILABLE FROM THE SEIZED DOCUMENTS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIONS ON A/C OF LAND COST OF RS.1,20,69,900/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE T ERMS AND CONDITIONS OF THE LEASE AGREEMENT BETWEEN VIVEKANAND CONSTRUCT ION (P) LTD. AND THE ASSESSEE. 3. THE GROUNDS NO. 1 TO 3 ARE INTER-RELATED AND TH EREFORE BEING TAKEN UP TOGETHER. THE ISSUE RAISED BY THE REVENUE IN THIS A PPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF UNDISCLOSED INCOME OF THE ASSESSEE. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTU RING AND SALE OF JUTE PRODUCTS. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OUT ON THE MALL GROUP DATED 30-06-2003 AND SUBSEQUENT D ATES. DURING THE COURSE OF SEARCH PROCEEDINGS, VARIOUS DOCUMENTS WERE SEIZE D AND ACCORDINGLY ASSESSMENT WAS FRAMED U/S 153A OF THE ACT BY TREATI NG THE FOLLOWING AS UNDISCLOSED INCOME OF THE ASSESSEE. 1. ADDITION OF CASH THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THE CASH OF RS. 5,16,990/- AS ON THE DATE OF SEARCH BUT AS PER THE CASH BOOK THE BALANCE WAS OF RS. 5,09,510/-. THEREFORE, A DIFFERE NCE OF RS.7,488/- WAS OBSERVED WHICH WAS TREATED AS UNDISCLOSED INCOM E AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 2. ADDITION OF UNDISCLOSED SALE IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 3 THE ASSESSEE BEING A SICK COMPANY DECIDED TO SALE P ART OF ITS LAND IN ORDER TO GET OUT FROM THE STATUS OF SICK COMPANY. A CCORDINGLY, THE PART OF THE LAND OF THE ASSESSEE WAS TRANSFERRED TO A DEVEL OPER COMPANY NAMELY VIVEKANANDA CONSTRUCTION PRIVATE LIMITED (FO R SHORT VCPL). AS PER THE UNDERSTANDING BETWEEN THE ASSESSEE AND THE VCPL, THE GAIN FROM THE PROJECT PROMOTED AND EXECUTED BY THE VCPL SHALL BE SHARED IN THE RATIO OF THE 33:67. THIS UNDERSTANDING WAS FOUN D ON THE BASIS OF SEIZED DOCUMENT PAGE NUMBER 5 OF HM/9. ON FURTHER PERUSAL OF PAGES NUMBER 34, 35 AND 36 OF THE SEIZED DOCUMENTS HM/10, FOLLOWING FACTS WERE REVEALED WHIC H ARE RELEVANT FOR THE YEAR UNDER CONSIDERATION. S.NO . PARTICULARS OF SALE AMOUNT OF SALE ASSESSEES SHARE 1. FLATS SALE PHASE-II 8,11,39,173.00 33%=2,67,75,927.00 2. CAR PARKING SALE PHASE-II 41,09,000.00 25%= 10, 27,250.00 3. CAR PARKING SALE PHASE-III NA 63,55,550.00 4. CAR PARKING SALE PHASE-IV NA 60,74,207.00 5. TOTAL 4,02,32,934.00 THUS THE AMOUNT OF ASSESSEES SHARE COMES TO RS.4,0 2,32,934/- IN TOTAL IN THE AFORESAID LAND DEVELOPMENT PROJECT. ON FURTHER PERUSAL OF PAGE NUMBER 34 OF THE SEIZED DOCUMENT MARKED AS HM/10 IT WAS REVEALED THAT THE ASSESSEE HAS RECE IVED AGGREGATE PAYMENT OF RS. 4,79,40,000/- FOR THE ASSESSMENT YEA RS BEGINNING FROM 2001-02 TO 2004-05. IT WAS ALSO OBSERVED BY THE AO DURING THE ASSESSMEN T PROCEEDINGS THAT THE TOTAL SALE PROCEEDS INCLUDING EVERYTHING COMES TO RS.9,00,61,412/- AND AGAINST THIS SALE PROCEEDS EXPENDITURE OF RS. 4 ,82,37,00,000/- WERE FOUND INCURRED. THUS, THE SAID PROPORTION OF THE EX PENDITURE TO RECEIPT WAS 53.36%. THIS RATIO WAS APPLIED IN ALL THE ASSES SMENT YEARS IN RESPECT OF ALL THE YEARS IN WHICH THE ASSESSEE FOUN D TO HAVE RECEIVED IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 4 THE MONEY FROM VCPL. THE YEAR UNDER CONSIDERATION T HE ASSESSEE HAS RECEIVED THE SUM OF RS.2,68,00,000/-. THE ABOVE RAT IO I.E. 46.64% OF THE INCOME WAS APPLIED ON MONEY RECEIVED IN THE YEA R WHICH COMES FOR RS. 1,24,99,520.00 (2,68,00,000.00 * 46.64) WHICH H AS BEEN TREATED AS UNDISCLOSED INCOME. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN THE ABOVE STATED UNDISCLOSED INCOME. THE ASSESSEE IN CO MPLIANCE THERETO SUBMITTED THAT THE UNDERSTANDING ON THE BASIS OF WH ICH THE ADDITION HAS BEEN MADE HAS NO LEGAL SANCTITY AS IT IS NOT THE SI GNED DOCUMENT. HOWEVER THE AO HAS DISREGARDED THE CONTENTION AND A DDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3. ADDITION OF LAND COST M/S VCPL HAS DEBITED THE COST OF LAND IN ITS PROFIT AND LOSS ACCOUNT FOR A SUM OF RS.1,20,69,900/- BUT THE AO OBSERVED THAT SU CH SALE OF LAND HAS NOT BEEN SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCO UNTS. THEREFORE THE AO TREATED THE SAME AS UNDISCLOSED INCOME WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD CI T(A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT THE UNDERSTANDI NG ON THE BASIS OF WHICH THE ADDITIONS HAD BEEN MADE IS THE PROPOSAL MADE BY VCPL. THEREFORE, THE SAME DOCUMENT CANNOT BE A BASIS FOR THE ADDITIONS A S MADE BY THE AO. IT IS NOWHERE CLEAR HOW THE INCOME OF RS. 2.68 CRORES HAS ACCRUED TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE VCPL IS FO LLOWING PROJECT COMPLETION METHOD WHEREAS THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, THE MISMATCH IN THE AMOUNT RECORDED BY T HE ASSESSEE AND VCPL IS ARISING ON ACCOUNT OF DIFFERENT METHOD OF ACCOUN TING. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS ALREADY SHOWN THE RECEIPT OF RS.4.11 CRORES ON SALE OF PROPERTY IN ITS REGULAR BOOKS OF ACCOUNTS UNDER MER CANTILE ACCOUNTING SYSTEM FOR THE AY 2003-04 UNDER THE HEAD CAPITAL GAIN. A S SUCH, THERE IS NO UNDISCLOSED INCOME AS OBSERVED BY THE AO IN HIS ASS ESSMENT ORDER. IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 5 THE ASSESSEE WITH REGARD TO THE ADDITION OF LAND CO ST SUBMITTED THAT IT HAS BEEN SHOWING INCOME IN ITS BOOKS OF ACCOUNTS AS LEA SE PREMIUM SINCE THE AYS 1993-94. OTHER THAN THE DISCLOSED INCOME OF THE LEASE PREMIUM NO OTHER INCOME WAS RECEIVED BY THE ASSESSEE. THE DIFFERENCE IS ARISING DUE TO THE DIFFERENT METHOD OF ACCOUNTING FOLLOWED BY VCPL AND THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 7. THE SUBMISSIONS ARE CAREFULLY CONSIDERED. IT IS SENT HA THE ASSESSMENT ORDER IS A SKETCHY AFFAIR AND SEEMS TO F OLLOW THE PATTERN OF BLOCK ASSESSMENT ORDER INCORPORATING DISCUSSIONS FO R A.Y 2001-02 TO 2004-05 IN ONE SINGLE ORDER. BUT THE BASIC SCHEME O F THE ORDER IS THAT THERE IS A DOCUMENT INDICATING AN AGREEMENT TO SHAR E THE SALE PROCEEDINGS BETWEEN THE APPELLANT COMPANY AND THE D EVELOPER IN THE RATIO 33:67 (HM-9/P-5), THAT SEIZED DOCUMENT FOUND FROM THE PREMISES OF THE DEVELOPER VCPL DISCLOSED NOT ONLY THE AMOUNT S RECORDED IN ITS BOOKS OF ACCOUNT BUT ALSO WHAT IS STATED IN THE COL UMN AS EXTRA AND THAT THE TOTAL RECEIPT WAS THE AGGREGATION OF THE R EGULAR AMOUNT AND THE EXTRA AMOUNT, THAT THE APPELLANT COMPANY MUST HAVE RECEIVED 33% OF THESE AGGREGATE AMOUNT. TO THE EXTENT THE APPELLANT DID NOT DISCLOSE THIS RECEIPT, TO THAT EXTENT THE APPELLANT COMPANY CONCEALED ITS INCOME. 7.2 TWO QUESTIONS ARE RELEVANT HER. THE FIRST IS WH ETHER THE LOOSE SHEET PROPOSING MEMORANDUM OF UNDERSTANDING CAN BE TAKEN TO SUPERSEDE AND OVERRIDE THE LEGAL AGREEMENT BETWEEN THE APPELL ANT COMPANY AND THE DEVELOPER. THIS WOULD NOT BE JUSTIFIED BECAUSE THE BUSINESS RELATION BETWEEN THE APPELLANT COMPANY AND THE DEVELOPER COM PANY IS GOVERNED BY THE CONTRACTS REVISED AND SUPPLEMENTED FROM TIME TO TIME AND UNDER THE SCRUTINY OF AUTHORITIES LIKE THE BIFR , THE KOLKATA HIGH COURT ETC. IF THE SEIZED PAPERS PURPORTING TO BE TH E MEMORANDUM OF UNDERSTANDING IS A MERE PROPOSAL WHICH NEVER TRANSL ATED INTO AN AGREEMENT, ENFORCEABLE OR OTHERWISE AND, DOES NOT A MOUNT TO AN AGREEMENT SURPERSEDING EARLIER AGREEMENTS, THE QUES TION OF QUANTIFYING THE REVENUE SHARING BY THE APPELLANT COMPANY FROM T HE SALE PROCEEDS RECEIVED BY THE VCPL DOES NOT ARISE. THE APPELLANT RECEIVED A FIXED SUM PER SQ.FT OF THE LAND ALONG WITH CONSTRUCTION U NITS SOLD BY THE VCPL. HOWEVER, IF THE SEIZED MEMORANDUM OF UNDERSTANDING SUPERSEDES EARLIER AGREEMENTS, THE INCOME OF THE APPELLANT MUS T BE QUANTIFIED ON THE BASIS OF THIS AGREEMENT. IN THAT CASE IT WOULD ALSO BE NECESSARY TO QUANTIFY THE AMOUNT OF SALES PROCESS RECEIVED BY TH E VCPL, BOTH DISCLOSED AND UNDISCLOSED. ON A PERUSAL OF THE EARL IER AGREEMENTS STARTING FROM 1986 AND ALSO ON PERUSAL OF THE SEIZE D DOCUMENTS HM- 9/P-6, I AM OF THE OPINION THAT THE LOOSE SHEET MEM ORANDUM OF UNDERSTANDING SEIZED IN THE COURSE OF SEARCH OPERAT ION WAS A MERE IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 6 PROPOSAL WHICH WAS NOT REDUCED TO DOCUMENTARY FORM. FURTHER, NO MATERIAL IS FOUND IN THE COURSE OF SEARCH ACTION AS RECORDED IN THE ASSESSMENT ORDER TO SHOW THAT THERE IS CORROBORATIV E MATERIAL IN SUPPORT OF HOLDING HM-9/P-6 AS THE EVIDENT AND OPERATIVE AG REEMENT ON STAMP PAPER. TILL THE PRIMARY OF THE DOCUMENT HM-9/P-5 IS ESTABLISHED, THE EXERCISE OF ESTIMATING THE APPELLANT COMPANYS SHAR E OF SALE PROCEEDS DOES NOT BECOME VALID. 7.3 FROM THE SEIZED DOCUMENT VCL/9, PAGE NO. 53, IT IS SEEN THAT IN THE DETAILS OF RECEIPTS FROM PHASE-II TABULATING THE AR EA, THE DISCLOSED AMOUNT AND THE EXTRA AMOUNT IN EACH BLOCK OF PHASE- II, REFERENCE TO THE SHARE OF THE APPELLANT IS IN THE BOX AT THE BOTTOM OF THE PAPER. THERE, THE AMOUNT PAYABLE BY THE VCPL TO THE APPELLANT @ 1 25 PER SQUARE FT IS TREATED AS THE VCPLS LIABILITY, DISCHARGED BY THIS PROPOSED ARRANGEMENT OF 33% OF SALE PROCESS. THE SAME BOX SH OWS THAT THE ACCUMULATED AMOUNTS PAYABLE TO THE APPELLANT WOULD REMAIN OUTSTANDING TO THE EXTENT NOT DISCHARGED BY PAYMENT OF 33% OF REVENUE FROM SALE OF FLATS. THE ARGUMENT OF THE APPELLANT T HEREFORE, IS ACCEPTABLE THAT THE APPELLANT IS NOT CONCERNED AND SHOULD NOT BE AFFECTED BY THE MANNER IN WHICH THE VCL PROPOSES TO DISCHARGE ITS O UTSTANDING LIABILITY WHETHER OUT OF REGULAR AMOUNTS OR EXTRA AMOUNTS. AS FAR AS THE APPELLANT IS CONCERNED IT HAS SHOWN THE AMOUNTS REC EIVABLE FROM THE VCPL AS ITS INCOME ON ACCRUAL BASIS IN EARLIER YEAR S. THE A/R OF THE APPELLANT RIGHTLY RELIED UPON THE TABLE, REPRODUCED AS ANNEXURE A TO THIS ORDER WHERE IT IS SHOWN THAT THE APPELLANT OFF ERED FOR TAX LEASE PREMIUM @ 67,66,000/- FOR THE FINANCIAL YEAR 1993-9 4 TO 1995-96, RS.1,75,00,000/- IN THE FINANCIAL YEAR 2002-03 AND RS.75,00,000/- N FINANCIAL YEAR 2003-04. THE APPELLANT ALSO DISCLOSE D LEASE RENT @ RS.6,00,000- FROM FINANCIAL YEAR 1993-94 TO 2004-05 . THE LIABILITY OF THE VCPL IS THE MOUNT RECEIVABLE BY THE APPELLANT FROM IT: TOTAL LEASE PREMIUM OF RS.4,52,98,000/- AND TOTAL LEASE RENT OF RS.72,000,000/-. IN DISCHARGE OF THIS, THE VCPL MADE PAYMENTS FROM TIME TO TIME AS CAN BE SEEN FROM TABLE IN ANNEXURE-A TO THIS ORDER. THE AR GUMENT THEREFORE, IS ACCEPTED THAT EVEN IF APPELLANT RECEIVED ANY PART O F DISCLOSED OR UNDISCLOSED SALES RECEIPT FROM THE VCPL, WHETHER IT IS 33% OR MORE, IT HAS NO RELEVANCE IN DETERMINATION OF THE INCOME OF THE APPELLANT AS IT HAS ALREADY OFFERED FOR TAX SUCH AMOUNTS RECEIVABLE FROM THE VCPL ON MERCANTILE BASIS. ACTUAL RECEIPT IS RELY AN ACCOUNT ING ADJUSTMENT. IT CANNOT BECOME THE APPELLANTS INCOME SECOND TIME. G ROUND NO. 6 IS ALLOWED. BEING AGGRIEVED BY THE ORDER OF LD CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO WHEREAS THE LD. AR RELIED ON THE ORDER OF LD. CIT(A). IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 7 7. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOT H THE SIDES AND ORDERS OF THE LOWER AUTHORITIES. THE ISSUE IN THE P RESENT CASE RELATES TO THE UNDISCLOSED INCOME AS OBSERVED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ADDITIONS WERE MADE BY THE AO FOR MANY ACCOUNTS, FIRSTLY DIFFERENCE IN THE CASH FOUND IN THE BOOKS OF ACCOUN TS AND AT THE TIME OF SEARCH, SECONDLY, UNDISCLOSED SALE OF THE FLATS AND PARKING SPACE, THIRDLY, UNDISCLOSED SALE OF LAND. THE LD. AR DID NOT MAKE A NY ARGUMENT IN RESPECT TO THE ADDITION MADE BY THE AO FOR THE MISMATCH OF THE CASH ON ACCOUNT OF SMALL AMOUNT. HENCE THE SAME IS CONFIRMED. HENCE THE ORDE R OF LD. CIT(A) IS REVERSED. ACCORDINGLY, AO IS DIRECTED. 8. NOW COMING TO ADDITION MADE BY THE AO ON ACCOUNT OF UNDISCLOSED SALE PROCEEDS OF FLATS & PARKING SPACE IN THE BOOKS OF A CCOUNTS OF THE ASSESSEE. AT THE OUTSET, WE FIND THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF DOCUMENTS WHICH WERE FOUND IN THE COURSE OF SEARCH AT A PLACE OF THE VCPL. IT IS IMPORTANT TO NOTE THAT THESE DOCUMENTS ARE NOT THE SIGNED DOCUMENT. THEREFORE IN OUR CONSIDERED VIEW, THE ADDITION ON A CCOUNT OF NON-SIGNED DOCUMENTS IN THE AFORESAID FACTS & CIRCUMSTANCES CA NNOT BE MADE. SIMILARLY WE ALSO FIND THAT THE UNDISCLOSED INCOME HAS BEEN D ETERMINED ON THE BASIS OF THE SEIZED DOCUMENTS MARKED AS HM 9/ PAGE 12 OF THE PAPER BOOK WHERE THE EXPENDITURE INCURRED BY THE VCPL AT THE RATE OF 53. 36% WAS RECORDED. ACCORDINGLY, THE AO WORKED OUT THE UNDISCLOSED INCO ME IN THE INSTANT CASE. IN OUR VIEW, THE BASIS ADOPTED BY THE AO FOR DETERMINI NG THE UNDISCLOSED INCOME IS BASELESS. IT IS BECAUSE THAT THE AO HAS NOT MADE ANY REFERENCE TO THE BOOKS OF ACCOUNTS AND OTHER RELEVANT DOCUMENTS. HEN CE, WE FIND NO INFIRMITY IN THE ORDER OF LD CIT(A). SIMILARLY FOR THE ADDITION OF RS.1,20,69,900/- TOWA RDS THE LAND COST WE FIND THAT THE LAND WAS HANDED OVER TO THE VCPL IN THE EARLIER YEARS AND THE ASSESSEE HAS BEEN SHOWING LEASE PREMIUM ON SUCH LAND CONSIST ENTLY. HOW THE VPCL IS SHOWING THIS TRANSACTION IN ITS BOOKS OF ACCOUNTS I S NOT CONCERN OF THE ASSESSEE. IT IS BECAUSE THE ASSESSEE AND THE VCPL A RE INTO DIFFERENT LINE OF IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 8 ACTIVITIES. VCPL IS INTO CONSTRUCTION ACTIVITY AND FOLLOWING DIFFERENT METHOD OF ACCOUNTING. THEREFORE, FOR ANY MISMATCH WHICH IS AR ISING IN THE BOOKS OF THE ASSESSEE AND THE VCPL CANNOT BE CONCLUDED AS UNDISC LOSED INCOME. IN THE CASE ON HAND MERELY SOME ENTRY FOUND IN THE BOOKS O F THIRD PARTY CANNOT BE THE BASIS FOR MAKING THE ADDITION IN THE HANDS OF T HE ASSESSEE AS THE ASSESSING OFFICER HAS NOT BROUGHT ANY DEFECT IN THE BOOKS OF ACCOUNTS. THEREFORE, IN OUR VIEW THE ADDITION IS NOT SUSTAINA BLE. BESIDES THE ABOVE, WE ALSO FIND THAT THE LD DR HAS NOT BROUGHT ANYTHING O N RECORD CONTRARY TO THE FINDING OF LD CIT(A). HENCE, WE FIND NO INFIRMITY I N THE ORDER OF LD CIT(A). IN VIEW OF ABOVE, ALL THE GROUNDS OF THE APPEAL 1 TO 3 ARE PARTLY ALLOWED. 9. NEXT ISSUE RAISED IN GROUND NO. 4 OF THE APPEAL IS THAT LD CIT(A) ERRED IN GIVING DIRECTION TO THE AO FOR GIVING RELIEF OF RS. 6,85,853.00 AND RS.18,83,872/- UNDER THE PROVISIONS OF SECTION 43B OF THE ACT. 10. AT THE OUTSET IT WAS OBSERVED THAT THERE ARE CE RTAIN EXPENSES WHICH ARE ALLOWED ON THE BASIS OF ACTUAL PAYMENT IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THESE EXPENSES ARE SPECIFIED UNDER THE PROVISIONS OF SECTION 43B OF THE ACT. IT IS ALSO IM PORTANT TO NOTE THAT THE AMENDED PROVISIONS OF SECTION 43B ARE CLARIFICATORY IN NATURE AND THEREFORE WILL BE APPLIED TO ALL THE PENDING MATTERS. IN THE CASE ON HAND THE LD CIT(A) HAS GIVEN DIRECTION TO ALLOW THE CLAIM OF THE ASSESSEE SUBJECT TO THE FULFILLMENT OF THE CONDITIONS OF SECTION 43B OF THE ACT. ACCORDING LY, THE AO AFTER VERIFYING THE DETAILS HAS PASSED EFFECT GIVING ORDER AND GIVEN TH E RELIEF TO THE ASSESSEE WHICH IS PLACED ON PAGE 34 OF THE PAPER BOOK. IN VI EW OF ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF LD CIT(A). HENCE, THIS GR OUND OF APPEAL OF THE REVENUE IS DISMISSED. 11. NEXT ISSUE RAISED IN GROUND NO. 5 OF THE APPEAL IS THAT LD CIT(A) ERRED IN GIVING DIRECTION TO THE AO FOR GIVING RELIEF OF THE LOSS PERTAINING TO THE AY 1996- 97 UNDER THE PROVISIONS OF LAW. IT(SS)A NO.16/KOL/2008 A.Y. 2004-05 DCIT CC-XXII, KOL. VS. M/S HOWRAH MILLS CO . LTD. PAGE 9 12. AT THE OUTSET, IT WAS OBSERVED THAT THE LD CIT( A) HAS GIVEN DIRECTION TO ALLOW THE CLAIM OF THE ASSESSEE FOR THE LOSS PERTAI NING TO THE AY 1996-97 AS WORKED OUT BY THE AO. ACCORDINGLY, THE AO AFTER VER IFYING THE DETAILS HAS PASSED EFFECT GIVING ORDER AND GIVEN THE RELIEF TO THE ASSESSEE WHICH IS PLACED ON PAGE 34 OF THE PAPER BOOK. IN VIEW OF ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF LD CIT(A). HENCE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT, REVENUES APPEAL STANDS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT 22/ 03/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 22 / 03 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT,CC-XXII, 18, RABINDRA SARANI, PODDA R COURT,5 TH FL, KOL-01 2. /RESPONDENT-M/S HOWRAH MILLS CO. LTD., 135 FORE SHO RE ROAD, HOWRAH-711102 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,