Income Tax Appellate Tribunal - Delhi
Ramprastha Greens (P) Ltd., New Delhi vs Department Of Income Tax on 16 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 3238/Del/2013
AY: 2010-11
DCIT, vs M/s Ramprastha Builders Pvt. Ltd.,
Central Circle-14, B-23-25, Kailash Colony,
New Delhi. New Delhi.
(PAN: AADCR3877N)
ITA No. 3239/Del/2013
AY: 2010-11
DCIT, vs Ramprastha Greens (P) Ltd.,
Central Circle-14, C-10, C-Block Market,
New Delhi. Vasant Vihar, New Delhi.
(PAN: AADCR3868F)
ITA No. 3240/Del/2013 & 3241/Del/2013
AY: 2010-11, 2009-10
DCIT, vs M/s Ramprastha Promoters & Developers Pvt. Ltd.,
Central Circle-14, C-10, C-Block Market,
New Delhi. Vasant Vihar, New Delhi.
(PAN: AADCR6481J)
(Appellant) (Respondent)
Appellant by : Smt. Nandita Kanchan, CIT (DR)
Respondent by : S/ Shri Ved Jain, Rajesh Jain, CAs
ORDER
PER BENCH All these four appeals are preferred by the Department. All the appeals pertain to Ramprastha Group of Companies.
2. In I.T.A. No. 3238 the assessee is Ramprastha Builders (Pvt.) Ltd. and it pertains to Assessment Year 2010-11.It has been filed against the order dated 20.02.2013 passed by the Ld. CIT(A)-XXXIII, I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 New Delhi. The main issue in dispute is deletion of the addition of Rs.12 crores by the Ld. CIT (A) based on alleged retraction of surrender statement by the Chairman of the Group.
3. I.T.A. No. 3239 also pertains to Assessment Year 2010-11 and relates to another assessee Ramprastha Greens (P) Ltd. in the same group. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal, the Department has challenged the deletion of addition of Rs. 2 crores, again on the basis of alleged retraction of statement.
4. I.T.A. No. 3240 pertains to yet another assessee Ramprastha Promoters & Developers Pvt. Ltd. in the Ramprastha group of companies. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal for Assessment Year 2010-11, the Department is agitating the deletion of Rs.14 crores based on alleged retraction of statement by the Chairman of the Group. Another dispute in this appeal is regarding the deletion of addition of Rs. 7,31,89,263/- on account of pro rate notional interest on interest free advances given to associated concerns.
5. I.T.A. 3241 pertains to Assessment Year 2009-10 and the 2 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessee is Ramprastha Promoters & Developers Pvt. Ltd. This appeal has been preferred against the order dated 20.2.2013 passed by the Ld. CIT(A)-XXXIII, New Delhi. The issues in dispute in this appeal are deletion of addition of Rs. 55 crores (added u/s 40A (3) of the Income Tax Act, 1961 and deletion of Rs. 5,10,38764/- being notional interest on interest free advances given to associated concerns.
6. As the issues involved in all the four appeals are common and related, all the appeals are being disposed of by this common order. 6.1 The facts, in brief, common to all appeals are that search/survey operation was conducted by the department at the business premises of Ramprastha Group companies as well as on the residential premises of the directors of Group Companies. At the time of search Sh. Balwant Singh, Chairman of Ramprastha Group of Companies, surrendered an amount of Rs. 52 crores u/s 132(4) of the Income Tax Act, 1961 (hereinafter called 'The Act') for different companies in the Ramprastha Group. During the course of search, various documents were found and seized from Plot No. 114, Sector-44, Gurgaon which is the office premises of the group. The statement of Shri Balwant Singh, Chairman of Ramprastha group of companies was recorded u/s 132 of the Act on 31.7.2009 and 3 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 various documents, inter-alia, contained in Annexures A-2 to A-27 were confronted to him. The relevant questions and answers in his statement recorded u/s 132(4) of the Act on 31.7.2009 are reproduced as under:
- "Q1 I am showing you annexure A-2 to A-27 found and seized during the course of search at premises 114, Sector 44, Gurgaon today i.e. 31.7.2009. Please explain the contents of these pages.
Ans: These pages and annexure relate to financials of various group companies of Ramprastha group. The pen drive and the hard disks mentioned as annexure contain details of the business of Ramprastha group. The detailed explanation of these annexure of loose pages/hard disks/pen drive would be submitted by me later. Most of the transactions mentioned in these annexure are reflected in the books of accounts of various companies of Ramprastha group. However, after prima facie going through these documents, I admit that some of the transactions are not reflected and recorded in the books of accounts of various companies of Ramprastha group. On account of non- recording/non-reflection of these transactions, I hereby voluntarily admit following additional income for taxation:4
I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 Sl.No. Name of the concern Asstt.Year Amount (in Rs.) Head 3,60,87,765 Disallowance u/s
1. Corporate Exim Pvt. Ltd. 2007%08 40A(3)(1) (as per page 1 & 2 of the statement)
2. Excellent Advertising & 2007%08 4,71,56,625 %do% Marketing (P) Ltd.
(%do%)
3. Ramprastha Builder (P) Ltd. 2007%08 2,00,320 %do% %do% 2,00,000
4. Kamla Vallabh Developers (P) 2007%08 %do% Ltd.
%do%
5. Corporate Exim Pvt. Ltd. 2008%09 1,74,90,400 %do% As per page 2 & 3 of the statement
6. Ramprastha SARE Land 2008%09 27,94,000 %do% Holding Co. Pvt. Ltd.
%do%
7. Ramprastha Greens Pvt. Ltd. 2008%09 2,76,000 %do% %do%
8. SA Propcon Pvt. Ltd. 2008%09 15,000 %do% %do%
9. Ramprastha Builders Pvt. Ltd. 2009%10 4,00,00,000 Unexplained investment in 5 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 stock i.e. work in progress
10. Mahamaya General Finance Co. 2009%10 1,00,00,000 Unaccounted Pvt. Ltd. receipts
11. Ramprastha Builders Pvt. Ltd. 2010%11 12,00,00,000 Unexplained investment in stock i.e. work in progress
12. Ramprastha Greens Pvt. Ltd. 2010%11 2,00,00,000 Unexplained investment in stock i.e. work in progress
13. Ramprastha Promoters & 2010%11 14,00,00,000 Unexplained Developers Pvt. Ltd. investment in stock i.e. work in progress
14. Ch. Balwant Singh Yadav 2010%11 1,20,00,00 Unaccounted trade advance to Jagbir son of Harsingh, Garauli Kalan, Distt. Gurgaon
15. Ch. Balwant Singh Yadav 2010%11 1,00,00,000 Unaccoutned trade advance to Abhay son of Arjun, Mevk Distt. Gurgaon
16. Sandeep Yadav 2010%11 1,00,00,000 Unaccounted trade advance to Ravinder son of 6 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 Hukamchand resident of Kedipur Gurgaon.
17. Sandeep Yadav 2010%11 60,00,000 Unaccounted trade advance to Narendra son of Bihari Lal Mewke, Gurgaon
18. Arvind Walia 2010%11 90,00,000 Unaccounted trade advance to Lal Chand son of Rai Singh, Wazirpur, Gurgaon
19. Arvind Walia 2010%11 80,00,000 Unaccounted trade advance to Satvir son of Ram Kumar Harsaroop, Gurgaon.
20. Other discrepancies to be 2010%11 3,08,00,000 %%%%% accounted for in the hands of various persons of the assessee group Total admitted additional income Rs. 52,00,00,000/- only * Q. No. 2 Please state how will you pay tax on this voluntarily admitted additional income of Rs. 52,00,00,000/- in the hands of persons mentioned above 7 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 by you?
Ans.2 The taxes on this admitted additional income of Rs.52,00,00,000/-admitted by me on behalf of various persons mentioned above would be paid out of sale proceeds of our various business projects. I assure you that the taxes would be paid as due, as far as possible, on this income."
6.2 Again, during the course of post search enquiries, the ADIT (Inv.) Unit V (2) New Delhi recorded the statement of Shri Balwant Singh under section 131 of the Income-tax Act, 1961 on 17.9.2009. The relevant portion of his statement is reproduced as under: -
"Q1 During the course of search and seizure operation on the Ramprastha group on 30.7.2009, you, on behalf of the various companies and individuals surrendered Rs. 52 crore under various heads. Please again explain the same?
A1 As I correctly remember, the total surrender amount was around Rs. 52 crores. I am not remembering exactly various heads and mode of surrender for various, group companies and Directors. However, the details are fully available in my statement recorded on the day of search.
Q2 How much tax you have paid on the surrendered amount? How do you intend to structure the future tax payments?8
I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 A2 The group has already paid Rs. 1 crore and the balance amount payable in September, 2009 amounting to Rs. 2 crore will be paid by 30th September, 2009. The remaining tax on the additional income surrendered of Rs.52 crore, will be paid on due dates as per law and as committed earlier.
Q3 More you anything else to say?
A3 No thanks.
I have read above over had (sic.) over above said statement and found it correctly recorded. I have given this statement without any fear, threat, pressure or coercion."
6.3 During post search investigations, when the assessees were asked to explain the entries appearing in various seized documents, the AR of the assessee vide his letters dated 30.10.2009, inter alia, submitted as under:-
"Without prejudice to the above, it is further submitted that there is a total surrender of Rs.52 crores in various entities in terms of statement of Shri Balwant Singh u/s 132(4) of the Act at the time of search and the surrender was made by the group without pinpointing any documents seized by the search party and the same was in the totality of the facts and circumstances of the case as conveyed to Shri Balwant Singh during the 9 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 course of search and therefore, even though, the contents of the documents referred to us, not belonging to the group but otherwise cannot be considered separately from the surrender of amount of Rs.52 crore which was largely on account of certain investments/expenditure/work in progress which is outflow of income and as such, without admitting the contents of the documents referred to us, cannot be read in isolation and can be treated as different undisclosed receipts liable for tax separately due to the simple logic that every undisclosed expenditure, if any, must correspond with undisclosed receipts. Therefore, undisclosed expenditure already offered for tax shall take care of the amount of undisclosed receipts, if any, emanating from the documents seized from the residence of the Directors/offices of various group companies."
Again, the authorised representative of this assessee vide letter dated 13.11.2009 filed before the Investigation Wing, submitted, inter-alia, as under:
"This is also again emphasized, in continuation of statement given by Ch. Balwant Singh during the course of search that surrender of income made by him is subject to the condition that no penalty or any- other adverse proceedings shall be initiated against any of the group companies and their directors by the Income-tax department. The surrender of income made by him is contingent to the said condition. The aforesaid condition was also 10 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 asserted by him before the authorised officer."
6.4 In response, the assessee was informed vide Investigation Wing's letter dated 25.11.2009 as under:
"Please refer to the letter of your authorised representative Rajesh Jain & Associates dated 30th October,2009 on the above cited subject. It has been stated in the letter that "Without prejudice to the above, it is further submitted that there is a total surrender of Rs. 52 crores in various entities in terms of statement of Shri Balwant Singh u/s 132(4) of the Act at the time of Search and the surrender was made by the group without pinpointing any documents seized by the search party.In this connection it is "stated that at the various residential and business premises of the Ramprastha group a number of documents had been seized/impounded which were confronted to the Directors and other concerned persons of group companies, including the Chairman of the group, Shri Balwant Singh. In the light of this fact it is incorrect to say that the surrender was made without pinpointing any documents."
Since in the returns of income filed, all the three assessees did not declare the surrendered amount as per the statement of Shri Balwant Singh, show cause notices were issued to the 11 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 three assessees and it was pointed out that that in the return filed by it in the additional income as surrendered during the course of search u/s 132(4) of the Act, had not been declared.
7. All the three assessees filed various objections against recording of statement and the surrender made by the Shri Balwant Singh. The main objections were that the statement of Shri Balwant Singh recorded u/s 132(4) of the Act was not voluntary recorded statement as it was recorded under coercion, threat and compulsion and he was compelled to sign the said statement as being voluntary. Another objection was that Shri Balwant Singh had made the surrender on behalf of 10 persons (which were different entities) whereas one person could not make surrender on behalf of the other and fasten the latter with the liability. The three assessees also objected by submitting that these types of statements were usually prepared in all search actions by Investigation Wing to show their output although the CBDT did not appreciate such surrenders.
12 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 7.1 In three cases viz. I.T.A. Nos. 3238, 3239 and 3240, the Assessing Officer proceeded to contend that the said statement of Shri Balwant Singh was voluntary and was given without any force, pressure or coercion. He also noted that Shri Balwant Singh had reiterated his statement during the post search inquiry. The Assessing Officer also noted that at the end of the statement, Shri Balwant Singh had recorded that the statement was voluntary, without any threat, force or coercion. Regarding evidence in support of the surrender, the Assessing Officer mentioned that during the course of search as per AO-4 (Annexure 5, pages 1 to 15) were letter heads of different contractors duly signed which could be used to write out bills to suite the requirements of the assessee. The Assessing Officer also contended that the surrender was made by Shri Balwant Singh after the perusal of the seized documents. 7.2 All the three assessees in their appeals before the first appellate authority challenged the additions made on the basis of statement of Shri Balwant Singh. The Ld. CIT(A) in the appeals of all the three assessees while allowing their appeals has given almost a similar finding that neither the Investigation Wing nor the Assessing Officer had correlated any seized document with 13 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 the surrender of stock or work-in-progress. The Ld. CIT (A) was of the view that Shri Balwant Singh was never confronted with the seized documents so as to establish their incriminating nature. As far as the blank letter heads were concerned, the Ld. CIT (A) was of the view that such blank letter heads will in no way prove unaccounted payment to the contractors specially since the various contractors of the Ramprastha group had been surveyed simultaneously and no document of unrecorded receipts were found and no addition was made in the hand of the contractors on this issue whereas the entire construction was done through the contractors. The Ld. CIT (A), accordingly, held that the entire addition was made only on the basis of the statement of Shri Balwant Singh. The Ld. CIT (A) also noted that in the post-search proceedings, the assessees had informed the Investigation Wing twice that the surrender on account of work-in-progress was made without pin-pointing any seized material. The Ld. CIT (A) was also of the view that the Assessing Officer did not take any action even after the statement was, in effect, retracted. The Ld. CIT (A) also held that the surrender was on mistaken facts because as per the statement of Shri Balwant Singh, cash payments for acquiring land were debited in the books of account 14 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 whereas as per records, Ramprastha group of companies had made payments only through cheques to Dharam Raj Construction and Infrastructure (P) Ltd. who in turn has made cash payments to the sellers of land. The Ld. CIT (A), in the result, proceeded to hold that additions based on retracted statement alone and that too based on mistaken facts could not be sustained. Hence, the appeals of the three assessees viz. Ramprastha Builders Pvt. Ltd., Ramprastha Greens Pvt. Ltd. and Ramprastha Promoters & Builders (P) Ltd. for Assessment Year 2010-11 were allowed by the Ld. CIT (A) through a somewhat similarly worded order on a similar set of facts.
8. Now, the Department is before us in appeal and is contesting the deletions made by the Ld. CIT (A). Ld. D.R. submitted that a statement recorded on oath is presumed to be carrying force of truth. The statement recorded on oath cannot be dismissed lightly. The statement made on oath binds the maker of the statement and in the absence of any denial or adequate explanation thereof, admission is almost conclusive regarding the facts contained therein. Although there is nothing specific in the Income tax Act or Indian Evidence Act to make admission as conclusive proof or always binding on the maker, yet it is settled 15 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 position by way of judicial pronouncements that in the absence of any rebuttal or retraction, the earlier stated facts will be conclusive and can be relied upon. The Ld. DR submitted that specific provisions of the Income tax Act itself as contained under section 132(4), 133A (5) etc. provide that a statement recorded in the income tax proceedings has an evidentiary value. The Hon'ble Supreme Court in the case of Avadh Kishore Das Vs. Ram Gopal AIR 1979 page 61 has held that the admission is best evidence that the opposite party can rely upon. He submitted that although it is not conclusive proof of the facts admitted, but it does raise an estoppel and shifts the burden of proof on the person making the statement. He submitted that the Hon'ble Supreme Court has further held that unless shown or explained to be wrong, a statement is efficacious proof of the facts admitted. On the issue of retraction of statement recorded u/s 132(4), the courts have taken the view that statement u/s 132(4) of the Income Tax Act is a piece of evidence against the assessee. However, the same is not conclusive and if the assessee wants to retract from such statement/admission, the burden lies on him to prove that the statement was obtained under coercion, threat duress, undue influence, under mistaken belief of facts and law. 16 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 The Ld. DR emphasized that the courts have taken the view that the retraction is to be supported by the person making retraction with supportive evidence/material and he has to establish that the statement was given under such mistaken belief either of fact or of law. Any bald retraction is not permissible. A person retracting from the statement has to establish that the statement was not correct in view of the facts or material/evidence on record or such other facts or material/evidence which came to light at a later stage. Thus a failure on the part of the maker of the statement to prove that the facts earlier stated in the earlier statements were wrong is sufficient to conclude the matter. The Ld. DR submitted that for any retraction to be successful in the eyes of law, the maker of the statement has to show as to how the statement recorded earlier does not state the true facts or that there was coercion, undue influence or threat while recording his earlier statement. The Ld. DR further submitted that the courts have accorded importance to the statement recorded u/s 132(4) by observing that surrender made in the course of search by way of a statement u/s 132(4) has got evidentiary value and it could not be used to sidetrack the attention of the department from making deeper investigation in the matter. The Ld. DR submitted 17 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 that in the case of Rabindra D. Trivedi vs. CIT 2008 215 CTR 313 (Raj.), the Hon'ble Rajasthan High Court upheld the addition of Rs. 3 lacs representing discrepancies in the stock admitted by the assessee in the statement u/s 132 (4) by holding that during the search the assessee had accepted the discrepancies and had made disclosure by way of calculated attempt to sidetrack the attention of the search party and, therefore, sidetrack the investigations of the discrepancies. But on a later date, the assessee did not disclose the admitted income in the return of income. In these circumstances, the retraction was not allowed and the addition-was upheld. Reliance was also placed on the following decisions - (A) Kantilal C.Shah Vs ACIT Circle-3, Ahmedabad (ITAT Ahd. Ç Bench), (B) Narayan Bhagwantrao Gosavi Balajiwale vs Gopal Vinayak Gosavi & Ors. (AIR 1960 100 SC), (C) T.S. Kamarasamy vs ACIT (65 ITD 189) (ITAT Mad.), (D) Rakesh Mahajan Vs. CIT 214 CTR 218 (P&H)
9. The Ld. DR submitted that the assessees have claimed that the statement of Sh. Balwant Singh u/s 132(4) of the Income tax Act was not voluntary and was recorded under coercion, threat and compulsion. He submitted that this allegation is only an afterthought and an attempt to wriggle out of the situation. It is 18 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 also contrary to the material on record and is not backed by any documentary evidence. Apart from the statement of Sh. Balwant Singh recorded on 31.07.2009 admitting additional income of Rs. 52 crores, Sh. Balwant Singh reiterated the total surrender of Rs. 52 crores in his statement recorded by the Investigation Wing on 17.09.2011. Thus the disclosure of additional income was not only made during the search but the same was reiterated during the course of post search investigation. Therefore, it is incorrect to say that the statement of Sh. Balwant recorded on 31.07.2009 was under coercion, threat and compulsion. The Ld. DR submitted that in para 6 of the Panchnama at the residence of Sh. Balwant Singh, it has clearly been mentioned that no pressure was put on the various persons whose statements were recorded during the search. The Panchnama has duly been signed by Shri Balwant Singh, the authorised officers and two independent witnesses. A perusal of the statement of Sh. Balwant Singh recorded u/s 132(4) on 31.07.2009 shows that he himself has recorded at the end of the statement that the statement has been given by him voluntarily without any fear, threat, pressure or coercion. Further, the retraction of the statement has not been supported by any evidence. The 19 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessees have not demonstrated by placing evidence on record that the statement recorded earlier was incorrect.
10. The Ld. DR further submitted that as regards the assessees' contention that Shri Balwant Singh had made the surrender on behalf of 10 persons for which he was not authorized, the same is not relevant because Sh. Balwant Singh is on the Board of Directors of these companies and, therefore, he was fully competent to make a declaration of additional income in the hands of assessee companies. The Ld. DR also submitted that although there is no concept of on-spot assessment at the time of search but the surrender of additional income was made by Sh. Balwant Singh after proper thought and after he was confronted with the various books of accounts/documents seized during the course of search. Therefore, it cannot be said that the disclosure was at the spur of the moment and that no thinking had gone into it before making disclosure of additional income.
11. In response, the Ld. AR submitted that it is on the basis of seized documents that Sh. Balwant Singh was made to believe that there were huge discrepancies and that he had no option but to surrender the income. On this basis, Mr. Balwant Singh made the surrender of the sum of Rs. 52 crores. Post search, on verification of facts and seized documents, the 20 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessees realized that there is no discrepancy and all the transactions stated in the seized documents were recorded in the books of accounts and hence while filing the returns, income was computed on the basis of books of accounts. The Ld. AR submitted that the AO, during the course of assessment, raised the issue of surrender. Detailed replies dated 5.12.2011 were filed. The AO ignoring the facts and the replies as given by the assessees made the additions on the ground that surrender is valid piece of evidence. The Ld. AR submitted that the orders passed by the CIT (Appeals) are reasoned orders and the additions made by the AO have been rightly deleted. The Ld. AR emphasized that the AO has heavily relied upon the statement of Sh. Balwant Singh recorded on the date of search without analysing the statement and without appreciating the facts stated therein. He drew our attention to the AO's order wherein in question no. 1 of the statement quoted on Pg. 2 Para 3 of the AO's order, Shri Balwant Singh was shown the seized documents A-2 to A-27. The Ld. AR pointed out that in response thereto Shri Balwant Singh had categorically stated as under:
"These pages and annexure relate to financials of various group companies of Ramprastha group. The pen drive and the hard disks mentioned as annexure contain details of the business of Ramprastha group. The detailed explanation of these annexures of loose pages/hard disk/pen drive would be submitted by me later, most of the transactions mentioned in these annexures are reflected in the books of accounts of 21 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 various companies of Ramprastha group. However, after prime facie going through these documents, I admit that some of the transactions are not reflected and recorded in the books of accounts of various companies of Ramprastha group. On account of non recording/non- reflection of these transactions, I hereby voluntarily admit following additional income for taxation. "
11.1 The Ld. AR submitted that the above answer clearly shows that detailed explanation was yet to be submitted. Further the reply was preliminary reply and not a conclusive reply. The Ld. AR also submitted that if, later on, the assessees after going through the seized documents and books of accounts found that the transactions were reflected in the books of accounts then the assessees were well within their rights to correct the amount. He further submitted that the law is to state the correct income. The law is not that income to be declared in the return should be higher of the two i.e., income stated in the statement and income as per the seized documents. The Ld. AR also submitted that the AO has referred to the statements dated 17.9.2009 to support his case. However, this statement is in the continuation of the statement dated 31.7.2009 and is a simply reiteration. The Ld. AR submitted that the assessees can compute the correct income 22 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 only after getting seized documents and verification thereof with the books of accounts. He further submitted that the AO has referred to letters dated 30.10.2009 whereby it has been categorically stated without prejudice to the above. The use of these words clearly shows that the surrender is without prejudice to the explanation regarding the seized documents. The Ld. AR submitted that it has also been stated that surrender was made without pinpointing any error in the seized document. The Ld. AR further pointed out that thereafter during the course of assessment proceedings a detailed explanation vide letter dated 05.12.2011 was filed. However, the AO instead of dealing with the issue tried to meet the objections raised by referring to case laws. 11.2 The Ld. AR also submitted that the surrender was made on the basis of seized documents as Shri Balwant Singh was made to believe that the transaction were not reflected and recorded in the books of accounts. However, later on, it was found that the transactions were reflected and recorded. The Ld. AR further pointed out that if the AO was disputing these explanations then the AO had to refer to the seized documents. These were not documents which were found and released to the assessee so as to raise a doubt about the authenticity of such documents. These 23 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 were the documents found and seized and were with the AO and the AO could have easily cross verified these documents with the books of accounts of the assessees to ensure whether the same were reflected and recorded or not in the books of accounts. He further submitted that the AO during the course of assessment had sought explanations to seized documents and each of the seized documents was duly explained and it is not the case of the AO that the assessees had failed to explain the seized documents. Thus it is evident that the AO had made the additions merely on the basis of the statement. The Ld. AR also submitted that the judgments relied on by the Department are not applicable to the facts of the case and distinguishable. The Ld. AR also placed reliance on the direction given by the CBDT vide instruction letter No. 286/2/2003-IT (Inv) dated 10.3.2003 on Confession on additional income during the course of search and seizure and survey operation. Reliance was also placed on Instruction No. F. No. 286/57/2002-IT), dt. 3rd July, 2002. The Ld. AR submitted that in the present cases, the AO has not been able to bring any material or evidence to substantiate the additions. The AO has ignored the fact that an addition can be made only when there is material. In case the addition is to be based solely on the 24 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 statement then there has to be corroboration. In the absence of any corroboration addition cannot be made.
12. As far as the issue of disallowance of proportionate interest is concerned in I.T.A. Nos. 3240 & 3241 in the case of Ramprastha Promoters & Developers (P) Ltd., the Ld. DR submitted that during the assessment proceedings, the Assessing Officer had noticed that the assessee company had raised interest bearing loans in the form of Compulsory Convertible Debentures (CCD's). The assessee had debited interest to profit/loss account in respect of loans taken and CCDs. However, the Assessing Officer also noticed that the assessee had given interest free loans/advances to group companies. Ld. DR further submitted that the assessee company had failed to discharge the onus to prove that the fund borrowed, on which the interest was paid, was used for the purpose of business. He submitted that the assessee had failed to bring any evidence on record to prove that the advances given to sister concerns were given in furtherance of the business objects of the assessee and, therefore, the Assessing Officer had rightly held that the interest relatable to the amount advanced to its sister concern could not be allowed as a deduction u/s 36(1)(iii) of the Act. Learned Departmental Representative submitted that the Ld. CIT (A) has wrongly deleted the disallowance and prayed that the order of the Assessing Officer should be restored.
25 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 12.1 In response the Ld. AR submitted that as per section 36(1)(iii) of the Act any amount of interest paid in respect of capital borrowed for the purpose of business and profession has to be allowed as deduction in computing income u/s 28 of the Act. He submitted that the AO ignored the explanations given by the assessee and without any justification considered the transactions as not for the business purpose and made the addition in the hands of the assessee. He submitted that the AO did not point out any adverse finding in respect the documents produced by the assessee. He relied on the following judgments:
1. S.A. Builders Ltd Vs. CIT 268 ITR 1(SC)(2006) , 2. ACIT & others Versus Gillete Diversified Operation P Ltd & others 2015(4) TMI 49, 3. Madhav Prasad Jatia Vs CIT (118 ITR 0200) SC.
13. The Learned Departmental Representative submitted that the last issue in this bunch of appeals relates to ITA No. 3241 and pertains to the disallowance of Rs.55 lacs paid in cash for payment towards purchase of land and disallowed by the Assessing Officer u/s 40A(3) of the Act. Learned Departmental Representative submitted that the meaning of 'expenditure' and constitutional validity of section 40A (3) has been discussed by the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh vs CIT 191 ITR 667 (SC) where the Hon'ble Apex Court has held that all outgoings 26 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 including purchase for stock in trade are covered u/s 40A (3) of the Act. He submitted that in view of this judgment, the Ld. CIT(A) has erred in deleting the addition and prayed that the order of the AO should be restored. 13.1 In response the Ld. AR submitted that section 40(A)(3) of the Act provides for disallowance of an expenditure in respect of which payment in a sum exceeding the specified limit is made otherwise than by a crossed cheque and crossed bank draft unless the case falls within the exceptions specified in Rule 6DD. He submitted that the exceptions provided in Rule 6DD are not exhaustive and therefore the provision of section 40A (3) shall not be attracted if the parties are identified and there is not material on record to doubt the genuineness of the payment. He submitted that the first proviso of section 40A (3) clearly provides the exceptions (as prescribed by the board in Rules), but the Rules are required to be framed keeping in view the legislative intention as prescribed in the main section and it clearly prescribed that the consideration of business consistency and other relevant factor are required to be considered before invoking the provision of section 40A (3). He submitted that the assessee has not claimed any expenditure for purchase of land in the profit and loss account and therefore did not reduce its income and as such 27 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 the provisions of section 40A (3) cannot be invoked in a mere technical manner. He submitted that if the contention of the assessing officer taken as correct an artificial income will be assessed. He further submitted that otherwise also, the Honorable Supreme Court in Attar Singh Gurumukh Singh vs ITO 191 ITR 667 has clearly observed that the purpose of section 40A(3) is to disallow bogus cash payment for increasing the expenditure for artificially reducing assessable income only but not to disallow genuine expenditure though incurred in cash due to business exigencies. He further submitted that the latest judgment of various High Court and Tribunals after considering the judgment of Attar Singh Gurumukh Singh vs ITO after considering the genuineness of the payment, identity of the payee and compelling and mitigating circumstances has taken a view favorable to the tax payer .He submitted that in the present case, the assessee is engaged in the business of real estate, it purchased agricultural land in village surrounding Gurgoan vide registered sale deed and the purchaser has admitted before the sub registrar having received the entire consideration. This clearly proves that the payment and the identity of the payee is not doubted. Further the assessee would not be able to purchase 28 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 land if the cash payment would not have been paid and the business of the assessee would have suffered and therefore exception as provided in rule 6DD will come to be invoked. He placed reliance on RC Goel vs. CIT 84 DTR 0432(Del), Sri Laxmi Stayanarayana Oil Mills vs. CIT 367 ITR 0200(AP), Smt. Harshila Chordia vs. ITO 208 CTR 0208 (Raj.), Anupam Tele Services vs. ITO 366 ITR 122 (Guj.), Walford Transport (Eastern India) Ltd. Vs. CIT 240 ITR 0902 (Gauhati). He submitted that the Ld. CIT has passed a reasoned order on the facts of the case and as such the same should be upheld.
14. We have heard the rival submissions and have perused the material on record. First and foremost issue is the issue with regard to additions made on the basis of the surrender statement of Shri Balwant Singh. The said surrender is highlighted in Answer to question no. 5 of impugned statement of Shri Balwant Singh, inter alia stating that "...The detailed explanation of these annexure of loose pages/hard disks/pen drive would be submitted by me later. Most of the transactions in these annexure are reflected in the books of accounts of various companies of Ramprastha Group. However, after prima facie going through these documents, I admit that some of the transactions are not reflected 29 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 and recorded in the books of accounts of various companies of Ramprastha Group. On account of non recorded/non reflection of these transactions, I hereby voluntarily admit following additional income for taxation... " It is further explained in Answer to Question No. 15, 16 wherein it is stated inter alia that " I have voluntarily admitted additional income of Rs 52 crores over and above regular income in the hands of various persons belonging to the group. " We find that there is a gross lack of clarity and total vagueness in aforesaid statement of Shri Balwant Singh so as to lead to any conclusion, much less adverse conclusion, to fasten any tax liability. It is a well laid down law that there is no concept of "on the spot" assessment at the time of search u/s 132 of the Act. During Post search enquiries Shri Balwant Singh again repeated his surrender statement. The recording of the statement again by the Investigation Wing under the aforesaid circumstances is nothing but technically repeating the same exercise. We also find force in the arguments of the Ld. AR that mere one person not authorized by other persons (here assessee companies and individual) being independent and separate assessees cannot fasten any liability on others. Shri Balwant Singh 30 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 cannot be treated as spokesperson for others who have not adopted his statement in writing. Further, knowledge and capacity of a single person who is not having full and complete knowledge of financial affairs of everybody connected to search operations, needs to be appreciated.
15. The Hon'ble High Court of Kerala in the case of Commissioner of Income Tax, 'Kerala-11 vs. A.P. Parukutty Mooppillamma and Others, 149 ITR 131 held that, "An assessment is to be made, not solely based on the admission of a person and this view of law which he takes. A proper order of assessment should be made on the basis of all facts and circumstances and on a correct appreciation of the relevant provision of the law. " It is trite law that income tax needs to be assessed on income actually earned and not on something which is notional and hypothetical and based on a global surrender like the present one.
16. The Mumbai bench of ITAT in the case of Shri Haresh P. Dadia (ITA Nos. 484, 1067 & 1194/Mum./2009) held that, "The judgment in Meghraj S. Jain (supra), relied upon by the learned Departmental Representative, does not come to the rescue of the Revenue for the reason that the High Court held that, a retracted 31 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 confession can be acted upon only when there is corroborative evidence gathered by the authorities. In this case, there is no corroborative evidence. The Assessing Officer has not done any investigation or collected any evidence. On the other hand, CBDT has, in its Circular, directed their officers to base their assessments on the evidence collected during the course of search and. during the course of assessment proceedings. It was specifically directed that no addition should be based solely on confession or disclosures made at the time of search. The Hon'ble Gujarat High Court in Kailashben Manharlal Chokshi (supra), has held that a statement recorded at midnight need not be given any credit as the person may not be in a position to make any c0rrect or conscious disclosure in a statement, if such statement is recorded at such odd h0urs. In view of the above and also in view of the fact that the assessee has never, at any, given point of time, stated or agreed that the purchase and sale of shares were not genuine, we are of the opinion that the Assessing Officer was wrong in basing his entire assessment order on this one answer given by the assessee at the time of search, that too, without investigation, subsequent to a retraction. Coming to the variation in statement recorded under section 131 of the Act during the course of 32 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessment proceedings, we do not find any merit in the conclusions drawn by the Assessing Officer which are presumably, based on the purported variations in the replies to questions, especially when the assessee has furnished evidence to show that he had, in fact, purchased and sold shares of M/s. Bolten Properties Ltd.. "
16.1 It will not be out of place to refer to the judgment of the Hon'ble High Court of Madras in M.Narayanan & Bros. Vs. Asst Commissioner of Income Tax Tax Case (Appeal) 81 of 2005 wherein the Hon'ble Madras High Court has held that, "It is seen from the Circular dated 10th March, 2003, which has been extracted in the decision reported in (2008) 300 ITR 157 (Mad) (Commissioner of Income Tax V. S. Kahder Khan Son) that the Board emphasized the need to have a focus on the collection of evidence, search and seizure and survey operations, which leads to an information as regards the undisclosed income. The Board viewed that confessions recorded during the course of search and seizure and survey operations did not serve any useful purpose.
The Board also insisted that while recording statements during search and seizure and survey operations, no attempt should be mode to obtain confession statement as to the undisclosed income.33
I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 It was also stated that any action on the contrary, shall be viewed seriously and the said circular has to be applied to all pending assessments. Thus the Board insisted the Assessing Officer to rely upon the evidences/materials gathered during search operation and that the assessment could not rest simply on the confession statements made. Thus going by the said decision of the Supreme Court, as well as the law declared in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another) that it is always open to a person who made the admission, to show that the statement to offer income is incorrect and had material to substantiate so, we hold that the Tribunal is not justified in placing undue emphasis on the confession statements made by the assessee. ...As rightly pointed out by the learned counsel appearing for the assessee when the assessee had explained the statement made on the second day of the search with materials, that the amounts offered were the loans taken from the relatives who were already assessed on the said amount; apart from this, even otherwise, the transactions relating to pawn broking, related to years prior to the date of assessment and had no relevance to the year under consideration, rightly the Commissioner of Income Tax (Appeals) accepted the case of 34 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 assessee to cancel the assessment on Rs.4.00 lakhs. Thus when the assessee had explained his statement as not correct in the context of the materials produced, as held by the Apex Court in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another), we do not think that the Tribunal would be justified in its conclusion that the statement made would clothe the assessment with legality. Quite apart from that, the case of the assessee also stands supported by the Circular dated 10th March, 2003 of the Central Board of Direct Taxes, which has given categorical directions to the officers, who are entrusted with the job of assessment that undue emphasis should not Be placed on the statements recorded In fact, it had given a mandate not to obtain confession as to the undisclosed income. Thus applying the Circular dated 10th March, 2003 to the facts of the case, which is binding on the Revenue, we have no hesitation in setting aside the order of the Tribunal. ".
16.2 The Hon'ble Delhi High Court in the case of Dhingra Metal Works (ITA No. 1111 of 2010) has held that, " the word may used in Section 133A(3)(iii) of the Act clarifies beyond doubt that the material collected and the statement recorded during the survey is not a conclusive piece of evidence by itself. In any event, it is 35 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 settled law that though an admission is extremely important piece of evidence, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect. Since in the present case, the respondent-assessee has been able to explain the discrepancy in the stock found during the course of survey by production of relevant record including the excise register of its associate company, namely, M/s. D.M W.P. Ltd., we are of the opinion that the AO could, not have made the aforesaid addition solely on the basis of the statement made on behalf of the respondent-assessee during the course of survey." 16.3 It is trite law that a statement has its value in the eyes of law if it is corroborated by connected evidence. As far as the statements being recorded under the Act are concerned, there are two situations i.e. sometimes statement is recorded u/s 133A of the Act at the time of survey. The courts have clearly held that there is no evidentiary value in respect of a statement u/s 133A unless it is supported by some material. Second situation is that the Act has empowered the Revenue to record the statement during the course of search and statement is recorded u/s.132 (4) of the Act. However, merely on the basis of a statement recorded u/s 132(4), no addition can be made until some 36 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 corroborative evidence was found in support of such admission. As far as the general principle is concerned, an admission can be said to be an extremely important piece of evidence, if made as per the prescribed l a w . B u t such an admission cannot be said to be conclusive. It is open for the assessee to show that the said admission was incorrect and the onus is on that person to establish that the impugned admission was incorrect. He has to place convincing reason or evidence to show that the earlier admission was not the correct position of fact. In the case of S. Khader Khan & Son (supra) the scope of section 133 A was in dispute, however, the finding was that solely on the basis of the statement given by one of the partners, it is not lawful to assess an income. The Hon'ble Apex Court had occasion to deal with the issue of admission in the case of Chikkam Koteswara Rao v. Chikkam Subarao AIR (1971) (SC) 1542, wherein the Hon'ble Apex Court has stated that an admission, however, binds the person making it only in so far as facts are concerned but an admission is not a conclusive proof of the matter admitted, though it may, in certain circumstances, operate as estoppel. But in such cases, there should be no doubt or ambiguity about the alleged admission. However, an admission or acquiescence on 37 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 the part of the assessee cannot be the foundation of assessment, where the income is returned under an erroneous impression or misconception of law. It is always open to the assessee to demonstrate and satisfy the authority concerned that a particular income was not taxable in his hands and that it was returned under erroneous impression. In the present case before us, the assessee has proved that the disclosure made was neither the undisclosed / unaccounted income of the assessee-company and not even a single piece of incriminating paper or document or evidence of any nature were found from the impounded materials. Even the AO has made addition just on the basis statement recorded. There is no iota of evidence, which suggest that there is unaccounted / undisclosed income emerging out of the incriminating seized during the course of search. Thus, considering the entire factual matrix we find that the AO has not been able to demonstrate or give even an example of any document seized which has not been reflected in the books of accounts. The adverse inference drawn by the AO on the basis of the letterheads of different contractors found during the search is wrong and in fact contradictory. Firstly, the letterheads of the different contractors per se did not establish that assessee has 38 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 done something wrong. The AO has not even referred to any expenditure or deduction debited or claimed in the books of account which is not genuine. Under the law the assessee is supposed to state the correct income. The correct income will mean income which is not less than the income earned and not more than the income actually earned. Thus the assessee has offered the correct income in its return of income and AO has not been able to point out or give any instance of any error or discrepancy in the income offered. Having considered the entire facts and arguments, we find that the neither the Investigation Wing nor the Assessing Officer has correlated any seized document with the surrender of unaccounted stock or work-in- progress. At the time of putting the question leading to surrender of income some seized document was referred, namely, A-2 to A-
27. Exact incriminating nature of document was never confronted either by Investigation Wing or the Assessing Officer to Sh. Balwant Singh. The only seized document discussed by the Assessing Officer is signed blank letter heads of contractors in support of unaccounted work-in-progress. These blank letter heads in no way prove unaccounted payment to the contractors, specially under the circumstances that various contractors of the 39 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 Ramprastha Group were surveyed simultaneously and no documents of unrecorded receipts were found and no addition was made in the hands of contractors on this issue. This factor is very important when entire construction is done through the contractors. Therefore, it is obvious that entire additions have been made on the basis of statement u/s 132(4) of Sh. Balwant Singh. We have considered the contents of statement under Section 132(4) of Sh. Balwant Singh. He has made disclosure of additional income on behalf of various companies of Ramprastha Group and other persons. In the substantive part of answer, Sh. Balwant Singh has stated that mostly the transactions are recorded in books of accounts and some parts are unaccounted. Ld. AR has argued that entire seized document was examined during post search and assessment proceeding and no incriminating material was found. Subsequent statements were recorded by the Investigation Wing as mentioned in the assessment order. However no question was asked in furtherance of the statement regarding the contents of the seized document. During original statement also subsequent details of work-in- progress, such as address, quantum of work done, accounted Work-in-progress and undisclosed work in progress were not 40 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 asked for. The assessee companies during post search proceedings had twice informed the Investigation Wing that the surrender of work- in-progress has been made without pinpointing any seized material. No action was apparently taken even by the Assessing Officer, when effectively the statement got retracted. After considering entire facts and circumstances of the case and judicial pronouncements referred to hereinabove, we are of the considered opinion that the additions based on the statement of Shri Balwant Singh alone, cannot be sustained. Accordingly, the action of the Ld. CIT (A) in deleting the addition of Rs. 12 crores pertaining to ITA No 3238, Rs. 2 crores pertaining to ITA No 3239 and Rs. 14 crores pertaining to ITA No 3240 based on the surrender statement of Shri Balwant Singh is upheld and the grounds of appeal of the Department on this issue are dismissed.
17. As far as the issue of disallowance of Interest amounting to Rs. 7,31,89,263/- in ITA No. 3240 and Rs. 5,10, 38,764/- in ITA No. 3241 is concerned, we find that the Ld. CIT(A) has given a categorical finding in his order that the advances given to the various sister concerns was for business purposes. The Revenue has not been able to contradict this finding before us also. The 41 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 Hon'ble Apex Court has held in the case of SA Builders Ltd vs. CIT (supra), "We agree with the view taken by the Delhi High Court in CIT v. Dalmia Cement (Bharat) Ltd. [20021254 ITR 3 7 7 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. ". Respectfully following the ratio of the decision of the Hon'ble Apex Court, we hold that on the facts and circumstances of the case, the interest amount of Rs. 7,31,89,263/- in ITA No. 3240 42 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 and Rs. 5,10, 38,764/- in ITA No. 3241 has been incorrectly disallowed and we find no infirmity in the Order of the Ld. CIT(A) on this issue also. Accordingly, the grounds of appeal pertaining to this issue are also dismissed.
17.1 As far as the issue of disallowance of Rs. 55 crores in ITA No. 3241 is concerned, after going through all the relevant records and after giving a careful consideration to the rival submissions, it is seen that the fact remains unassailed on record that the expenditure disallowed by the AO, which has been upheld by the Ld. CIT (A), was never claimed as an expense by the assessee. Section 40A starts with the non-obstante clause setting out that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provisions of the Act relating to the computation of income under the head 'profits and gains of business or profession'. Sub- section (3) of section 40A is an exception to the deductibility of expenditure under the computation provisions of 'profits and gains of business or profession'. Thus consequently what does not fall within the computation of income will not attract the provisions of section 40A (3). On this issue the judgement of the Hon'ble Rajasthan High Court in the case of Motilal Khatri (2008) 43 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 218 CTR 602 (Raj.) is very clear. Their Lordships before arriving at their decision categorically took note of the fact that the provisions of section 40A (3) had been looked at and thereafter the position is very clear in as much as when the assessee has not claimed any deduction of any expenditure the question of not allowing any part of that expenditure as deduction does not arise. For ready-reference, we extract the relevant finding of their Lordships from the said judgement:-
"In our view, a bare reading of the language of this sub- section is enough to show, that in the circumstances of the case, provisions of s.40A(3) are not attracted with respect to either of the transactions; obviously because it only prohibits allowing of deduction as expenditure. Expenditure obviously means expenditure admissible to be deducted from out of the income, which may include the expenditure on purchase and the like, and the sub-section provides that if any such expenditure is incurred after specified date, in a specified manner, then 20 per cent of such expenditure shall not be allowed as a deduction. In the present case the assessee has not claimed any deduction of any expenditure of Rs.3,88,000 or Rs.7,35,000 and therefore, there is no question of not allowing any part of that expenditure, as deduction. Thus, the finding arrived at in this regard, by the learned CIT (A), and the learned Tribunal cannot be said to be wrong. Question No.2 is accordingly answered in favour of the assessee and against the Revenue."
17.2 Similarly, it is seen that the judgement of the Hon'ble Punjab & Haryana High Court in the case of CIT vs Alpha Toyo Ltd. (2008) 174 Taxmann 427 (P & H) also fully supports the view 44 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11 taken. For ready-reference, we reproduce paras 6 & 7 of the said judgement:- "We have heard learned counsel for the revenue. The Tribunal has found as a fact that the annual reports for the assessment year 1989-90 of the assessee clearly shows the outstanding loans to the three parties as on 1-4-1989. Copies of the loan account of the three parties for the period comprising the previous year are also available on the record. The plea of the assessee that the payments were made in respect of the capital account have been rightly accepted by the Commissioner of Income tax (Appeals).The Assessing Officer without giving any finding on the issue has merely gone on the presumption that the books of account have been manipulated. The Assessing Officer has also not given a finding that the sum in question was actually revenue expenditure which were claimed as deduction in profit and loss account. (Emphasis supplied). In view of the above finding of facts, the Tribunal has rightly concluded that the payment in question were made on account of capital account, therefore, provisions of section 40A(3) of the Act were not attracted. Thus, we do not find any merit in this appeal and no substantial question of law arises for determination of this Court. Hence this appeal is dismissed."
45 I.T.A. 3238, 3239, 3240, 3241/Del/2013 Assessment Years: 20009-10,2010-11
18. Accordingly on a consideration of the facts and circumstances of the case and considering the relevant provision of the Act namely Section 40A(3), we hold for the detailed reasons given hereinabove that Section 40A(3) of the Act has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed. Accordingly, this ground of the Department is also dismissed.
19. All other remaining grounds are dismissed as not pressed.
20. In the result, all the four appeals of the Department are dismissed.
Order pronounced in the open court on 16th February, 2016.
Sd/- Sd/-
( G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
VICE PRESIDENT JUDICIAL MEMBER
DT. 16th FEBRUARY, 2016
'GS'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT 4.CIT(A)
4. DR
By Order
Asstt. Registrar
46