Income Tax Appellate Tribunal - Mumbai
Dcit 13(1)(2), Mumbai vs Pebble Bay Developers P.Ltd, Mumbai on 21 October, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "C" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND
SHRI PAVAN KUMAR GADALE (JUDICIAL MEMBER)
ITA No. 5744/MUM/2017
Assessment Year: 2008-09
Dy. Commissioner of Income- M/s Pebble Bay Developers
tax-13(1)(2), Pvt. Ltd.,
2nd floor, Room No. 218, Vs. Raheja Chambers, Linking
Aayakar Bhavan, M.K. Road, Road, Main Avenue Santacruz
Mumbai-400020. (West),
Mumbai-400054.
PAN No. AACCG 1645 E
Appellant Respondent
Revenue by : Ms. Vranda Matkari, DR
Assessee by : Mr. Nishit Gandhi, AR
Date of Hearing : 26/08/2022
Date of pronouncement : 21/10/2022
ORDER
PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated 27/06/2017 passed by the Learned Commissioner of Income-tax (Appeals)-21, Mumbai [in short 'the Ld. CIT(A)'] for assessment year 2008-09, raising following grounds:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the provision of Sec. 69C for M/s Pebble Bay Developers Pvt. Ltd. 2 ITA No. 5744/M/2017 disallowance on account of unexplained cash transactions is not applicable in this case as the assessee has not claimed any expenses in the instant year contrary to the fact that the Directors of the KBPLA (Sister concern of the assessee compa company) while deposing before the Hon'ble Court of the XIX Addl. City Civil & Sessions Judge, Bangalore City have failed to give satisfactory explanation regarding the case expenses incurred by the assessee company to vacate the land from encroachers.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO u/s 69C 25,58,00,000/ without appreciating the fact that the of Rs. 25,58,00,000/-
Hon'ble Court of the XIX Addl. City Civil & Sessions Judge, city pronounced the judgement against the assessee Bangalore city company in a suit filed by the KPBL for reimbursement expenses incurred by it and its sister concern i.e. the assessee company who acquired the land from M/s L.K. Trust for failure in proving thee said transaction in its pass books, cash books and evidence of th books of accounts to support the claim.
2. Briefly stated facts of the case are that the assessee filed return of income on 30/09/2008, which was subsequently revised on 12/05/2009 at a loss of ₹2,55,13,241/-.. The said return of income was processed under section 143(1) of the Income-tax tax Act, 1961 1 (in short 'the Act').
). Subsequently, the assessment was reopened by way of issue of notice under section 148 of the interalia, the order of Act dated 31/03/2015,, in view of receipt of information interalia Judge Banglore rejecting claim of reimbursement of Hon'ble City Session Judge, M/s Pebble Bay Developers Pvt. Ltd. 3 ITA No. 5744/M/2017 hutment removal expenses of M/s Kanyakumari Builders Private limited (KBPL) i.e. a sister concern of assessee against M/s LK Trust, from whom the assessee purchased a plot of land at Banglore. After following due process of law, the Ld. Assessing Officer (AO) completed the reassessment on 30/03/2016 under section 147 read with section 143(3) of the Act, wherein he made addition of ₹25,58,00, 25,58,00,000/- as unexplained expenditure incurred by the assessee or on behalf of the assessee towards obtaining vacant possession from the dwellers/hutments dwellers/hutme in plot to property purchased , which was lore. Before the Ld. CIT(A), the situated at Nagashetty Hali Village, Banglore.
assessee challenged reopening of the assessment as well as addition on merit.
reassessment, however deleted the The Ld. CIT(A) upheld the validity of the reassessment, addition on merit. Aggrieved, the Revenue has preferred this appeal before Income-tax tax Appellate Tribunal (ITAT) [in short 'the Tribunal'], raising the grounds ass reproduced above.
2.1 During the course of hearing, the assessee moved an application under Rule 27 of the ITAT Rules, Rules, 1963 on the issue of validity of reassessment [i.e. which was decided against the assessee by the Ld CIT(A)] CIT(A)]. The assessee challenged validity of the reassessment before the Ld. CIT(A) on various M/s Pebble Bay Developers Pvt. Ltd. 4 ITA No. 5744/M/2017 grounds including (a) the notice issued by the Assessing Officer was time-
time barred having been issued after six years from the end of the relevant assessment year; (b) the reassessment is invalid since the actual reasons recorded were not provided to the assessee;
ass (c)
c) improper sanction and
satisfaction of the sanctioning authority as per section 151 of the Act; (d) reasons were recorded based on incorrect facts and particularly the whole basis of the reassessment did not exist; e) reasons recorded by the Assessing exist (e) Ass Officer are vague, without application of mind and at the most mere reasons to suspect and not reason to believe; (f) the reassessment is initiated on the assumption of escapement of income; (g) reopening is on the mere borrowed satisfaction of the investigation wing without any application of mind.
2.2 It was contended that the Ld. CIT(A) was convinced on the merit of the case and accordingly granted relief in the appeal however he upheld the reopening of the assessment. Against the said order of tthe he Ld. CIT(A), the Revenue is in further appeal before the Tribunal. The Ld. counsel submitted that since the assessee was granted complete relief on merit by the Ld. CIT(A), therefore no appeal was preferred by the assessee before the Tribunal against the order of the Ld. CIT(A), however the assessee filed the application under M/s Pebble Bay Developers Pvt. Ltd. 5 ITA No. 5744/M/2017 djudicating on the Rule 27 seeking the indulgence of the Tribunal in adjudicating jurisdiction of the Assessing Officer to pass the impugned assessment order.
referred to application under Rule 27 of the The Ld. counsel of the assessee re ITAT Rules and submitted that the assessee is entitled to support the order passed by the Ld. CIT(A) on any of the grounds decided against the assessee. It was submitted that in the present case the Ld. CIT(A) rejected rejected the grounds of reassessment without giving any specific reasons and without considering the submission filed by the assessee. It was submitted that since ince the ground of validity of the reassessment has been decided against the assessee assessee, the assessee is eligible to challenge the same under Rule 27 of the IT Rules. In contention, the Ld. Counsel, relied on the decision of the support of the contention Hon'ble Gujrat High Court in the case of PCIT v. Sun pharmaceutical industries Ltd (2018) 408 ITR 517 (Gujarat) and nd decision of Hon'ble Madras High Court in the case of CIT v. Sundaram & company (1964) 52 ITR 763 (Madras).
2.3 In view of above, the Ld. Counsel of the assessee submitted that petition filed by the assessee under rule 27 of ITAT to Rules might be admitted.
admit M/s Pebble Bay Developers Pvt. Ltd. 6 ITA No. 5744/M/2017
3. The Ld. Department Representative (DR) on the other hand objected that the assessee is not entitled for moving application under Rule 27 of the ITAT Rules and the assessee should have filed cross objection if aggrieved with the order of the Ld. CIT(A).
CI
4. We have heard rival submission of the parties on the issue of admissibility of application of the assessee under Rule ule 27 of the ITAT IT rules.
For ready reference,, said rule is reproduced as under :
"Rule 27: The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him."
4.1 We find that appeal has been decided on merit in favour of the assessee and thus no resultant tax liability on the assessee, therefore no appeal or cross objection tion has been preferred by the assessee. But the issue of validity of the reassessment has been decided against the assessee and therefore the assessee is eligible to support the order appealed against on the ground of validity of reassessment decided against it. In the case of PCIT vs. sun against pharmaceutical industries Ltd (supra), (supra) the ITAT allowed application under Rule 27 of the ITAT Rules to the assessee for challenging the reopening of the assessment by the assessee, assessee, which was affirmed by the Hon'ble High Court.
M/s Pebble Bay Developers Pvt. Ltd. 7 ITA No. 5744/M/2017 Co. (supra),, the Tribunal quashed Similarly in the case of CIT Vs Sundaram & Co the reassessment proceeding, which were challenged by way of an application ITAT Rules and same was affirmed by the Hon'ble High under Rule 27 of the IT Court.
4.2 In view of above discussion, we admit the application of the assessee asse under rule 27 of the ITAT Rules for challenging the validity of the reassessment.
5. rbook containing pages 1 to The Ld. counsel of the assessee filed a paperbook
306.
6. We have heard both the parties on the issue of validity of the reassessment. The Ld Counsel of the assessee has raised various issues challenging the validity of reassessment. Each issue challenging the validity of the reassessment is dealt as under:
(i) otice issued by the Assessing Officer was time-barred The notice time having been issued after six years from the end of the relevant assessment year;
M/s Pebble Bay Developers Pvt. Ltd. 8 ITA No. 5744/M/2017 6.1 the Ld. Counsell of the assessee submitted that there is no dispute that notices under section 148 of the Act is dated 31/03/2015, which was sent by the speed post, however same was received by the assessee only on 09/04/2015,. The Ld. Counsel Coun of the assessee submitted that a copy of the dispatch register or evidence having handing hand over the said notice to the postal authorities orities on 31/03/2015 , had not been provided to the assessee and on the contrary as per the postal certificate the article was picked up and delivered on 09/04/2015 (refer PB: 79). Relying elying on the judgement of the Hon'ble jurisdictional High Court in the case of Harjeet Surajprakash Girotra Vs UOI WP 513 of 2109, the Ld. Counsel submitted that notice u/s 148 of the Act is time-barred and hence the reassessment is unsustainable.
6.2 The Ld. DR on the other hand submitted thatduring appellate proceeding the Ld. CIT(A) duly provided copy of the documents to the Authorized Representative of the assessee, including the dispatch register of that notice under section 148 of the Assessing Officer, from which it is evident that the Act was provided to the postal authorities on 31/03/2015. Regarding the postal certificate, he submitted that same has been issued by the Post Office, Office M/s Pebble Bay Developers Pvt. Ltd. 9 ITA No. 5744/M/2017 who delivered the notice to the assessee and not the Post Office who received re the notice for delivery from the Income-tax Department.
6.3 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The learned Counsel of assessee learne Coun contended that no evidence of handing over of the article to the postal authorities on 31/03/2015 were provided to the assessee. However, However we find that the Ld. CIT(A) has duly noted the fact that dispatch register maintained in the office of the Assessing Officer, Officer which was produced before him him. The Ld CIT(A) noted that it transpired that said notice under section 148 of the Act appearing at Serial No. 239 of the register was duly handed over to the postal authorities on 31/03/2015. ecific finding by the Ld CIT(A), 31/03/2015 In view of specific CIT(A) the grievance of the assessee that no such evidence was provided to the assessee is ill founded and baseless. It is the assessee who is asserting that said notice has not been provided to the Postal Authorities on 31/03/2015, therefore therefore, the assessee. It was open to the assessee to obtain such burden of proof lies on the assessee evidences from the Assessing Officer invoking Right to Information Act, Act 2005.
Further, as regard to the contention of the assessee of certificate of the Postal Authority placed on paperbook page 79, it is found that the said certificate has M/s Pebble Bay Developers Pvt. Ltd. 10 ITA No. 5744/M/2017 been issued by the 'Santacruz Office' Mumbai 400054, which reads Santacruz West Post Office as under:
"Santacruz west post office Mumbai 400054 TO WHOMSOEVER IT MAY CONCERNED THE SPEED POST ARTICLE NO. EM1966639731N WAS RECEIVED AND DELIVERED ON DATED 09/04/2015 BY THE POSTMAN OF SANTACRUZ WEST POST OFFICE"
6.4 The Ld. Counsell did not rebut the submission of the Ld. DR that the certificate has been issued by the Post Office, who had delivered the notice to the assessee and not the Post Office, who had collected the said notice from Department. The Ld. CIT(A) has also referred to the dispatch the Income-tax Department.
register and nd relevant entry dated 31/03/2015 of notice issued to the assessee, where postal authorities had put of their stamp.
6.5 In the circumstances, we reject the contention of the assessee that year from the end of the relevant notice was not issued within the six years assessment year.
(ii) The he reassessment is invalid since the actual reasons recorded were not provided to the assessee;
assessee
7. The Ld. Counsell of the assessee contested that assessee has not been provided actual copy of the reasons recorded by the Assessing Officer, but M/s Pebble Bay Developers Pvt. Ltd. 11 ITA No. 5744/M/2017 production of the same has been provided by way of a letter only a mere reproduction dated 29/12/2015. According to the Ld. Counsel, reasons recorded have been undisputedly issued to the assessee beyond 31/03/2015 and therefore same are beyond the timeline ne prescribed for reopening the assessment. The learne learned Counsell submitted that assessment has been framed without supplying the reasons within six years from the end of the relevant assessment year, therefore, same deserve to be quashed.. In support of his contention the Ld. Counsel relied on the decision of the Hon'ble Delhi High Court in the case of Haryana Acrylic mgg Co. Vs CIT (2009) 308 ITR 38 (Delhi).
7.1 The learned DR on the other hand submitted that firstly the assessee has not substantiated that the reasons communicated to the assessee are any way different then reasons actually recorded by the Assessing Officer.
According to him, it hardly makes difference if the Assessing Officer provide a photocopy of the reasons or reproduce them in a letter unless it is proved that no reasons were recorded or different reasons are recorded.
recorded The Ld. DR submitted that it is the presumption of the Ld. Ld Counsel of the assessee only and no such objections were raised immediately after providing the th reasons.
M/s Pebble Bay Developers Pvt. Ltd. 12 ITA No. 5744/M/2017 7.2 Further, he submitted that the law only prescribe for issue of notice under section 148 of the Act prior to expiry of six years from the end of the relevant assessment year and subsequently, reasons can be provided to the assessee only after er filing return of income after responding to notice under section 148 of the Act as laid down by Hon'ble Supreme Court in the case of GKN Driveshaft (India) Ltd. v. ITO (2003) 259 ITR 19 (SC).
7.3 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Ld. Counsel has not been able to substantiate that reasons provided to the assessee are different in any manner from the actual reason recorded by the Assessing Officer and no such objection was ever raised before the Assessing Officer and thus raising the issue that reason supplied to the assessee is different then then, actual reasons is asses , which is unsubstantiated and accordingly only imagination of the assessee, rejected. As regarding objection of o providing reasons sons beyond expiry ex of six years is concerned,, we find that under u section 149 of the Act during relevant period, it is prescribed that notice under section 148 of the Act could have been issued prior to expiry of six year from the end of thee relevant assessment year. In the instant case relevant assessment year is 2008-09 2008 and therefore M/s Pebble Bay Developers Pvt. Ltd. 13 ITA No. 5744/M/2017 notice under section 148 of the Act could have been issued before 31/03/2015,, and which has been issued on 31.03.2015 as held by us in earlier recorded to the assessee, is part of this order. As far as providing of reasons recorded concerned, the Hon'ble Supreme Court in the case of GKN Driveshaft Private Limited (supra) held as under:
We see no justifiable reason to interfere with the order under "We challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the notice notices is to file return and if he so desires, to seek reasons for issuing notices. Thee assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notices is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years.
years."
7.4 Thus, the assessee could have sought the reasons recorded only after filing the return of income. The Assessing Officer has noted in the impugned assessment order that assessee by way of a letter dated 24thApril 2015 requested to treat the return of income filed on 30/09/2008, 30/09/2008 which was 12/05/2009, as return of income in response to notice dated u/s revised on 12/05/2009 M/s Pebble Bay Developers Pvt. Ltd. 14 ITA No. 5744/M/2017 148 dated 31/03/ 2015. The Ld. Assessing Officer has further noted that assessee subsequently requested for reasons for reopening & same were provided to the assessee by letter dated 29/12/2015. In the circumstances, the contention of the Ld. Counsell of the assessee that copy of the reasons recorded should have been provided to the assessee prior to the expiry of the six years from the end of the relevant assessment year is not in accordance with provisions of the law, thus same is rejected. Regarding the supply of reasons recorded, the Hon'ble Delhi High Court in the case of Haryana Acrylic Mfg Co (supra) held as under:
"22.
22. This argument suffers from several infirmities. First of all, the respondents cannot be permitted to gloss over the fact that the reasons which were supplied to the petitioner were different from the reasons purportedly recorded in the said form on which they now seek to rely. If the which reasons in the said form were the 'actual' reasons, why were they not communicated to the petitioner? Why was nothing said about these reasons (noted in the form) when the petitioner filed its objections to the h were supplied to it? It must be remembered that in its reasons which objections, the petitioner took the specific plea that in the absence of any allegation that the petitioner had failed to disclose fully and truly all Assessing Officer had no material facts necessary for assessment, the Assessing jurisdiction to issue the notice under section 148 and initiate action under section 147 after four years from the end of the relevant assessment year. Despite this precise objection, there is no mention of the reasons noted in M/s Pebble Bay Developers Pvt. Ltd. 15 ITA No. 5744/M/2017 the said id form in the impugned order dated 2 2-3-2005.
2005. If the respondents had regarded the reasons noted in the said form to be the 'actual' reasons, it would have been very easy for the Assessing Officer to have countered this objection by simply referring to the reasons noted in the form and saying that the allegation of failure to disclose is very much there. It is obvious that the reasons noted in the said form were never regarded as the reasons for initiating action under section 147 of the said Act. Thus, the respondents cannot now be permitted to fall back on those purported reasons noted in the said form. 23. Secondly, let us assume for the sake of argument that the 'actual' reasons were those as noted in the said form.
communicate a different set of reasons Then why did the Assessing Officer communicate to the petitioner? Did he think that the supplying of reasons and the inviting of objections were mere charades? Did he think that it was a mere pretence or a formality which had to be gotten over with? At this point, it would be well to remember that the Supreme Court in GKN Driveshafts (India) Ltd.'s case had specifically directed that when a notice under section 148 of the said Act is issued and the noticee files a return and seeks notice,, the Assessing Officer is bound to reasons for the issuance of the notice furnish reasons within a reasonable time. On receipt of the reasons, the noticee is entitled to file objections to the issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.
der. These are specific directions given by the Supreme Court in all cases where notices under section 148 of the said Act are issued. Surely, the Assessing Officer could not have construed these specific directions to be a letters? There is a strong logic and purpose mere empty formalities or dead letters?
behind the directions issued by the Supreme Court and that is to prevent handedness on the part of Assessing Officers and to temper any action high-handedness contemplated under section 147 of the said Act by reason and sub substance. In fact, even section 148 (2) stipulates that the Assessing Officer shall, before M/s Pebble Bay Developers Pvt. Ltd. 16 ITA No. 5744/M/2017 issuing any notice under the said section, record his reasons for doing so. The Supreme Court has only carried forward this mandatory requirement the reasons which are recorded be communicated to the by directing that the assessee within a reasonable period of time so that at that stage itself the assessee may point out any objections that he may have with regard to the initiation of action under section 147 of the said Act. The requirement of Act.
recording the reasons, communicating the same to the assessee, enabling the assessee to file objections and the requirement of passing a speaking order are all designed to ensure that the Assessing Officer does not reopen assessments which have been finalized on his mere whim or fancy and that he does so only on the basis of lawful reasons. These steps are also designed to ensure complete transparency and adherence to the principles of directions would entail the natural justice. Thus, a deviation from these directions nullifying of the proceedings. Assuming as we have done that the 'actual' reasons were those as noted in the said form, it is obvious that the reasons were never communicated to the petitioner and it is only for the first time in thee course of the present writ petition that those 'reasons' have surfaced. Therefore, if he proceeded on the assumption that the 'actual' reasons were those as noted in the said form, the proper course of action as directed by Driveshafts (India) Ltd.'s case, has not been the Supreme Court in GKN Driveshafts followed. It would mean that the reasons which were supplied to the petitioner were not the actual reasons and the objections which were taken by the petitioner were not to the actual reasons and the speaking order 2005 which was passed was also neither on the basis of the dated 2-3-2005 actual reasons nor the objections to the actual reasons. The entire process would be a sham and would amount to making a mockery of the law as settled by the Supreme Court. Therefore, for this reason also, the notice under section 148 as well as all proceedings subsequent thereto as also the order dated 2--3-2005 are liable to be quashed."
M/s Pebble Bay Developers Pvt. Ltd. 17 ITA No. 5744/M/2017 7.6 In the above case, the assessee filed objection against the reasons recorded, which were duly disp disposed of by the Assessing Officer. But in the present case,, the assessee did not file any objection before the Assessing Officer challenging the copy of reasons provided ass not the actual reasons.
The Ld. CIT(A) in para 4.9 of the impugned order has held th that no objections were filed before the Assessing Officer till completion of the assessment order i.e. 31/3/2016 and therefore Assessing Officer has completed the assessment following due procedure of law. For ready reference said finding of the Ld. CIT(A) is reproduced as under:
4.9. It is further noted that the reasons recorded were furnished to the appellant on 29.12.2015. The assessment order has been passed on 30.3.2016. The appellant had ample time but did not file any objections.
No evidence of filing any objection is produced in the appellate proceedings. Thus, due procedure has been followed by the assessing officer. In the light of these facts and discussion earlier, I do not find merits in the contention of the appellant. The Grounds of Appeal No. 'A' to 'C' is thus, dismissed and the reopening of the assessment is upheld.
upheld."
7.7 Moreover in the case, the assessee has not represented that actual reasons recorded are different from the reasons to believe communicated to the assessee by way of letter of the Assessing Officer. In view of above, the Coun l of the assessee on the decision of the reliance placed by the Ld Counsel t M/s Pebble Bay Developers Pvt. Ltd. 18 ITA No. 5744/M/2017 Hon'ble Delhi High Court in the case of Haryana Acrylic Mfg Ltd (supra) is of no assistance to the assessee.
(iii) Improper mproper sanction and satisfaction of the sanctioning authority as per section 151 of the Act;
8. The Ld. Counsell of the assessee submitted that in the case as per the provisions of the Act reasons recorded by the Assessing Officer should have been approved by the Additional Commissioner of Income-tax r tax rather than the Commissioner of Income urther mentioned that the ncome-tax. The Ld. Counsel has further Ld. CIT(A) in the impugned order has mentioned that a forwarding letter regarding approval was received from the office of the Additional Commissioner by the Assessing Officer and a copy of the same was provided to the AR of assessee during appellate proceedings, but same might have been delivered to the another chartered accountant, accountant who was handling the assessment/first appellate proceedings and therefore the Tribunal should ensure to issue direction for producing the said records .
8.1 The Ld. DR on the other hand objected that the assessee is making wild allegations despite providing evidence by the Ld. CIT(A) to the Authorized Representative of the assessee, and now assessee cannot shift its burden to M/s Pebble Bay Developers Pvt. Ltd. 19 ITA No. 5744/M/2017 ribunal for providing the evidence which were already provided to the the Tribunal assessee during first appellate proceedings.
8.2 We have heard rival submission of the parties on the issue in dispute record. It is evident from the para 4.2 of and perused the relevant material on record.
impugned order of the Ld. CIT(A) that he provided the document in support of the approval/sanction for notice under section 148 of the Act as prescribed under the provisions of section 151 of the Act, to the authorized author representative of the assessee. The allegation of no proper approval of reasons recorded, are only ba sed on presumption and surmises.
based surmises In the
learned Counsel
circumstances, we reject the contention of the learne Coun of the assessee that no proper sanction/approval was granted for the reasons recorded by the Assessing Officer.
(iv) Reasons were recorded based on incorrect facts and particularly the whole basis of the reassessment did not exist;
9. The arguments made by the Ld. Counsel on the issue has been summarized by him in the written submission as under:
"d. Reasons recorded based on incorrect facts:
M/s Pebble Bay Developers Pvt. Ltd. 20 ITA No. 5744/M/2017 i. The Appellant further submits, that the reasons recorded by the AO are based on erroneous and incorrect facts. The same could be manifested from the following:
g to the AO as stated in his reasons, the project between,
1. According Kanyakumari Builders P. Ltd. (KBPL) and L K Trust was transferred to Pebblebay Developers, the Appellant. However, the transaction only pertained to land and no project as such was in existence at the time of the said transfer and consequently there is no question of transfer of any project.
2. The AO has further alleged that certain expenditure was incurred by KBPL in cash towards vacation / evictment of the hutments existing on the land which was originally ori sold to it by LK Trust. Firstly, the allegation of cash expenditure in the case of KBPL has itself not been proved by the AO or established on facts by him. Secondly, even the payments made by the Appellant / KBPL are through Account Payee Cheques / Bank Drafts to one Mr. Anand whose identity is not in doubt and who had undertaken the work of clearing hutments which is evidenced by his Confirmation and other related evidences. (Ref. Copy of Appellant's Letter dated 29.03.2016 at pg.155 to 180 of PB, Bank Statements of the Appellant at pg. 91 to 98 of PB reflecting the impugned payments, Copy of Confirmation of Mr. Anand at pg.156 of PB, Copy of Aadhar Card of Mr. Anand at pg. 157 of PB, Copy of Ledger Account of L.K Trust in the Appellant's books at pg. 158 to 161 of PB and Sample Copy of Cheques / Drafts at pg. 170 to 180 of PB.). As such the whole assumption of the AO of incurring of cash expenditure by the Appellant is totally erroneous.
3. Lastly, the AO has also incorrectly stated in the reasons tha that the alleged cash expenditure incurred by KBPL is claimed as cost by the Appellant which is factually incorrect. In this regard it is relevant to note that the impugned amounts paid to Anand were recorded in the Balance sheet as M/s Pebble Bay Developers Pvt. Ltd. 21 ITA No. 5744/M/2017 advances reflected in the Balance Sheet as on 31.03.2007 & 31.03.2008 which were written off in the Financial Year ending 31.03.2009 & 31.03.2010. However, in the computation of income for AY 2009-10 2009 & 2010- 11 the said amounts were added back (Ref. Schedule 7 of the Annual Report or the year ended 31.03.2010 at pg. 58 of PB & Computation of Income for for AY 2009-10 2010-11 at pg.37 to 77 of PB). As such the assumption of
10 & AY 2010 claiming the said amount as cost is also factually incorrect.
4. It also needs mention that even as per the order of the Hon'ble City Civil and Sessions Judge (which has been used as a basis for re re-opening) it has been held that no cash expenditure is incurred by even KBPL. As a natural consequence, therefore, there is no question of holding that cash expenditure is incurred by the Assessee [Ref. order of the Hon'ble Sessions Judge and particularly, pg. 244 of PB for issues before the Court, pg.252, 253, 255 of PB wherein it is accepted that cheque payment was made to one Mr. Anand who in turn paid cash to the slum dwellers, and pgs. 278, 279 of dwellers, PB wherein the issues as regards cash expenditure are decided against KBPL].
ii. In view of the above it is evident that reasons and consequently the entire assessment is based on incorrect facts and as such is bad in law and re-assessment serves to be quashed. The Appellant relies on the following judgement in deserves support of its contention:
Hindustan Dorr Oliver Ltd. vs P. K. Kedia - (2008) 305 ITR 0282 (Bom) ".....7. Considering the above discussion as the notice itself is not based on any material non-existing material, the formation of opinion or 'reasons ial andlor on non to believe' is based on no material, must be quashed and set aside."
M/s Pebble Bay Developers Pvt. Ltd. 22 ITA No. 5744/M/2017 9.1 The Ld. DR vehemently opposed the above submission of the Ld. counsel of the assessee. He submitted that at tthe he stage of recording reasons, the Assessing Officer has to record reasons to believe that income escaped the assessment on the basis of the material before him and he is not required to establish the facts at the stage of recording reasons.
9.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The first grievance of the assessee is that the allegations of the cash expenditure has not been proved by the Assessing Officer or established cts. The second grievance is that the establish on facts.
allegation of cash expenditure incurred by KBPL has been claimed as cost by the assessee, is not factually correct. We find that the assessee is challenging factual correctness of the reasons recorded. We may like to mention m that Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd (1999) 236 ITR 34 (SC) has held that sufficiency or correctness of the information/material is not required to be seen at the stage of recording of the reasons. Further, in the decision decision relied upon by the assessee in the case of Ltd. (supra), reasons were based on nonexistence Hindustan Dorr Oliver Ltd material,, whereas in the case correctness of the facts has been challenged, M/s Pebble Bay Developers Pvt. Ltd. 23 ITA No. 5744/M/2017 therefore the decision relied upon by the assessee is distinguishable on facts.
Further, in case of Export Credit Guarantee Corporation of India Ltd. v.
ble Bombay High Court Addl. CIT (2013) 30 taxmann.com 211 (Bom) Hon'ble held that facts are not required to established at the stage of rec recording of reasons. Accordingly, we reject the contention of the Ld. counsel of the assessee to quash the reassessment in view of the above arguments.
(v) Reasons recorded by the Assessing Officer are vague, without application of mind and at the most mere reasons to suspect and not no reason to believe;
10. According to the Ld. Counsel, even in the case of sister concern KBPL it has not been established that any expenditure was incurred in cash and therefore whole assumption of escapement of income is based merely on suspicion. The Ld. counsel submitted that in fact assessee has made payment ques and bank draft to an identified person and no claim by account payee cheques of said alleged cash expenditure has been made by the assessee. He further vacating the hutments and clearing the submitted that entire transaction of vacating land for development was a revenue neutral transaction. According to the Ld. M/s Pebble Bay Developers Pvt. Ltd. 24 ITA No. 5744/M/2017 Counsel in view of above discussion the reasons recorded are vague without application of the mind and nothing more than a suspicion.
10.1 The Ld. DR on the other hand submitted that reasons have been ourt of Additional city recorded on the basis of the decision of the Hon'ble Court Judge wherein it is held that M/s KBPL made claim for Civil and Sessions Judge, reimbursement of expenses from LK trust and deta detail il of cash expenses ,58,00,000/- was submitted. In our opinion, the reasons amounting to ₹25,58,00, recorded are based on relevant material wherein amount of income escaped sel of the assessee has been clearly identified. The contentions of the Ld. Counse that reasons recorded being vague, based on suspicion as well as the AO has not applied his mind reasons are baseless and without ind while recording the reasons, any supporting evidence, therefore same are rejected.
(vi) The he reassessment is initiated on the assumption & escapement of income;
11. According to the Ld. Counsell of the assessee neither any sum was received by the assessee from LK trust nor any claim has been made in books of account for expenditure made in n respect of the amounts spent on removal herefore reasons recorded aare merely manifests suspicion, of hutments therefore M/s Pebble Bay Developers Pvt. Ltd. 25 ITA No. 5744/M/2017 assumption and presumption by the Assessing Officer. The Ld. DR vehemently opposed this contention of the Ld. Counsel of the assessee.
11.1 We have heard rival submission of the parties. We find th that ultimately it is the assessee, who became owner of the land and before the Hon'ble Additional City Civil & Session Judge also held that most of the expenses have been ultimately incurred from the books of account of the assessee. We find that the expenses on eviction of hutments are connected with the land owned by the assessee, therefore, refore, the Ld. Assessing Officer is justified in forming reasons to believe that said expenditure has been incurred by the assessee.
We do not find any assumption by the Assessing Officer and reasons are based on the finding of Hon'ble Sessions Judge, therefore we reject the contention of the Ld. counsel of the assessee.
11.2 In support off the contention that reasons have been recorded on the basis of the borrowed satisfaction, the argument of the Ld. counsel filed in the form of written submission are reproduced as under:
i. From a bare reading of the reasons as recorded by the AO, it is evident evi that the notice issued by the AO is based on some purported information received from the investigation wing (ref. reasons at pgs.81 to 82 of PB). However, as explained in the earlier paragraphs, M/s Pebble Bay Developers Pvt. Ltd. 26 ITA No. 5744/M/2017 in the reasons as well as in the order there is nothing which evidences any income chargeable to tax much less any income escaping assessment from tax.
ii. The above manner in which the reasons were simply recorded for issuing notice us 148 merely relying on some information from the thereafter making additions clearly manifests investigation wing and thereafter lack of application of mind by the AO while recording reasons and issuing notice w/s 148 of the Act. Such an assessment is wholly arbitrary and totally illegal and therefore deserves to be quashed. The Assessee relies on the following judgements in support of its re assessment cannot be simply based upon certain contention that re-assessment information received from the investigation wing in the absence of corroborative details and without any application of mind thereto:
CIT W SUREN EN INTERNATIONAL PT LTD - (2013) 85 CCH 0040 (Delhi) Held as follows at para 14- 14 "..In the first instance, we do not find the reasons as recorded by the Assessing Officer to be reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, entries discloses that the same entries have been repeated six times. This is clearly indicative of the callous manner in which the reasons for initiating reassessment proceedings are recorded and we are unable to ance that any belief based on such statements can ever be arrived countenance at. The reasons have been recorded without any application of mind and thus no belief that income has escaped assessment can be stated to have been formed based on such reasons as recorded."
CIT w/s SFIL Stock Broking Lid. - (2010)325 ITR 285(Del) M/s Pebble Bay Developers Pvt. Ltd. 27 ITA No. 5744/M/2017 Held dismissing the appeal of the Dept. as follows at para 10.:
". From the above, it is clear that the A0 referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice unders. 148. We are afraid that these cannot be the reasons for proceeding under s. 147/1-18 147/1 of the said Act. The first part is only an information and the second and the third parts of the beginning para of the so-called called reasons rea are mere directions. From the so-called called reasons, it is not at all discernible as to whether the AO had applied his mind to the information and independently arrived at a belief that, on the basis of the escaped assessment.
material which he had before him, income had escaped Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration...
R 0051 (Delhi) SIGNATURE HOTELS (P) LTD. ws ITO - (2011) 338 ITR (A case where the Hon'ble High Court quashed the re-assessment re proceedings on the ground that the reasons were recorded simply on the basis of information from investigation wing stating that the ntry and that the same were Assessee is a beneficiary of accommodation eentry recorded without any application of mind whatsoever).
Held as follows:
"14. The first sentence of the reasons states that information had been received from Director of IT (lnv.) that the petitioner had introduced amounting to Rs.5 lacs during financial year2002-03 money amounting year2002 as per the details given in Annexure. The said Annexure, reproduced above, relates to a cheque received by the petitioner on 9th Oct., 2002 from Swetu Stone M/s Pebble Bay Developers Pvt. Ltd. 28 ITA No. 5744/M/2017 PV from the bank and the account number mentioned therein.
there The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary.
15. The aforesaid reasons do not satisfy the requirements of s. 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link li which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the AO did not apply his own mind to the information and examine the basis and material of the information. The AO accepted the plea on the basis of accepted vague information in a mechanical manner. The CIT also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the AO did not independently apply his mind to the information received ffrom the Director of IT (Inv.) and arrive at a belief whether or not any income had escaped assessment...
SARTHAK SECURITIES CO. (P) LTD. » ITO - (2010) 329 TR 0110 (Delhi) ".. In the case at hand, as is evincible, the AO was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the AO was made aware of the situation by the Investigation Wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not M/s Pebble Bay Developers Pvt. Ltd. 29 ITA No. 5744/M/2017 necessary to have the established fact of escapement of income but what relevant material on which a reasonable is necessary is that there is rele person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not companies were used as disputed. What is mentioned is that these companies conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Lid. (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his tated that the companies had bank accounts and objections had clearly sstated payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted...
ITO W M/s Comero Leasing & Financial - [ITA No.4281 / Del / 2010 vide order dated 14.08.2014 14.08.2014] ... In the appeal before us, the contention of the assessee is that the Assessing Officer issued the notice under Section 148 mechanically simply on the basis of information alleged to have been received from the Investigation Wing without application of mind. On the facts of the case, we find this contention of the learned counsel to be correct and moreover, more on identical facts, Hon'ble Jurisdictional High Court in the case of Suren International P.Ltd. (supra) held that the reasons recorded without any application of mind cannot be said to be a proper belief with regard to fore, respectfully following the decision escapement of income. We, therefore, M/s Pebble Bay Developers Pvt. Ltd. 30 ITA No. 5744/M/2017 of Hon'ble Jurisdictional High Court in the case of Suren International P. Lid. (supra), uphold the order oflearned CIT(A) and dismiss the appeal filed by the Revenue.
ACIT v/s Shri Devesh Kumar - IL.T. 4, No 2069/0.42010 vide order dated 31.10.2014) "19. in the light of aforesaid discussion we are inclined to hold that in the extant case the AO proceeded to initiate proceedings us 147 of the Act and to issue notice ws 148 of the Act on the basis of information received from Investigation Wing of the department in the form of a CD prepared by Shri Sanjay Shah and Shri Vishesh Prakash, ITOs of Unit V. New Delhi. Subsequently, the A0 reproduced details gathered from the CD and mind, held that the assessee was without application of independent mind, beneficiary of accommodation entries amounting to Rs. 4,51,000. In the main part of reason to believe, there is no mentioning of nature of transaction to establish and fortify the fact that the impugned the nature of accommodation entries. We also transactions were in the observe that there is no mentioning of date therein and it can safely be presumed that the AO had not examined the assessment record of the assessee which was processed us 143(1)(a) of the Act on 15.3.2005 for rming a belief that the income of the assessee had escaped assessment. forming
20. Under these facts and circumstances, we are in agreement with the observation and conclusion of the CIT(A) that there was no material on ndependent mind in forming record to show that the AO had applied her iindependent a belief which may result in the required reason to believe as per provisions of section 147 and 148 of the Act...
iii. re assessment is issued on the borrowed Further admittedly, the re-assessment satisfaction of the Investigation wing and not the objective M/s Pebble Bay Developers Pvt. Ltd. 31 ITA No. 5744/M/2017 satisfaction of the AO himself. Such a reassessment is entirely vitiated and deserves to be quashed irrespective of whether the original assessment is under section 143 (1) or 143 (3) [Ref. PCIT W Shodiman nn.com 153 (Bombay)l. As Investments Pvt. Ltd. - (2018) 93 Taxmann.com such it is respectfully submitted that even on this count the assessment deserves to be quashed."
11.3 We find that the Ld. CIT(A) has rejected the contention of the assessee observing as under:
4.3. The Assessing officer has referred to the information received regarding the transaction between M/s. Kanyakumari Builder Pvt. Ltd.
and L. K. Trust and consequent litigation. The statement made before the Hon'ble Court of the XIX Addl. City Civil and Session Judge at Bangalore City clearly constitutes an admissible evidence. The Hon ble Court had held that M/s. Kanyakumari Builder Pvt. Ltd. had failed to produce bank passbook / cheque book / cash book and books of account to support the sing Officer recorded that the claim. In the light of these finding the Assessing Rs.25,58,00,000/ incurred by M/s. Kanyakumari cash expenditure of Rs.25,58,00,000/-
Builder Prt. Ltd: towards obtaining vacant possession from the dweller / 2007 09 remains unexplained and attracts the provisions hutments in FY 2007-09 of section 69C of the IT.Act, 1961. The Assessing Officer has categorically recorded that the Assessee has under reported its income to the tune of Rs.25,58,00,000/ Accordingly,, notice u/s.148 has been issued..
Rs.25,58,00,000/- issued 4.4. It is therefore seen that there is tangible material forming &-live nexus with formation of belief that income has escaped assessment. It is trite law that for reopening the assessment, the A.O. has to merely form reason to believe that income has escaped assessment. The reassessment M/s Pebble Bay Developers Pvt. Ltd. 32 ITA No. 5744/M/2017 proceedings allows the appellant appellant to rebut the reasons for reopening of the assessment. The only question to be seen is whether there is relevant material on which a reasonable person could have formed requisite belief. Whether those facts stated in material are true or not, is not the concern at this stage. This is so because the formation of belief by the Assessing officer is within his subjective satisfaction - refer Supreme Court's decision in the case of ITO vs. Lakhmani Mewaldas (1976) 103 ITR 437 (SC), Phool Chand Bajranglal Bajranglal vs. ITO (1993) 203 ITR 456 (SC), ITO vs. Select Dalurband Coal Company Pvt. Ltd. (1996) 217 ITR 597, 599 (SC) and Central Province Manganese Ore Company Ltd. Vs. ITO (1991) ITR 662, 666 (SC).
4.5. The action u/s 147 is possible despite complete disclosu disclosure of material facts if there is any escapement of income in the assessment proceedings - refer Praful Chunilal Patel, Vasant Chunilal Patel vs. ACIT (1999) 236 ITR 832, 840 (Guj), Stock Exchange Vs. ACIT (1997) 227 ITR 906 (Gui) and ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC).
4.6. In the present case, the return was merely processed u/s 143(1). An intimation us 143(1) cannot be treated as an order of assessment. There is no question of change. of opinion when none is expressed. The assessing Officerr can form reasons to believe that income has escaped assessment by examining the very return/ documents accompanying the return. Refer Indulata Rangwala vs. DCIT (2016) 286 CT (Del) 474, CIT vs. Rajesh (SC),, DCIT vs. Zuari Shaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC) Estate Development & Investment Co. Ltd. (2015) 373 IT 661 (SC).
4.7. When no finding either positive or negative is arrived at during the course of original assessment proceedings, there is no question of change refer A.L.A. Firm vs. CIT 102 ITR 622 (Madras), Ess Kay of opinion - refer-
M/s Pebble Bay Developers Pvt. Ltd. 33 ITA No. 5744/M/2017 Engineering Company (P) Ltd. vs. CIT 247 ITR 818 (SC) and EMA India Ltd. vs. ACIT (30 DTR 82) (Allahabad).
4.8. When an income liable to tax has escaped assessment in the original oversight and inadvertence or a mistake assessment proceedings due to oversight committed by the original Assessing Officer, subsequently, while verifying the records, Assessing Officer can start reassessment proceedings for escapement of income. Further, there is a legal proposition accepted by arious courts that reassessment proceedings is permissible even if the various information is obtained after proper investigation from the materials on record or from any enquiry or research into facts or law. There is a plethora of judgments that such information need not be from external source - refer CIT & anr. vs. Rinku Chakraborty 56 DTR 227 (Kar) and Kalyanji Mavji and Company Vs. CIT 102 ITR 287 (SC). It is also pertinent to mention that for reopening of completed assessment u/s 148, tangible material need not be from outside the return of income. It can be obtained from the return of income or evidences on record itself. The reference may be had of ACIT vvs. Kanga & Co. (2010) - TIOL 464 ITAT Mumbai. It is also in assessment proceedings relevant to mention that information obtained in of subsequent year, can also be utilized for reopening of the complete assessment - refer Raymond Woolens Mills Ltd. vs. ITO and other 236 ITR 34 (SC) and Revathy C.P. Equipment Ltd. vs. DCIT and Ors. 241 ITR 856 (Mad).
4.9. It is further noted that the reasons recorded were furnished to the appellant on 29.12.2015. The assessment order has been passed on 30.3.2016. The appellant had ample time but did not file any objections. No evidence of filing any objection is produced in the appellate a proceedings. Thus, due procedure has been followed by the assessing officer. In the light of these facts and discussion earlier, I do not find M/s Pebble Bay Developers Pvt. Ltd. 34 ITA No. 5744/M/2017 merits in the contention of the appellant. The Grounds of Appeal No. 'A' to the reopening of the assessment is upheld."
'C' is thus, dismissed and the upheld.
11.4 In view of the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stockbrokers Private Limited (2007) 291 ITR 500 (SC) for reopening, there must be a relevant material on the basis of which reasonable person can form requisite belief that in come escaped the income assessment. Thus, prime requirement is relevant material which should be before the Assessing Officer. In the present case, a copy of the order orde of the Hon'ble City Sessions Judge was beforee the Assessing Officer, wherein cash payment has been shown to have been made in relation to the property Thus order of Hon'ble City Sessions Judge is definitely owned by the assessee.. Thus, a relevant material on the basis of which reasonable person can form the belief. In our opinion, the contention of the Ld. Counsell of the assessee of the borrowed satisfaction, are baseless and therefore same are rejected.
11.5 In view of the above detailed discussion, the objections raised by the assessee under rule 27 of the ITAT Rules are rejected.
12. Now we take up the grounds raised by the Revenue in its appeal.
M/s Pebble Bay Developers Pvt. Ltd. 35 ITA No. 5744/M/2017
13. The ground No. 1 and 2 of the appeal relates to addition under section 69C of ₹25,58,00,000/-.. It is the contention of the Revenue that Ld. CIT(A) has 6 are not applicable in the case as erred in holding that provision of section 69C the assessee has not claimed those expenses in the instant year. The revenue has also contended that judgement has been pronounced against the assessee company in the suit filed ed by the sister concern of the assessee i.e. KBPL for reimbursement of the expenses incurred in cash due to failure in explaining source of the same before the Hon'ble district Court.
14. The facts in brief qua the issue in dispute emanating from the order ord of the lower authorities and submission of the assessee including paper book consisting of the order of the Hon'ble City Sessions Judge, are that :
(i) Residential plot of land admeasuring 11 acres 20 guntas situated at Banglore,, was owned by M/ss LK Trust, who agreed to engage M/s Kanyakumari builders Private Limited (KBPL) i.e. the sister assessee vide joint development agreement (JDA) concern of the assessee, land. This JDA was duly dated 1/2/2006 for development of said land.
egal hutments and slums were in registered on 18/02/2006. Illegal M/s Pebble Bay Developers Pvt. Ltd. 36 ITA No. 5744/M/2017 existence on a small part of said plot of land (approx. 2 acres and 4 guntas) and approx. 475 families were residing.
(ii) VI clause 6.1 of JDA, the owner LK trust was As per the Article VI, required to remove those huts/temporary sheds heds and put the developer in vacant possession of the said plot of land for development.. Since illegal hutment could not be vacated by the LK development Trust,, therefore the work of vacating those hutments was entrusted to the KBPL after mutual agreement. In the 'plaint' filed fore the Hon'ble City Sessions Judge,, the KBPL submitted that before this task of moving the hutment was a stupendous and required outsourcing, negotiation with the dweller/occupants. It was claimed that KBPL had to expend their own money from the beginning since LK trust did not pay the amount for commencement. It was submitted in the 'plaint'' that the dwellers were not ready to vacate and hand over the possession and they even threatened to obstruct or stop progress of the development fore, the KBPL found no other alternative option but to work, therefore, rehabilitate them in a nearby area and also pay heavy amount.
The dwellers had reposed confidence with one person namely M/s Pebble Bay Developers Pvt. Ltd. 37 ITA No. 5744/M/2017 M/s Anand who in turn dispersed payments to respective occupants and obtained receipts r and affidavits from them. The KBPL sought alternative place in Kogilu village, Banglore Nothtaluke and by the end of Nov.
No 2007, most of the area of 2 ied unauthorizedly) acres 4 guntas (i.e. which was occupied unauthorizedly was cleared, leveled and surrendered, su however disbursement of the money to some of the reluctant occupants/dwellers was made on/upto 18/02/2008. The KBPL claimed claim to have maintained a detailed running account in its ordinary course of its business showing the actual cost incurred towards obtain obtaining vacant possession from the dweller/hutments. It was claimed that M/s KBPL spent totally ₹36,36,72,564/- for obtaining vacant possession of land however LK Trust made only part payment of 10 crores on 27/01/2007. In the 'plaint' it was claimed that LK ₹10 26,36,72,564/- but it Trust assured to make balance payment of ₹26,36,72, ake the payment and therefore ssuit of the recovery was did not make filed.
(iii) On the other hand, in reply to the 'plaint' of KBPL, the LK Trust denied that the amounts were paid to Mr. Mr Anand and he M/s Pebble Bay Developers Pvt. Ltd. 38 ITA No. 5744/M/2017 amount. The LK trust denied other unacknowledged receipt of the amount.
averments and made counterclaims.
(iv) On the basis of the rival pleadings of the KBPL and LK trust, Hon'ble Sessions Court concluded that claim of expenses expense by the KBPL was not substantiated.
14.1 Based on the observation of the Hon'ble Sessions Court and documents including cash vouchers filed before the Hon'ble Court,, which shown that expenditure was incurred for removal of hutments, the assessment in the case Assessing Officer of KBPL passed on the of KBPL was reopened and the Assessing information regarding the decision of the Hon'ble Sessions Court to the Assessing Officer of the assessee. On the basis of said information information, the assessment in the case of the assessee was reopened.
15. Before the Assessing sing Officer the assessee claim claimed that out of ₹10 crores iven by way of bank received from Mrs. LK trust, ₹7,67,98,000/- was given 2,32,02,000/- was drafts/cheque to Mr. Anand by M/s KBPL and balance ₹2,32, transferred to assessee for removal of huts. A copy of accounts of Mr Mr. Anand in the books of KBPL was submitted before the Assessing Officer. It was further submitted that the responsibility of removing huts were shifted to the M/s Pebble Bay Developers Pvt. Ltd. 39 ITA No. 5744/M/2017 e. Purchaser), who continued with the services of Mr assessee company (i.e. Mr. Anand for removal of huts and paid ₹23,36,11,240/- on various dates by draft/cheques. It was submitted the total amount spent on removal of the huts was of ₹26,43,81,240/-- during the financial year 2007-08 08 and 2008 2008-09. A itted before the Assessing copy of account of said expenditure was submitted Officer. Further it was claimed that such expenses have not been debited to profit and loss account and same had been accounted as receivable from M/s.
M/ LK Trust.. The assessee denied of giving any cash payment for removal of hutments and cash vouchers were collected from Mr. Anand for making Trust. The assessee provided address of Mr. further claim to LK Trust. Mr Anand and submitted that summon might be issued to him for verification of the claim of the assessee.
16. The Ld. Assessing Officer summarised the observation of the Hon'ble Sessions Court in para 5.5.2 of the impugned assessment order, which are extracted as under:
5.5.2 The issues, submissions and facts came up before the Hon'ble Court are as "5.5.2 follows:
ya Raheja, Director, of the Company, admitted in his cross
a) Shri Aditya examination that some cash vouchers do not contain the name of the payer and M/s Pebble Bay Developers Pvt. Ltd. 40 ITA No. 5744/M/2017 as per the law, the name of the payer is to be shown in the cash voucher. The major portion of the amount has been paid to one Anand. Since the payer is Anand, the name of the Company is not shown in the cash vourcers.
b) Ex. P. 29 to Ex. P. 232 cash vouchers have not been obtained on the revenue stamps.
c) The amounts were paid to many persons, but the Company has not at all examined any of the authors of the said documents i.e., any of the payer under said Ex. P. 29 to Ex. P. 232 cash vouchers.
d) Major portion of the amount for about Rs. 8.75 Crores was paid to Anand, but said Anand has not been examined before the Court.
Court
e) Shri. Aditya Raheja stated that all the payments to Anand were made through cheques and no cash payment have been made to Anand. But the Company has not at all produced the pass book or bank statement of the Company to show that all these amounts were debited from the account of the Company and the same were paid to Anand.
f) Shri Adity Raheja further clearly admitted in page no. 11 of his cross examination that all the payments made by them are reflected in their books of accounts and he does not know as to whether they have been mentioned and his CA knows the same. But the Company has not at all produced the said books of accounts.
g) Ex.P.63 a cash voucher dated 06.12.2007 stated that the said amount was paid in advance towards the sale of the land at Kogilu villiage. Land was 2,25,00,000/ for rehabilitation of the purchased from Byrappa by paying Rs. 2,25,00,000/- hutments. The Company has not at all produced the sale deed or other documents to show that land was purchased from Byrappa.
M/s Pebble Bay Developers Pvt. Ltd. 41 ITA No. 5744/M/2017
h) Ex.P.64 is another cash cash voucher passed by one Subramani Civil contractor on 1,53,00,000/ to civil contractor 07.12.2007 wherein the Company has paid Rs. 1,53,00,000/- for construction of residential units for rehabilitants at Kogilu village. However as stated in Ex.P. 63 & Ex.P. 64, if land was purchased on 06.12.2007 as per Ex. P. 63, the residential units cannot be constructed in a single day on 07.12.2007. Moreover the author of Ex.P.63 Byrappa and Ex.P.64 Subramani have not been examined before the Court.
i. Total Rs. 1,05,00,000/-was
1,05,00,000/ paid to Lakshamma for acting site and
handing over the possession of site at Nagasettihalli village by way of cash vouchers Ex.P. 111, Ex.P. 112 and Ex.P.113 of Rs. 72 lakhs, Rs. 8 laksh & Rs. 25 laksh respectively dated 05.02.2008. But it is not known which wa was the site and how much area she had occupied. Even Lakshamman has not been examined before the Court.
j) Ex.P. 114 is another cash voucher dated 09.02.2008 under which Rs. 25 lakhs was paid to one Armugaum for removal of hutments on 09.02.2008. Ex.P. 115 is cash voucher under which Rs. 25 lakhs was paid to one Venkatappa for removal of hutments. Under Ex.P. 116 voucher dated 09.02.2008 Rs. 40 laksh was paid to one Shamalamma for removal of the sign board and for rehabilitation of the hut dwellers. But the author of Ex. P. 116 was not examined. Ex.P.117 is the sh voucher dated 09.02.2008 under which Rs. 75 laksh was paid Anand towards the expenses incurred for vacating of hut dwellers. So also in Ex.P.119 Rs. 50 Lakhs was paid to Jayamma on 09.02.2008 for eviction of hut dwellers. These eviction cash vouchers clearly raise doubt with regard to payment made by the Company to these persons.
k) Shri Aditya Raheja admitted that Ex.P.141 to Ex.P.210 cash vouchers do not contain voucher number and date of payment.
M/s Pebble Bay Developers Pvt. Ltd. 42 ITA No. 5744/M/2017 I) The Company mpany neither produced the account book of the Company nor the cash book.
m) Shri Aditya Raheja stated in page No. 15 of his cross examination that he has collected the acknowledgement from Anand while making payment to him acknowledgment. But he has not produced the and he will produce the acknowledgment.
acknowledgment said to have been passed by Anand."
16.1 The Assessing Officer observed that cash vouchers made are mostly self made without any supporting in lakhs of Rupees. He pointed out that payment een made by cheques by the assessee were established to be claimed to have been same as cash payment shown in vouchers filed before the Hon'ble Sessions Judge. The Ld. Assessing Officer held that there is no correlation in two payments as one is made by way of cash and other is by way of cheque. He also observed that the assessee has nowhere produced any document to substantiate that cash has been paid from the accounted books of the assessee 000/- as unexplained and therefore he held that said expenditure of ₹25,58,00,000/ expenditure enditure in terms of section 6 69C of the Act.. The relevant finding of the Ld. Assessing Officer is reproduced as under:
"5.6 Thus, the Director has made a submission before the Hon'ble Court regarding certain expenses being incurred in cash in various years. The statement being made before the Hon'ble Court is admissible as evidence. The submitted before the Hon'ble Court on details of cash expenses which was submitted M/s Pebble Bay Developers Pvt. Ltd. 43 ITA No. 5744/M/2017 which dates are mentioned sum totaled to R Rs.25,58,00,000/-.. Further it's the Director of the assessee company Shri Aditya Raheja who has during the cross examination owned up the cash vouchers as he has duly confirmed the various va payments made in cash. The series of these facts have already been enumerated vide para 5.5.2 above. This clearly entails to the fact that the Director of the assessee company is well aware to the fact that the payments have been incurred in cash and for which the assessee company does not have relevant supporting.
5.7 Further from cursory look at the facts and the vouchers submitted by the assessee in the court duly mentions that all the payments have been made in 20,000/-.. However even for the said cash vouchers cash and are in excess of R$ 20,000/ entering into lacs of Rupees, the same do not have any supporting documents other than being self-made self vouchers. Further the assessee, company has claimed that it has paid a sum of Rs. 25 crores in cheque to one Mr M Anand.
However the total of cash payments voucher is 25.58 crores. Thus there is no correlation in the two payments as one is by mode of cash and the other is by way of cheque. The assessee has nowhere produced any document so as to substantiate that the cash has been paid from the accounted books of the assessee.
5.8 In light of the findings of the Hon'ble Court and in view of the above discussions, the cash expenditure of Rs. 25,58,00,000/-
25,58,00,000/ incurred by assessee company towards obtaining vacant possession from the dweller/hutments in 08 remains unexplained and attracts the provisions of section 69C of F.Y. 2007-08 the Income-tax tax Act, 1961.
1961."
16.2 On further appeal, the Ld. CIT(A) after considering submission of the assessee, deleted the addition observing obse as under:
M/s Pebble Bay Developers Pvt. Ltd. 44 ITA No. 5744/M/2017 5.7. The entire case of the assessing officer is based on the court proceedings and the order of the Hon'ble Court of the XIX Addl. City Civil & Sessions Judge Banglore City. It is noted that the court order is dated 17.7.2014 in case O.S. No. 6741/2008. The plaintiff if M/s Kanyakumari Builders P. Ltd. and the defendant is M/s L K Trust. The appellant in this case is not a party in this suit. This is a 26,36,72,564/- with interest is suit for recovery of money. An amount of Rs 26,36,72,564/ claimed. The court records that the plaintiff had purchased/agreed to develop residential project on land belonging to the defendant. There were encroachments on the land which the defendant was to clear at its own cost. On ant requested the plaintiff to get the failure of the defendant to do so, the defendant encroachments removed. The expenses incurred by the plaintiff for the same eimbursed by the defendant. The plaintiff spent several crores for was to be reimbursed clearing the encroachments. The plaintiff made payments to one A Anandh who in turn made payments to the dwellers/owners of hutments on the land for vacating the land. As per the Plaintiff it had incurred R$ 36,36,72,564/-
36,36,72,564/ but the Plaintiff had paid only Rs 10 crores. Hence the suit for the balance amount had been filed. The defendant on the other hand claimed that it had given R$ 10 crores with the understanding that balance amount will be refunded. It denied having agreed to reimburse any amount incurred by the plaintiff. I disputed the expenditure by the plaintiff. It also claimed that any incurring of the claim of expenditure expenditure incurred for this purpose was to be with mutual consent. The Hon'ble Court finally dismissed the plaint for several reasons including that the expenditure claimed to be incurred in cash was not proved and also dismissed proved the counter claim of the defendant for Rs 10 crores stating that the plaintiff had spent several crores to get the land free from encroachments.
5.8. As noted earlier, the appellant in this case was not a party to the suit disposed. The assessing officer has not dealt with the submissions and details filed by the appellant in the assessment proceedings to show that it had not by M/s Pebble Bay Developers Pvt. Ltd. 45 ITA No. 5744/M/2017 itself incurred any cash payments, and that all payments to Anandh was by way of Demand Drafts or cheques and that such payments were reflected in its bank accounts. Further, it is noted from the assessment case records called and perused, that the appellant had filed such details vide submission dated 15.1.2016 (page nos 169 to 233). These contain ledger aceount in name of L K Trust, and copy of bank statement with Std Chartered Bank account no 237 237-0- 503099-1, 1, Santa Cruz West, Mumbai. and several specimen copies of demand drafts issued by Standard Chartered in favour of Anandh. Vide submission filed by the assesse dated 29.3.2016 in the assessment proceedings, declaration by Mr Anandh Kumar confirming that he had received all payments by cheques /demand drafts from the appellant company and Ms Kanyakumari Builders P. removing the hutments on part of land at Ltd. and that he was instrumental in removing Nagashetty Halli Village along with copies of bank statements, demand drafts / cheques and copy of ledger account was filed (pages 287 to 309). Copy of Aadhar Card of Shri Anand Kumar was also filed. The assessing offi officer has not examined these evidences nor commented on the same as to how it is concluded that the appellant has made the cash payments.
5.9. The cash payments have been made by Mr Anandh as confirmed by him, but same from him, in case he had any the assessing officer did not verify the same doubts.
5.10.
.10. The appellant has rebutted the observations of the assessing officer which are in turn based on the observations in the Court Order. It has been explained that the name of payer is not mentioned in cash vouchers since the payer was Mr Anandh. The appellant has also disputed that Shri Aditya Raheja had owned up to making payments in cash by referring to page 13 of his cross examination where he stated that all payments were made by cheques. The appellant has also shown that the payments to Shri Anandh were more than Rs 25 crores and hence the comparison to an amount of ₹25.58 crores is entirely out of context M/s Pebble Bay Developers Pvt. Ltd. 46 ITA No. 5744/M/2017 and baseless. The claim of the Appellant to the extent of Rs.36.26 Crores 'ble Sessions Judge not on the basis that no (Approx.) was denied by the Hon 'ble payments were made by KBPL but only on the basis that KBPL failed to produce evidences in the nature of books of accounts, bank statements, etc. before the Sessions Judge. The issue before the Hon'ble Sessions Judge was relating to Judge claim of receivable by KBPL from LK Trust. Its observations cannot be automatically imported in the ease of income tax proceedings of the appellant. The order of the court dismissing the plaint for not proving that expenditure red and that the defendant was liable, does not prove nor is relevant was incurred to concluding that the appellant itself has incurred cash expenses and further that the same are unexplained. The appellant has a point when it claims that if o be relied upon then as per the court order the the order of the court is tto expenditure in cash was not proved and as corollary, there cannot be any addition if such expenditure was not incurred. From the facts discussed, it is therefore concluded that there is no basis to invoke section 69C in the facts of section this case as it has not been found that there is any payments not reflected in the appellant's books and not reflected in the bank statements. All payments are by way of cheques/demand drafts and reflected in the bank statements.
5.11. The issue that arises next is that even though the payments are made by cheques to Shri Anandh, he has made the payments in cash and possibly all all-
such payments have not been spent as claimed. Thus, such expenses should not be allowed in the hands of the appellant.
5.12. The appellant has categorically confirmed no deduction has been claimed either by the appellant or KBPL against their taxable incomes. It is pursuing its pursuing its remedy against L K Trust in its appeal before the Karnataka High urt. In the appellant's books this amount advanced to Mr Anandh is not Court.
claimed as expenditure but is shown as recoverable from L K Trust. In subsequent AY 2009-10 2010 11 the advance was written off but was 10 and AY 2010-11 M/s Pebble Bay Developers Pvt. Ltd. 47 ITA No. 5744/M/2017 added back in the computation of income. Assessments Assessments have been completed u/s 143(3) for those years. Thus, the amounts have not been claimed as expense nor added in Work in Progress. Singe in the current year such expenses are not claimed, question does not arise of any disallowance. The assessing officer is, however, at liberty to examine such expenditure if ever claimed in future.
Rs.25,58,00,000/- u/s 69C of Income Tax Act, 1961, 5.13. The addition made of Rs.25,58,00,000/ is therefore deleted and The grounds of appeal D to H are allowed as above."
above.
17. In support of the grounds raised by the Revenue,, the Ld. Departmental Representative relied on the order of the Assessing Officer and submitted that in view of finding of the Hon'ble City Sessions Judge that assessee and its explain source of the cash expenditure incurred sister concern failed to explai mentioned in vouchers through its books of accounts. The onus was on the assessee to produce copy of all the cash vouchers vo chers and produce Mr. Mr Anand for verification of the claim of the assessee, instead of shifting the th burden of producing Mr. Anand to the Assessing Officer. He submitted that primarily the assessee was required to substantiate whether the expenditure claimed 29 to Ex.P.245 was before the Hon'ble Sessions Judge by way of exhibit Ex.P -29 her the books of accounts of the assessee or its sister incurred out of either concern. Instead of doing so, the assessee mainly harped on argument that payments to Mr. Anand was made by way of cheque or demand draft from the M/s Pebble Bay Developers Pvt. Ltd. 48 ITA No. 5744/M/2017 bank account of the assessee and its sister concern, for which also no documentary evidences were filed before the Assessing Officer. He submitted that Ld. CIT(A) has deleted the addition without providing opportunity to the Assessing Officer on the documents filed before the Ld. CIT(A). He submitted that there is need to verify whether amount of expenditure in question has been credited in the bank account of Mr. Anand and whether the source of the same has been originated from the bank account of the assessee or its sister concern. He submitted that it is the the sister concern of assessee who has filed suit against LK Trust for recovery of expenditure on the ground that it has incurred expenditure on removal of huts and filed voucher by way of Ex.P.29 to Ex.P.245, therefore onus is on the assessee to show that the expenditure reflected in those exhibits has been incurred out of books of accounts of the assessee or its sister concern. He submitted that no such burden has been discharged by the assessee even before the Ld. CIT(A) and therefore order of ed to be reversed and addition in question need to be the Ld. CIT(A) need restored back to the AO.
18. Before us, the Ld. counsel of the assessee filed a paperbook containing cont pages 1 to 306. Further,, he assailed the addition made by the Ass Assessing Officer M/s Pebble Bay Developers Pvt. Ltd. 49 ITA No. 5744/M/2017 9C of the Act.. He submitted that addition could be made in the under section 69C hands of the assessee only if the assessee offers no explanation about the source of such expenditure or he offers an unsatisfactory explanation about the source of such expenditure. He submit submitted ted that in the present case, the books of accounts of the assessee have been audited and have also been accepted by the Ld. Assessing Officer himself as depicting true and fair view of company. According to him, once the books the state of affairs of the assessee company of accounts are accepted as correct then there is no question of any further fu 69C of the Act, since the source is duly explained. He addition under section 6 submitted that in such circumstances the addition deserve to be deleted ent of the Hon'ble Delhi High Court in the case of CIT Vs relying on the judgment Radhika creation (2011) 10 taxmann.com 138 (Delhi).
(Delhi)
19. He further submitted that for invoking section 69C of the Act burden is on the Revenue to prove that expenditure actually incurred by the assessee has not been explained. In the present case, said burden has not been discharged by the Assessing Officer and therefore no addition additio could be made under section 69C 9C of the Act.
M/s Pebble Bay Developers Pvt. Ltd. 50 ITA No. 5744/M/2017 mitted that assessee has made payments to Mr Anand 19.1 Further, he submitted and who in turn vacated the said property. As such any expenditure in cash at all incurred was by him and not by the assessee therefore entire payments and transactions should be treated as explained and therefore herefore there is no question of any disallowance.
disallowance 19.2 Further it was also submitted that assessee had submitted all details before the Assessing Officer and therefore it was onus of the Assessing Officer to prove that said details were incorrect by way of of making necessary inquiries that the assessee cannot be penaliz and investigation. He submitted that penalized for any failure on the part of the Assessing Officer in performing his duty. According to the Ld. counsel of the assessee Assessing Officer has not performed any enquiry like summoning Mr. Mr Anand, even after the entire details of evidence and materials/particulars of the transactions are furnished to him. As such the addition is unsustainable, since it is attributable to the failure on the part of the Assessing Officer to perform his part of the duty. In support of the contention that once the assessee furnishes all the requisite details, the AO cannot sit back with folded hands till the assessee exhaust all the evidence submitted in his possession and then reje reject ct the claim of the assessee on the M/s Pebble Bay Developers Pvt. Ltd. 51 ITA No. 5744/M/2017 presumption, the Ld. counsel relied on the decision of the Hon'ble Calcutta High Court in the case of CIT v. Kamdenu Vyapar Co Ltd (2003) 263 ITR 692 ( Calcutta).
19.3 It was also submitted by the Ld. counsel of the assessee that no eduction has been claimed by the assessee in respect of the said payments to deduction Mr. Anand for clearing the property and said amount paid by the assessee is overable from LK Trust. As such, there was no claim for actually recoverable expenditure is made, therefore there cannot be subject to disallowance disallowance.
20. We have heard travel submission of the parties on the issue in dispute and perused the relevant material on record. The facts of the case have been discussed in earlier paras of this order and therefore therefore we are not repeating the same again for brevity. The issue in dispute in the background of above facts is that whether the expenditure incurred for removal of hutments for which KBPL filed a suit for recovery from LK Trust, has been incurred out of explained sources or sources of which are unexplained. The plot of land in question has been ultimately transferred to the assessee and it is claimed before the Hon'ble Sessions Judge by KBPL that with effect from 27/01/2007, expenses for removal of huts have been incurred by the assessee. i.e. i.e Pebble M/s Pebble Bay Developers Pvt. Ltd. 52 ITA No. 5744/M/2017 bay developer Private Limited. It is the KBPL, who has claimed that expenses of more than ₹ 36 crore have been incurred on removal of hutments. List of all such expenses along with vouchers were produced befo re the Hon'ble City before Sessions Judge, which have been particularly identified as Ex.P Ex.P-29 to Ex.P.245.
The moot question is whether those expenses have been incurred from the books of KBPL or books of the assessee. The Hon'ble H City Sessions Judge has analyzed the evidencess filed by KBPL in support of those expenses and observed that KBPL failed to correlate the source of those payments either from the bank statements or from cash book. The Hon'ble City Sessions Judge framed was whether the KBPL has framed various issues. The first issue framed incurred an expenditure of ₹29,66,11,240/- for clearing the huts found in the property at the instance of LK Trust. The Hon'ble court examined three witnesses on behalf of the KBPL including its director Sri Aditya Raheja and marked rked documents as Ex.P 245. Sri Aditya Raheja admitted during Ex.P-1 to Ex.P-245.
cross examination before the court that some cash vouchers do not contain name of the payer and major portion of the payment was made to Sh.
Sh Anand.
expenditure were made through the assessee He also stated that payments for expenditure i.e. Pebble Bay developers Private Limited, whose statement of accounts was M/s Pebble Bay Developers Pvt. Ltd. 53 ITA No. 5744/M/2017 filed as Ex.P-10. observation of the Hon'ble City Sessions Judge
10. The relevant observations are extracted as under:
"25. Major or portion of the .amount for about Rs.8.75 Crores was paid to Anand as can be seen from Ex.P.9 and Ex.P.10 statement of account. But said Anand has not been examined before the court. No doubt, as can be seen from the order sheet, the plaintiff had made efforts to examine said Anand and he got issued summons to said Anand. But said Anand did not appear inspite of service of summons. The plaintiff also made efforts to secure the presence of said Anand by getting issuing arrest warrant and attachment of his property and ame, said Anand did not appear before the court and he could inspite of the same, not be examined by the plaintiff.
26. 2 clearly states in page No.013 that he has made all the payments to PW-2 Anand through cheques as stated in para 3 of the affidavit and no cash een made to Anand. He further clearly admit payment have been admits amount of Rs.29,66,11,240/- shown in para 13 and 14 of the plaint have not been shown in Ex.P.11 letter. It is pertinent to note that Ex.P.10 statement of account relates ebble Baby Developers Pvt.Ltd:. Admittedly M/s.Pebble Baby to M/s.Pebble Developers Pvt.Ltd., is not the plaintiff and M/s.Pebble Baby Bab Developers Pvt.Ltd., is the purchaser of the schedule property from the defendant on 31/1/2007 under Ex.P.5 sale deed. It has come in the evidence that both the iff company and M/s. Pebble Baby Developers Pvt.Ltd., are under the plaintiff control of family of the Sri Vijay Raheja and his family is associated with the plaintiff company and M/s. Pebble Baby Developers Pvt. Ltd. But Ex.P.10 .Pebble Baby Developers Pvt.Ltd., for the statement of account pertains to M/s.Pebble period 1/4/2004 to 31/3/2009. No doubt, as can be seen from Ex.P.10, the amounts were paid through banks Standard Chartered Bank through cheques. But in order to support the entries made in Ex.P.10, the plaintiff has h not at all M/s Pebble Bay Developers Pvt. Ltd. 54 ITA No. 5744/M/2017 produced the pass book of the plaintiff company or M/s. Pebble Baby Developers Pvt.Ltd., to show that the amount shown in Ex.P.10 were deducted from the account of the plaintiff company or M/s.Pebble Baby Developers Pvt. Ltd."
20.1 The Hon'ble City Sessions Judge has recorded statement of the director cross examination, he was of KBPL Sh Aditaya Raheja where in during cross-examination, specifically asked to substantiate the payment from bank account or from the cash book, but he did not comply.
20.2 The relevant finding of the Hon'ble City Sessions Judge is reproduced as under:
4. As stated supra, the plaintiff has mainly relied upon Ex.P.29 to Ex.P.232 to "34.
basis his suit: claim amount.
Rs.2,25,00,000/-. It is
35. Ex.P.63 is one cash voucher passed by Byrappa for Rs.2,25,00 stated in Ex.P.63 that the said amount was paid in advance towards the sale of the land at Kogilu village, Yelahanka Hobli for rehabilitation of hutmants. But plaintiff has not at all produced the sale deed or other documents to show that d was purchased form this Byrappa by paying Rs.2,25,00,000/ land Rs.2,25,00,000/- . for rehabilitation of the hutments. It is pertinent to note that this Ex.P.63 is dated:
6/12/2007. Ex.P.64 is another cash voucher passed by one Subramani, Civil wherein the plaintiff has allegedly paid Contractor, on 7/12/2007 wherein Rs.1,53,00,000/- to civil contractor for construction of residential units for rehabilitants at Kogilu village, Yelahanka Hobli. If land was purchased on 6/1/2007 as per Ex.P.63, the residential units cannot be constructed constructe in a single M/s Pebble Bay Developers Pvt. Ltd. 55 ITA No. 5744/M/2017 day on 7/12/2007. More over the author of Ex.P.63' Byrappa and Ex.P.64 Subramani have not been examined before the court. The plaintiff could have examined these persons in order to establish the contents of Ex.P.63 and Ex.P.64. ExP-11 is another cash voucher under which Rs.72 Lakhs was paid to one Lakshamma being the compensation towards vacating and handing over possession of site at Nagasettihalli village, Bangalore and it is dated: 5/2/2008. Though Ex.P.112 is another cash voucher under which Rs.8 Lakhs was again paid to Lakshmamma for vacating and handing over possession of the site at Nagasettihalli village. Again under Ex.P.113 cash voucher, another Rs.25 Lakhs was paid to Lakshamamma. Therefore, it is clear that totally Rs.1,05,000,00/-
Rs.1,05,000, was paid to Lakshamma for vacating the site and handing over possession. But it is not known which of the site and how much area she has occupied. Even the author of Ex.P.111Lakshmamma has not been care examined before the court. Ex.P.114 is another voucher v dated: 9/2/2008 under which Rs.25 Lakhs was paid to one Armugaum for removal of hutments on 9//2008. Ex.P.115 is cash voucher under which Rs.25 Lakhs was paid to one Venkatappa for removal of Rs.40 Lakhs was paid the hutments. Under Ex.P.116 voucher dated: 9/2/2008 Rs.40 to one Shamalamma for removal of the sign board and for rehabilitation of the hut dwellers. But the author of Ex.P.116 was not examined. Ex.P.117 is the cash voucher dated: 9/2/2008 under which Rs.75 Lakhs was paid Anand towards the expenses hut dwellers. Ex.P.118 is another cash es incurred for vacating of hut-dwellers.
voucher under which RS.50 Lakhs was paid to Madhusudhan for incurring the hut-dwellers . So also in Ex.P.119 Rs.50 Lakhs was paid expenses for eviction of hut n of hut dwellers. These cash vouchers to Jayamma on 9/2/2008 for eviction clearly raised doubt with regard to payment made by the plaintiff to these persons.
36. But as stated supra, the plaintiff has not produced the account book of the plaintiff company. Even he has not produced the cash book or IT returns. The M/s Pebble Bay Developers Pvt. Ltd. 56 ITA No. 5744/M/2017 defendant had filed an application under Order 11. Rules 12, 14, 15 of CPC directing the plaintiff to produce the IT returns and cash books. But PW-2 has stated in page No.6 of his cross-examination that he doess not know whether their company has maintained the cash book and he has to check with his C.A. and he will produce the said cash book if available. But said application of the PW 1 has stated that he does not have any cash defendant was rejected since PW-1 book.
k. So far as income income-tax returns are concerned, the application was rejected on the ground that they are confidential documents. But it is the settled principle of law that plaintiff should stand on his own legs and he should not make use of the weakness of the other side. In order to support the entries made in cash vouchers produced at Ex.P.29 to Ex.P.232, the plaintiff could have produced the cash book and account extracts maintained by the plaintiff. But the plaintiff has not done the same.
37. A question on was posed to PW PW-2 in page No.14 of his cross-examination examination that as per para 13 and 14 of the plaint, the plaintiff had claimed Rs.29,66,11,240/-
Rs.29,66,11,240/ and as per Ex.P.29 to Ex.P.232 vouchers the said amount would come to Rs.30,17,10,100/- and witness answered that t he would reconcile the statement 2 has not given explanation with and he would get back and say. But PW-2 regard to the discrepancy of amount during the course of his further cross- examination on 11/3/2014. Moreover, PW-2 clearly admits in page Nos.14 an and 15 of his cross- examination that Ex.P.141 to Ex.P.210 cash vouchers do not contain voucher number and date of payment. As stated supra, the plaintiff has 2 clearly stated in page No.15 of his paid major amount to one Anand. PW-2 examination that he has collected the acknowledgment from Anand while cross-examination making payment to him and he will produce the acknowledgement and IT returns. But plaintiff has not produced the acknowledgment said to have been passed by Anand. Moreover, More it is pertinent to note that as per Ex.P.11, the work was to be completed within one month and the deposited amount of Rs.10 M/s Pebble Bay Developers Pvt. Ltd. 57 ITA No. 5744/M/2017 Crores was to be refunded after deducting expenses of eviction of slum dwellers. But these cash vouchers at Ex.P.111 to Ex.P.119 are dated: 5/2/2008 to 9/2/2008 i.e., they were spent after one month from 27/1/2007 mentioned in Ex.P.11."
20.3 Thus, it is clear that the assessee assessee claimed to have incurred of 36,72,564/- for removal of hutments, through books of expenditure of ₹36,36,72,564/ accounts of the assessee (KBPL), however, er, no supporting evidence by way of bank statement or cash book was produced before the Hon'ble Court of City Sessions Judge,, accordingly, the Hon'ble court rejected the claim observing as under:
"57. When plaintiff has failed to establish the actual expenses made by him and how much amount was due from the defendant, he is not entitled for interest. Therefore, the plaintiff is not entitled for the suit claim amount. Accordingly, issue Nos. 1 and 2 are held in the negative."
negative.
20.4 The Assessing Officer has also noted that no supporting documents to explain the source of expenditure incurred by way of vouchers Ex.P 29 to Ex.P.245 were filed before him. Before the Ld. CIT(A) the assessee mainly submitted that assessee has discharged its burden by way of claiming c that payments were made by way of bank cheques/Draft cheque Draft to one Mr. Mr Anand, who has made further payments to hutments dwellere/other persons, which might M/s Pebble Bay Developers Pvt. Ltd. 58 ITA No. 5744/M/2017 be in cash. It is claimed that assessee had provided address of Mr. Mr Anand to the Assessing Officer and therefore it was his duty to issue summon to him and verify the fact of payment by the assessee. The Ld. CIT(A) concurred with above arguments of the assessee and held that cash payments have been Mr Anand as confirmed by him but it is the made for removal of hutments by Mr. Assessing Officer who did not verify the same from him. We are not convinced with the above finding of the Ld. CIT(A). We find that Mr. Mr Anand did not appear even before the Hon'ble City Sessions Judge despite issuing warrant esence, and he did not confirm the cash payments before Hon'ble for his presence, City Sessions Judge whether same were incurred through him or not. In such circumstances, it was onus of the assessee to produce him before the a how much amount was received by him Assessing Officerr and justify as through bank cheque or draft and how much amount was deposited in his bank accounts and thereafter distributed to hutments devellers or other contractors. The assessee has only produced list of drafts or cheques claimed sued from the bank account of assessee or KBPL but whether to have been issued Mr. Anand, has not been the same has been credited into bank accounts of Mr established.
M/s Pebble Bay Developers Pvt. Ltd. 59 ITA No. 5744/M/2017 69C is concerned, if the expenditure 20.5 Ass far as invoking of section 69C incurred as recorded in Ex.P.29 to Ex.P.245 has not been incurred out of explained sources, then it is liable for addition under section 69C either in the hands of KBPL or the assessee. The claim of the assessee that no addition can be made in the hands of the assessee ass no deduction of expenditure has been claimed in the year under consideration, is devoid of merit. The issue of disallowance of expenditure under section 37 arises if same is claimed by the assessee as business siness deduction, but in the instant case the Assessing Officer has proposed addition for making payment out of unexplained sources or sources of which are not recorded in books of accounts of the assessee or KBPL. The Ld. counsel of the assessee referred refer to page 88 of the paperbook o Mr. Anand in the books of M/ss KBPL. This ledger which is ledger account of account shows payment of ₹8,75,00,000/-. Further, urther, in paperbook pages 89 to 90,, ledger account of LK trust in the books of assessee has been placed on record has been written off cord and according to which amount of ₹24,11,79,240/-has of recoverable. The Ld. counsel has also referred to a declaration signed as non-recoverable.
by Mr. Ananad Kumaram confirming that he was instrumental in removing the draft from KBPL, which is placed on hutments and received cheques/draft paperbook pages 156. The assessee in its submission has mainly stated that M/s Pebble Bay Developers Pvt. Ltd. 60 ITA No. 5744/M/2017 for removal of the hutments expenses have been incurred from the books of accounts of the assessee.
assessee In our opinion, the moot question is whether the expenditure recorded in Ex.P29 to Ex.P.245 has been incurred out of explained sources are not and it is not the question what the assessee has incurred expenditure out of its books of accounts for removal of hutments.
hutments The he assessee has not discharged o onus nus of explaining sources of expenditure recorded in Ex.P.29 to Ex.P.245. In the facts and circumstances and the interest of substantial justice, we feel it appropriate to restore this matter ssessing Officer for deciding afresh back to the file of the Ld. Assessing a with the direction to the assessee to:
(1) Produce a copy of all vouchers of expenses submitted before the Hon'ble City Sessions Judge as asEx.P.1 to Ex.P.245.
(2) Produce a copy of Statement and cross objection of sh Aditya Raheja before Hon'ble City Sessions Judge (3) Produce Sh Anand along with his bank statement , wherein the alleged bank cheques / draft issued by the KBPL or assessee have been deposited M/s Pebble Bay Developers Pvt. Ltd. 61 ITA No. 5744/M/2017 (4) Produce evidence in support of source of payment incurred in relation to Ex.P. 29 to Ex.P.245 (5) Produce the pe d those cash and other persons, who have signed vouchers,, so that it can be ascertained from their Bank vouchers accounts as who paid them whether it is KBPL or Mr Mr. Anand.
20.6 The Assessing Officer may carry out any other enquiry which he feels deem fit in the facts and circumstances of the case. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard.
20.7 Accordingly, the grounds raised by the Revenue are allowed for assessee in application statistical purposes whereas the grounds raised by the assessee under rule 27 are dismissed.
21. In the result, appeal of the Revenue is allowed for statistical purposes, whereas the application of the assessee under rule 27 is dismissed.
dismissed Order pronounced nounced in the open Court in 21/10/2022.
/10/2022.
Sd/- Sd/
Sd/-
(PAVAN
PAVAN KUMAR GADALE)
GADALE OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 21/10/2022
Dragon Legal/Rahul Sharma, Sr. P.S.
M/s Pebble Bay Developers Pvt. Ltd. 62
ITA No. 5744/M/2017
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Sr. Private Secretary)
ITAT, Mumbai