Income Tax Appellate Tribunal - Ahmedabad
Maheshraj Chemicals Pvt.Ltd., ... vs The Dy.Cit.,Cent.Circle-2(1),, ... on 2 January, 2017
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'डी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" D " BENCH, AHMEDABAD
सव ी राजपाल यादव, या यक सद य एवं द प कुमार के डया, लेखा सद य के सम ।
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
And SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T(ss).A. Nos.85, 86, 87 & 88/Ahd/2011
( नधा रण वष / Assessment Years : 2004-05, 2005-06, 2006-07 &
2007-08 respectively)
Maheshraj Chemicals बनाम/ The DCIT, CC-2(1)
Pvt.Ltd. Vs. Ahmedabad
141, GIDC, Phase-IV
Naroda, Ahmedabad
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AABCM 0424 C
(अपीलाथ% /Appellant) .. ( &यथ% / Respondent)
अपीलाथ% ओर से / Appellant by : Shri S.N. Soparkar, AR
&यथ% क( ओर से/Respondent by : Shri Rajeshkumar Sinha,CIT-DR
ु वाई क( तार ख /
सन Date of Hearing 20/10/2016
घोषणा क( तार ख /Date of Pronounce ment 02/01/2017
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM:
The above captioned appeals filed by the Assessee are directed against the common order of the Commissioner of Income Tax (Appeals)-III, Ahmedabad [CIT(A) in short] dated 11/11/2010. Since IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -2- the identical issues are involved in all these years in the captioned appeals, we shall, for convenience, take up IT(ss)A No.85/Ahd/2011 relevant to Assessment Year (AY) 2004-05 as a lead case for adjudication of the issues involved.
IT(ss)A/85/Ahd./2011- AY 2004-05(Assessee appeal)
2. The assessee has sought to assail the order of the CIT(A) by raising following grounds of appeal:-
1. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground of appeal challenging the validity of the proceedings initiated u/s.153A of the I.T. Act, when nothing incriminating was found during the course of search, and in spite of the fact that this issue was squarely covered in assessee's favour by virtue of various decisions of the Hon'ble Tribunal.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the Assessing Officer's finding that the loans and advances given by the assessee company to M.R. Chemcials which is a proprietary concern of its director Shri Mahesh Agarwal were not for business purposes and, therefore, to the extent interest hearing borrowed funds were utilized in giving such loans and advances, the interest payable on such borrowed funds is to be disallowed.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs.60,00,000 made by the Assessing Officer on the alleged and assumed basis that the aforesaid amount represented unaccounted investment in Sarthik-II property referring to a seized paper.
4. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground or appeal IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -3- challenging levy of interest u/s.234A, u/s.234B and u/s.234C of the I.T. Act, merely mentioning that 'this is only consequential in nature'.
3. In the course of hearing, the Ld.AR for the assessee submitted that the legal ground pertaining to validity of section 153A of the Act as per ground No.1 of the appeal memo is not under serious challenge. We also simultaneously notice that various materials and documents were admittedly found during the course of search proceedings which give rise to reasonable apprehension to potential escapement of income. Thus, ground No.1 of assessee's appeal stands dismissed.
4. The relevant facts concerning Ground No.2 of the appeal are that the assessee is in the business of manufacturing and trading of dyes and dyes intermediate accessories. In this case, the search was carried out under section 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on 21/03/2007. A notice under section 153A of the Act was issued to the assessee on 18/12/2007. In compliance, the assessee filed return of income on 21/10/2008 declaring total income of Rs.58,36,660/-. The assessment was framed at total income of Rs.1,20,35,670/- as against the returned income of Rs.58,36,660/-. In the course of the assessment, the Assessing Officer (AO) inter alia observed that assessee has claimed interest of Rs.21,175/- incurred on loan obtained from financial institutions and banks. The AO disallowed the aforesaid interest expenditure as non-business expenditure on the ground that assessee has IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -4- shown Rs.3,62,54,597/- as loans and advances to M/s. M.R. Chemicals in which Shri Mahesh Agrawal, Director of the company is the proprietor. No interest has been charged by the assessee on such advances. The proprietor has allegedly invested the amount received from the assessee in RBI bonds and thus has utilized the amount for personal purposes. The assessee-company, on the other hand, has claimed interest expenses on the borrowings from financial institutions and banks. The AO alleged that the amount borrowed from the financial institutions and banks have been utilized by the assessee for purposes other than business purposes. Thus, in essence, it is the case of the AO that interest bearing borrowed funds have been diverted for non-business purposes. Accordingly, he resorted to proportionate disallowance of interest and added the same to the total income of the assessee.
5. In the first appeal, the CIT(A) confirmed the action of the AO. The relevant finding of the CIT(A) reads as under:-
"7. The next ground of appeal in all the three assessment years is regarding disallowance of interest on the ground that the appellant company had shown loans and advances to M.R. Chemicals, a proprietary concern of Mahesh Agrawal, one of the directors of the appellant, who have utilized the amount for personal purposes. The AO observed that on the one hand the appellant had given sufficient amount of advances to its directors Shri Mahesh Agrawal who is a proprietor of M.R. Chemicals and such amounts are invested by the director in the RBI bonds, on the other hand, the company has claimed interest expenses on the IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -5- borrowing from financial institutions and banks. The AO held that the amount borrowed from financial institutions and banks have been utilized by the assessee for other than business purposes and accordingly proportionate disallowance of interest was made by him and added the same in the total income of the appellant. This issue has been adjudicated by me in the appellate order dated 1/10/2010 passed in the case of the appellant for assessment years 2001-2002 to 2003-2004. In the said order, the AO is directed as under:
--- If before the AO, the appellant is able to prove that the abovementioned credits appearing as on 11/4/2001, 26/4/2001 & 12/6/2001 and in A.Y. 2001-02 are the owned funds of the appellant then no disallowance of interest would be made by him, otherwise the addition of disallowance of interest would stand confirmed. In other words, if the source of loans given to M.R. Chemicals is out of the owned funds of the appellant then no interest would be disallowed by the AO. But if the source of loan is out of borrowed funds, then the action of the AO in disallowing interest on such borrowed funds would stand confirmed. Subject to this, this ground is disposed off. The onus is on the appellant to prove the nexus.
As the facts of the case are similar in the years under appeal, the AO is directed to follow the directions given by me in assessment years 2001-2002 to 2003-2004."
6. At the time of hearing before us, with reference to Ground No.2, concerning disallowance of interest, the Ld.AR submitted that the issue is IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -6- squarely covered in favour of assessee in its own case in IT(ss)A No.82 - 84/Ahd/2011 for AYs 2001-02 to 2003-04, order dated 27/11/2013 wherein the Tribunal has decided the issue in favour of assessee on the ground that own capital together with reserves exceeds the interest-free advances. The proportionate disallowance of interest is thus not called for in the light of decision of the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd., 313 ITR 340 (Bom). The Ld.AR also placed reliance on the subsequent decision of the Hon'ble Gujarat High Court in the case of Raghuvir Synthetics, 354 ITR 222 (Guj.) for aforesaid proposition.
7. We note the contention of the assessee that the direct issue arose for the consideration of the Tribunal in assessee's own case in the earlier assessment years. The relevant paras of the order of the Coordinate Bench of Tribunal is reproduced hereunder:-
"17. Fifth common ground of the appeal of the assessee in all the years is that the learned CIT(A) erred in law and on facts in confirming the disallowance of interest expenses of ₹1,16,227/- in A.Y.2001-2002, ₹7,70,343/- in A.Y.2002-2003 and ₹5,05,618/- in A.Y.2003-2004 by the AO holding that the interest bearing funds were utilized for advancing interest free loans to M.R. Chemicals, proprietary concern of the director of the assessee-company, Shri Mahesh Agrawal.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -7-
18. Brief facts of the case are that the AO observed that the assessee has advanced loan to M.R.Chemicals in which Shri Mahesh Agrawal of the company is proprietor without charging any interest and director has utilized the amount for investment in personal capacity, while the assessee has claimed the interest paid to financial institutions and banks as expenditure. Thus, the amount borrowed from the financial institutions and banks have been utilized by the assessee for other than business purpose, which was not admissible, hence, proportionate interest expenses was disallowed and added to the income of the assessee.
19. On appeal, the learned CIT(A) restored the matter back to the file of the AO to examine whether the source of loan given to M.R. Chemicals is out of own funds of the assessee or out of the borrowed funds of the assessee. He directed the AO that if the source of the funds advanced was out of the assessee's own funds, then no disallowance of interest was called for, otherwise, disallowance of interest has to be confirmed.
20. The learned AR of the assessee submitted that Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd., 313 ITR 340 (Bom) has held that if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption was established considering the finding of fact both by the Commissioner (Appeals) and the Tribunal. The interest was deductible. Learned AR of the assessee then referred to pages no.l to 44 of the paper book filed before us. He pointed out from page 6 of the paper book, wherein balance sheet for the year ending 31.3.2001 is filed, that the share capital and reserves and surplus of the assessee was ₹8,76,31,146, whereas advance given to M.R.Chemical was ₹9,98,902/- only. Further, he referred to page no.22 of the paper book, wherein the balance sheet for the year ending 31.3.2002 is IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -8- filed, and pointed there from that the share capital and reserves & surplus of the assessee was ₹10,50,31,583/- and the amount advanced to M/s.M.R. Chemicals was ₹2,75,90,237/-. He further referred to page no.36 of the paper book wherein the balance sheet for the year ending as on 31.3.2003 is filed, and pointed therefrom that the share capital and reserves & surplus of the assessee was ₹11,50,59,299/- and the advance made to M/s.M.R.Chemcials was ₹3,54,13,938/-. Thus, he submitted that it is clear that the assessee had sufficient own funds to advance loan to M/s.M.R.Chemcials during the year under consideration, and therefore, in view of the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra), no disallowance of interest expenditure was called for.
21. The learned DR agreed with the above submissions of the assessee.
22. In view of the above facts and circumstances of the case, we set aside the orders of the lower authorities and direct the AO to delete the disallowance of interest expenditure of ₹1,16,227/-in A.Y.2001- 2002, ₹7,70,343/- in A.Y.2002-2003 and ₹5,05,618/- in A.Y.2003- 2004. Thus, this ground of the appeal of the assessee is allowed in all the years under consideration."
8. In the light of the aforesaid decision of the Coordinate Bench, we are disposed to hold that no disallowance of interest for utilization towards non-business purpose is called for in the facts of the case. Accordingly, we adjudicate ground No.2 of the appeal in favour of the assessee.
9. We shall now advert to Ground No.3 of the appeal. The AO also inter-alia made additions of Rs.60 lacs towards unaccounted investment IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT -9- in office premises, namely Sarthik-II. The relevant facts have been noted in the extract of the CIT(A) order above and thus not intended to be repeated. Broadly speaking, in the course of search proceedings of the office premises of the assessee located at Sarthik-II, Opp. Rajpath Club, S.G.Road, Ahmedabad, certain loose-papers and documents found inter alia includes loose-papers filed marked as Annexure-AF 1/6 containing 90 pages. This loose-paper file among others, contains certain record of payments made to seller in respect of purchase of office. The AO on the basis of loose-paper determined the purchase price of office premises at Rs.2,06,50,140/- against the declared purchase costs of Rs.1,26,21,240/- paid by cheque. The AO thus worked out that Rs.80 lacs was paid as 'on-money' in cash out of undisclosed income which has not been accounted for in the Books. Out of aforesaid Rs.80 lacs, Rs.60 lacs was allegedly attributable to Financial Year 2003-2004, i.e. AY 2004-05 and balance Rs.20 lacs was stated to be attributable to Financial Year 2004- 05, i.e. AY 2005-06. The AO thus made additions of Rs.60 lacs towards undisclosed investments in Sarthik-II in relation to F.Y. 2003-04 relevant to AY 2004-05. Similarly, balance Rs.20 lacs were added as undisclosed investment for purchase of property at Sarthik-II in AY 2005-06.
10. In the first appeal, the CIT(A) decided the issue against the assessee. The issue involves factual analysis of seized documents. The IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
- 10 -
CIT(A) has noted the facts and dealt with the issue of unaccounted investment in Sarthik-II in following manner.
"12. The next ground of appeal is regarding unaccounted investment in Sarthik-II. The AO made addition of Rs.20 Lacs in assessment year 2005-2006 and Rs.80 Lacs in assessment year 2006-07 on the basis of seized documents seized from the office premises of the appellant. The relevant discussion of the AO at para-7 to para 8.8 of the assessment order is reproduced as under.
In the course of search proceedings at the office premises of the assessee located at 301, 311 & 312, Third Floor Sarthik-II, Opp. Rajpath Club, Above ICICI Bank, S.G. Road, Ahmedabad loose papers and documents found and seized interalia includes loose paper file marked as Annexure AF 1/6 containing 90 pages. It is seen from Page-4 of Annexure AF 1/6 that it contains record of payments made to Samprat Co Op. Society in respect of purchase of office. In this connection vide questionnaire dated 15/11/2008 assessee was asked to explain as under:
"............................
(vii) It is seen from page no. 4 of Annexure AF/ 1 /6 seized from Sarfhak-lI on 22/03/2007 that if contains noting of payment made in coded form which are duly acknowledged by putting signature in-short form "RB"
0.13 24/11/03 0.15 24/12/03 0.15 9/1/04 0.25 16/1/04 0.10 24/2/2004 0.20 9/4/04 It is also seen from page no.57, 58, 59, 62 of Annexure AF-1/6 that these are receipts issued by new Samprat Commercial Co-op. Society Ltd. to MRCPL on various date for various amount which are signed by its Secretary in - short form "RB".
If is also seen from seized page no. 9, 10,11 that of AF/l/6 that these are copies of letter issued by Auda to Secretary of New Samprat Co-op. Commercial Housing Society Ltd. As per these letters Secretary of this society is Smt. Priyanka R Bhrahmbhatt.
From the above if appears that the signature put on page no. 4 is Secretary of New Samprat Co-op. Commercial Housing Society Ltd. Smt. Priyanka R Bhrambhatt. As per page no.4 the payment details recorded in coded form IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
- 11 -
comes to Rs.78 lacs in F.Y. 2003-04 and.Rs.20 lacs falls in F.Y. 04-05. Please explain why the payment recorded as per these pages should not be treated as cash paid to New Samprtf Commercial Co-op. Housing Ltd. for the office purchases.
6.3. It is admitted by the assessee that the above papers have been seized from the office premises at Sarthik-II during the course of search. As per section 132 of the Income Tax Act, in respect of any paper or document found during the course of search at the premises of the assessee, it is to be presumed that it belongs to the assessee unless it is proved by the assessee otherwise. The assessee has tried to disown the responsibility of the above paper. However, as mentioned in the questionnaire the paper was found from the - premises belonging to the assessee. The assessee himself has admitted in his statement that this annexure is pertaining to the investment in Sarthik-II. This is also evidenced from the reply of Shri Mahesh D Agrawal, Director of the company, in the statement recorded on 6/6/2007 before Investigation Wing, which is reproduced as under:
Q-14 Refer page 12 to 32 of AF-1/6 seized from Sarthi-II on 21/03/2007, how many offices/business premises have been purchased in Sarthi-II, S G Highway and how much amount has been paid.
A-14 We have paid Rs.1.26 Crores approx. against this offices and one show room in Sarthi-II. These 3 offices are at 3r floor, 301, 311 & 312 and show room at No. 107 at first floor. Total ofRs.2 Crores amount was paid and balance amount i.e. Rs. 74 lacs has been returned by New Samprat to us i.e. Maheshraj Chemical P Ltd. In this case at the beginning I have told to the Safal to book some premises in my name i.e. Maheshra ' Chemical P Ltd. A lumsum built up area of 10000 sq, ft. though finally company has purchased only 3 offices i.e. 301, 311 & 312 and a show room at 107.
Thus, from the above it is evident that the above seized papers are "pertaining to the assessee only. It is to be noted that all this payments are acknowledged by initials against each payment mentioned on this seized paper. The secretary of New Samprat Comm. Co.Op. Society Ltd., is Smt. Priyanka R. Brahmbhatt. She is wife of Shri Rajesh Brahmbhatt who is one of the main person in Safal Group who has executed an MOU with the assessee for sale of office premises at Sarthik-II constructed by New Samprat Commercial Co.Op. Soc Ltd. The initial appearing on this page are-put by Shri Rajesh Brahmbhatt as R.B. The payment details figuring on this page are in coded form in terms of Crore Rs. as desiphered in succeeding para. For all these reasons assessee's contention that this page does not belong to it is not accepted and its financial implications are taken into consideration herein para No.7.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
- 12 -
7. Assessee is owner of office premises located at Sarthik-II, Opp. Rajpat Club, S.G. Road, Ahmedabad on first floor as well as on third floor. Assessee has purchased this property from New Samprat Commercial Co.Op. Society Ltd., and it has shown its purchase price at Rs. 1,26,21,2407-. Payment details towards purchase of this property is shown as under :-
In F.Y.2003-04 Rs.50,71,240
" 2004-05 Rs.1,50,00,000
Rs.2,00,71,240
Less : Amount received back
from the seller Rs.74,50,000
Rs.1,26,21,240
It is also seen from the various papers of Annexure AF-1/6 that the payment of Rs.2,00,71,240/- was made by the assessee in cheque on various dates as under:-
Sr.No. Date Amount Rs. Receipt Date as per Seized page No. receipt No. Nos.1. 13/9/03 5,11,111 3 44 2. 17/9/03 22,60,129 4 45
27,71,240
3. 22/11/03 5,00,000 27 21/11/03 57
4. 12/1/04 15,00,000 40 9/1/04 52
5. 24/2/04 3,00,000 48 24/2/04 56 23,00,000 6. 10/8/04 50,00,000 15 87
7. 16/8/04 50,00,000 17 16/8/04 63
8. 13/9/04 25,00,000 21 14/9/04 65 9. 16/9/04 25,00,000 22 70 IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
- 13 -
1,50,00,000 7.2 In the course of search at assessee's office premises located at 301, 311 & 312, Third Floor, Sarthik-II, Opp. Rajpath Club, Above ICICI Bank, S.G. Road, Ahmedabad, loose papers and documents found and seized, inter-alia includes loose paper file marked as Annexure AF-1/6 containing 90 pages. Most of pages of this file are in relation to purchase of property from New Samprat Commercial Co.Op. Society Ltd., known as Sarthik-II.
7.3 It is seen from Page No.l of this file that it contains noting in relation to sale of offices at Sarthik-II. It contains selling rate for Ground 'Floor and First Floor, area of Ground Floor and First Floor, Payment terms, rate of parking per Car, Maintenance deposit, ratio of Built-up area to Carpet area as well as possession period. This page also contains date which is 12/9/2003.
On deeper scrutiny of this page it is seen that the rates for Ground Floor is noted at Rs. 2475 per Sq. Ft. and for First Floor rate shown is Rs. 1475 per Sq.Ft. Area at Ground Floor is shown 3386 Sq. Ft. and 3614 Sq. Ft. The area at First Floor is shown at 6997 Sq.Ft. The maintenance deposit is shown as 120. The ratio of built-up to carpet area is shown 9%. Payment schedule is shown as 10% amount as token and 30% within commencement of work and 60% in equal monthly installments. Parking per Car is noted at Rs. 15,000/- per Car(for six parking.). Above notings are reflected on Page No.3 also as it is Xerox copy of Page No.l.
7.4 Above facts are again repeated in page No.5 & 6 which contain copy of MOU entered between Mr. Mahesh Agarwal - M/s. Maheshraj Chemicals Pvt. Ltd., as buyer and Mr. Rajesh Brahmbhatt of M/s. Safal Constructions Pvt. Ltd., Navrangpura, Ahmedabad as seller and Shri Arvind Shah, CEO - Space Management Ltd., Ahmedabad as intermediators. This agreement is executed on 15/9/2003 in relation to Shop No.l & 2 built up at Ground Floor and shop No.l on First Floor of Sarthik-II, - OPP. Rajpath Club, S.G. Highway, Ahmedabad. This document is on the letter pad of Space Management and it is signed by Arvind Shah as CEO - Land and Projects.
As per Para-1 of MOU the rates for Ground Floor (the area of Shop No.l - 3386 Sq. Ft. and Shop No.2 - 3641 Sq. Ft. - Total - 7027 Sq. Ft.) is shown @ Rs.2475 per Sq.Ft. built-up.
As per Para-1 of MOU the rates for First Floor (the area of Shop No.l - 6997 Sq. Ft.) is shown @ Rs.1475 per Sq.Ft. built-up.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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As per Para-2 of MOU the Maintenance deposit @50 per Sq. Ft., the AEC Charges, AUDA and legal charges @ 70 per Sq. Ft. and Stamp duty and Registration expenses @ Rs. 50 per Sq. Ft.(estimated) shown as would be charged extra.
As per Para-3 of MOU Parking space in the basement is for 6 Cars and the charges for the same are decided @ Rs. 15,000/- per Car.
As per Para-6 of MOU the schedule of payment is decided. As per this token payment is decided @ 10% and further payment @30% was to be made within commencement of work and balance in equal monthly installment basis for the period of 10 months. As per Para-6 of MOU for the purpose of area calculation the difference between built-up to Carpet area is decided as 9%.
7.5 On scrutiny of Page No. 1, 2, 3 and Page No.5 & 6 it is apparent that on 12/9/2003 the deal was negotiated and was noted down on page No.l, as a simple joting. However, it was executed in the form of MOU on 15/9/03 as per page N.o.5 &
6. On the basis of these pages the amount payable can be worked out as under :-
Floor Area (in Sq.Ft.) Rate (in Rs. Per Amount Rs.
Sq.Ft.)
GF 7027 2475 1,73,91,825
FF 6997 1475 1,03,20,575
Total 2,77,12,400
From the above the payment schedule can be worked out as under :-
10% token would be Rs. 27,71,240 30% Rs. 83,13,720
7.6 On collating details of payment as noted in seized paper No.4 and payment schedule as shown in para 7.1 above it can be seen that the MOU for purchase of shops a Sarthik-II was executed on 15/9/2003 and around that period the payment was made by the assessee as under :-
Sr.No. Date Amount Rs. By cheque
1. 13/9/03 5,11,111 By cheque
IT(ss)A Nos.85 - 88/Ahd/2011
Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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2. 17/9/03 22,60,129 By cheque
27,71,240
From the above, it is seen that as per MOU assessee was required to make token payment @ 10% amounting to Rs. 27,41,240/- and the same was paid meticulously as mentioned above. The payment dates are coinciding with the date of MOU. This goes to say that the property at Sarthik-II was purchased by the assessee as per terms of agreement executed on 15/9/03.
In the same way on commencement of work assessee was required to make payment @30% of total sale consideration which comes to Rs. 83,13,720/-. It is seen from the Para-7.1 above that after making token payment of Rs. 27,71,240/- in September, 2003, assessee had made payment of Rs. 23,00,000 by cheque on various dates i.e. Rs. 5 lac on 22/11/03, Rs. 15 lac on 9/1/04 and Rs. 3 lac on 24/2/04. The balance payment of Rs. 60 lacs has genesis in Page No.4 wherein payment is shown as under:-
Sr.No. Date Amount Rs.
1. 24/11/03 0.13
2. 24/12/03 0.15
3. 9/1/04 0.15
4. 16/1/04 0.25
5. 24/2/04 0.10
0.78
6. 9/4/04 0.20
Total 0.98
It is worthwhile to mention that on 9/1/04 the payment is shown as 0.15. On correlating this figure with the cheque payment of Rs. 15 lac made on 9/1/2004 as mentioned in para 7.1 above it goes to say that the amount noted in seized Page No.4 IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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is in Crores. On decoding the payment details recorded in seized page No .4 it indicates that as per this page the amount paid was Rs. 78 lacs in F.Y.03-04.
It is also necessary to mention here that on 9/1/2004 payment of Rs. 15 lacs was made by cheque and as per this paper payment on 24/2/2004 is noted as Rs. 10 lacs but out of the same Rs. 3 lac has been paid by cheque, as noted in para-7.1 above. After setting off these two payments, the payment other than cheque would come to Rs, 60 lacs which exactly coincides with the payment schedule mentioned in MOU executed on 15/9/03.
From the above, it is apparent that the payment detail noted in Page No.4 are in coded form. The total payment as per this page comes to Rs. 98 lacs which includes payment by cheque amounting to Rs. 18 lacs. Thus, the total cash payment made as per this page is Rs. 80 lacs. Out of the same Rs. 60 lacs falls in the Financial Year 2003-04 and Rs. 20 lacs falls in Financial Year 2004-05.
7.7 It is also worthwhile to mention here that assessee has shown payment in cheque for the purchase of property at Sarthik-II at Rs. 1,26,21,240/- and if the payment made in cash as per seized Paper No.4 is added to it, the total payment for purchase of this property would come to Rs. 2,06,21,240/- which would coincide with the sale consideration worked out on the basis of MOU.
In para 7.4 above the total payment for office premises located at Ground Floor and First Floor was worked out at Rs. 2,77,12,400/-. However, as per seized pages No.78, 77, 76, 75 & 74 of Annexure AF-1/6 assessee has purchased property at 1st Floor admeasuring to 7009 Sq.Ft. and at Third Floor 5738 Sq. Ft. As per this revised purchase details the value of the offices would come as under :-
Floor Area (in Rate (in Rs. Per Amount Rs.
Sq.Ft.) Sq.Ft.)
First Floor 7009 1475 1,03,38,275
Third Floor 5738 1475 84,63,550
1,88,01,825
Maintenance Deposit as per 12747 50 6,37,350
MOU
AEC Charges/AUDA & 12747 70 8,92,290
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legal charges as per MOD
Registration expenses as per 12747 25 3,18,675
MOU
Total 2,06,50,140
7.8 As discussed above, assessee has paid purchase consideration of office premises at Sarthik-II in cheque at Rs. 1,26,21,240/- and has also paid consideration in cash at Rs. 80 lacs as worked out above. Out of the same Rs. 60 lacs has been paid in Financial Year 2003-04 pertaining to the assessment year under consideration. Accordingly an amount of Rs. 60 lacs is added as undisclosed investment for purchase of property at Sarthik-II in A.Y.2004-05 and in the same way Rs. 20 lacs will be added as undisclosed investment for purchase of the property at Sarthik-II in A.Y.2005-06. Penal proceedings are also initiated for concealing particulars of income.
13. The written submission of the appellant on this issue is reproduced as under:
"Unaccounted investment in Sarthik-II property:
The Assessing Officer in his assessment order has observed that the appellant has invested more amount towards the purchase of showroom No. 101 and office premises located at 301, 311 and 312, 3rd floor, Sarthik-II, Opp. Rajpath club, S.G.Highway, Ahmedabadfrom New Sampart Co. Op. Commercial Housing Society compare to Rs. 1.26 crore shown in the boohs of accounts. According to Assessing Officer, as per the Annexure AF 1/6, seized during the course of search contains certain details of this transaction of office premises purchase and towards which the payment made comes to Rs. 80 Lakhs in cash and 1.26 crore by cheque. He has come to this findings on the basis of following grounds:
i) The Assessing Officer has stated that as the loose papers containing the papers of investment in the offices at Sarthik-II were found from the premises of the appellant, the inference if any from this papers should also be drawn in the hands of the appellant.
Further, he has relied on answer of Question No. 14 of the Director's Statement recorded during the course of search.
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ii) Further, he has stated that all the payments in the seized paper is acknowledged by the initials on behalf of New Sampart Co. Op. Commercial Housing Society.
iii) The Assessing Officer has relied on copy of M.O.U. found during course of search entered between appellant M/s. Maheshraj Chemicals Private Limited as buyer and Mr. Rajesh Brambhatt of M/s. Safal Constructions Private Limited, Navrangpura, Ahmedabad as seller and Shri Arvind Shah, CEO- Space Management Limited, Ahmedabad as intermediators. This agreement was executed on 15/09/2003 in relation to Shop No. 1 & 2 buildup at ground floor and Shop No. 1 on the first floor at Sarthik-II, Opp. Rajpath club, S.G. Highway, Ahmedabad. this document is on the letter pad of Space Management Limited and it is signed by Arvind Shah as CEO Land and Projects.
iv) The A. O. has relied on the following notings found during the course of search for arriving at figures ofRs. 80 Lakhs.
Sr. No. Date Amount Rs.
1. 24/11/2003 0.13
2. 24/12/2003 0.15
3. 09/01/2004 0.15
4. 16/01/2004 0.25
5. 24/02/2004 0.1
0.78
6. 09/04/2004 0.20
Total- -> 0.98
First of all the above payment details were decoded to be in crores by the Assessing Officer. Then the credit for Rs. 15 Lakhs paid on 09/01/2004 and Rs. 3 Lakhs paid on 24/02/2004 by cheque was given and remaining 80 Lakhs out of total figure of 98 Lakhs was assumed to be paid in cash. Out of the same, Rs. 60 Lakhs falls in the financial year 2003-2004 and Rs. 20 Lakhs falls in financial year 2004-2005.
v) Further the Assessing Officer has observed that as per seized pages No. 78,77,76,75 & 74 of Annexure AF 1/6 appellant has purchased property at 1st Floor IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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admeasuring to 7009 Sq.Ft. and at 3rd Floor 5738 Sq.Ft. As per this revised purchase details the value of the offices -would come as under:
Floor Area [in Rate [in Rs. Amount Rs.
Sq.Ft.] Per Sq.Ft.]
First Floor 7009 1475 1,03,38,275
Second Floor 5738 1475 84,63,550
1,88,01,825
Maintenance Deposit as per 12747 50 6,37,350
MOU
ARC Charges/ AUDA & legal 12747 70 8,92,290
charges as per MOU
Registration expenses as per 12747 25 3,18,675
MOU
Total 2,06,50,140
As discussed above, appellant has paid purchase consideration of office premises at Sarthik-II in cheque ofRs. 1,26,21,240/- and has also paid consideration in cash at Rs. 80 Lakhs as worked out above. Out of the same Rs. 20 Lakhs has been paid in Financial Year 2004-05 pertaining to the assessment year under consideration. Accordingly, an amount ofRs. 60 Lakhs is added as undisclosed investment for purchase of property at Sarthik-II in A. Y. 2004-05 and in the same way Rs. 20 Lakhs is added as undisclosed investment for purchase of the property at Sarthik-II in A. Y. 2005-06.
vi) Against the above stand of Assessing Officer, the appellant would like to submit that the whole addition has been made only on the basis of loose papers found during course of search without any correlated evidence. The appellant has explained that the loose papers were only rough noting before the finalization of purchase of office premises and the actual payment was made as per books of accounts.
vii) The assessee company had explained that initially it had decided to buy Lump sum for 10000 sqft space which was also confirmed from the statement taken u/s IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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132(4) given by the director of the assessee company. It was ready to finalize the purchase deal for the premises at ground, first and third floor if it would get a good deal for it. Therefore for the safer side the assessee company had made payment ofRs.2.01 crores for the booking for the ground, first and the third floor. But afterwards due to lack of interest in paying such a high price even after bargaining, the assessee company decided to purchase the premises at first and the third floor office for their business purpose. And finally the assessee company had finalised the deal for first and the third floor.
As mentioned above, the assessee company was not making payment as scheduled as the assessee company was waiting for the negotiation. Developer ofSarthik was not ready to bargain for the ground floor, but was ready for first and the third floor. Sarthik requested to cancel the booking for the ground floor. Therefore afterward assessee has found it proper to cancel the booking for ground floor and the refund was made to the assessee for balance Rs.74 lakh and Rs.126 lac was adjusted for the premises at first and third floor.
For the schedule payment the assessee was making payment as and when they could arrange for the funds. The fact was that company was in dilemma that it would be able to make good deal for the ground floor. Out of payments made by the assessee, the AO has haphazardly connected with scheduled payment as per MOU which was the standard MOU. The actual deal was for first and the third floor, while the MOU was for only for ground and first floor and that also before negotiation. AO stated that the assessee had made payment of Rs. 23,00,000/- by cheque on various dates i.e. Rs. 5 lacs on 22/11/03, Rs. 15 lacs on 09/01/04 and Rs. 3 lacs on 24/02/04. AO correlated this figures with the cheque payment of Rs. 15 lacs made on 9/1/2004 with the amount note in the seized material on Page - 4 Annexure AF-1/6. Applying the same logic again also that payment made on 24/2/2004 is noted as Rs. 10 lacs but out of the same Rs. 3 lacs has been paid by cheque AO can't assume that out of 10 lacs due on 24/02/04, Rs. 3 lacs has been paid by cheque remaining in cash. AO can't presume by himself that part payment are made through cheque and part in cash.
Rates taken by the AO was based on the MOU. The MOU Was before negotiation, it was a standard MOU same way reg. maintenance deposit it was standard format. The price was still pending to be finalized.
viii) This fact becomes more justifiable because the noting made in the loose papers pertains to ground floor and first floor rates while the actual deal has been for the office premises at the first floor and third floor. As the rate in the MOU was only for the first floor the same rate cannot be considered for third floor because there is always a tendency that prices for third floor is lower than that of first floor.
ix) It is also worthwhile to mention that MOU was not signed by the appellant and was on the letter head of third party. (Not of appellant nor of the developer). As such IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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it as a proposal by the writer of MOU who is a broker (Named as Space Management). As per the knowledge of the appellant the builder of the property or the owner of space management on whose letter head MOU was typed were never questioned on this issue nor the Department has any proof that the said parties have at any point of time validated this MOU. As said before this MOU was only rough estimate which was never executed. This fact get more justified when one reads at the bottom of MOU where it has been mentioned that it should be torn off when executed. As the MOU has not been executed the same was not torn off and should found at the premises during search.
x) Further, the appellant would like to submit that the sale deed is registered and the consideration paid has been accepted by the stamp valuation authority. No adverse inference has been drawn by the said authority. Hence the appellant would also like to rely on the Ahmedabad Tribunal judgment reported in 9 DTR 601 where it has held that in the absence of any material showing that the assessee has received higher amount than in books of accounts, the payment figure as per books of accounts has to be accepted. In case before hand there is no evidence that the appellant has paid more than the accounted entries and the Department has only relied on rough notings found in loose paper and unexecuted MOU which as stated was a proposal only. The MOU relied upon by the assessing officer and other loose papers inappreciably correlated to it by the assessing officer for making the addition is not justifiable as the MOU itself was not accepted by the appellant at any stage for which explanation has already been given in preceding para.
xi) In the statement recorded of the directors of the company, it has been clearly stated that the company has paid Rs.1.26 crore approx. against this offices and one show room in Sarthik-II. These 3 offices are at 3rd Floor, 301,311 & 312 and show room at No. 101 at the first floor. Total ofRs. 2 crores amount was paid out of which amount i.e. Rs. 74 lacs has been returned by them to the appellant i.e. Maheshraj Chemical Private Limited. In r this case at the beginning it was told to Safal to book some premises in appellant's name i.e. Maheshraj Chemical Private Limited. A lump sum built up area of 10000 Sq. Ft. though finally company has purchased only 3 offices i.e. 301,311 & 312 and a show room at 1019.
The calculation made by the Assessing Officer on the basis of loose papers as per Annexure AF 1/6 is only on assumption and no where the word cash has been mentioned so as to draw the inference that the said amount has been actually paid in cash. As said before, these documents were only a rough estimate before the actual finalization of office premises and has no noting to do with the actual purchase price of the office premises. "
14. The appellant made further submission on the seized papers as under:
"Further to whatever have been submitted, we have to submit as under.
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[1] It is a fact that the premises for which we had entered into primary understanding were changed, subsequently.
[2] It is a fact that on the date of search, no statement relating to the seized paper, which is now made the basis of the addition, has been recorded.
[3] It is also a fact that on the date of search, the entire transaction was explain in detail vide Answer to Question No. _____.
[4] On that date, no allegation was made by the search party about the transaction of on-money.
[5] The jottings which are now relied upon by the Assessing Officer are not at all in the hand writing of the assessee. The jottings are simple scribblings and not suggestive of any transaction.
[6] Whether it is receipt or payment, it is not at all coming out of the said jottings.
[7] Whether it is cheque or cash, it is also not at all in any way suggested by the said jottings..
[8] It is an admitted fact that many payments by cheques are made over and above the one cheque payment which is referred to by the Assessing Officer before and after these dates. Why these cheque payments have not been written or noted in these jottings. If the Assessing Officer's suggestion is to be accepted, then these papers ought to have contained details of other cheque payments.
[9] Just because one cheque is of Rs.15 lacs and tallies with one of the entries which is by way of coincidence, it cannot be taken as the basis for assuming that these are related to in terms of lakhs and that too, on-money payments. All of the basis adopted by the Assessing Officer are based on mere presumptions and assumptions.
[10] The documents which are now relied upon are not documents which contain the full details of the transaction. The payment by cheque which the Assessing Officer has suggested is for the property which has never been bought.
[11] It may appreciated on perusal of referred paper that the paper is written at a stretch, and this itself shows that the different amounts referred to and date does not reflect actual payment. Otherwise, the handwriting and letters would differ if it is noted on different dates. As such presumption of payments as per said paper is not correct.
[12] Further, to the best of information and knowledge of the appellant, the A.O. had at the relevant time issued notices u/s. 133(6) to SARTHIK and in reply they have confirmed that no on money payment was made by the appellant"
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15. I have considered the submissions of the appellant and also perused the assessment order. The main contention of the appellant is that
1. The MOU is not signed by the appellant. It is in the letter head of a third party namely M/s space management, who had offered rates for the ground and first floors of the Sarthik-II premises
2. The appellant has not purchased the office space at ground floor and first floor as mentioned in the MOU but ultimately purchased the office at first and third floor of Sarthik-II.
3. The appellant had paid total consideration of Rs.2 crores for the purchase of ground floor premises but since the office accommodation at ground floor was not available, Sarthik-II returned Rs.74 Lacs and adjusted Rs. 1.26 crores against the purchase of office premises at first and third floor.
4. The MOU therefore, should have not been relied upon by the AO while making the addition of Rs. 80 Lacs in respect of the purchase of office premises in Sarthik-II.
15.1 Had the addition been made by the AO only on the basis of the MOU, probably, I would have given the benefit of doubt to the appellant for the reason that as per the MOU the floors proposed for sale to the appellant is different than what has been ultimately purchased by the appellant and that the MOU is not signed by the appellant. But in this case, the main evidence is found and seized from the premises of the appellant which has been discussed by the AO in the assessment order. As per the loose papers, the following payments have been shown as made to RB, who according to the AO means Rajesh Brahmbhatt, a key person in Safal group who has executed an MOU with the appellant for the sale of office premises at Sarthik-II constructed by new Samprat Commercial Cooperative Society limited.
Sr. No. Date Amount Rs.
1. 24/11/2003 0.13
2. 24/12/2003 0.15
3. 09/01/2004 0.15
4. 16/01/2004 0.25
5. 24/02/2004 0.1
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0.78
6. 09/04/2004 0.20
Total 0.98
The fact of payment of the above mentioned amounts is corroborated by the fact that on 9/1/2004 cheque amount of Rs.15 Lacs(coded as 0.15 in the seized papers) is made by the appellant to RB. During the period 24/11/2003 to 24/2 /2004 total payment of Rs.78 Lacs was made by the appellant and as on 9/4 /2004 further payment of Rs.20 Lacs was made. In other words, all the payments shown by the appellant towards the purchase of the office premises during the period 24/11/2003 to 9/4/2004, whether by cash or by cheque, is reflected in the seized paper as discussed above. During this period, the appellant paid two cheques -- one for Rs.15 Lacs on 9/1/2004 and another for Rs.3 Lacs on 24/2/2004. In the loose paper, the entry of Rs.15 lacs is appearing as on 9/1/2004 and on 24/2/2004 the entry of Rs.10 Lacs is appearing which indicated that on 24/2/2004 the appellant paid total amount of Rs.10 Lacs including cheque amount of Rs.3 Lacs to RB. In other words, out of the total payment of Rs.98 Lacs made during 24/11/20,03 to 9/4/2004, cheque amount of Rs.18 Lacs only was paid. The balance amount of Rs. 80 Lacs represented the cash consideration. The AO has successfully corroborated this amount of Rs.80 Lacs with the contents of the MOU. From paragraph 8 to 8.8 of the assessment order he has proved beyond doubt that the total consideration passed towards the purchase of office premises at first and third floor was Rs.2,06,50,140/- as against Rs.1,26,21,240/- shown by the appellant. In fact, the rate worked out as per MOU was found to be exactly tallying with total consideration of Rs.2,06,50,140/- after considering the maintenance deposit, AEC charges and registration expenses etc., therefore, the contention of the appellant that merely because the MOU is not signed by the appellant, it should be ignored cannot be accepted. The contents of the MOU are independently verifiable from the loose paper seized from the premises of the appellant. Contention of the appellant that not much of reliance be placed on the seized document as it is not in the handwriting of the appellant or the cash payment has not been accepted either by the broker space management or by the developer Safal Construction can not be accepted at this stage. As the appellant is Co, the paper cannot be written by a company. Further, it is very unlikely that the other person would confirm the receipt of on money. What is to be seen in such type of cases, is preponderance of probability. The 12 point additional submissions particularly the authenticity of seized papers on the basis of which AO issued Show cause to the appellant, were never raised before the AO. As stated above, the AO has been able to prove that the appellant has paid on money to the tune of Rs.80 Lacs to Rajesh Brahmbhatt, a key person of Safal group who has developed the property known as Sarthik-II, the same is taxable in the hands of the appellant. Since out of this, Rs.60 Lacs pertain to assessment year 2004-2005 and Rs.20 Lacs to assessment IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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year 2005-2006, the AO was justified in making the addition of Rs.60 Lacs in assessment year 2004-2005 and of Rs.20 Lacs in assessment year 2005-2006.This ground is, therefore, decided against the appellant."
11. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal.
12. Dealing with ground No.3 of the appeal, the Ld.AR for the assessee submitted that the CIT(A) committed error in confirming addition of Rs.60 lacs as unaccounted investment in Sarthik-II property referring to seized paper in AY 2004-05 and Rs.20 lacs in AY 2005-06. The Ld.AR broadly reiterated various submissions made before the AO and the CIT(A). The Ld.AR vehemently exhorted that loose-papers found in the course of search have been misinterpreted and wrongful conclusion has been drawn. The Ld. AR submitted that the loose paper found in search does not pertain to the assessee. It was next contended on behalf of the assessee that the loose papers were only rough notings before the finalization of purchase of office premises. The actual payments were made as per books of accounts. It was submitted that the Assessee initially decided to buy 10000 sq. ft. space in lumpsum as can be seen from the statement of the director. The payment of Rs. 2.01 crores were made on safer side for booking office at ground floor, first floor and third floor being a good deal from assessee perspective. The assessee changed its stance and purchased first floor showroom and third floor offices and shunned ground floor office/ showroom owing to subsequent dilemma IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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and lack of interest. Rebutting the content of the MOU, it was submitted that the actual deal was for first and third floor while the MOU was for ground and first floor. The learned AR strongly objected to the interference drawn by the AO on the loose paper. It was submitted that the figures mentioned in loose paper 4 ( placed in paper book) assumed to be in crores is without any proper basis. It was further submitted that payment made on 24/02/2004 is noted as Rs. 10 lakhs in the said loose paper. The AO correlated 3 lakhs to be in cheque as per receipt found in the search and thus presumed balance Rs. 7 lakhs to be cash and unaccounted on surmises. It was contended that AO cannot presume by himself that part payment was made through cheque and part in cash. It was thereafter submitted that the rates taken by the AO was based on the MOU. The MOU was before negotiation. The price in the MOU was not finalized. The rate adopted for third floor is based on rates of first floor which is argued to be improper as there is always a tendency of lower rates for higher floors. It was contended that the MOU was only a proposal and was not signed by the developer or the assessee but was prepared on the letter head of the estate agent. It was thus a mere proposal and was a mere rough estimate. It was never acted upon. It was next contended that the sale deeds are registered and the price mentioned therein is thus required to be adopted. As regards loose paper 4, it was contended that jotting which were relied upon by the AO are not at all in the hand writing of the assessee. The jottings are simple scribblings and IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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not suggestive of any transaction. The nature of amounts being a receipt or a payment is not coming out of such loose paper. Similarly, whether it is cash or cheque transaction is also not known. The learned AR sought to assail the loose paper on the ground that all the cheque transactions are not found to be recorded in the loose paper.
13. We have heard the rival submissions and perused the orders of the lower authorities and other material and documents relied upon by the parties hitherto. The substantive question that hinges in the entire controversy is whether the loose papers and other documents seized in the premises of assessee are capable of giving rise to presumption of undisclosed income in the hands of the assessee in two assessment years or not.
13.1 The assessee is owner of showroom and office premises at first and third floor at Sarthik -II Ahmedabad. The purchase of property was stated to be made from M/s Safal Constructions Pvt. Ltd.. In the course of search proceedings of the office premises of the assessee on 21/03/2007, certain loose papers and documents seized included loose papers file marked as Annexure AF 1/6 containing 90 pages. Page 4 of these loose papers allegedly contains certain entries of payments towards purchase of offices at Sharthik-II covering some period wherein unaccounted component to the tune of Rs. 80 lacs is allegedly embedded.
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It was claimed by the AO that the payments made for purchase of property in the aforesaid loose paper no. 4 is duly acknowledged by the recipient in coded form " RB". The coded word 'RB' allegedly denotes 'Rajesh Brahmbhatt'. Rajesh Brahmbhatt allegedly happens to represent Safal Group in the aforesaid deal with the assessee as per MOU jotted by the intermediators i.e. estate consultant namely 'Space Management'. The purported MOU was also found and seized in the search proceedings. The secretary of the aforesaid commercial premises is named "Priyanka R. Brahmbhatt' who is wife of 'RB'.
13.2 The aggregate of truncated payment made as per the aforesaid loose paper no. 4 allegedly works out to Rs. 98 lacs in coded form which are allegedly acknowledged by putting signature in short form " RB". This loose paper is the axis of the entire controversy in hand. Certain receipts at page no. 57, 58, 59 and 62 issued by the society of the Commercial premises to the assessee on various dates for various amounts found in search are signed by its secretary in short form 'RB'. As noted above, the secretary of the Commercial premises namely 'New Samprat Comm. Co. op. society' is one Smt. Priyanka R. Brahmbhatt. She is stated to be wife of one Shri Rajesh Brahmbhatt who is one of the main person in Safal Group who has executed an MOU with the assessee for sale of office premises at Sarthik II constructed by the aforesaid society. In this connection, a statement of the assessee was recorded IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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before investigation wing about 3 months after search on 6/6/2007 wherein it was admitted that 3 office premises were purchased at 3rd floor and one show room at 1st floor of Sarthik-II. It was deposed by director Sh. Mahesh D. Agrawal therein that total of Rs. 2 crore was initially paid but balance 74 lacs has been eventually returned by the seller and thus a net consideration of Rs. 1.26 cr. approx. was only paid against the purchase of these offices and show room. It is the case of the revenue that the aforesaid loose paper showing payments clearly pertains to the Assessee and all the payments made by the assessee is acknowledged by the initials "RB". The initial is decoded to read as Rajesh Brahmbhatt. The payments recorded in the loose paper amounting to Rs. 98 lakhs are not traceable in the books except one or two instances aggregating to Rs. 18 lakhs. The balance amount of Rs. 80 lakhs were thus treated as undisclosed income apportioned at Rs.60 lakhs and 20 lakhs over two assessment years in appeal.
13.3 Based on similarity of the one instance of entry of Rs. 0.15 dated 12/01/2004 appearing in coded form in loose paper also correspondingly appearing in books at Rs. 15 lakhs on the same date, it was further inferred by the AO that the payment details figuring in the loose paper no. 4 in coded form are in terms of Rs. Crores. Thus, the AO decoded the figures mentioned as well as recipient in the loose paper and established the connection of recipient with the seller i.e. Safal Group. For all these IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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reasons, the assessees contention that this loose paper does not belong to him was rejected by the AO and endorsed by the CIT(A).
13.4 The Ld. AR for Assessee on its part alleged before us that the AO on the basis of rough unsigned note (purported MOU) and with reference to some unrelated / irrelevant figures has determined the purchase costs of office premises for Rs. 2,06,50,140/- against purchase costs of Rs. 1,26,21,240/- ( net of amount received back from seller Rs. 74.50 lakhs) and artificially worked out that Rs. 80 lakhs as paid in cash out of unaccounted source of income. The AO bifurcated the allegedly unaccounted income towards alleged cash payments at 60 lakhs relatable to FY 2003-04 relevant to AY 2004-05 and other Rs. 20 lakhs relatable to FY 2004-05 relevant to AY 2005-06 based on the date of transactions as recorded in the loose paper no. 4 seized.
13.5 At this stage, refer from the assessment order that the assessee claimed to have paid Rs. 50,71,240/- in cheque in FY 2003-04 and Rs. 1,50,00,000 in FY 2004-05 for which receipts were found in the loose papers seized. Thus, the total payments were admittedly made to the tune of Rs.2,00,71,240/-. However, the assessee simultaneously claims to have received back Rs. 74,50,000/- from the seller of the office premises. However, we are unable to find any concrete details concerning return of money viz. date of return, mode of return of money and circumstances IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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which compelled the parties to reverse the payments were referred. Thus, except for generic indication in this regard, no objective facts are available on record.
13.6 On the facts as recorded by the CIT(A) reproduced in Para-10 hereinabove, we do not find any reason to differ with the conclusion of the AO that the loose paper give rise to sound basis for determination of undisclosed income. There is no rebuttal to the assertion of the AO that the loose papers including page no. 4 were seized from the premises of the assessee.
13.7 To elaborate, we find that based on evaluation of the loose papers seized, the AO tabulated that total payments of Rs. 2,00,71,240 [ reproduced in the order of CIT(A) as extracted above]. The AO thereafter correlated entries in loose paper in coded form duly acknowledged by "
RB" and claimed that it stands for 'Rajesh Brahmbhatt' who happens to represent seller namely Safal Constructions Pvt. Ltd. and is also husband of the secretary of the society Mrs. Priyanka R. Bhahmbhatt. The AO noted that the name of Rajesh Bhrambhatt (RB) figures in an MOU seized and forms part of loose papers. The terms of understanding for purchase of property by way of MOU dated 15/09/2003 has been recorded on the letter head of the purported intermediary or estate broker M/s 'Space Management' wherein Rajesh Brahmbhatt was recorded to be IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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representative of Safal Constructions Pvt. Ltd. The aforesaid MOU although not signed by the Assessee and the same was found to be from the custody of the assessee in the course of search. The assessing officer took note of the rates agreed for initial negotiation of ground floor at higher rate of 2475 per sq. ft and first floor rate of 1475 per sq.ft. and extrapolated the concessional rate of Rs. 1475 per sq. ft. for revised acquisition of 3rd floor offices.
13.8 One can loose sight of the fact that such unrecorded entries are generally codified. We find that the AO has successfully decoded the payments made as recorded in abbreviated form in loose paper no. 4 to be in crores with reference to payment of Rs. 15 lakhs made on 9/1/2004 as per receipt found of the same date from the premises of the Assessee. Thus the inference drawn by the AO that all other coded payments were similarly put in crores as per the same analogy cannot be said to be improbable. The recipient referred to as RB has also been decoded. The AO thus decoded the figure mentioned as well as the recipient as mentioned page 4. The argument of the assessee that the loose paper found from the custody of the assessee is a lifeless or a dumb document thus gets neutralized. The figures mentioned in the loose paper do not remain obscure any longer on such corroboration. It is common knowledge that such notings are typically made in abbreviated form. The severe limitations with which the revenue is beset with cannot be IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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overlooked. The inference drawn by the AO thus has to be seen on the touchstone of preponderance of probabilities. The jottings found along with other property documents cannot be inferred to have been written aimlessly. The primary onus lies on the assessee to explain the purport of such notings. The assessee cannot sleepwalk over the onus of explanation in this regard. The Assessee has summarily disowned the responsibility in this regard without throwing any light on this. The AO on the other hand has founded his decoding based on firm documents. Thus, on comprehension of the facts in totality, the inference drawn is logical and cannot be shunned as irrelevant or extraneous piece of paper as alleged. The notings in loose paper seized marked page 4 is thus found credible in the facts cannot be tarred with skepticism.
13.9 Having noted that the Assessing officer has successfully mapped the transactions recorded in the loose paper and has correlated the particulars in general, we observe that the moot point in question is not whether showroom at ground floor was eventually purchased or not but whether payments as noted in the loose paper were found unrecorded or not. The AO has demonstrated that barring one instance of payment of Rs. 15 lakhs and other instance of part payment to the extent of Rs. 3 lakhs found recorded in the books, the other payments were not reflected in the books and went unrecorded. The AO has not merely relied on the entries in the loose paper for determination of undisclosed income in a IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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sweeping manner. We find that the AO could successfully collate the terms of MOU with the actual payments in installments. The first installment of Rs. 27,71,240 being 10 % of agreed amount determined as per MOU was found to be exactly tallied with the actual payments. Similarly, second installment of 30% was worked out to Rs. 83,13,720/- out of which 18 lacs of receipts found was co-relatable to loose paper. Thus, the balance account of 60 lacs (FY 2004-05) as noted and acknowledged in coded form in loose paper was inferred to be unaccounted cash payment. This difference of 60 lakhs as per loose paper was noted to coinciding with the payment schedule as per MOU. Thus, the terms of MOU were found to be broadly matching. The action of the AO in such facts cannot the said to be marred by conjectures or surmises. The trail of transactions and chain of documents are broadly matching. Needless to say, the documents were seized from the premises of the assessee. Thus, it is the assessee who is privy to the underlying facts about the notings made in the loose papers. The onus squarely lies on the assessee. The assessee is merely in a denial mode without throwing any light on the circumstances which led to creation of such large number of speaking documents. It is uncharacteristic of an assessee to say that a large sum of Rs. 74.50 lacs in the context was initially paid in excess and was returned later without any corroboration thereof. What circumstances compelled the assessee to pay such huge amount hurriedly and thereafter purportedly called back is for the assessee to explain. The date of IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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purported return of payment could also trigger further queries. No information was brought on record by the assessee to address this aspect.
13.10 There is another aspect concerning the issue. The tally of jotting of 0.15 in loose paper with date 9/01/2004 qua the receipt found is not a mere coincidence as alleged by the assessee. The transactions with safal group was in progress for the purchase. The recipient (RB) was found representing the seller. In these facts, the onus is wrongly attempted to be shifted by the assessee on the other side to answer something which is in the knowledge of the Assessee. It was for the assessee to explain the nature of assertions made in the loose paper. The AO, on the other hand, with the help of other documents seized could substantially correlate the chain of transactions and events to come to the conclusion of involvement of undisclosed income. The pertinent point is not which property was bought and which was not, but whether any unrecorded payments were made and if yes, source of such payments. The loose paper read with other documents seized suggests so. It is for the assessee to rebut the contents or explain the source thereof.
13.11 We are also alive to the plea of the assessee assailing the finding of the AO on the pretext that initial negotiation for ground floor and first floor in terms of purported MOU did not work and was eventually modified. This relocation of floor in our view would not dent fact of IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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payment as recorded in loose paper. How the change of floor position would lead to this mismatch or excess payment was for the assessee to explain. It is also for the assessee to explain the purport of entries with date and coded signature found from its premises. This aspect is completely missing in the response of the assessee.
13.12 In the absence of any plausible explanation for non existence of entries found recorded in the loose paper to the extent of Rs. 80 lakhs, the contention of the asseseee that the initial negotiation was revised and consequently loose paper found is dumb is an argument of despair. The AO has established the involvement of unaccounted money with reference to the cost of the offices acquired. To reiterate, notwithstanding change in the positioning of the office premises, the loose paper has unraveled the fact of truncated payments which remains to be explained to the extent of Rs. 80 lakhs. Another contention of the assessee that since all the cheque entries are not found in the loose paper rendering it to be incomplete and extraneous piece of paper. We see no warrant in such argument. The jottings may be for a particular period or for some transaction as it was not a regular record. The inference drawn by the revenue having regard to the totality of facts noted emerges intelligible and on a sound footing and thus cannot be impeached.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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14. In nutshell, the assessee has taken multiple stands from denial of the loose paper as belonging to it and were extended to its incorrectness. Except for disowning the responsibility of explaining the contents of loose paper found from its office premises, The Assessee has not come forward with any plausible reasons. The loose paper was found from the premises of the assessee and thus ostensibly belongs to the assessee. Hence, the primary onus is on the assessee in this regard which is not discharged at all. The revenue on the other hand, with the help of several documents seized in the search, made a discernible case that certain unexplained entries form connection with the purchase transaction. Apart from MOU, another loose paper showing terms and conditions at page 1 as well as page 3 were found from the premises of the assessee which reinforces the existence of unrecorded transactions. Pertinent here to mention that the assessee is a corporate entity. Thus, its management is expected to run professionally owing to fiduciary position of the board. Unrecorded jottings duly acknowledged by the other party is at the heart of the matter and not the substitution of one office by another. The presumption raised against the assessee by the revenue is plausible and based on the documents seized after duly confronting the assessee in this regard. The loose paper was established to be speaking document. The figures mentioned therein therefore do not lie. The hawkish explanation of the assessee with reference to loose papers seized is not entitled to great weight. The inference drawn by the revenue is thus based on IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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objective consideration of facts. Hence, in the absence of any tangible merit in the pleas of the Assessee, we decline to interfere with the order of the CIT(A). Ground No. 3 is thus dismissed.
15. As a result, the appeal of the assessee is partly allowed.
IT(ss)A No.86/Ahd/2011- AY 2005-06 (Assessee's appeal)
16. The grounds of appeal raised by the assessee assailing the order of the CIT(A) dated 11/11/2010 read as under:-
1. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground of appeal challenging the validity of the proceedings initiated u/s.153A of the I.T. Act, when nothing incriminating was found during the course of search, and in spite of the fact that this issue was squarely covered in assessee's favour by virtue of various decisions of the Hon'ble Tribunal.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the Assessing Officer's finding that the loans and advances given by the assessee company to M.R. Chemicals which is proprietary concern of its director Shri Mahesh Agarwal were not for business purposes and therefore, to the extent interest bearing borrowed funds were utilized in giving such loans and advances, the interest payable on such borrowed funds is to be disallowed.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs.2,30,403 made by the Assessing Officer on the ground that the aforesaid interest income was earned by the assessee from Asiatic Colour Chemicals Industries Pvt.Ltd., on the basis of a seized paper, allegedly not accounted in the books of account.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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4. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs.20,00,000 made by the Assessing Officer on the alleged and assumed basis that the aforesaid amount represented unaccounted investment in Sarthik-II property referring to a seized paper.
5. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground of appeal challenging levy of interest u/s.234A, u/s.234B and u/s.234C of the I.T. Act, merely mentioning that 'this is only consequential in nature'.
17. Ground No.1 relates to validity of jurisdiction of proceedings initiated under section 153A of the Act.
18. The Ld.AR for the assessee submitted that the aforesaid ground is not under serious challenge. In terms of para-3 of this order, ground No.1 of assessee's appeal stands dismissed on the similar footing.
19. Ground No.2 concerned disallowance of interest on borrowed funds on the ground that certain funds have been utilized for advancing interest-free loan to M/s.M.R. Chemicals. Identical issue was raised in the earlier year 2004-05 also. Following the parity of reasoning as per our decision relating to AY 2004-05, we hold that no disallowance of interest for utilization of borrowed funds for the purpose of advance to M/s.M.R.Chemicals is called for. Accordingly, ground No.2 of the appeal is adjudicated in favour of assessee.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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20. Ground No.3 concerns addition of Rs.2,30,403/- made by the AO on the ground that aforesaid interest income was earned by the assessee from M/s.Asiatic Colour Chemicals Industries Pvt.Ltd. on the basis of seized paper allegedly not accounted in the books.
21. The relevant facts concerning the issue are that the assessee has advanced loan of Rs.273 lakhs and interest of Rs.19,09,463/- has been allegedly received from Asiatic Colour Chemicals Industries Pvt.Ltd. According to the assessee, the amount so received is on account of sales and is thus an adjustment against sales. However, the AO has treated the said amount as interest income and added to the total income on amount of Rs.2,30,403/- for AY 2005-06 and Rs.16,79,060/- for AY 2006-07 on mercantile basis.
22. In the first appeal, the CIT(A) has confirmed the action of the AO. The relevant extract of the order of the CIT(A) reads as under:-
"11. I have considered the submissions of the appellant. I have seen the copy of account of the appellant in the books of Asiatic Colour Chem Industries Ltd. As per this, Asiatic Colour Chem Industries Ltd. has received a cheque of Rs. 48 Lacs of Union Bank of India, cheque number 345952 from the appellant. Similarly on 6/1/2006 cheque number 364416 of Union Bank of India for Rs.48,78,234/- was received from the appellant. This clearly shows that besides-making the sales to Asiatic Colour Chem Industries Ltd, the appellant has advanced loans to this party. One of the contentions taken by the AR during the course of hearing was that the interest was calculated on the late payment of sale proceeds. This contention of the appellant is incorrect as is evident IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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from the copy account of the appellant in the books of Asiatic Colour Chem Industries Ltd. The interest is not charged on the late payment of sale proceeds but on the loans given by the appellant to that party. Another contention of the appellant before the AO was that the party M/s Asiatic Colour Chemical Industries Pvt. Ltd was not making payment in time, the appellant calculated the interest and the cheque was received from this party. However, the party requested the appellant not to charge any interest as they had assured the appellant to make the payments in time in future. This contention of the appellant was not accepted by the AO on the ground that the appellant has received the interest amounting to Rs. 19,09,460/- as mentioned in the letter dated 6/1/2006 at page number 33 and the details of amount of interest worked out at page number 19 of Annexure A-13. The AO further observed that in fact the amount of Rs. 19,09,463/- has been credited in the bank account number 77032 of Union Bank of India, SSI branch, Ahmedabad, on 10/4/2006 which is paid by Asiatic Colour Chemical Industries Ltd. As the interest of Rs. 19,09,463/- related to assessment years 2005-2006 and 2006-2007, the AO made addition of Rs.2,30,403/- and Rs.16,79,060/- in assessment year 2005-2006 and 2006-2007 respectively. In my view, the AO is justified in taxing the income of Rs.19,09,463/- in two assessment years that is Rs.2,30,403/- in assessment year 2005-2006 and Rs.16,79,060/- in assessment year 2006-2007. The working of interest calculation along with the letter addressed to Asiatic Colour Chemicals Industries Ltd was found and seized from the premises of the appellant. As per this letter, Asiatic Colour Chemical Industries Ltd was required to pay interest amounting to Rs. 19,09,464/- for the period 13/9/2005 to 30/9/2005 on Rs.48 Lacs and for the half-year on the amount of Rs. 176,21,766/- and also for the period from 6/1/ to 31/3/2005 on Rs.48,78,234/-. Further, TDS of Rs.76,408/- is calculated on the above mentioned amounts of interest. According to the AO, this interest of Rs. 19,09,463/- was duly paid by Asiatic Colour Chemical Industries Ltd which is credited in the bank account of the appellant with Union Bank of India on 10/4/2006. This clearly shows that not only the interest had accrued to the appellant but also it was received and credited in the bank account of the appellant on 10/4/2006. The contention of the appellant that this amount of Rs.19,09,464/- adjusted by the appellant IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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against the sale proceeds due from Asiatic Colour Chemicals industries Ltd and that no interest income has been received from them, is without any basis. Once the appellant has charged interest from Asiatic Colour Chemical Industries Ltd and the party has paid the amount, in my opinion, the amount is taxable as interest income irrespective of what treatment has been subsequently given by the appellant in his books of accounts. I therefore, have no hesitation in confirming the addition of interest income in both assessment years."
23. Addressing the issue the ld.AR for the assessee submitted that the party namely Asiatic Colour Chemicals Industries Pvt.Ltd. was not making payment in time and the assessee had adjusted the receipt of cheque of Rs.19,09,463/- against sales receipt against sum outstanding from the party. This was done since the party had urged the assessee not to charge interest as they have assured the assessee to make payment in time in future. The action of the assessee thus cannot be assailed. The ld.AR for the assessee submitted that all the amount has been received by way of cheque and have duly accounted for in the books of accounts. There is no allegation from the Revenue that any amount has been received outside the books. The accrual of interest is thus far fetched.
24. The Ld.DR relied on the order of the CIT(A).
25. On careful consideration of the totality of the facts of the case, we find that the amount of Rs.19,09,463/- was received by way of cheque and duly accounted in the books. The Revenue could not establish that IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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interest had accrued indeed and was legally due to the assessee. Mere claim of interest on outstandings per se does not tantamount its accrual. The contention of the assessee that the amount has been adjusted against the principal amount of sale proceeds to be received is within the realm of ordinary conduct and thus cannot be brushed aside. remains uncontroverted. The seized paper giving working of interest does not give rise in the inference that the income towards interest had become legally due in the circumstances of the case. We thus find merit in the arguments of the assessee and accordingly adjudicate the issue in favour of the assessee. Ground No.3 is accordingly adjudicated in favour of the assessee.
26. Ground No.4 concerns addition of Rs.25 lakhs on account of unaccounted investments in Sarthik-II property. The issue has been dealt with in detail in AY 2005-06. For the party of reasoning, we find no reason to interfere with the order of the CIT(A) confirming the addition. Accordingly ground No.4 of the appeal of the assessee is without any merit and therefore dismissed.
27. Ground No.5 & 6 being consequential in general in nature and does not call for any adjudication.
28. In the result, Assessee's appeal IT(SS)A No.86/Ahd/2011 for AY 2005-06 is partly allowed.
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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Assessee's appeal in IT(SS)A No.87/Ahd/2011 for AY 2006-07
29. The grounds of appeal raised by the assessee assailing the order of the CIT(A) dated 11/11/2010 read as under:-
1. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground of appeal challenging the validity of the proceedings initiated u/s.153A of the I.T.Act, when nothing incriminating was found during the course of search, and in spite of the fact that this issue was squarely covered in assessee's favour by virtue of various decision of the Hon'ble Tribunal.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs.16,79,060 made by the Assessing Officer on the ground that the aforesaid interest income was earned by the assessee from Asiatic Colour Chemicals Industries Pvt.Ltd., on the basis of a seized paper, allegedly not accounted in the books of account.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in Confirming the Assessing Officer's finding that the loans and advances given by the assessee company to M.R. Chemicals which is a proprietary concern of its director Shri Mahesh Agarwal were not for business purposes and, therefore, to the extent bearing borrowed funds were utilized in giving such loans and advances, the interest payable on such borrowed funds is to be disallowed.
4. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground of appeal challenging levy of interest u/s.234A, u/s.234B and u/s.234C of the I.T.Act, merely mentioning that 'this is only consequential in nature".
30. Ground No.1 of assessee's appeal is dismissed on the similar lines with that of AYs 2004-05 & 2005-06 dealt with (supra).
IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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31. Ground No.2 is identical to ground No.3 of AY 2005-06. For the party of reasoning, ground No.2 stands allowed.
32. Ground No.3 is identical to ground No.2 of AY 2005-06. For the parity of reasoning, ground No.3 of the present appeal stands allowed.
33. Ground Nos.4 & 5 are general in nature and therefore does not call for any adjudication.
34. In the result, appeal of the assessee for AY 2006-07 is partly allowed.
Assessee's appeal in IT(SS)A No.88/Ahd/2011 for AY 2006-07
35. The substantive ground of appeal raised by the assessee assailing the order of the CIT(A) dated 11/11/2010 read as under:-
1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the Assessing Officer's find that the loans and advances given by the assessee company to M.r.Chemicals which is a proprietary concern of its director Shri Mahesh Agarwal were not for business purposes and, therefore, to the extent interest bearing borrowed funds were utilized in giving such loans and advances, the interest payable on such borrowed funds is to be disallowed.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the assessee's ground of appeal IT(ss)A Nos.85 - 88/Ahd/2011 Maheshraj Chemicals Pvt.Ltd. vs. DCIT
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challenging levy of interest u/s.234A, u/s.234B and u/s.234C of the I.T. Act, merely mentioning that 'this is only consequential in nature'.
37. The aforesaid grounds is identical to the ground No.2 in IT(SS)A 86/Ahd/2011 and Ground No.3 in IT(SS)A No.87/Ahd/2011. Since the facts involved are similar, the issue is decided in favour of assessee for the parity reasoning given in earlier assessment years. Accordingly, ground raised by the assessee in the captioned appeal is allowed.
38. In the result, appeals of the Assessee in IT(SS)A Nos.85, 86 & 87/Ahd/2011 are partly allowed and IT(SS)A No.88/Ahd/2011 is allowed.
This Order pronounced in Open Court on 02 /01/2017
Sd/- Sd/-
(राजपाल यादव) ( द प कुमार के डया)
या यक सद य लेखा सद य
(RAJPAL YADAV) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 02/01/2017
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
IT(ss)A Nos.85 - 88/Ahd/2011
Maheshraj Chemicals Pvt.Ltd. vs. DCIT
- 47 -
आदे श क ! त#ल$प अ%े$षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &यथ% / The Respondent.
3. संबं5धत आयकर आयु7त / Concerned CIT
4. आयकर आयु7त(अपील) / The CIT(A)-III, Ahmedabad
5. 8वभागीय त न5ध, आयकर अपील य अ5धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स&या8पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 21.11.16/20.12.16 (dictation-pad 15+ 15pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...22.11.16/20.12.16
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......02.01.2017
7. Date on which the file goes to the Bench Clerk.....................02.01.2017
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................