The ACIT, 1(2), Indore V. M/s Magnificient Constructions P. Ltd., Indore

ITSSA 79/IND/2011

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8210 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Assessee Lawyers: S S DESH
• Keywords: Business expenditure; Loose papers; Document seized; Deemed dividend; Retraction; Documents seized
• Section: 40A(3); 143(3); 153A; 131; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAECM3922A I.T (SS) .A. NO. 77/IND/ 2011 A.Y. : 2004 - 05 ACIT, 1(2), INDORE. M/ S. MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, VS 12/2, R. N. T. MARG, INDORE. APPELLANT RESPONDENT C.O.NO.59/IND/2011 (ARISING OUT OF I.T(SS).A. NO. 77/IND/2011) A.Y. : 2004 - 05 M/ S. MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, ACIT, 1(2), INDORE. 12/2, R. N. T. MARG, VS INDORE. CR OSS OBJECTOR RESPONDENT I.T (SS) .A. NO. 78/IND/2011 A.Y. : 2006-07 ACIT, 1(2), INDORE. M/ S. MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, VS 12/2, R. N. T. MARG, INDORE. APPELLANT RESPONDENT -: 2: - 2 I.T (SS) .A. NO. 83/IND/2011 A.Y. : 2006 - 07 M/ S . MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, ACIT, 1(2), INDORE 12/2, R. N. T. MARG, VS INDORE. APPELLANT RESPONDENT I.T (SS) .A. NO. 79, 80 & 81/IND/2011 A.Y. : 2007 - 08, 2008 - 09 & 2009 - 10 ACIT, 1(2), INDORE. M/ S. MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, VS 12/2, R. N. T. MARG, INDORE. APPELLANT RESPONDENT I.T (SS) .A. NO. 84 & 85 /IND/2011 A.Y. : 200 7 - 08 & 2008 - 09 M/ S. MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, ACIT, 1(2), INDORE 12/2, R. N. T. MARG, VS INDORE. APP ELLANT RESPONDENT PAN NO. : AAACQ1041Q I.T (SS) .A. NO. 86 TO 88/IND/2011 A.Y. : 200 6 - 07 TO 2008 - 09 -: 3: - 3 M/ S. ZOOM REALITY PROJECTS PVT.LTD., A-53, ROAD NO.1, ACIT, 1(2), INDORE MIDC. INDUSTRIAL AREA, MAROL, ANDHERI (E), MUMBAI VS APPELLAN T RESPONDENT PAN NO. : AAACQ1041Q I.T (SS) .A. NO. 82/IND/2011 A.Y. : 2007 - 08 ACIT, 1(2), INDORE M/S.ZOOM REALITY PROJECTS PVT.LTD., A-53, ROAD NO.1, VS MIDC. INDUSTRIAL AREA, MAROL, ANDHERI (E), MUMBAI APPELLANT RESPONDENT PAN NO. : ABNPC7872L I.T (SS) .A. NO S . 89 TO 93 /IND/2011 A.Y. : 2003 - 04, 2004 - 05, 200 5 - 06, 2007 - 08 & 2008 - 09 SHRI VIJAY CHOUDHARY, 11/2, MALHARGANJ, INDORE. ACIT, 1(2), INDORE VS APPELLANT RESPONDENT -: 4: - 4 PAN NO. : ABNPC7873M I.T (SS) .A. NO. 94/IN D/2011 A.Y. : 2006 - 07 S MT. MANJRI CHOUDHARY, 11/2, MALHARGANJ, INDORE. VS. ACIT, 1(2), INDORE APPELLANT RESPONDENT DEPARTEMNT BY : SHRI DARSHAN SINGH, CIT DR ASSESSEE BY: SHRI S. S. DESHPANDE, C. A. DATE OF HEARING : 30.05.2012 DATE OF PRONOUNCEMENT : 07.06.2012 O R D E R PER R. C. SHARMA, A.M. FIRST WE DEAL WITH CROSS APPEALS FIXED BY M/S.MAGNI FICENT CONSTRUCTION PRIVATE LIMITED AND M/S. ZOOM REALITY PROJECTS PRIVATE LIMITED AGAINST THE ORDERS OF CIT(A) FOR TH E ASSESSMENT YEARS 2004-05 TO 2009-10 IN THE MATTER OF ORDERS PA SSED U/S 143(3) READ WITH SECTION 153A OF THE INCOME-TAX ACT , 1961. -: 5: - 5 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ONE OF THE COMPANY OF ZOOM GROUP OF INDUSTRIES HEADED BY SHRI VIJAY CHOUDHARY AND HIS WIFE SMT MANJARY CHOUDHARY. A SEARCH U/S. 132 WAS CONDUCTED ON 04.02.2009 AT VARIOUS BUSINESS PREMISES OF THE GROUP INCLUDING THAT OF THE ASSESSEE COMPANY AS WELL AS THE RESIDENTIAL PREMISES OF THE 'DIRECTORS. THE VARIOUS COMPANIES OF THE GROUP WHICH WERE COVERED IN THE SEARCH ACTION ARE ZOOM DEVELOPERS PVT LTD, ZOOM REALITY PROJECTS PVT LTD, MAGNIFICENT CONSTRUCTIONS PVT LTD, CHOUDHARY INNOVATIVE BUSINESS PVT LTD. AND BRILLIANT INFRASTRUCTURE PVT LTD. DURING THE SEARCH, THE GROU P SURRENDERED ADDITIONAL INCOME OF RS. 105 CRORES IN THE HANDS OF ZOOM DEVELOPERS PVT LTD RS.25 CRORES IN THE HANDS OF ZOOM REALITY PROJECTS PVT LTD; RS5 CRORES EACH IN THE HANDS OF SHRI VIJAY CHOUDHARY AND SMT. MANJARY CHOUDHARY. SUBSEQUENTLY, WHILE FILING' THE RETURNS, THE SURRENDERED INCOME OF RS. 105 CRORES WERE OFFERED FOR TAXATION IN THE CASES OF -: 6: - 6 ZOOM DEVELOPERS PVT LTD IN A.YS. 2003-04 TO 2009- 10. HOWEVER, THE SURRENDER MADE IN THE HANDS OF ZOOM REALITY PROJECTS PVT LTD WAS RETRACTED FULLY, WHILE SHRI VIJAY CHOUDHARY AND SMT MANJARY CHOUDHARY MADE PARTIAL RETRACTION AND OFFERED RS.50 LAKHS AND RS.1 CRORE RESPECTIVELY FOR TAXATION. 3. THE ADDITION IN VARIOUS ASSESSMENT YEARS ARE BASED ON THE ITEMS ALREADY SHOWN IN THE ORIGINAL RETURNS. THE ASSESSEE CLAIMS THAT NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE SEARCH AND THEREFORE NO ADDITION ON THE REGULAR ITEMS SHOWN IN ITS ORIGINAL RETURNS CANNOT BE MADE IN THE PROCEEDINGS U/S. 153A PURSUANT TO SEARCH. THE ADDITIONS IN VARIOUS ASSESSMENT YEARS HAVE BEEN MADE ON ACCOUNT OF DISALLOWANCES OF EXPENSES U/S 40A(3) FOR PURCHASE OF LAND THROUGH CASH PAYMENTS AND THE ILLEGAL PAYMENT TO GOVERNMENT OFFICIALS THROUGH ADVOCATES NAMED M/S. PARKAR & PARKER. 4. DISALLOWANCE U/S 40A(3) DURING THE YEAR UNDER -: 7: - 7 CONSIDERATION THE ASSESSEE HAS PURCHASED LAND AMOUNTING TO RS.3,50,00,000/- AND HAS SHOWN THE SAME AS INVENTORY IN THE BALANCE SHEET. IN THIS REGARD, THE ASSESSEE WAS ASKED VIDE ADDITIONAL QUERY SHEET DATED 14.12.2010 TO FURNISH THE DETAILS OF THE LAND PURCHASED IN TABULAR FORM AND ALSO TO PRODUCE THE COPIES OF PURCHASE DEEDS. THE ASSESSEE WAS ALSO ASKED TO FURNISH THE DETAILS OF PAYMENTS ALONG WITH MODE OF PAYMENT. THE ASSESSEE IN ITS REPLY DATED 23.12.2010 SUBMITTED AS UNDER: 'THE CONVEYANCE DEED FOR INVENTORY SHOWN AT RS. 3.50 CRS HAS ALREADY BEEN ENCLOSED WITH OUR EARLIER SUBMISSIONS FOR A.Y. 2003- 04. IN RESPECT OF ADVANCE PAID FOR PURCHASE OF PROPERTY FOR RS.35.00 LACS, IT IS SUBMITTED THAT THE SAME WAS PAID FOR THE COST OF STAMP DUTY AND REGISTRATION COST WHICH WAS -: 8: - 8 DEPOSITED WITH BOMBAY HIGH COURT OF GETTING THE CONVEYANCE DEED EXECUTED. THE NECESSARY ADJUSTMENTS HAVE BEEN MADE IN SUBSEQUENT YEARS.' AS PER ASSESSING OFFICER, THE ASSESSEE NEITHER FURNISHED THE DETAILS OF PAYMENTS NOR THE COPIES OF RELEVANT BANK ACCOUNTS. IN THE CONVEYANCE DEED, THERE IS NO DETAIL OF PAYMENTS MADE FOR PURCHASE OF LANDS. SHRI SANDEEP DESHPANDE, A.R. OF THE ASSESSEE AND SHRI SHARAD KABRA, DIRECTOR WAS ALSO ASKED TELEPHONICALLY ON 27. 12.20 10 TO FURNISH THE DETAILS REGARDING PAYMENTS BUT NO COMPLIANCE WAS MADE. IT IS CLEAR THAT IN SPITE OF GIVING AMPLE OPPORTUNITIES, THE ASSESSEE AVOIDED TO FURNISH THE DETAILS . IT IS NOTABLE THAT THE GROUP COMPANIES OF THIS GROUP (ESPECIALLY M/S. ZOOM REALITY PROJECTS PVT. LTD.) HAVE BEEN MAKING HUGE -: 9: - 9 CASH PAYMENTS IN GENERAL FOR PURCHASE OF LANDS. THE STATEMENT OF SHRI S.K.TANWAR, ASSTT. VICE PRESIDENT OF M/S. ZOOM DEVELOPERS PVT. LTD. WAS RECORDED ON 05.02.2009 U/S 131 OF THE LT. ACT IN WHICH SHRI TANWAR HAS CLEARLY SUBMITTED THAT THE PAYMENTS ARE BEING MADE IN CASH. FURTHER ON PERUSAL OF THE BANK STATEMENTS (THE ASSESSEE HAS NOT FURNISHED THE STATEMENT OF THE BANK ACCOUNTS FOR THE ASSESSMENT YEARS 2003-04 AND 200405) IN THE SUBSEQUENT YEARS ALSO REVEALS THAT THE ASSESSEE HAS MADE HUGE CASH WITHDRAWALS FROM ITS BANK ACCOUNTS. SINCE THE ONUS THAT THE ASSESSEE HAS NOT MADE PAYMENTS IN VIOLATION OF SECTION 40A(3), LIES UPON THE ASSESSEE, IN WHICH THE ASSESSEE HAS FAILED, IT IS CLEAR THAT THE DELIBERATE AVOIDANCE ON THE PART OF THE ASSESSEE IS ONLY TO CONCEAL THE FACT THAT THE PAYMENTS HAVE -: 10: - 10 BEEN MADE IN CASH. 5. IN VIEW OF THE ABOVE DISCUSSION THE ASSESSING OFFICER HELD THAT THE PAYMENT OF RS.3,50,00,000/- FOR PURCHASE OF LAND HAS BEEN MADE IN CASH AND HENCE TWENTY PERCENT OF THE SAME WAS DISALLOWED U/S 40A( 3) AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE U/S 40A(3) AFTER HAVING THE FOLLOWING OBSERVATIONS :- GROUND NO.(3), (3.1) & (3.2): THROUGH THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 70,00,000/- U/S 40A(3). THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER CONSIDERING THE PAYMENT OF RS. 3.5 CRORE IN CASH TOWARDS PURCHASE OF LAND. ON THAT BASIS, THE ASSESSING OFFICER HAS ADDED 20% THEREOF U/S 40A(3) WHICH AMOUNTED TO RS. -: 11: - 11 70,00,000/-. DURING THE APPEAL PROCEEDINGS, IT IS SUBMITTED THAT PAYMENT OF RS. 3.5 CRORE WAS MADE THROUGH PAY ORDERS/DRAFTS AND NOT THROUGH CASH AS ASSUMED BY THE ASSESSING OFFICER. IT HAS BEEN FURTHER SUBMITTED THAT THE PAYMENT WAS MADE TOWARDS THE COST OF LAND WHICH WAS PURCHASED THROUGH AN OPEN AUCTION BY THE HIGH COURT OF BOMBAY; THAT THE AMOUNTS WERE PAID BY M/S. ZOOM DEVELOPERS PVT. LTD' ON THEIR BEHALF; THAT AO DID NOT BOTHER TO GO THROUGH THE CONFIRMATION OF ZOOM DEVELOPERS PVT. LTD FILED BEFORE HIM; THAT RELEVANT BANK STATEMENT OF ZOOM DEVELOPERS PVT. LTD' WERE ALSO FILED DURING THE COURSE OF THEIR ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD ALSO FILED COPY OF CONVEYANCE DEED, THE AO, HOWEVER, OBSERVED IN THE ASSESSMENT ORDER THAT DETAILS OF PAYMENTS WERE NOT AVAILABLE IN THE SAID CONVEYANCE DEED; AND THAT THE ASSESSEE NEITHER FURNISHED THE DETAILS OF PAYMENTS NOR THE COPIES OF RELEVANT BANK ACCOUNTS. THE AO TOOK COGNIZANCE OF THE -: 12: - 12 STATEMENT OF SHRI S.K. TANWAR, ASST. VICE PRESIDENT OF ZOOM DEVELOPERS PVT. LTD., WHICH WAS RECORDED DURING THE SEARCH, WHEREIN HE HAD CATEGORICALLY ACCEPTED THAT THE GROUP HAD MADE HUGE CASH PAYMENTS FOR PURCHASE OF LAND AND CONCLUDED THAT THE SAID PAYMENT OF RS.3.5 CRORE WAS ALSO MADE IN CASH ONLY. 'IN THIS CONTEXT, IN ORDER TO ASCERTAIN THE MODE OF PAYMENT, I HAVE PERUSED THE COPY OF ACCOUNT OF THE ASSESSEE COMPANY IN THE BOOKS OF ACCOUNTS OF ZOOM DEVELOPERS PVT. LTD' WHICH REFLECTS THE ENTIRE PAYMENT OF RS.3.5 CRORES THROUGH THEIR ACCOUNTS MAINTAINED IN ALLAHABAD BANK, UNITED BANK OF INDIA AND PUNJAB NATIONAL BANK. THE BANK ACCOUNT OF ZOOM DEVELOPERS PVT. LTD. MAINTAINED IN ALLAHABAD BANK REFLECTS PAYMENT OF RS. 10,00,000/- ON 03.11.2003, THAT OF UNITED BANK OF INDIA REFLECTS PAYMENT OF RS.77,50,OOO/- ON 11.02.2004 AND THE BANK ACCOUNT IN PUNJAB NATIONAL BANK REFLECTS PAYMENT OF RS. 2,62,50,000/- FOR GETTING PAY -: 13: - 13 ORDERS. THIS AMOUNTS TO TOTAL PAYMENT OF RS. 3.5 CRORE. IT IS TRUE THAT IN THE CONVEYANCE DEED, THE BREAK UP DETAILS OF SUCH PAYMENTS ARE NOT MENTIONED BUT THERE IS A REFERENCE OF PAYMENT OF RS. 3.5 CRORES TO THE COMMISSIONER FOR TAKING ACCOUNTS, IN TERMS OF THE ORDER DATED 05.02.2004 PASSED BY THE HON'BLE BOMBAY HIGH COURT. FROM THE CONTENT AS AVAILABLE IN THE SAID CONVEYANCE DEED, IT IS NOTED THAT THE LAND UNDER REFERENCE WHICH HAS BEEN PURCHASED BY THE ASSESSEE, WAS AUCTIONED BY MR. G. T. MESTHA, THE COMMISSIONER FOR TAKING ACCOUNTS, HIGH COURT, BOMBAY PURSUANT TO THE ORDER DATED 05.02.2004 PASSED BY HIS LORDSHIP, THE HON'BLE MR. JUSTICE A.M. KHANVILKAR IN EXECUTION APPLICATION NO. 77 OF 2002 IN THE CONTEXT OF DISPUTE BETWEEN CAMERON FINANCE & INVT. LTD WITH M/S. VIRAL ENTERPRISES AND OTHERS. THE LAND OWNED BY M/S. VIRAL ENTERPRISES AND OTHERS WAS PUT TO AUCTION FOR MAKING PAYMENT TO CAMERON FINANCE & INVT. LTD., IN FULL AND -: 14: - 14 FINAL SETTLEMENT OF THE DISPUTE. THE AUCTION SALE WAS CONFIRMED BY THE HON'BLE MR. JUSTICE KHANVILKAR ON 05.02.2004 WHEREIN ZOOM DEVELOPERS PVT. LTD. WAS DECLARED AS THE SUCCESSFUL AUCTION PURCHASER ON SALE CONSIDERATION AMOUNTING TO RS.3.5 CRORES WHICH WAS DEPOSITED WITH THE COMMISSIONER FOR TAKING ACCOUNTS, HIGH COURT, BOMBAY AND ON AN APPLICATION MADE BY ZOOM DEVELOPERS PVT. LTD. TO THE HON'BLE HIGH COURT FOR AN ORDER THAT THE CONVEYANCE SHOULD BE EXECUTED IN FAVOUR OF THE ASSESSEE COMPANY, MAGNIFICENT CONSTRUCTIONS PVT. LTD., THE HON'BLE HIGH COURT BY ITS ORDER DATED 24.03.2004 GRANTED THE SAID PRAYER. IN VIEW OF THESE FACTS, IT IS VERY CLEAR THAT THE ENTIRE PAYMENT OF RS. 3.5 CRORE WAS MADE TO THE COMMISSIONER FOR TAKING ACCOUNTS THROUGH PAY ORDERS AND DRAFTS PREPARED FROM THE BANK ACCOUNTS OF ZOOM DEVELOPERS PVT. LTD., ON BEHALF OF THE ASSESSEE. EVEN OTHERWISE ALSO IN SUCH AUCTION, WHICH IS EXECUTED BY THE HIGH -: 15: - 15 COURT, PAYMENTS THROUGH CASH COULD NOT BE ACCEPTED. THEREFORE, JUST BECAUSE THE DETAILS OF PAYMENTS WERE NOT MENTIONED IN THE CONVEYANCE DEED, THE AO'S CONCLUSION THAT PAYMENTS WERE MADE THROUGH CASH CANNOT BE SUSTAINED. THE ASSESSEE'S GROUND IS ALLOWED. THE ADDITION OF RS. 70,00,000/- (I.E. 20% OF RS.3.5 CRORE) MADE U/S.40A(3) STANDS DELETED. 7. COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE AND REVENUE IN ALL THE YEARS UNDER CONSIDERATION, T HEREFORE, ALL WERE HEARD TOGETHER AND ARE NOW DECIDED BY THIS CONSOLIDATED ORDER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEE WAS ENGAGED IN THE BU SINESS OF REAL ESTATE AND INFRASTRUCTURE DEVELOPMENT. THERE W AS SEARCH AT VARIOUS BUSINESS PREMISES OF THE ASSESSEE AND IT S GROUP U/S 153A ON 04.02.2009. DURING THE COURSE OF ASSESSMENT U/S 153A, THE ASSESSING OFFICER MADE ADDITION IN RESPEC T OF PAYMENTS MADE FOR PURCHASE OF LAND, WHICH WAS SHOWN AS -: 16: - 16 INVENTORY IN THE BALANCE SHEET. FOR INVOKING SECTIO N 40A(3), A SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE. CONTEN TION OF THE ASSESSEE WAS THAT, FIRSTLY, THESE PAYMENTS WERE MAD E BY CHEQUES BY ITS SISTER CONCERN M/S. ZOOM DEVELOPERS AND SECONDLY THE ASSESSEE HAS NOT DEBITED THESE EXPENDI TURE IN THE PROFIT AND LOSS ACCOUNT, THEREFORE, NO DISALLOWANCE U/S 40A(3) CAN BE MADE. DURING THE COURSE OF APPELLATE PROCEED INGS, THE LD. CIT(A) AFTER CALLING THE ASSESSING OFFICER PERU SED THE COPY OF ACCOUNT OF ASSESSEE COMPANY IN THE BOOKS OF ACCO UNT OF ZOOM DEVELOPERS, WHICH REFLECTS THE ENTIRE PAYMENT OF RS. 3.5 CRORES THROUGH THEIR ACCOUNTS MAINTAINED IN THE ALL AHABAD BANK, UNITED BANK OF INDIA AND PUNJAB NATIONAL BANK . AT PARA 4.3, THE LD. CIT(A) HAS CATEGORICALLY RECORDED A FINDING WITH RESPECT TO THE VARIOUS PAYMENTS MADE THROUGH D IFFERENT BANK ACCOUNTS. WE ALSO FOUND THAT PAYMENT WAS MADE TOWARDS THE COST OF LAND, WHICH WAS PURCHASED THROU GH AN OPEN AUCTION BY THE HIGH COURT OF BOMBAY AND THAT A MOUNTS WERE PAID BY M/S. ZOOM DEVELOPERS PRIVATE LIMITED O N BEHALF OF THE ASSESSEE. IN THE CONVEYANCE DEED ALSO, THERE IS A REFERENCE OF PAYMENT OF RS. 3.5 CRORES TO THE COMMI SSIONER FOR -: 17: - 17 TAKING ACCOUNTS, IN TERMS OF THE ORDER DATED 5.2.20 04 PASSED BY HON'BLE BOMBAY HIGH COURT. IN VIEW OF THE FINDIN G RECORDED BY THE LD.CIT(A) AT PARA 4.3 AS REPRODUCED HEREINAB OVE, WHICH HAS NOT BEEN CONTROVERTED BY THE LD. CIT DR BY BRIN GING ANY POSITIVE MATERIAL ON RECORD, WE DO NOT FIND ANY REA SON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING DISAL LOWANCE OF RS. 70 LAKHS ( 20% OF RS.3.50 CRORES) U/S 40A(3) OF THE INCOME-TAX ACT, 1961. 9. SIMILAR ADDITIONS HAVE BEEN DELETED BY THE LD.CIT(A ) IN THE ASSESSMENT YEAR 2008-09 AMOUNTING TO RS. 87,03, 841/- AND IN ASSESSMENT YEAR 2009-10 RS. 64,45,097/-. IN VIEW OF THE DETAILED FINDINGS RECORDED BY THE CIT(A) WHICH HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINGING ANY POS ITIVE MATERIAL ON RECORD, WE CONFIRM THE ACTION OF CIT(A) FOR DELETING THESE DISALLOWANCES MADE U/S 40A(3). 10. DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER ALSO FOUND LETTER OF M/S. PARKER & PARKER ASSOCIATE S DATED 1 ST JULY, 2006, ACCORDING TO WHICH THE ASSESSEE WAS REQ UIRED TO MAKE PAYMENT OF RS. 3 CRORES BY 3 RD JULY, 2006, BY DD FAVOURING M/S. PARKER AND PARKER. THE AO HAS MADE -: 18: - 18 ADDITION OF RS.57,11,000/-IN A.Y. 2006-07; RS. 96,04,690/- IN A.Y. 2007-08 AND RS. 7,94,830/- IN A.Y. 2008-09 ON ACCOUNT OF PAYMENTS MADE TO THE SAID CONCERN ON THIS ACCOUNT. THE AO HAS CONSIDERED SUCH PAYMENTS AS ILLEGAL ON THE BASIS OF A LETTER DATED 01.07.2006 OF PARKER & PARKER ASSOCIATES ADDRESSED TO MR. VIJAY CHOUDHARY ON THE SUBJECT 'PROFESSIONAL FE ES I SPEED MONEY'. THIS LETTER WAS FOUND AND SEIZED DURI NG THE SEARCH. THROUGH THIS LETTER, THE PARKER & PARKE R ASSOCIATES HAD ASKED FOR PAYMENT OF PROFESSIONAL FE E AMOUNTING TO RS.3 CRORE BY 03.07.2006 THROUGH DEMAND DRAFT. THE CONTENT OF THE LETTER HAS BEEN INTERPRETED BY THE AO AS ILLEGAL PAYMENT MADE THROUGH THEM FOR BRIBING THE .GOVERNMENT OFFICIALS IN ORDER TO PURSUE THEIR PROPOSAL FOR PERMISSION OF PURCHASE OF LANDS. THE AO HAS ALSO TAKEN COGNIZANCE OF THE STATEMENT OF SHRI S.K. TANWAR, ASTT. VICE PRESIDENT OF M/S. ZOOM DEVELOPERS PVT. LTD., WHEREIN HE HAD EXPLAINED THAT THE TERM 'SPEED MONEY' IS USED FOR T HE MONEY USED TOWARDS EXPENDITURE IN THE GOVERNMENT -: 19: - 19 OFFICES OR TO THE PEOPLE OF INFLUENCE TO EXPEDITE T HE WORK OR TO GET THE WORK DONE. THE SAID LETTER HAS B EEN SCANNED AND FINDS PLACE IN THE ASSESSMENT ORDER, HOWEVER, FOR A CLARITY OF THE DISCUSSION ON THIS IS SUE, THE CONTENT IS BEING REPRODUCED HEREUNDER :- PARKER & PARKER ASSOCIATES ADVOCATES & LEGAL CONSULTANTS PLEASE TAKE SERIOUS NOTE THAT THE MATTER FOR PERMISSION FOR THE PURCHASE OF LANDS WITHIN VINDHANE-MOTHI JUI VILLAGES OF URAN ( J.N.P.T) TALUKA IS AT FINAL STAGE. THE AUTHORITIES REQUESTED, ORDERS ORDERED TO SATISF Y THEM REGARDING CERTAIN LEGAL POINTS, WHICH IS TO BE DONE TODAY. WE ARE THEREFORE REQUESTING YOU TO ARRANGE A DEMAND DRAFT TO ON M/S. PARKAR & PARKAR'S NAME OF RS. THREE CRORES ONLY, AS PROFESSIONAL FEES, FOR PREPARATION, TO SATISFY THE AUTHORITIES HOW OUR -: 20: - 20 APPLICATION IS A GOOD APPLICATION AND THE PERMISSION OF THE SAY TO SATISFY THE AUTHORITIES HOW OUR APPLICATION IS A GOOD APPLICATION AND TO EXPEDITE THE MATTER. FOR THIS, THE PROFESSIONAL FEES TO BE DEPOSITED IN OUR ACCOUNT FOR FILING THE 'SAY'. THIS AMOUNT SHOULD BE MADE AVAILABLE ON MONDAY, 3RD JULY, 2006, BEFORE STARTING OF THE MONSOON SESSION OF MAHARASHTRA. THE RESPONSIBILITY OF THIS PROFESSIONAL FEES IS CERTAINLY OF M/S. PARKAR & PARKAR, AND IT WILL BE ADJUSTED AT THE FINAL STAGE OF THE TRANSACTION OF PURCHASE OF 3000 ACRES OF LAND, WITHIN URAN (JNPT) TAHSIL OF RAIGAD DISTRICT, OR FOR THE KHALAPUR (RAIGAD) PROJECT, AS PER THE MOU SIGNED ON 29TH DEC, 2005. ANY HARM DUE TO A ONE DAY DELAY, AND PAYMENTS THE RESPONSIBILITIES FOR THE SAME WILL BE YOURS/BORNE BY YOU. PLEASE TAKE CARE AND SEE THAT, PROFESSIONAL FEES -: 21: - 21 WILL BE DEPOSITED ON MONDAY 3RD JULY, 2006 BY DEMAND DRAFT ON M/S. PARKAR & PARKER'S NAME. THANKING YOU IN ANTICIPATION. SD/- (S.S. PARKAR) 1 ST JULY, 2006 11. BEFORE THE CIT(A), THE CONTENTION OF THE ASSESSEE WAS THAT THE ASSESSEE HAD ENTERED INTO MOU WITH PAR KER & PARKER ASSOCIATES IN WHICH THE SAID FIRM WAS APPOIN TED AS A FACILITATOR FOR PROCUREMENT OF LAND AT VARIOUS PLAC ES AS MENTIONED IN THE MOU; THAT AS PER THE UNDERSTANDING ENTERED WITH THEM THEY HAVE TO PROCURE THE LAND AND GIVE IT TO THE ASSESSEE AT A FIXED PRICE; THAT THE AGREEMEN TS WERE TO BE ENTERED DIRECTLY WITH THE FARMERS/LAND OWNERS IN WHICH THEY WERE ALSO TO BE NAMED AS CONFIRMING PARTY; THAT THE PAYMENTS TO FARMERS AND LAND OWNERS WERE TO BE MADE FROM THEIR ACCOUNT; THAT AS SUCH THE ASSESSEE WAS MAKING THE PAYMENT TO PARKER & PARKER AND IN TURN THEY WERE MAKING THE PAYMENTS TO THE FARMERS / LAND OWNERS; THAT NUMBER OF AGREEMENTS WERE ENTERED -: 22: - 22 BY THEM WITH THE FARMERS AND THE ASSESSEE COMPANY, HOWEVER NO FINAL CONVEYANCE DEED (SALE DEED) COULD, BE EXECUTED AND THEREFORE THE AMOUNTS PAID BY THE ASSESSEE COMPANY WERE SHOWN IN THE BALANCE SHEET AS ADVANCE. 12. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE ONLY TO THE EXTENT OF RS. 7 LAKHS IN T HE ASSESSMENT YEAR 2006-07, RS. 4 LAKHS IN THE ASSESSM ENT YEAR 2007-08 AND RS. 50,000/- IN THE ASSESSMENT YEAR 200 8-09 AFTER HAVING THE FOLLOWING OBSERVATIONS :- 4.3.2 IT IS NOTED FROM THE BALANCE SHEET FOR THE YEARS RELEVANT TO A.Y. 2006-07, 2007 -08 AND 2008-09 THAT PAYMENTS MADE BY THE ASSESSEE COMPANY TO PARKER & PARKER ASSOCIATES HAVE BEEN SHOWN IN THE BALANCE SHEET AS ADVANCE AGAINST JNPT LAND (PARKAR & PARKAR ASSOCIATES). THE BALANCE AS ON 31.03.2006 IS . RS. 57,11,000/-; THAT OF AS ON -: 23: - 23 31.03.2007 IS RS.1,53,15,690/- ( I.E. RS. 57,11,000 + 96,04,690) AND THAT OF AS ON 31.03.2008 IS RS.1,57,10,520/- (I.E. RS.57,11,000 + 96,04,690 + 3,94,830). THE DETAILS FURNISHED IN THIS REGARD REFLECTS THAT THE PAYMENTS TO M/S. PARKER & PARKER ASSOCIATES WERE MADE THROUGH BANK ACCOUNTS OF THE ASSESSEE COMPANY OR THE GROUP CONCERN ZOOM DEVELOPERS PVT. LTD. IT IS ALSO NOTED THAT IN RESPECT OF A.Y. 2008-09, THE PAYMENT OF RS.7,94,830/- HAS BEEN MADE THROUGH CHEQUE NO.314862 TO PARKAR & PARKAR ASSOCIATES TOWARDS PURCHASE OF STAMP DUTY AND REGISTRATION, WHEREAS THE BALANCE SHEET INCLUDES THE AMOUNT OF ADVANCE TO THE EXTENT OF RS.3,94,830/- ONLY. THE DIFFERENCE OF RS. 4 LAKHS MIGHT HAVE BEEN ADJUSTED IN THE ACCOUNTS ON ANY OTHER HEADS. SINCE, THE ISSUE IS NOT OF THE QUANTUM BUT RATHER THE ADMISSIBILITY OF THE -: 24: - 24 PAYMENTS MADE TO M/S . PARKAR & PARKAR ASSOCIATES, I HAVE NOT TRIED TO ASCERTAIN HOW THE DIFFERENCE OF RS.4 LAKHS HAS BEEN ACCOUNTED FOR. THE MATTER IS BEING LOOKED INTO AS TO WHETHER THE PAYMENTS MADE TO M/S. PARKAR & PARKAR ASSOCIATES WAS UTILISED FOR BRIBING THE GOVERNMENT OFFICIAL OR FOR THE PURPOSES OF FACILITATING THE LAND DEALS. THE CONTENTS IN THE LETTER DATED 01.07.2006 OF M/S. PARKAR & PARKAR ASSOCIATES, WHICH HAS BEEN REPRODUCED HEREINABOVE, HAS ALSO USED CERTAIN WORDS WHICH DO NOT RULE OUT THE POSSIBILITY OF UTILIZING A PART OF SUCH PAYMENTS MADE TO THE SAID FIRM AS SPEED MONEY IN THE MANNER AS STATED BY SHRI S.K. TANWAR, BUT UNDER NO STRETCH OF IMAGINATION THE ENTIRE PAYMENTS COULD BE TREATED AS ILLEGAL MONEY FOR PAYING BRIBES TO GOVERNMENT OFFICIALS FOR GETTING THEIR DUE PERMISSION FOR THE LAND DEALS. THE -: 25: - 25 DIS ALLOWANCE COULD BE MADE ONLY IN RESPECT OF THE AMOUNT UTILISED FOR ILLEGAL PAYMENTS, BUT IT IS VERY DIFFICULT TO ASCERTAIN THE QUANTUM OF SUCH PAYMENTS. IT IS NOTED THAT MR. S.K. TANWAR HAS SIGNED VARIOUS SALE DEEDS ON BEHALF OF THE ASSESSEE COMPANY TOO ON THE STRENGTH OF POWER OF ATTORNEY AND AS SUCH THE AO HAS RIGHTLY TAKEN INTO THE COGNIZANCE OF THE STATEMENT GIVEN BY MR. TANWAR, WHO HAPPENS TO BE EMPLOYEE OF OTHER GROUP CONCERN, IN THE CASE OF ASSESSEE COMPANY TOO. 4.3.3 DURING THE APPELLATE PROCEEDINGS BEFORE ME, THE ASSESSEE SUBMITTED THE COPY OF MOU DATED 29.12.2005 WITH M/S PARKAR & PARKAR ASSOCIATES IN SUPPORT OF THEIR CLAIM. THAT THE SAID CONCERN WAS APPOINTED AS A FACILITATOR FOR PROCUREMENT OF LAND AT VARIOUS PLACES AT FIXED RATES. AS PER THE MOU, THE SAID CONCERN WAS ALSO RESPONSIBLE TO GET THE CONVERSION OF -: 26: - 26 LAND-USE TO NON-AGRICULTURAL PURPOSE; TO OBTAIN THE NOC FROM CONCERNED COMPETENT AUTHORITIES AND TO FACILITATE THE ASSESSEE GROUP TO GET THE PARTICULAR DEVELOPMENT RIGHTS ON THE SAID SCHEDULED PROPERTIES INCLUDING CLEARANCE FROM URBAN LAND CEILING AUTHORITIES. THE ASSESSEE ALSO FILED A TWO PAGE DOCUMENTS, WHICH ARE SAID TO HAVE BEEN ISSUED DURING THE COURSE OF SEARCH OPERATION AND PLACED IN THE LOOSE PAPERS SEIZED AT S-8 ANNEXURE A-1 ON PAGE NOS. 74-80. THE SAID DOCUMENTS REFLECTS THE STATUS REPORT ON THE LAND ACQUISITION FOLLOWING THE MOU WITH M/S PARKER AND PARKER ASSOCIATES. THE STATUS REPORT HAS BEEN PREPARED BY MR. KISHORE A. SHIVKAR, AN EMPLOYEE OF ZOOM GROUP. ACCORDING TO THIS STATUS REPORT RS. 99.11 LAKHS WERE PAID TO M/S. PARKER & PARKER ASSOCIATES DURING 29.02.2005 TO 08.05.2006, WHEREAS THE EXPENSE STATEMENT GIVEN BY -: 27: - 27 PARKERS REFLECTED TOTAL EXPENDITURE OF RS. 101.68 LAKHS TILL THEN. THE BREAK UP OF THIS EXPENSE STATEMENT CLEARLY REFLECTS PAYMENT OF RS. 7 LAKHS AS SPEED MONEY FOR GETTING GOVERNMENT PERMISSION. THE FOLLOWING TWO TABLES REFLECTS THE DETAILS OF PAYMENTS TO M/S. PARKER & PARKER ASSOCIATES AS WELL AS THE EXPENSE STATEMENT GIVEN BY THEM AS PER THE SAID STATUS REPORT. TABLE-BREAK UP/DETAILS OF PAYMENTS TO M/S PARKER & PARKER ASSOCIATES DATE AMOUNT ( RS. IN LAKHS) 29.12.2005 0.11 25.01.2006 25.00 16.02.2006 10.00 11.03.2006 10.00 23.03.2006 7.00 28.03.2006 10.00 22.04.2006 15.00 08.05.2006 27.00 TOTAL 99.11 -: 28: - 28 TABLE-EXPENSE STATEMENT GIVEN BY PARKERS 1. PARTICULARS AMOUNT (RS. IN LAKHS) TOWARDS SATHEKHAT (DOUCMENTS SUBMITTED) 55.55 GIVEN TO FORMERS FOR 237 ACRES OF LAND INTERMEDIATE LOCAL AGENTS 5.56 SPEED MONEY FOR GOVERNMENT PERMISSION 7.00 LEGAL EXPENSES 8.00 OFFICE EXPENSES SUCH AS SALARY, CONVENIENCE, 25.57 RENT, TELEPHONE BILLS, OFFICE HARDWARE, DOCUMENTATION ETC. TOTAL 101.68 THE DETAILS/ BREAK UP GIVEN IN THE STATUS REPORT AS SHOWN IN ABOVE TABLES CONFIRMS THE PAYMENT OF RS. 57.11 LAKHS DURING THE FY 2005-06 (FROM 29.12.2005 TO 28.03.2006). IN THE NEXT FINANCIAL YEAR I.E., 2006-07 THE TOTAL PAYMENT OF RS. 96.04 LAKHS WERE MADE TO THEM BUT THE STATUS REPORT INCLUDES THE PAYMENT OF RS. 42 LAKHS ONLY WHICH WERE PAID TILL 08.05.2006. IT SHOWS THAT THIS STATUS REPORT WAS PREPARED DURING THE FY 2006-07 EITHER ON 08.05.2006 OR THEREAFTER BEFORE MAKING FURTHER PAYMENT OF THE BALANCE AMOUNT. THE EXPENSE STATEMENT TILL THAT TIME CLEARLY REFLECTS PAYMENT OF RS, 7 LAKHS AS SPEED MONEY FOR GETTING THE GOVERNMENT CLEARANCE. -: 29: - 29 THIS AMOUNT INDEED IS IN THE NATURE OF BRIBE AND WOULD AMOUNT AS ILLEGAL PAYMENT WHICH CERTAINLY CANNOT BE ALLOWED AS EXPENDITURE. IT IS NOTED THAT ENTIRE PAYMENT MADE TO M/S. PARKER & PARKER ASSOCIATES HAS BEEN SHOWN AS ADVANCES TOWARDS PURCHASE OF LAND WHICH WOULD BE ITS STOCK-IN-TRADE. ACCORDINGLY THE DISALLOWANCES IN AY 2006-07 IS TO BE RESTRICTED TO RS. 7 LAKHS ONLY (ILLEGAL PAYMENT) AS AGAINST THE ENTIRE AMOUNT OF RS.57.11 LAKHS PAID TO M/S. PARKER & PARKER ASSOCIATES. FURTHER DETAILS AS REGARDS TO THE ILLEGAL PAYMENTS AS SPEED MONEY OUT OF THE PAYMENTS MADE IN AY 2007-08 AND 2008-09 ARE NOT AVAILABLE. IN CIRCUMSTANCES PROPORTIONATE ( APPROX @ 7% I.E 7 OUT OF 99.11) DISALLOWANCES TO EXTENT OF RS. 4 LAKHS AND RS. 50,000/- ARE ESTIMATED IN RESPECT OF THE BALANCE PAYMENT OF RS. 54 LAKHS (96.04 - 42) AND 7.94 LAKHS IN AYS 2007-08 AND 2008- 09 RESPECTIVELY. TO SUMMARIZE, THE DISALLOWANCE TO EXTENT OF RS. 7 LAKH AS AGAINST RS 57.11 -: 30: - 30 LAKHS IN AY 2006-07; RS. 4 LAKH AS AGAINST RS. 96.04 LAKHS IN AY 2007-08 AND RS. 50,000/- AS AGAINST RS. 7.94 LAKHS ARE CONFIRMED. 4.3.4 A PLEA HAS BEEN TAKEN BY THE ASSESSEE THAT AMOUNTS PAID TO M/S. PARKAR & PARKER ASSOCIATES HAVE NOT BEEN CLAIMED AS A DEDUCTION IN THE P&L ACCOUNT AND THE DISALLOWANCE ON THIS ACCOUNT (I.E. AS ILLEGAL PAYMENT) CANNOT BE MADE IN ALL THESE YEARS [I.E. A.Y. 2006-07, 2007-08 AND 2008-09), MEANING THEREBY THAT THE DISALLOWANCE, IF ANY, ON THIS ACCOUNT CAN BE MADE ONLY IN THOSE YEARS (WHICH WOULD FALL THEREAFTER) WHEN EXPENSES ARE CLAIMED AS A DEDUCTION IN ITS P&L ACCOUNT BASED ON PROJECT COMPLETION METHOD. AS MENTIONED EARLIER, THE ASSESSEE COMPANY IS IN THE BUSINESS OF PROPERTY DEVELOPMENT. THE LAND PURCHASED BY IT IS ITS STOCK IN TRADE. DURING THE RELEVANT YEARS UNDER REFERENCE, THE ASSESSEE HAS PURCHASED HUGE LAND. THE DEVELOPMENT OF THE LAND ,HOWEVER, WAS NOT DONE AND CONSEQUENTLY NO SALES WERE MADE. -: 31: - 31 IT IS NOTED THAT THE DISALLOWANCE IS U/S.37(1) READ WITH EXPLANATION THEREUNDER WHICH PROVIDES THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. IN THE 'PROFIT & LOSS- ACCOUNTS OF ALL- THESE -YEARS, NO - INCOME HAS BEEN CREDITED BUT EXPENDITURE ON ACCOUNT OF AUDIT FEE, CONVEYANCE, LEGAL AND PROFESSIONAL FEES, RATES & TAXES, PRINTING & STATIONERY, OFFICE EXPENSES, REPAIRS & MAINTENANCE ETC., HAVE BEEN DEBITED BASED ON WHICH IT HAS SHOWN LOSSES IN ALL THESE YEARS. THE PAYMENTS MADE TO M/S. PARKAR & PARKAR ASSOCIATES HAVE BEEN REFLECTED IN THE BALANCE SHEET AS ADVANCE FOR JNPT LAND'. AS DISCUSSED HEREINABOVE, AS PER THE SAID LETTER DATED 01.07.2006 OF M/S.. PARKAR & PARKAR ASSOCIATES, SUCH PAYMENTS ARE INTENDED TO BE ADJUSTED -: 32: - 32 AGAINST THE COST OF LAND AFTER PURCHASES ARE MADE. IN A WAY, ASSESSEE INTENDS TO CLAIM SUCH PAYMENTS AS EXPENDITURE TOWARDS THE COST OF LAND WHICH IS ITS STOCK-IN-TRADE. IN THE CONTEXT, I AM OF THE VIEW THAT SUCH EXPENDITURE I PAYMENTS SHOULD HAVE BEEN DEBITED IN THE P&L ACCOUNT AND THE CORRESPONDING CLOSING BALANCES (WORK-IN- PROGRESS) SHOULD BE CREDITED IN THE P&L ACCOUNT AND THEREAFTER REFLECTED IN .THE BALANCE SHEET. MERELY BECAUSE THE DUE PRESENTATION HAS NOT BEEN MADE BY THE ASSESSEE IN ITS P&L ACCOUNT IN THE MANNER AS MENTIONED ABOVE, ITS PLEA THAT EXPENDITURE IN RESPECT OF PAYMENT TO M/S. PARAKAR & PARKAR WAS NOT DEBITED IN THE P&L ACCOUNT CANNOT BE ACCEPTED. RATHER, THE PLEA SO MADE BY THE ASSESSEE IS MISPLACED. FOR THE PURPOSES OF THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE, THE EXPENSES SO MADE TOWARDS ILLEGAL PAYMENT THROUGH M/S. PARAKAR & PARKAR ASSOCIATES HAS TO BE TREATED AS DEBITED IN THE P&L ACCOUNT OF THE RESPECTIVE ASSESSMENT YEARS -: 33: - 33 ITSELF. (I.E. A.YS.2006-07, 2007-08 AND 2008-09) AND ACCORDINGLY, THE DISALLOWANCE HAS TO BE MADE IN THESE YEARS ITSELF. IN VIEW THEREOF, THE ASSESSING OFFICERS DECISION FOR ADDITION OF THE AMOUNTS PAID TO M/S. PARKER & PARKER ASSOCIATES IN THE RESPECTIVE YEARS IN WHICH SUCH PAYMENTS WERE MADE TO THE EXTENT OF RS. 7 LAKHS IN ASSESSMENT YEAR 2006-07, RS. 4 LAKHS IN ASSESSMENT YEAR 2007-08 AND RS. 50,000/- IN ASSESSMENT YEAR 2008-09 IS UPHELD. ACCORDINGLY, ADDITION TO THE EXTENT OF RS. 7 LAKHS AS AGAINST THE DISALLOWANCE OF RS. 57.11 LAKHS MADE IN THE TOTAL INCOME OF THE YEAR UNDER CONSIDERATION ( I.E. ASSESSMENT YEAR 2006-07) STANDS CONFIRMED. THE ASSESSEE WILL GET RELIEF OF RS. 50.11 LAKHS. 13. IT IS CLEAR FROM THE DETAILED FINDINGS RECORDED BY THE LD.CIT(A) THAT OUT OF THE TOTAL PAYMENT ONLY A SUM OF RS. 7 LAKHS HAS BEEN PAID AS SPEED MONEY RELEVANT TO ASSE SSMENT YEAR 2006-07, RS. 4 LAKHS IN ASSESSMENT YEAR 2007-0 8 AND RS. 50,000/- IN THE ASSESSMENT YEAR 2008-09, HE UPHELD THE -: 34: - 34 ADDITION TO THIS EXTENT BY OBSERVING THAT MERELY BE CAUSE THE ASSESSEE HAS NOT DEBITED THIS EXPENDITURE IN THE PR OFIT AND LOSS ACCOUNT, NO DISALLOWANCE SHOULD BE MADE. WE FO UND THAT AFTER APPRECIATING ENTIRE FACT, THE CIT(A) FOUND TH AT THE PAYMENTS TO PARKER & PARKER WAS MADE FOR ACQUISITIO N OF LAND AND THE ASSESSEE HAS NOT CLAIMED SUCH PAYMENT AS A DEDUCTION IN THE PROFIT AND LOSS ACCOUNT, THEREFORE , HE CONFIRMED THE DISALLOWANCE ONLY TO THE EXTENT MENTI ONED HEREINABOVE. AS PER OUR CONSIDERED VIEW, THE AMOUNT OF DISALLOWANCE SO ASCERTAINED BY THE LD.CIT(A) IS PER FECTLY JUSTIFIED, HOWEVER, SUCH DISALLOWANCE SHOULD BE MAD E ONLY IN THE YEAR IN WHICH ASSESSEE CLAIMED SUCH PAYMENT AS EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT AND NOT IN THE YEARS UNDER CONSIDERATION, WHEREIN UNDISPUTEDLY NO CLAIM OF ANY OF SUCH EXPENDITURE IS MADE BY THE ASSESSEE AS PER THE AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET PLACED BE FORE THE LOWER AUTHORITIES, WHICH ALSO FIND PLACED IN THE PA PER BOOK. WE DIRECT ACCORDINGLY. 14. IN VIEW OF THE ABOVE DISCUSSION, WE MODIFY THE ORDE R OF THE CIT(A) FOR DISALLOWANCE ON ACCOUNT OF PAYMENT M ADE TO -: 35: - 35 M/S. PARKER & PARKER, WHICH WAS FOUND TO BE SPEED M ONEY. WE DIRECT ACCORDINGLY. I.T(SS).A. NO. 82, 86 TO 88/IND/2011 : 15. IN TERMS OF OUR DISCUSSION HEREINABOVE IN CASE OF MAGNIFICENT CONSTRUCTION PRIVATE LIMITED, THE ADDIT ION WAS MADE BY THE ASSESSING OFFICER IN CASE OF ZOOM REALI TY IN THE ASSESSMENT YEAR 2006-07 TO 2008-09 IN RESPECT OF CA SH PAYMENT MADE FOR PURCHASE OF AGRICULTURAL LAND. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITI ON AFTER HAVING FOLLOWING OBSERVATIONS : THE CIT(A) HAS CO NFIRMED THE DISALLOWANCE BY OBSERVING THAT WHERE THE LAND SO PURCHASED WAS AS STOCK IN TRADE AND MERELY BECAUSE THE ASSESSEE HAS NOT ACCOUNTED FOR SUCH EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT AND CORRESPONDING CLOSING BALANCE, WORK IN PROGRESS, HAS NOT BEEN CREDITED THE PROFIT AND LOSS ACCOUNT, DUE TO WRONG PRESENTATI ON IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE CANNOT COME OUT OF THE PURVIEW OF SECTION 40A(3). 16. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FIND FROM RECORD PAYMENT SO MADE WAS NOT CLAIMED AS EXPE NDITURE -: 36: - 36 IN THE PROFIT AND LOSS ACCOUNT AND, THEREFORE, PROV ISIONS OF SECTION 40A(3) IS NOT ATTRACTED. THE ASSESSEE HAS A LSO GIVEN UNDERTAKING TO OFFER THE DISALLOWANCE U/S 40A(3), W HILE CLAIMING SUCH BUSINESS EXPENDITURE IN THE FUTURE. I N VIEW OF THESE UNDERTAKING OF THE ASSESSEE AND KEEPING IN VI EW, THE PROVISIONS OF SECTION 40A(3) AS DISCUSSED HEREINABO VE, WE DO NOT FIND ANY JUSTIFICATION FOR THE DISALLOWANCE MAD E DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE MODIFY TH E ORDER OF BOTH LOWER AUTHORITIES AND DIRECT THE DEPARTMENT TO MAKE DISALLOWANCE BY ATTRACTING PROVISIONS OF SECTION 40 A(3) ONLY IN THE YEARS IN WHICH ASSESSEE CLAIMS SUCH PAYMENT AS EXPENDITURE FOR ARRIVING AT ITS BUSINESS PROFITS. W E DIRECT ACCORDINGLY. 17. IN THE ASSESSMENT YEAR 2007-08, THE REVENUE IS IN APPEAL FOR DELETING ADDITION OF RS. 1,37,98,459/- R EPRESENTING UNDISCLOSED INVESTMENT IN LAND, PARTICULARLY WHEN B OOKS OF ACCOUNT AND BANK ACCOUNT AND RELEVANT CRUCIAL DETAI LS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. 18. IN THIS REGARD, WE FOUND THAT THE ASSESSING OFFICER HAS MADE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIO NS :- -: 37: - 37 DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FILE EXPLANATION OF THE ABOVE DOCUMENT THE ASSESSEE HAS STATED THAT ALL THE PAYMENTS ARE THROUGH BANKING CHANNELS. HOWEVER, THE ASSESSEE NEVER PRODUCED THE BOOKS OF ACCOUNTS. THE SEIZED HARD DISK COULD NOT BE OPENED FOR WANT OF PASSWORD. BANK STATEMENTS WERE NOT FILED. THE ASSESSEE IN ITS REPLY DATED 22.12.2010 IN POINT NO. 2 STATED THAT BANK STATEMENTS FOR A Y 2003-04 TO A.Y. 2006-07 ARE NOT AVAILABLE AND THAT THERE NOT MUCH TRANSACTIONS DURING THE RELEVANT PERIOD. INSPITE OF REPEATED REQUEST HARD COPIES OF BOOKS OF ACCOUNTS WERE NEVER PRODUCED AND THE SOFT COPIES WERE PROVIDED AS LATE AS ON 24.12.2010, WHICH ALSO COULD NOT BE OPENED FOR THE REASONS BEST KNOWN TO THE ASSESSEE. IT SEEMS THAT SUBMISSION OF DETAILS AND EXPLANATIONS HAVE BEEN DELAYED WITH THE SOLE INTENTION OF AVOIDING PROPER INVESTIGATION AND INQUIRIES INTO THE MATTER. CONSIDERING THESE FACTS, -: 38: - 38 THE TRANSACTIONS OF THE ASSESSEE COULD NOT BE VERIFIED. THE EXPLANATION FILED IN THIS REGARD IS A LSO NOT SATISFACTORY. OBVIOUSLY THE AMOUNT HAS BEEN PAID FROM THE SOURCES WHICH IS NOT BEEN DISCLOSED TO THE DEPARTMENT ACCORDINGLY THE AMOUNT WHICH HAS BEEN MENTIONED AT PAGE 38 AND BACK SIDE OF 39 AMOUNTING TO RS. 1,37,98,459/- IS TREATED AS INVESTMENT FROM UNDISCLOSED SOURCES AND ADDED AS PER THE PROVISIONS OF SECTION 69 OF THE INCOME TAX ACT. 19. IT IS CRYSTAL CLEAR FROM THE OBSERVATIONS MADE BY T HE ASSESSING OFFICER THAT ADDITION HAS BEEN MADE BY TH E ASSESSING OFFICER U/S 69 ON ACCOUNT OF INVESTMENT M ADE FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER HAS OBSE RVED THAT AMOUNT HAS BEEN PAID BY THE ASSESSEE FROM THE SOURC E, WHICH HAS NOT BEEN DISCLOSED TO THE DEPARTMENT, ACCORDING LY, THE AMOUNT WHICH HAS BEEN MENTIONED AT PAGE 38 & 39 OF THE ASSESSING OFFICERS ORDER AMOUNTING TO RS. 1,37,98, 459/- WAS ADDED U/S 69 OF THE INCOME-TAX ACT, 1961. THE CIT(A ) HAS -: 39: - 39 DELETED THE ADDITION SO MADE BY OBSERVING THAT ADDI TIONS HAVE ALREADY BEEN CONFIRMED WHILE UPHOLDING THE ACTION O F ASSESSING OFFICER FOR DISALLOWANCE UNDER SECTION 40 A(3). HOWEVER, THE CIT(A) HAS ALSO OBSERVED THAT DURING T HE APPELLATE PROCEEDINGS, THE RELEVANT SALE DEED HAVE BEEN FILED BY THE ASSESSEE AND ON TEST CHECK BASIS, THE CIT(A) FOUND THAT CHEQUES MENTIONED IN THE SEIZED DOCUMENTS WERE ISSU ED FOR PURCHASE OF LAND, WHICH ALREADY FIGURED IN THE BALA NCE SHEET OF THE ASSESSEE COMPANY. IT MEANS CIT(A) HAS RELIED ON SOME ADDITIONAL DOCUMENTS, WHICH WERE NOT PRODUCED BEFOR E THE ASSESSING OFFICER WHILE ARRIVING AT CONCLUSION FOR MAKING ADDITION OF RS. 1,37,98,459/- U/S 69 OF THE INCOME- TAX ACT, 1961. 20. IN VIEW OF THE ABOVE OBSERVATION, IT IS CLEAR THAT THE LD. CIT(A) AHS NOT DELETED THE ADDITION BY CONTROVERTIN G THE FINDING RECORDED BY THE ASSESSING OFFICER WITH RESPECT TO T HE APPLICABILITY OF PROVISIONS OF SECTION 69 UNDER WHI CH INVESTMENT FROM UNDISCLOSED SOURCES IS ADDED. THE C IT(A) HAS SIMPLY DELETED THE ADDITION BY RELYING ON THE ADDIT ION CONFIRMED BY HIM U/S 40A(3). WE SET-ASIDE THE ORDER OF CIT(A) -: 40: - 40 ON THIS GROUND AND IN THE INTEREST OF JUSTICE, MATT ER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECID ING AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 21. IN THE RESULT, THE APPEALS OF THE ASSESSEE AND REVE NUE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. I.T(SS).A.NOS. 89 TO 94/IND/2011 : 22. IN THESE APPEALS, THE ASSESSEES ARE AGGRIEVED FOR ADDITION MADE BY INVOKING PROVISIONS OF SECTION 2(2 2)(E) BEING ADVANCE RECEIVED AGAINST SALE OF PROPERTY. 23. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ADDITIO N AFTER HAVING FOLLOWING OBSERVATIONS :- THE ADDITION WAS MADE BY THE ASSESSING OFFICER I N RESPECT OF LOAN/ADVANCES RECEIVED FROM CHOUDHARY INNOVATIVE BUSINESS PVT.LTD. THE TABLE BELOW REFLE CTS THE ASSESSMENT YEAR-WISE ADDITION ON ACCOUNT OF DEEMED DIVIDEND IN THE HANDS OF SHRI VIJAY CHOUDHARY AND SMT. MANJIRI CHOUDHARY. S.NO. APPEAL NO. NAME A.Y. AMOUNT OF ADDITION U/S 2(22)(E) 1. IT-435/10-11 SHRI VIJAY CHOUDHARY 2005-06 682,75 1 -: 41: - 41 2. IT-430/10-11 SMT.MANJIRI CHOUDHARY 2006-07 174, 000 3 IT-436/10-11 SHRI VIJAY CHOUDHARY 2007-08 545,72 7 4. IT-437/10-11 SHRI VIJAY CHOUDHARY 2008-09 35,95 5 4.3.1 SHRI VIJAY CHOUDHARY AND SMT. MANJIRI CHOUDHARY ARE THE SHAREHOLDERS OF CHOUDHARY INNOVATIVE BUSINESS PVT.LTD.( FORMERLY KNOWN AS CHOUDHARY TRADING FINANCE PVT.LTD.) EACH HOLDING MORE THAN 10 % OF THE VOTING POWER. THE TABLE BELOW REFLECTS THE AMOUNT OF LOAN/ADVANCE TAKEN BY THEM FROM THE SAID COMPANY DURING ASSESSMENT YEARS 2005-06 TO 2008-09 TOGETHER WITH THE AVAILABLE RESERVE AND SURPLUS OF THE SAID COMPANY. S.NO. A.Y. NAME AMOUNT OF LOAN AVAILABLE RESERVE & SURPLUS OF THE COMPANY 1. 2005-06 SHRI VIJAY CHOUDHARY 3,500,000 682,751 SMT.MANJIRI CHOUDHARY 3,532,994 2. 2006-07 SMT. MANJIRI CHOUDHARY 174,000 1,213,977 3. 2007-08 SHRI VIJAY CHOUDHARY 600,000 14,025,478 4. 2008-09 SHRI VIJAY CHOUDHARY 35,955 1,608,170 -: 42: - 42 4.3.2 BEFORE THE A..0 IT WAS CONTENDED THAT THE AMOUNT SO RECEIVED BY SHRI VIJAY CHOUDHARY AND SMT MANJIRI CHOUDHARY FROM THE SAID COMPANY WAS ADVANCED AGAINST SALE OF THEIR PROPERTY TO THE COMPANY AND THEREFORE THE SAME CANNOT BE REGARDED AS DEEMED DIVIDEND U/S. 2(22)(E). AS PER THEIR SUBMISSION BEFORE AO, COPY OF THE AGREEMENT WAS ENCLOSED WITH THEIR REPLY, HOWEVER, THE AO HAD CATEGORICALLY NOTED THAT NO SUCH AGREEMENT WAS ACTUALLY ENCLOSED AND SUBMITTED BEFORE HIM. AO HAS ALSO NOTED THAT IN A.Y.2005-06, SHRI VIJAY CHOUDHARY HAD RECEIVED ADVANCES PRIOR TO SMT MANJIRI CHOUDHARY AND THEREFORE HE LIMITED THE AMOUNT OF ADDITION U/S. 2(22)(E) TO THE AVAILABLE RESERVE AND SURPLUS OF THE COMPANY AMOUNTING RS.6,82,751/- IN THE HANDS OF SHRI VIJAY CHOUDHARY. IN VIEW THEREOF, NO ADDITION WAS MADE IN THE HANDS -: 43: - 43 OF SMT MANJIRI CHOUDHARY (IN A.Y. 2005- 06). IN A.Y. 2006-07, 2007-08 AND 2008-09 ALSO THE ADDITION WAS MADE ON THE BASIS OF THE UNUTILISED BALANCE OF RESERVE & SURPLUS OF THE COMPANY. AS SUCH, THERE IS NO DISPUTE ON THE QUANTUM OF ADDITION. THE ONLY ISSUE IS WHETHER THE AMOUNT RECEIVED BY SHRI VIJAY CHOUDHARY AND SMT MANJIRI CHOUDHARY FROM THE SAID COMPANY ARE HIT BY THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. THE ISSUE IS CONSIDERED. THE ASSESSEE HAS FURNISHED TWO COPIES OF AGREEMENTS. ONE AGREEMENT IS BETWEEN SHRI VIJAY CHOUDHARY (HUF) THROUGH ITS KARTA SHRI VIJAY CHOUDHARY AND CHAUDHARY TRADING & FINANCE PVT. LTD (THE OLD NAME OF CHOUDHARY INNOVATIVE BUSINESS PVT.LTD.) AND THE OTHER IS BETWEEN SMT. MANJIRI CHOUDHARY AND CHOUDHARY TRADING & FINANCE PVT.LTD. BOTH THE AGREEMENTS ARE -: 44: - 44 DATED 23.08.2004 AND PURPORTS TO SELL THE SHARE OF THEIR RESPECTIVE PROPERTIES COMPRISING OF UPPER GROUND FLOOR AND FIRST FLOOR SITUATED AT ROAD NO.2, MALHARGANJ, INDORE. THE TOTAL COST OF THE PROPERTIES, AS PER THE AGREEMENTS WAS RS.81,92,500/- AND RS. 76,57,500/- RESPECTIVELY. AS AGAINST THAT RS. 16,25,000/- WAS TO BE PAID TO BOTH OF THEM ON THE DAY OF AGREEMENT AND RS.18,75,000/- ON 31.03.2005. THE BALANCE AMOUNTS OF RS.46,92,500/- AND RS. 41,57,500/- WAS TO BE PAID AT THE TIME OF CONVEYANCE DEED AND HANDING OVER THE POSSESSION OF THE CONSTRUCTED AREA. IN THIS CONTEXT, I HAVE LOOKED INTO THE BALANCE SHEET OF CHOUDHARY INNOVATIVE BUSINESS PVT. LTD. AND FIND THAT THE SAID COMPANY HAS SHOWN THE AMOUNTS GIVEN TO SHRI VIJAY CHOUDHARY AND SMT MANJIRI CHOUDHARY AS PURE ADVANCES DURING ALL THESE YEARS. IT IS -: 45: - 45 NOTED THAT THE SAID COMPANY HAS REFLECTED ADVANCE AGAINST LAND AND PROPERTIES SEPARATELY AND THE AMOUNT PAID TO SHRI VIJAY CHOUDHARY AND SMT MANJIRI CHOUDHARY HAD NOT BEEN INCLUDED THEREIN. RATHER, THE AMOUNT PAID TO BOTH OF THEM HAD BEEN SHOWN UNDER THE HEAD 'OTHER ADVANCES'. THIS FACT WAS POINTED OUT TO THE ASSESSEE'S REPRESENTATIVE DURING THE APPEAL PROCEEDINGS. TO THIS, REPLY DATED 20.07.2011 HAS BEEN FILED AND PLACED ON RECORD. IN THE SAID REPLY, IT HAS ACCEPTED CATEGORICALLY THAT THE COMPANY HAS SHOWN THE ADVANCES PAID UNDER THE HEAD 'OTHER ADVANCES' INSTEAD OF 'ADVANCE AGAINST PROPERTIES' AND TERMED SUCH TREATMENT MERELY A GROUPING ERROR. IT IS NOTED THAT THE PROPERTY UNDER REFERENCE HAVE STILL NOT BEEN HANDED OVER TO A COMPANY. THE REASONS TO THAT IS ATTRIBUTED TO BE NON-PAYMENT OF -: 46: - 46 ENTIRE CONSIDERATION TILL DATE. IN MY CONSIDERED VIEW SUCH EXPLANATIONS 'ARE NOT AT ALL ACCEPTABLE. AFTER ALL THE CASES OF COMPANY ARE AUDITED REGULARLY AND THEREFORE, IT IS PRESUMED THAT THE PRESENTATION MADE THEREIN REFLECTS THE CORRECT NATURE OF TRANSACTIONS AND AS SUCH IT IS HELD THAT THE NATURE OF PAYMENTS RECEIVED BY SHRI VIJAY CHOUDHARY AND SMT MANJIRI CHOUDHARY HAVE BEEN THAT OF LOAN AND PURE ADVANCES AND NOT THE ADVANCE AGAINST THE SALE OF THEIR PROPERTY. THE AGREEMENTS APPEARS TO HAVE BEEN PREPARED AS AN AFTER-THOUGHT TO SAVE THEM FROM THE STRINGENT MEASURES OF THE PROVISIONS OF SECTION 2(22)(E). HAVING CONSIDERED THE FACTS OF THE CASE THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS UPHELD. ACCORDINGLY, ADDITION OF RS.6,82,751/- IS CONFIRMED. -: 47: - 47 24. IT IS CLEAR FROM THE ORDER OF THE LD. CIT(A) THAT H E HAD CONFIRMED THE ADDITION BY OBSERVING THAT IN THE RES PECTIVE BALANCE SHEET OF THE COMPANY AMOUNT HAS NOT BEEN SH OWN SEPARATELY AS ADVANCE AGAINST THE LAND AND PROPERTI ES AND THE SAME HAVE BEEN SHOWN UNDER THE HEAD OTHER ADVANCES . 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT GENUINENESS OF THE AGREEMENT SO E NTERED BY THE ASSESSEE WITH THE RESPECTIVE COMPANY WAS FOUND TO BE AFTER THOUGHT. AS PER AGREEMENT, THE ASSESSEE WAS T O RECEIVE THE BALANCE AMOUNT AT THE TIME OF HANDING OVER THE POSSESSION OF THE CONSTRUCTED AREA, HOWEVER, TILL DATE NEITHER POSSESSION HAS BEEN HANDED OVER NOR BALANCE PAYMENT WAS RECEIV ED BY THE ASSESSEE. THUS, EVEN IF THE AGREEMENTS ARE FOUN D TO BE GENUINE, THE SAME HAVE NOT BEEN ACTED UPON. THE DET AILED FINDINGS RECORDED BY THE LD.CIT(A) TO THE EFFECT TH AT EVEN IN THE AUDITED BALANCE SHEET, THE ASSESSEE HAD NOT SHOWN T HE PAYMENTS AS ADVANCE AGAINST LAND AND PROPERTY, BUT WAS SIMPLY SHOWN AS OTHER ADVANCES. THE DETAILED FINDIN G RECORDED BY THE LD.CIT(A) HAS NOT BEEN CONTROVERTED BY BRINI NG ANY -: 48: - 48 POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE CONFIR M THE FINDINGS AND THE ADDITIONS SO MADE U/S 2(22)(E) OF THE ACT. 26. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISMISSE D. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :7 TH JUNE, 2012. CPU* 4.7.6