Income Tax Appellate Tribunal - Indore
The Acit 1(1), Indore vs M/S. Brilliant Estate Pvt. Ltd., Indore on 30 May, 2019
Brilliant Estates Ltd
IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER
AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER
IT(SS)A No.45/Ind/2015
Assessment Year 2008-09
The Deputy Commissioner of Vs. M/s. Brilliant Estate Pvt. Ltd
Income Tax 1(1), Indore 17, Race Course Road,Indore
(Revenue) (Respondent)
PAN AAACB7115L
C.O.No.30/Ind/2015
Assessment Year 2008-09
M/s. Brilliant Estate Pvt. Ltd Vs. The Deputy Commissioner of
17, Race Course Road,Indore Income Tax 1(1), Indore
(Appellant) (Respondent)
ITA No.393/Ind/2017
Assessment Year 2013-14
The Deputy Commissioner of Vs. M/s. Brilliant Estate Pvt. Ltd
Income Tax 1(1), Indore 17, Race Course Road,Indore
(Revenue) (Respondent)
Revenue by Smt. Ashima Gupta, CIT
Assessee by Shri Ajay Tulasiyan, CA
Date of Hearing 27.03.2019
Date of Pronouncement 30.05.2019
1
Brilliant Estates Ltd
IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
ORDER
PER MANISH BORAD, AM.
The above captioned two appeals and Cross Objections relates to Assessment Year 2008-09 and 2013-14. The revenue's appeal for Assessment Year 2008-09 and Assessment Year 2013-14 and the assessee's Cross Objection for Assessment Year 2008-09 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-I, Indore (in short 'CIT(A)'), dated 31.10.2014 and 28.02.2017 respectively, which are arising out of order u/s 143(3) r.w.s. 153C of the Income Tax Act (In short the 'Act') dated 30.12.2010 and u/s 143(3) of the Act dated 23.3.2016 framed by ACIT-1(2) and DCIT-1(1), Indore respectively.
2. As the issues raised in these appeals and cross objection are common and pertains to the same assessee, these were heard together and are being disposed by this common order for sake of convenience and brevity.
2 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
3. We will first take up the revenue's appeal and assessee's cross objection for Assessment Year 2008-09 wherein following grounds have been raised:-
IT(SS)A No.45/Ind/2015 (Revenue) "On the facts and in the circumstances of the case, the Ld. CIT(A) :-
(i) erred in deleting the addition of Rs. 6,75,OO,OOO/-made by the AO on account of undisclosed income from sale of land.
(ii) erred in deleting the addition of Rs. 6,75,OO,OOO/-made by the AO on the basis of seized material and findings during search proceedings.
(iii) erred in deleting the addition while holding that as per the registered sale deeds between agriculturists and Brilliant Sare Realty Pvt. Ltd., the assessee was never a part of the transactions. The Ld. CIT(A) has ignored that the AO made addition on the basis of notings in the seized document which clearly reveals that the transactions had been done without registry, and that the assessee-company had purchased land from agriculturists and then sold the same to Brilliant Sare Realty Pvt. Ltd.
Thus, the Ld. CIT(A) has completely ignored that in this case, the apparent (the registered sale deeds) is not real, and the AO after lifting the veil has established the truth.
(iv) erred in deleting the addition while holding that page-ll of LPS-5 does not show any such noting that 65 acres were purchased for Rs. 16 crores. Whereas the notings to this effect are clearly mentioned in the said page and the AO pasted the scanned copy of this page in the assessment order itself. As such, the finding of the Ld. CIT(A) is factually incorrect in this regard.
3 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
(v) erred in deleting the addition while not properly considering the AO's finding on the basis of page-32 of LPS-1.2, and while not giving proper weightage to the portions of the statement of Shri Sanjay Choudhary wherein his assertion corroborates the notings of the aforesaid seized loose papers.
(vi) The appellant reserves the right to add, amend or alter the ground of appeal on or before the date the appeal is finally heard for disposal." C.O.No.30/Ind/2015 (Assessee) Though the disallowance u/s 14A amounting to Rs. 44,38,101/- was challenged but not pressed before the Ld. CIT(A), but due to decisions of the Hon'ble Income Tax Tribunals and Hon'ble High Courts bringing much clarity on the contentious issue of disallowances u/s section 14A and also with a view to endow on the appellant a reasonable opportunity of being heard and not to deprive the appellant the benefits of a plethora of judicial precedents in its favour on this issue, it is submitted:
1.1 That the Ld. AO erred in disallowing a sum of Rs. 44,38,101/- u/s 14A of the Income Tax Act, 1961.The said disallowance made ignoring the fact that the entire investment is only in the shares of unlisted private limited associate companies, is uncalled for and is prayed to be deleted.
1.2 The learned AO erred in applying the rules provided under rule 8D in a mechanical manner and working out the disallowance at Rs.44,38,lOl/without satisfying the pre-requisite conditions prescribed u/s 14A in this respect. Without prejudice to the above, the appellant submits that the AO has also erred in not reducing the amount of interest received from the interest paid for working out the said disallowance.4
Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 1.3 That the Ld. AO erred in disallowing a sum of Rs. 44,38,101/- u/s 14A ignoring the fact that the appellant had earned no tax free income during the year. It is prayed that since there being no tax free income the disallowance u/s 14A is uncalled for and hence may very kindly be deleted.
1.4 That, on the facts and in the circumstances of the case, the said disallowance is bad in law and wrong and deserves to be deleted as such. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of cross objection on or before final hearing, if necessity so arises.
4. Briefly stated facts are culled out from the records are that the assessee is a private limited company engaged in real estate business. Search and Seizure operation u/s 132 of the Act were carried out on 4.2.2009 at the premises of M/s. Zoom Developers and Brilliant Estate. Mr. Sanjay Choudhary heads the Brilliant Group. The assessee company belongs to the Brilliant Group. Since the search warrant was issued in the name of the assessee company the case is covered u/s 153A of Act and notice dated 8.7.2009 were duly served upon the assessee for furnishing the Income Tax Return. On 15.9.2009 e-return of income filed declaring total income of Rs.1,72,88,300/- and u/s 115 JB of the Act income was declared at Rs.2,37,28,587/-. Subsequently notice u/s 143(2) and 142(1) of the Act were duly served upon the 5 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 assessee. Books of accounts of the assessee were examined on test check basis. Information was also called seeking reply about various documents seized during the course of search. One spiral dairy was seized from the residence of Shri Sanjay Choudhary and on page-11 of this dairy there was certain jottings showing some names and figures. Ld. A.O examined this seized document vis-a-vis statement of Mr. Sanjay Choudhary recorded during and post search proceedings. Ld. A.O tried to connect the reply to Question No.7 relating to purchase of 65 acres of land at Bicholi Hapsi and Kanadia, Indore by Brilliant Sare Reality Pvt. Ltd during financial year 2007-08 with page No.11 of spiral dairy. Ld. A.O seeked reply of the assessee towards his observation that in the land deal of purchase of 65 acres of land there is an undisclosed investment of Rs.6.75 crores which is arrived out of the figures being difference between the land price computed @ Rs. 35 lakh per acre for 65 acres which comes to Rs.22.75 crores, and the purchase price of Rs. 16 crores stated by Mr. Sanjay Choudhary in the statement. Information was also called about the agreement between Brilliant Sare Reality Pvt. Ltd. ( in short BSRPL) and M/s. Brilliant Estate Pvt. Ltd ( in short BEPL) alleging that Brilliant Estate Ltd firstly purchased the land from various land owners for Rs.16 crores and thereafter sold it to BSRPL for Rs.22.75 crores. 6 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
5. The assessee gave submissions with regard to explanation of alleged income of Rs.6.75 crores which finds it mention at page No.11 of the seized dairy submitted that the jottings on page No.11 of the seized dairy are rough jottings and no actual transaction has ever happened as mentioned in the seized paper. There is no mention of any date, detail of transaction of purchasing agriculture land nor it is signed by any of the person on behalf of the assessee. It also stated that no such land has been purchased in the name of assessee. 65 acres of land in question was actually purchased by BSRPL directly from the land owners. Assessee company was awarded the work to procure land from various land owners and for this exercise certain amount was fixed per acre of land to be paid to the assessee company and the same has been duly offered to tax. Detailed reply which was filed before Ld. A.O claiming that no such income of Rs.6.75 crores is attributable to the assessee is reproduced below;
Explanation for Rs. 6.75 crores It has been stated that as per the statement of Shri Sanjay Choudhary vide answer to question 7 land at Bicholi & Kanadia upto 65 acre was purchased in FY 2007-08 and is reflected in the books of accounts of Brilliant Sare Reality Pvt. Ltd. and the same was purchased for Rs. 16 crore. It has been further stated that as per the agreement between Brilliant Sare and Brilliant Estate the land price @ 7 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 35 lacs per acre works out to 22.75 crores and therefore the assessee is required' to show cause as to why the difference amount of Rs.'6.75 crores should not' be' charged for· taxation in the hands of MI.s Brilliant Estate Limited for AY 2008-09. In this respect the assessee wishes to clarify its stand as under:
1. That Shri Sanjay Choudhary in his statement recorded on 04.02.2009, i. e the first day of the search, at his residence in reply to question no. 7 has stated that he was trying to purchase land in Bicholi & Kanadia out of which some land -has been' acquired and 65 acre has been acquired around the FY 2007-08 which has been shown in the books of Sare Reality. He further stated that this land was acquired for about 16 crores.
2. At this juncture- it is clarified that Brilliant Sare Reality has acquired about 101.28 acre land during the FY 2006-07 for approximately for Rs. 39.75 crores and incurred additional expenses of Rs. 5.49 crores on account of registration etc totalling to Rs>45.24 crores. Out of this land approximately 65.67 acre was acquired at Bicholl itself
3. Kindly also refer to answer to question no. 8 where in it has been stated by Shri Sanjay choudhary that approximately 115 acre land has been purchased by Brilliant Sare RealityPvt. Ltd. for approximately Rs. 50 crores.
4. It may be further clarified that Brilliant Sare Reality Pvt. Ltd. has further purchased approximately 12.95 acre land in FY 2007-08 for approximately 5.77 crores and has incurred additional Rs. 0.78 crores on registration etc. totalling to Rs. 6.55 crores. That the complete details of total land purchased by Brilliant Sare Reality Pvt. Ltd. along with copies of all the purchase deeds are being produced before Your Honour. These details and documents shall be filed in the case of M/s Brilliant Sare Reality Pvt. Ltd., whose assessments are also pending U/S 153C In any case all these details and documents form part of the seized record.8
Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
5. Coming back to Your Honour observation that as per the agreement between Brilliant Sare Reality Pvt. Ltd. & Brilliant Estate the land price was @ 35lacs per acre which for 65 acre amounts to Rs. 22.75 crores and as per the statement of Shri Sanjay Choudhary the same has been actually purchased for Rs. 19 crores and therefore why the difference of Rs. 6. 75 crores should not be charged to M/s Brilliant Estate Limited for AY 200~-09. In reply to this observations the assessee wish to state as under: -
(i) That the figure of 16 crores state by Shri Sanjay Choudhary was an abrupt answer to the search party on the very first day of the search. This answer when read with the answer to the immediately next question i.e. question no. 8 where he stated that approximately 115 acre was purchased for about 50 crores, will explain the situation. Assuming for a moment that both the answers were given in normal state of mind, the position would emerged as under: -
Total land purchased 115 acre
Total price 50 crores
(As per-answer to question no. 8)
65 acre purchased for Rs. 16 crores (as per answer to question no. 7).
It implies that 50 acres (115 - 65) was purchased for Rs. 34 crores (50 crores -16 crores).
As per answer to question on. 8 the average price per acre works out to 43.481acs (50 crores I 115 acre) and the average price as per answer to question no .. 1'·works to 24.62 lacs per acre (16 crores / 65 acre) and on this presumption the average price for the balance land of 50 acres works out to 68 lacs per acre (34 crores / 50 acre).
9 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
(ii) The above exercise reveals that the value of 16 crores stated for 65 acre was not proper. This fact has been clarified by Shri Sanjay Choudhary himself in subsequent proceedings before the wing. Attention is drawn to the statement recorded on 13.04.2009 in reply to question no. 5 wherein he has stated that his earlier reply was an abrupt reply. Therefore the figure of 16 crores stated earlier was not correct. It may be further clarified that the average rate per acre of total land purchased by M/s Brilliant Sare Reality Pvt. Ltd. and debited in its books of accounts for 114.23 acre is Rs. 45.53 crores. This does not include payments for registration and other expenses which is another Rs. 6.27 crores debited to the books of accounts. Therefore the total cost on an average per acre, as debited in the books works out to Rs. 45.34 lacs per acre.
(iii) That whatever payment has been made for purchase of land is duly recorded in the books of account and undisclosed income cannot be worked out merely on the basis of an abrupt answer.
6. We wish to clarify at the very beginning that the statement of Shri Sanjay Choudhary recorded at residence on 04-02-2009 at E-13, Saket Nagar, Indore was under extreme pressure as that was the first day of search. The reply given therein was not correct as understandably the mindset of Shri Sanjay Choudhary was not right at the given point of time and to recollect everything with pinpoint accuracy was not too much for asking. It was later that he was able to recollect the entire transactions and then in the statement given on 13.05.2009 before the investigation wing after verifying the records a correct presentation of the proceedings was made.
7. Now coming to the seized page 11 of Spiral diary as referred above is enclosed at page no. 10 and the relevant extract of the subsequent statement of Shri Sanjay Choudhary recorded on 13.05.2009 Q 7 (statement page 21 &
22) are enclosed at page 11 to 12.
8. The noting on page 11 of the diary (BS 1) seized from residence at Saket were 10 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 rough notings and were not conclusive. These noting were only in relation to lands proposed to be acquired. The first name mentioned is 'Sanghi' from whom 3.048 hectare land (situated at Khasara No. 45611· at Bicholi Hapsi of 2.328 Hectare and .720 Hectare) was planned to be purchased. In fact the DD of Rs. 79,63,000/- bearing no. 110314 of Punjab National Bank dated 24.03.08 was also prepared in the name Geeta Estates Pvt. Ltd. which is a company belonging the Sanghis from one of the group companies M/s North West Automobiles Pvt. Ltd. and another DD of Rs. 4,55,00,000/- was also made in the same name from M/s Brilliant Sare Reality Pvt. Ltd .. However ... the transaction finally did not materialize and these DDs were cancelled later on. We are enclosing herewith a copy of account of M/s Geeta Estates Pvt. Ltd. in the books of Brilliant Sare Reality Pvt. Ltd. at page 13 which clearly shows that the pay order of Rs. 4,55,00,000/- was made in favour of Geeta Estates Pvt. Ltd. and which was subsequently cancelled. A copy of the bank statement of Punjab National Bank is also enclosed at page 14 which clearly shows that a pay order of Rs.4,55,00,000/- was prepared and then subsequently cancelled. Both these entries have been duly highlighted for the sake of convenience. Similarly a copy of account of Geeta Estates Pvt. Ltd. in the books of another group company M/s North West Automobiles Pvt. Ltd. is enclosed at page 15. This copy of account again shows the debit of Rs. 79,63,000/- when the pay order was prepared and then a subsequent credit when the pay order was cancelled. To substantiate this further we are also enclosing a copy of the pay order and a copy of slip for the preparation of pay order showing payment of commission of Rs.120001- at page no. 16. A letter addressed to the Branch Manager, Punjab National Bank, Manoramaganj Branch, Indore is enclosed at page 17 requesting for cancellation of the said pay order of Rs. 79,63,000/-. A copy of the bank statement of Punjab National Bank highlighting the debit and credit entries of Rs. 79,63,000/- clearly showing the preparation and cancellation of pay order is also enclosed at page 18.
11 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017
9.The person (broker) through whom negotiations were being made, had assured that he had ready agreements for 65 acres of land out of total 80 acres proposed to be acquired. In fact none of the lands mentioned on this page 11 has been finally purchased by the assessee or his group companies. That M/s Geeta Estate Pvt. Ltd. is a company incorporated under the Companies Act 1956, having its registered office at 25, Palasia Main Road Indore. The property under consideration was a big property of 3.048 hectare and cannot be negotiated by any person out of books of accounts. These facts will substantiate that all the notings on this sheet are rough notings 1 estimates and has no relevance. In case Your Honour is still not convinced, the fact that the assessee did intended to purchase the said properties but were ultimately not purchased, may very kindly be verified from M/s Geeta Estate Pvt. Ltd. as well as from the sub- registrar's office as to who is the owner of these properties. It is therefore requested that the proposed addition of Rs. 6. 75 corer is without any basis and may very kindly be dropped.
6. However, Ld. A.O was not convinced with the reply submitted by the assessee and confirmed the addition for undisclosed income of Rs.6.75 crores making following observations;
"However, the reply has been considered and found that the same is not convincing. The statement of Shri Sanjay Choudhary which was recorded at his residence clearly reveals that the transactions in the spiral book at page 11 was done by M/s Brilliants Estate Ltd. Subsequently this land was purchased by M/s Brilliant Sare Reality Pvt. Ltd. the agreement which was made between Brilliant Sare Reality Pvt. Ltd. and Brilliant Estate Ltd. clearly reveals that M/s Brilliant Sare Reality Pvt. Ltd. will, purchase the land @ 35 lacs per acre. 'Since, the land measuring 65 acre - was purchased by M/s Brilliant Estate Ltd. at Rs. 16 crore, the purchase price in the hands of M/s Brilliant Sare 12 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 Reality Pvt. Ltd. will be 27.75 crore hence, in the sale of land at Bicholi & Kanadia net profit of Rs. 6.75 crore has been earned by M/s Brilliant Estate Ltd. This fact is also proved from page 32 of LPS-1/2 wherein some money needed is mentioned. In this page against Kalani an amount of 6.30 has been mention. As per reply filed vide Annexure-2 on 12-05-2009. It was stated by Shri Sanjay Choudhary that M/s Kalani Group has finally invested Rs. 6.50 crore. Similarly, in this page against Sare figure 0[26.60 is written. If figure written in this page one against Shri Kalani is matching (as per the statement of Shri Sanjay Choudhary)with the alleged investment made by Kalani Group, then obviously the investment made by others are real figure and not rough noting and estimates as submitted by Shri Sanjay Choudhary vide letter dated 18-05-09.
It may be pointed out that considering all these issues, Shri Sanjay Choudhary has also surrendered an additional income of 10 crores Therefore it is clear that the assessee at hand a profit of Rs. 6.75 crores respect of the properties mentioned in the loose paper purchased by the assessee and sold to M/s Brilliant Sare Pvt. Ltd. and the same is being added to the total income of the assessee. Penalty proceedings U/S 271(1)(c) is being initiated.
7. Apart from the above addition for undisclosed income of Rs. 6.75 crores as discussed above the Ld. A.O also made disallowance u/s 14A of the Act at Rs.44,38,101/- observing that the assessee held average investment of Rs.5,79,48,950/-. Accordingly income assessed at Rs.8,92,26,400/-.
8. Aggrieved assessee preferred appeal before Ld. CIT(A) and gave detailed submissions in support of grounds challenging the additions 13 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 made by the Ld. A.O but partly succeeded. Ld. CIT(A) deleted the addition for undisclosed income of Rs.6.75 crores placing reliance's on various judgments coming to the conclusion that the jottings at page-11 of seized spiral dairy LPS-5 are merely rough jottings and do not show any such correlation with the alleged transaction of purchase of 65 acres of land as mentioned by Mr. Sanjay Choudhary in his statement. However Ld. CIT(A) confirmed the disallowance u/s 14A of the Act for Rs.44,38,101/- as the assessee did not press the ground before Ld. CIT(A).
9. Now the revenue is in appeal before the Tribunal against the deletion of addition of Rs.6.75 crores by Ld. CIT(A) whereas the assessee filed Cross Objection challenging the disallowance u/s 14A of the Act at Rs.44,38,101/-.
10. We will first take up revenue's appeal wherein Ground No. 1 to 5 relating to the deletion of addition of undisclosed income of Rs.6.75 by Ld. CIT(A) has been raised.
11. Ld. Departmental Representative vehemently argued supporting the orders of Ld. A.O and also filed two paper books. One was filed on 30.11.2018 giving copies of page No.11 of spiral diary seized from the residence of Shri Sanjay Choudhary and statement of Shri Sanjay 14 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 Choudhary as recorded at the residence by the officers of Income Tax Department running from page 1 to 22 and another filed on 12.12.2008 providing the statement of Shri Sanjay Choudhary dated 13.4.2009. Ld. Departmental Representative further submitted that the Ld. A.O has rightly held that the transaction mentioned at page-11 of the seized spiral diary relates to the assessee and subsequently this land was purchased by M/s. BSRPL. She also draw attention to the final observation of the Ld. A.o wherein he stated that as per the statement of Shri Sanjay Choudhary 65 acres of land was purchased by the assessee at Rs.16 crores whereas as per agreement between the assessee and M/s. BSRPL the purchase price was fixed at Rs.35 lakhs per acre which works out to Rs.22.75 crores for the 65 acres of land and therefore the difference of Rs.6,75 crores is earned by the assessee.
12. Per contra Ld. Counsel for the assessee placing heavy reliance of the finding of Ld. CIT(A) submitted that the alleged seized document i.e. page-11 of spiral diary is dumb in nature and no logical analysis can be drawn in any manner. The additions made by the Ld. A.O is merely made on surmises and conjectures as the Ld. A.O has merely connected the figure of Rs.6.75 crores mentioned in the rough jottings with the transaction of land purchase of 65 acres. In the seized diary at page-11 15 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 against the figure 6.75 "Mobile No. and name "Sharath" is stated which has no co-relation with the transaction of land purchase. He further stated that Mr. Sanjay Choudhary in his statement mentioned that all the entries noted on the alleged seizer paper were rough jottings as no transaction actually took place. The Ld. A.O considered only part of the answer of Question No.7 but ignored other parts of the reply which Mr. Sanjay Choudhary gave in Question No.8 and 9 for the total purchase of 150 acres of land for Rs.50 crores. Further as regards to the agreement referred to between the assessee and M/s BSRPL it was submitted that M/s. BSRPL was desirous of setting a township project for which it required approximate 120 acre of land at Village Bicholi Hapsi and Kanadia, Indore. As per the agreement the lands were purchased in the name of M/s BSRPL only and certain amount was agreed to be paid to the assessee towards the stamp duty, registration charges and incidental charges for carrying out the responsibility to pay the requisite sale/transfer conveyance etc. to be registered in favour of M/s BSRPL. The amount so received for getting the land purchased by M/s BSRPL have been duly offered to tax by the assessee. The assessee company neither purchased any land nor sold any land to M/s BSRPL and therefore the question of earning any income from sale of land does not 16 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 arises. He also contended that the assessment of M/s. BSRPL was also completed simultaneously along with the impugned assessment of the assessee but no adverse view was taken in the case of M/s. BSRPL. Ld. Counsel for the assessee placed reliance on the following decisions:-
(i) Ashwani Kumar V/s ITO (1991) 39 ITD 183(Del)
(ii) S.P. Goyal V/s DCIT (2002) 82 ITD 85 (Bom) (TM)
(iii) CIT V/s Maulikumar K Shah (2008) 307 ITR 137 (Guj)
(iv) CIT V/s Shri Kulwant Rai (2007) 291 ITR 36 (Del)
(v) ACIT V/s Kences Foundation (2007) 289 ITR 509
(vi) Bansal Strips Pvt. Ltd V/s ACIT (2006) 99 ITD 177 (Del)
(vii) CBI V/s V.C. Shukhla & ors (1998) SCC 410 (SC)
13. We have heard rival contentions and perused the records placed before us and gone through the judgments referred to and relied by the Ld. Counsel for the assessee. The revenue is aggrieved with the deletion of addition of undisclosed income of Rs.6.75 crores by Ld. CIT(A) made by the Ld. A.O on the basis of jottings at page-11 of seized spiral diary LPS-5 found at the residence of Mr. Sanjay Choudhary vis-a-vis his statements recorded during and post search proceedings.
14. During the course of search conducted u/s 132 of the Act on 17 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 4.2.2009 at the Brilliant Group of companies headed by Mr. Sanjay Choudhary his statements were recorded. In question No.7 he was asked about some jottings mentioned at page-11 of spiral diary containing, to which Mr. Sanjay Choudhary replied that around 65 acres of land has been purchased during the financial year 2007-08 for an approximate cost of Rs.16 crores. In next Question No.8 he was asked that in the area of Bicholi and Kanadia how much land does he possess and how much cost incurred for it. To which Mr. Sanjay Choudhary replied that he has around 115 acres of land purchased for around Rs. 50 crores which are duly accounted for in the books of accounts of M/s BSRPL. Thereafter on 13.4.2009 another statement was recorded. Revenue authorities giving reference to the agreement between M/s. BSRPL and the assessee for purchasing land at Rs.35 lakh per acre computed the cost of 65 acre of land at Rs.22.75 crores and asked Mr. Sanjay Choudhary that in his earlier statement he has stated that 65 acre of land was purchased for Rs.16 Crores but as per the rate mentioned in the agreement cost of the 65 acre land will come to Rs.22.75 crores and therefore why the difference of amount of Rs.6.75 crores may not charged for taxation in the hands of the assessee. In response to this Shri Sanjay Choudhary stated that his earlier reply 18 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 might have been stated abruptly and figure of Rs.16 crores/65 crores appear to be estimates only and no such difference in pricing has occurred. However Ld. A.O during the course of assessment proceedings after set of replies given by Mr. Sanjay Choudhary and submission given by assessee on various occasions came to a conclusion that 65 acres of land was purchased by the assessee from the land owners for Rs.16 crores and thereafter sold to M/s. BSRPL for Rs.22.75 crores but in the books of M/s. BSRPL only the cost price of Rs.16 crores is mentioned and thereafter the assessee has not disclosed the undisclosed income of Rs.6.75 crores which finds it mention in page-11 of seized spiral diary LPS-5. It seems that the addition of Rs. 6.75 crores was made by the Ld. A.O on the basis of noting "6.75" of page-11 of the spiral diary seized from the residence of Mr. Sanjary Choudhary. From perusal of statement of Mr. Sanjay Choudhary given on 04.02.2009 in reply to Question No.7 in which he was asked about the purchase of 65 acre of land he stated to have purchased for Rs.16 crores. During the post search proceedings in another statement recorded on 13.04.2009 when he was again asked about the purchase of 65 acres of land for Rs.16 crores vis-a-vis the agreement between the assessee company and M/s. BSRPL for the purchase of land at Rs.35/- lakhs per acre and Mr. Sanjay 19 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 Choudhary stated that his earlier reply might have stated abruptly and the figure of Rs.16 crores/65 crores appears to be estimates only and no such difference in pricing is occurred.
15. The Ld. Counsel for the assessee contended that during the course of assessment proceedings the assessee was asked to explain the action before the Ld. A.O. Complete details were filed for land purchased by Ms. BSRPL measuring about 101.21 acre during the financial year 2006- 07 and 12.95 acre purchased during financial year 2007-08. Complete details along with the purchase deeds were produced during the assessment proceedings and assessee also filed them in the case of M/s. BSRPL whose assessment were also taken up simultaneously u/s 153C of the Act. The assessee during the course of assessment proceedings stated that jottings at page-11 of the spiral diary were rough jottings and not conclusive. The assessee also requested the Ld. A.O to conduct independent enquiry and verification from the respective parties and also from the Sub-Registrar office regarding the ownership of the properties mentioned on seized page-11 of the spiral diary.
16. However the Ld. A.O found the submission of the assessee not convincing and stated that the transaction in the spiral diary at page-11 20 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 was done by M/s. BSPL i.e. the assessee and subsequently the land was purchased by M/s. BSRPL and as per the agreement between the assessee and M/s. BSRPL, the land was to be purchased at Rs.35 lakhs be acre by M/s. BSRPL. Ld. A.O further alleged that the land of 65 acre was purchased by M/s. BSPL i.e. the assessee for Rs.16 crores and the purchase price in the hands of M/s. BSRPL would be Rs.22.75 crores and therefore the assessee earned profit of Rs.6.75 crores which was an undisclosed income and therefore is liable to be added to the income of the assessee.
17. We further observe that when the issue came up before Ld. CIT(A) he after relying various decisions deleted the addition of Rs.6.75 crores giving following finding of facts:-
"5. Gr. No.1 of appeal is against an addition of Rs.6,75,00,000 made in the income of appellant by the AO, on the ground that difference in purchase price of land was observed in statement of director of appellant company recorded during search, on the loose paper No.11 seized in spiral diary (LPS-5). The AO has referred to answer of appellant's director Sh. Sanjay Choudhary to Q.No.7 recorded u/s 132(4) of LT. Act on 04-02-2009/ 05-02-2009. In this question he was asked to explain the content of page No.11 of LPS -5. He explained that they have purchased around 65 acres land in Bicholi, Kanadia in F.Y. 2007-08 in the name of Brilliant Sare Reality for appr. Rs.16 crore. By referring to reply of this question only, AO came to the conclusion that as per the memorandum of understanding (MOU) 21 Brilliant Estates Ltd IT(SS) A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITANo.393/Ind/2017 between Brilliant Sare Realty and Brilliant the Estate the land was purchased at the rate of Rs.35 lakhs per acre which works out at Rs.22.75 crore for 65 acres land. The difference of these two amount of Rs.6.75 crore (22.75-16) was charged to tax by AO, in the hands of appellant i.e. M/ s Brilliant Estate P. Ltd.
5.1 While making such addition of Rs.6.75 crore in the hands of appellant i.e. Brilliant Estate, assessing officer assumed that such lands were first purchased by Brilliant Estate and thereafter they were transferred by appellant to Brilliant Sare Reality and in between they earned such profit of Rs.6.75 crores. However as per the registered sale deeds of such lands, these lands were directly transferred by agriculturists to Brilliant Sare Reality and such lands were never transferred to appellant. Even the appellant has categorically stated in submission dated 31-10-2014, that it has not sold any land to Brilliant Sare Reality P. Ltd in AY 2008-09 and as a proof thereof they have furnished copies of registered purchase deeds of such lands by M/ s Brilliant Sare Reality P. ltd pertaining to AY 2008-09 which proves that none of these lands were purchased by that company from appellant and ledger account of major income heads of appellant were also furnished in order to prove that there was no income fro sale of land. Therefore the assumption of assessing officer that suc lands admeasuring 65 Acres were firstly purchased by appellant a Rs.16 crore and thereafter sold to Brilliant Sare Reality P. ltd at Rs.22.75 crores is not well founded.
5.2 Secondly reply of director of appellant company to Q.No.7 is based on two things, firstly it was based on rough noting on page 11 of LPS-5 and secondly it was based on memory of director. Page No.11 of LPS-5 contain rough noting, which are reproduced below:-22
Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 23 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 5.3 After seeing this paper, the director replied that they have purchased appr. 65 Acres land in Brilliant Sare Reality P. ltd for appr. Rs.16 crore. Firstly this paper No.11 of LPS-5 does not show any such noting that 65 Acres were purchased for Rs.16 cores.
Director gave such reply on the basis of his memory and not according to any notings on this paper No.1l. Secondly AO only took one part of answer to Q.No.7 that 65 Acre land was purchased for Rs.16 crore but completely ignored the other part of answer that purchases of such lands were made by Brilliant Sare Reality and therefore no addition on account of purchase of such lands could be made in hands of appellant i.e. Brilliant Estate. As held in case of Bansal Strips P. ltd [2006] 99 ITD 177 (Del.). AO cannot selectively rely upon the part of the statements against the assessee and at the same time ignore other part which goes in favour of the assessee. Thirdly page No.11 of LPS-5 does not show either any cash transaction or earning of any profit of Rs.6.75 crore by appellant i.e. Brilliant Estate, in transaction these lands. If there is no noting on such paper regarding any cash transactions in the land purchase and even AO has not made any addition for any cash transaction, in such circumstances, the only transactions left for consideration are transaction through cheque, which are duly recorded in registered sale deeds and books of account of M/s Brilliant Sare Reality. Therefore the assessing officer was not at all justified in making addition of Rs.6.75 crore in the recorded transaction that too in case of appellant i.e. M/s Brilliant Estate P.Ltd who did not purchase or sale any such land in the year under consideration, merely relying on a part of memory based reply of director to Q.No.7. When it comes to finding any gaps in recorded transaction, the only possible method with AO was to compare such reply of appellant, with the transaction of these lands recorded in the books of account of M/s Brilliant Sare Reality 24 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 P. Ltd.
3. 5.4 Where loose papers are found, there is usual inference by AO that they represent concealed transaction, such inference does not readily follow. Such inference can be positively made only after identification of papers and after due verification. Figures therein could not be lightly inferred to represent unaccounted income, unless there is something more to it , as held in case of Goyal (S.P.) 269 ITR 496 (HP) and Babros Machinery Manufactures P. Ltd [2004] 269 ITR (AT) 36 (Ahd.) In its books of account Brilliant Sare Reality P. Ltd has shown purchases of 114.23 Acres of land for Rs.51.80 crores (Rs.45.53 crore for land price + Rs.6.27 crore for registration). In fact in statement of director referred by AO, in answer to the very next question i.e. Q. No.8 the director replied that they have purchased appr. 115 Acres land in Bicholi for appr. Rs.50 crores, but assessing officer conveniently ignored this answer. Therefore the addition of Rs.6.75 crore cannot be sustained, because page no.11 of LPS-5 does not show any such agreement for purchase of 65 acre land were already in place up to the time of such noting and in fact lands of 114.23 Acres were purchased for a total of RS.51.80 crore by M/s Brilliant Sare Reality P. ltd which were duly reflected in books of account of that company and in the year under consideration appellant has neither purchased nor sold any such land to M/s Brilliant Sare Reality P. ltd. In view of the same, there was no basis whatsoever to make such addition on account of difference in price of land, when in the year under consideration no part of such land was sold by appellant to that company. As there was no seized material representing such addition and addition was based merely on surmises, the same cannot be sustained as held in case of M.M. Financiers (P) Ltd. [2007] 107 TTJ 200 (Chennai). As a result, Gr. No.l of appeal is 25 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 allowed."
18. From perusal of the above findings of Ld. CIT(A) we observe that Revenue authorities have nothing on record to controvert the categorical and factual finding of Ld. CIT(A). The observation of Ld. A.O that 65 acres of land has been purchased firstly by the assessee and then sold to M/s BSRPL seems to be merely on assumptions because nothing connecting this allegation was found during the course of search and no such material has been referred in the assessment order which could prove that the land was firstly purchased by the assessee company.
19. On the contrary there is sufficient evidence placed on record in the paper book page 109 to 194 and 195 to 235 filed by the assessee on 23.11.2016 which proves that various agriculture land referred to by Ld. A.O have actually been purchased by M/s BSRPL from various land owners. For instance there is an agreement between Chandrakanta Dewa and others and M/s BSRPL for the sale of 0.313 hectare of agriculture land for consideration of Rs.22,31,000/-. Another agreement between V. Ram S/o Ram Singh and others with M/s. BSRPL for sale of 0.17 acre land for 26 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 Rs.35 lakhs. Registered sale deed dated 10.03.2008 between Sourabh bai W/o Umrao Singhji and M/s BSRPL for sale of 0.332 hectare of land for consideration of Rs.56,18,000/-. Audited financial statement of M/s. BSRPL also shows the details of various lands purchased by it during the year which is part of its stock in trade. So it is proved beyond doubt that the alleged land measuring 65 acres was never purchased in the name of the assessee but there are direct transactions of purchase and sale between the land owners i.e the farmers and M/s. BSRPL .
20. We also observe that the Ld. A.O has reached to a conclusion on the basis of the statement given by Shri Sanjay Choudhary but he has merely referred to Question No.7 of the statement but has not considered the statement in entirety. Perusal of the statement shows that in reply to Question No.8 Shri Sanjay Choudhary has stated that he has approximately purchased 150 acre of land in M/s. BSRPL. In question No.7 he stated that 65 acres of land purchased for Rs.16 crores and in Question No.8 he stated that 150 acres of land purchased for Rs.150 crores. It implies that out of 150 acre after reducing 65 acres the remaining land 50 acre was 27 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 purchased at Rs.34 crores (Rs.50 crores (-) Rs.16 crores). So the first average price per acre as per question No.8 would be 43.48 lakh (50 acres/115 acres) per acre whereas the average price as per question No.7 works out to Rs.24.62 lakhs (Rs.16 crores/65 crores) and the third average price of the balance land of 50 acre will works out to Rs.68 lakhs per acre (Rs.34 crores/Rs.50 crores). It seems that the Ld. A.O did had not given due credit to the statement of Mr. Sanjay Choudhary in entirety before reaching to this conclusion for making addition of Rs.6.75 crores. There is no dispute to the fact that M/s. BSRPL has incurred the cost of Rs.44.53 crores for projects of 114.23 acre land duly shown in the audited financial statements which does not include payment for registration and other expenses of Rs.6.27 crores separately debited in the books of accounts. If this cost of Rs.6.27 crores is considered then the average price per acre will works out to Rs.45.34 lakhs per acre 114.23 which is much above the price of Rs.35 lakhs assumed by the Ld. A.O for computing the cost of 65 acre of land at Rs.22.75 crores.
21. We also observe that the Ld. A.O has stated on Page-8 of the impugned order that on the basis of Page-32 of LPS 1/2 the 28 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 assessee had earned profit of Rs. 6.75 crores. On perusal of the said page which has been filed in the paper book by Ld. CIT (DR), we find that certain figures are mentioned on this page under the head "amount of on money". Two notings mentioned in this page-32 of LPS 1/2 are seen with reference to the notings on page-11 of spiral diary. It is found that not a single noting of both these document is matching or have been co-related. Therefore the contention of the assessee that there is no co-relation with the notings of these two loose papers appears to be correct and the observation of the Ld. A.O in this regard appears to be wrong. From perusal of reply along with the documents filed by the assessee during the course of assessment proceedings, it is evident that the assessee explained that around 101.28 acre of land was purchased by M/s. BSRPL during the financial year 2006-07 which included 65.67 acre land acquired in the area named Bicholi. It was further clarified that M/s. BSRPL further purchased around 12.95 acre of land during the financial year 2007-08. All these transactions are duly accounted for and reflected in the audited books of accounts of M/s. BSRPL. Therefore the assumption of the Ld. A.O that 65 acres of land was sold by the assessee to M/s. BSRPL for Rs.22.75 crores 29 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 seems to be ill founded and far from truth as during financial year 2007-08 i.e. Assessment Year 2008-09 M/s. BSRPL has purchased only 12.95 acres of land. The alleged transaction of purchase of 65 acres of land actually took place during the financial year 2006-07 i.e. assessment year 2007-08 whereas the addition has been made in the hands of the assessee for Assessment Year 2008-09. Therefore in any case the questing of earning any alleged profit cannot arises in Assessment Year 2008-09 when the transaction of purchase of 65 acres of land by M/s. BSRPL took place during assessment year 2007-08. The addition cannot be made merely on the basis of documents under consideration without any other supportive material and evidence. With regard to the alleged transaction of sale of 65 acres of land and earning of Rs.6.75 crores profit being not offered to tax, there is no corroborative material to justify the transaction made by the Ld. A.O. The assessee has categorically denied having transaction in respect of land deal of which are alleged to be mentioned on the seized document and this fact remain uncontroverted by the revenue authorities. So far as the agreement between the two parties i.e. M/s. BSRPL is concerned it was submitted by Ld. Counsel for the assessee that the said 30 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 agreement has been duly acted upon as per which the land to be purchased and registered in the name of M/s. BSRPL, cost to be incurred by M/s. BSRPL and certain amount to be incurred was to be given to the assessee for carrying out various works relating to the projects of agriculture land including the registration charges. It is established beyond doubt that the transaction theory which the Ld. A.O has tried to establish on the basis of seized document i.e. Page No.11 of spiral diary of LPS-5 has no head and tail and the addition of Rs.6.75 crores for undisclosed income is merely made on surmises and conjectures.
22. Through the above detailed discussions as well as the observations and the facts in totality, we find that the alleged seized document i.e. page-11 of spiral diary of LPS-5 is merely a dumb document which is not signed by any of the parties, no co-relation have been established by the revenue authorities that the actual transaction if any to have taken place. Therefore the jottings on such document are rough jottings. Whether the Ld. A.O was justified in making any addition in the hands of the assessee on the 31 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 basis of dumb document needs to be further examined in the light of various judicial pronouncements.
23. In the case of Ashwin Kumar V/s ITO (supra) the Tribunal held that "when a dumb document, like the present slip, is recovered and the revenue wants to make use of it, it is the duty of the revenue to collect necessary evidences which may provide acceptable narration to the various entries. The evidences collected should be such that any reasonable man would accept the hypothised advanced by the revenue, that the figure written on the right side of the slip represent incomes earned by the assessee. It was conceded by the Departmental Representative that no such evidence have brought out on record".
24. Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd V/s CIT 1954 261 ITR 775 held that "in making assessment u/s 23(3) of the Indian Income Tax Act, the ITO is not fractured by technical rules of evidence and fluctuations and he is entitled to act on material which may not accept an evidence in the court of law, but the IT is not entitled to make and power comes and making assessment without reference to any evidence or any 32 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 material delivered. There must be something more than more where suspicion to support the assessment u/s 23(3)". The rule of law on this subject has been fully and rightly stated by Hon'ble High Court in the case of Sree Shanmugar Mills Ltd v/s Commissioner of Income Tax, Punjab 1944 12 ITR 393. Similar view was also taken by Delhi Tribunal in the case of Bansal Strips V/s ACIT (supra) observing that "the A.O cannot first make certain conjectures and surmises and thereafter deemed provisions based on such conjectures and surmises". In the absence of material as to the nature of ownership of the transaction, undisclosed income cannot be assessed in the hands of the assessee summarily by arithmetically total various figures dotting down on the loose document. Any other seized for the purpose of exercising to deemed provisions dumb documents order documents with no certainty for no evidential value".
25. Hon'ble High Court of Delhi in the case of CIT V/s Anil Bhalla (2010) 322 ITR 191 (Del) also held that "when no independent material or evidence has been brought on record by the A.O to establish that the notices of jottings of loose sheets or on the paper 33 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 written on accounted transactions cannot be made".
26. Our view based on the judgments referred to and relied above that the revenue authorities cannot make any addition on the basis of dumb document without establishing any co-relation with the actual transaction, is also supported by the judgment of Hon'ble High Court of Gujarat in the case of CITV/s Maulikumar K Shah 2008 307 ITR 137 wherein it was held that "the additions made by the A.O on the basis of seized paper alone without any corroborative evidence could not be sustained".
27. Similar view was taken by the Co-ordinate Bench in the case of M.M. Financiers V/s DCIT 2007 107 TTJ 200 (Chennai).
28. There are also certain legal precedent which clarifies that the loose documents cannot alone make basis where loose sheets are found, there was inference drawn by the AO that they represent concealed transactions but such inference can be positively made only on identification of papers and after due verifications. Figures therein cannot be rightly inferred to represent un accounted income unless there is something more to it.
34 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017
29. In the case of CIT V/s Girish Choudhary 2008 296 ITR 691 (Delhi) the Hon'ble High Court had dismissed the revenue's appeals holding that "when there was no materials on record to show on what basis the AO had reached to the conclusion that the figure 48 was to be read as Rs.48 lakhs when the document recovered during the course of search a dumb document and lead nowhere".
30. Examining the facts in the light of the above judgments, we find that the alleged seized documents i.e. page No.11 of spiral diary have not been corroborated by any independent evidence or other seized material and this cannot be reliable piece of document for making addition for unaccounted income of Rs.6.75 crores. In the given case the assessee has categorically denied of having transacted in respect of any purchase/sale of land with M/s. BSRPL and the alleged dealing of 65 acre of land was between the farmers and M/s. BSRPL duly accounted for in their books of accounts in Assessment Year 2007-08. The alleged addition of earning undisclosed income of Rs.6.75 crores has no legs to stand for and the addition seems to be made by the Ld. A.O merely on surmises and conjectures.
35 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017
31. We therefore respectfully following the ratio held by Hon'ble Courts and Co-ordinate bench and in the totality of facts and circumstances of the case are of the considered view that Ld. CIT(A) rightly deleted the impugned addition of Rs.6.75 cores. We therefore find no reason to interfere with the finding of Ld. CIT(A) and uphold the same. In the result Ground No.1 to 5 of revenue stands dismissed.
33. Ground No.6 is general in nature which needs no adjudication.
34. In the result appeal of the revenue for Assessment Year 2008- 09 stands dismissed.
35. Now we take up Cross Objection filed by the assessee against the disallowance u/s 14A of the Act for Rs.44,38,101/-. Ld. A.O on observing that the assessee held average investment of Rs5,79,48,950/- which fetched exempt income applied to provision of Section 14A read with Rule 8D of IT rules and computed disallowance at Rs.44,38,101/-. This ground was not pressed by the assessee before CIT(A). Now the assessee has raised this 36 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 ground contending that this being purely legal ground can be raised before the Tribunal. Reliance on the judgment of Hon'ble Supreme Court in the case of NTPC V/s CIT 1998 229 0383 as well as the judgment of Hon'ble jurisdictional High Court in the case of DCIT V/s Turquoise Investment and Finance Ltd 2008 299 ITR 143 (MP). Ld. Counsel for the assessee also submitted that no exempt income was earned by the assessee company during the year.
36. In the above stated facts as well as the decision laid down by the Hon'ble Apex Court in the case of NTPC V/s CIT (supra) we admit this legal ground for adjudication based on the fact that no exempt income has been earned by the assessee. In case the assessee had earned exempt income then this ground would have become infructuous and it had to go back to Ld. CIT(A) for adjudication. However in the instant case there is no dispute at the end of both the parties to the fact that the assessee had NOT earned exempt income during the year and if the assessee has not earned exempt income whether the provisions of Section 14A of the Act could be applied on the assessee.
37. Ld. Counsel for the assessee taking this legal ground 37 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 submitted that the issue is squarely covered in favour of the assessee by the judgement of Hon'ble High Court of Delhi in the case of Cheminvest Limited V/s CIT (2015) 378 ITR 033 (Delhi) as well as the judgment of Hon'ble Gujarat High Court in the case of CIT V/s Corrtech Energy Pvt. Ltd (2015) 372 ITR 0097 (Guj.).
38. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O and opposed the submission made by Counsel for the assessee.
39. We have heard rival contentions and perused the records placed before us. The assessee through this Cross Objection has raised legal ground that the Ld. AO has erred in making disallowance u/s 14A of the Act at Rs.44,38,101/-. This disallowance was confirmed by Ld. CIT(A) because the assessee did not press the ground before him during the appellate proceedings. Now the assessee has taken a legal ground for the applicability of Section 14A of the Act on the assessee which have been admitted by us in light of judgement of Hon'ble Supreme Court in the case of NTPC V/s CIT (Supra). The assessee had made investment in equity shares and other investments and the average investments for the 38 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 year under appeal is Rs.5,79,48,950/-. There is no dispute to the fact that "NO" exempt income has been earned during the year from these investments. Whether in this situation provisions of Section 14A can be applied?
40. We find that Hon'ble High Court of Delhi in the case of Cheminvest Limited V/s CIT(supra) as well as Hon'ble Gujarat High Court in the case of CIT V/s Corrtech Energy Pvt. Ltd (supra) has held that if no exempt income is earned by the assessee then no disallowance u/s 14A of the Act is warranted. It was also brought to our notice that a Special Leave Petition preferred by the Income Tax Department against the judgment of Hon'ble High Court in the case of Cheminvest Limited V/s CIT(supra) has been dismissed by the Hon'ble Apex Court vide order dated 8.02.2019.
41. We can therefore safely conclude that as the assessee has "NO" exempt income during the year no disallowance u/s 14A of the Act is attributable. We therefore allow the Cross Objection filed by the assessee and delete the disallowance of Rs.44,38,101/- made by Ld. A.O. In the result Cross objection filed by the assessee is allowed.
39 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017
42. Now we take up revenue's appeal for Assessment Year 2013- 14 raising following grounds of appeal.
ITA No.393/Ind/2017 Assessment Year 2013-14
1.Whether on the facts and in the circumstances of the case, the learned CIT(A) has erred in Law by deleting the addition of Rs.3,1O,93,327/- made by the AO on account of disallowance made on rule 8D r.w.s. 14A of the Act without considering the fact that interest expenses of Rs.l7.55 Crores has been debited in P&L a/c for borrowed funds.
2.Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law by deleting the addition of Rs.3,1O,93,327/- made by the AO on account of disallowance made on rule 8D r.w.s. 14A of the Act.
3.Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciated the fact that the assessee has not established its contention with supporting documents in form of copy of bank accounts, fund flow statement and details of cheques from which such investment were made.
4.The appellant reserves his right to add, amend or alter the ground of appeal on or before the date, the appeal is finally heard for disposal.
43. From perusal of the above grounds we observe that the only issue raised in the appeal is against the finding of Ld. CIT(A) deleting the disallowance made u/s 14A of the Act at Rs.3,10,93,327/- . Brief facts of the case as culled out from the records are that the assessee filed its Income Tax return on 29.9.2013 for Assessment Year 2013-14 declaring loss of 40 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 Rs.3,99,30,905/- and agriculture income of Rs.46,75,000/-. Case selected for scrutiny and notice u/s 143(2) of the Act were duly served upon the assessee. Ld. A.O on observing that the assessee has shown investments of Rs.40,18,12,600/- and interest expenses of Rs.4,42,13,049/- invoked the provisions of Section 14A of the Act and after considering the submission made by the assessee, made disallowance u/s 14A of the Act at Rs.3,10,93,327/-. Against this addition assessee preferred appeal before Ld. CIT(A) and succeeded. Ld. CIT(A) placing reliance on various decisions observed that the company made investments in the companies and the income fetched from such investments have been duly offered for taxation.
44. Now the revenue is in appeal before the Tribunal.
45. The Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O.
46. Per contra Ld. Counsel for the assessee at the outset submitted that the issue raised by the revenue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench for 41 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 Assessment Year 2012-13 in its own case in ITA No.349/1/17 order dated 13.12.2018.
47. We have heard rival contentions, perused the records placed before us and carefully gone through the decision relied by both the parties. Revenue's sole grievance is against the finding of Ld. CIT(A) deleting the disallowance of Rs.3,10,93,327/- made by the Ld. A.O. We find that the similar issue came up before us for the Assessment Year 2012-13 in assesese's own case and the revenue's ground challenging the disallowance u/s 14A of the Act was dismissed by us by distinguishing facts of the assessee with the fact adjudicated by the Hon'ble Apex Court in the case of Maxopp Investment Ltd vs. CIT 101 CCH 0092 dated 12.02.2018. Relevant extract of the decision of the Tribunal in assessee's own case for Assessment Year 2012-13 dealing with the issue of disallowance u/s 14A of the Act is reproduced below;
14. From going through the above discussions, we are satisfied with the submission made by the Ld. Counsel for the assessee that the judgment of Hon'ble Apex Court in the case of Maxopp Investment Ltd (supra) is not applicable on the assessee as the facts are different. Similarly reliance placed by Ld. DR on the decision of I.T.A.T. Amritsar Bench is also not applicable to the facts of the assessee.
15. Further we are of the considered view that disallowance u/s 14A of 42 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 the Act is not called for in the case of the assessee as there is no dividend income earned during the year and the assessee's case is squarely covered in the judgment of Hon'ble Gujarat High Court in the case of CIT V/s Corrtech Energy (P) Ltd (supra) wherein the Hon'ble High Court has held that "where the assessee has not made any claim for any exemption then in such situation the disallowance u/s 14A of the Act have no application".
16. Perusal of the audited balance sheet of the assessee shows that as on 31.03.2012 the total of the share capital and reserve and surplus at the end of the year stands at Rs.39,28,44,695/- and against these interest free funds available with the assessee, the average value of investment is Rs.29,83,62,600/-, which means that the average investments are less than the interest free fund available with the assessee. Further there is no specific satisfaction by the Ld.A.O which could prove that interest bearing funds have been applied for the investments in group concerns for non business purposes. In such situation judgment of Hon'ble High Court of Bombay in the case of CIT V/s Reliance Utilities & Power Ltd (supra) is also applicable and is in favour of the assessee, wherein the Hon'ble High Court while adjudicating similar issue held that "if there are funds available, both interest free and over draft or loans taken, then the presumption would arise that the investments would be out of the interest free fund generated but available with the company, if the interest free funds were sufficient to meet the investments".
17. Similar view was also taken by Hon'ble High Court of Bombay in the case of CIT V/s HDFC Bank Ltd (supra) wherein the assessee's capital, profit, reserve surplus and current account deposits were higher than the investment in tax free securities, then it would have to be presumed that investment made by the assessee would be out of the available interest free funds.
18. We therefore respectfully following the above judgments, detailed finding of Ld.CIT(A) as well as our discussions above are of the considered 43 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 view that no disallowance u/s 14A was called for by the Ld.A.O and therefore we find no infirmity in the finding of Ld.CIT(A) deleting the disallowance u/s 14A of the Act at Rs.2,31,50,925/-. In the result Ground No.1 of the revenue stands dismissed".
48. We therefore respectfully following the decision of the Co- ordinate Bench as well as in the given facts and circumstances of the case are of the considered view that firstly the assessee has sufficient interest free funds in the form of share capital and reserve and surplus to cover up various investments made in subsidiary and associated companies and secondly the alleged investments in subsidiary companies have been made for promoting business and to have controlling interest and the income from investments have been duly offered to tax and therefore no disallowance u/s 14A of the Act was called for. Accordingly we find no reason to interfere in the finding of Ld. CIT(A) deleting the disallowance of Rs.3,10,93,327/-. Accordingly Ground No. 1 to 3 of revenue duly stands dismissed.
49. Ground No.4 is general in nature which needs no adjudication.
50. Accordingly appeal of the revenue for Assessment Year 2013- 44 Brilliant Estates Pvt. Ltd IT(SS)A No.45/Ind/2015, C.O.No.30/Ind/2015 & ITA No.393/Ind/2017 14 is dismissed.
51. In the result appeal of the revenue for Assessment Year 2008- 09 & 2013-14 are dismissed and assessee's Cross Objection for 2008-09 is allowed.
The order pronounced in the open Court on 30.05.2019.
Sd/- Sd/-
( KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
दनांक /Dated : 30th May, 2019
/Dev
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By order
Assistant Registrar, ITAT, Indore
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