ACIT CEN. CIR. 17 & 28, MUMBAI vs. M/S. J.B. BADA OFFSHORE SURVEYORS ADJUSTORS PVT. LTD., MUMBAI

PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM

These two appeals by the Revenue and assessee respectively These two appeals by the Revenue and assessee respectively These two appeals by the Revenue and assessee respectively are directed against two separate orders directed against two separate orders, passed by Ld. First passed by Ld. First Appellate Authority. Appellate Authority. The appeal by the Revenue is directed against The appeal by the Revenue is directed against order dated 10.08.2004 passed by the Ld. Commissioner of Income- order dated 10.08.2004 passed by the Ld. Commissioner of Income order dated 10.08.2004 passed by the Ld. Commissioner of Income tax (Appeals), Central tax (Appeals), Central – IV, Mumbai for assessment of block period IV, Mumbai for assessment of block period from 01.04.1995 to 07.11.2001 from 01.04.1995 to 07.11.2001, arising from the block assessment from the block assessment order dated 07.04.2004 passed u/s 158BC of the Income-tax Act, order dated 07.04.2004 passed u/s 158BC of the Income order dated 07.04.2004 passed u/s 158BC of the Income 1961 (in short ‘the Act’) 1961 (in short ‘the Act’) by the Deputy Commissioner of Income puty Commissioner of Income-tax, Central Circle -17 & 28, Mumbai ( 17 & 28, Mumbai (in Short ‘the Assessing officer the Assessing officer’). The appeal by the assessee is The appeal by the assessee is against another order against another order dated 31/12/2009 of the Ld. of the Ld. Commissioner of Income-tax (Appeals) tax (Appeals)-39, Mumbai for the same block period Mumbai for the same block period i.e. 1/4/1995 to 7/11/2001, i.e. 1/4/1995 to 7/11/2001, which is arising from order dated 23.06.2008 passed by the which is arising from order dated 23.06.2008 which is arising from order dated 23.06.2008 Assessing Officer, while Officer, while giving effect to the order of the Ld. CIT(A) e order of the Ld. CIT(A) dated 26/02/2008.

M/s J.B. Boda & Co. Pvt. Ltd. 3 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

made on account of excess deduction claimed us 80- made on account of excess deduction claimed us 80 made on account of excess deduction claimed us 80 0 of the Income tax Act, 1961." 0 of the Income tax Act, 1961." 2. On the facts and On the facts and circumstances of the case and in circumstances of the case and in law, the LD.CIT(A) erred in deleting the additions of law, the LD.CIT(A) erred in deleting the additions of law, the LD.CIT(A) erred in deleting the additions of the sums of Rs. 2.34.24.148/ the sums of Rs. 2.34.24.148/- for the A. Yr. 1996 for the A. Yr. 1996-97 without appreciating that the Finance Act, 2002 has without appreciating that the Finance Act, 2002 has without appreciating that the Finance Act, 2002 has amended the relevant provisions retrospectively amended the relevant provisions retrospectively amended the relevant provisions retrospectively we.f. 17.1.1995 we.f. 17.1.1995 to provide that any expense, to provide that any expense, deduction or allowance claimed, which is found deduction or allowance claimed, which is found deduction or allowance claimed, which is found false shall be included in the undisclosed income." false shall be included in the undisclosed income." false shall be included in the undisclosed income." 3. "On the facts and circumstances of the case and in "On the facts and circumstances of the case and in "On the facts and circumstances of the case and in law, the LD.CIT(A) erred in directing the A.O. to law, the LD.CIT(A) erred in directing the A.O. to law, the LD.CIT(A) erred in directing the A.O. to grand additional deduction grand additional deduction u/s 80-0 on the 0 on the undisclosed undisclosed undisclosed income income income determined determined determined in in in the the the block block block assessment without appreciating that the deduction assessment without appreciating that the deduction assessment without appreciating that the deduction u/s 80 u/s 80-0 under chapter VIA can't be claimed beyond 0 under chapter VIA can't be claimed beyond the relief claimed in the original assessment. the relief claimed in the original assessment. the relief claimed in the original assessment. 3. This appeal of the Revenue was disposed off This appeal of the Revenue was disposed off by y the Income-tax Appellate Tribunal (In short the ‘Tribunal’ Appellate Tribunal (In short the ‘Tribunal’) vide order dated ) vide order dated 9/04/2008. In this appeal the Tribunal dismissed the first two 9/04/2008. In this appeal the Tribunal dismissed the first two 9/04/2008. In this appeal the Tribunal dismissed the first two grounds following the finding of the Tribunal in another case of the grounds following the finding of the Tribunal in another case of the grounds following the finding of the Tribunal in another case of the Group namely M/s J B Boda Surveyors P Ltd in M/s J B Boda Surveyors P Ltd in M/s J B Boda Surveyors P Ltd in IT(SS)A No. 578/Mum/04. On a miscellaneous application filed by the assessee On a miscellaneous application filed by the assessee On a miscellaneous application filed by the assessee that Ground No. 3 of the appeal of the Revenue was not that Ground No. 3 of the appeal of the Revenue was not that Ground No. 3 of the appeal of the Revenue was not adjudicated, the Tribunal vide order dated 4/07/2008 passed in MA adjudicated, the Tribunal vide order dated 4/07/2008 adjudicated, the Tribunal vide order dated 4/07/2008 No. 320/Mum/2008 No. 320/Mum/2008 dismissed the Ground No. 3 of the appeal of dismissed the Ground No. 3 of the appeal of Revenue, observing as under: observing as under:

“4. After hearing the Ld. Departmental Representative, After hearing the Ld. Departmental Representative, After hearing the Ld. Departmental Representative, we find substance in M.A. Non adjudication of ground we find substance in M.A. Non adjudication of ground we find substance in M.A. Non adjudication of ground of appeal is apparent mistake the order rectified u/s of appeal is apparent mistake the order rectified u/s of appeal is apparent mistake the order rectified u/s 254(2). In the case u 254(2). In the case under consideration, ground No. 3 nder consideration, ground No. 3 has been adjudicated therefore there is apparent has been adjudicated therefore there is apparent has been adjudicated therefore there is apparent

M/s J.B. Boda & Co. Pvt. Ltd. 4 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

mistake in the order and same is rectified by mistake in the order and same is rectified by mistake in the order and same is rectified by inserting para 5A in the order reads as under: inserting para 5A in the order reads as under: inserting para 5A in the order reads as under: 5A. The issue raised in ground No. 3 in Form The issue raised in ground No. 3 in Form No. 36 is pertaining to additional deduction u/s eduction u/s 80-O on the undisclosed income determined in O on the undisclosed income determined in the block assessment. The CIT(A) decided the the block assessment. The CIT(A) decided the issue issue in in favour favour of of the the assessee assessee after after considering considering amended amended provisions provisions of of the the Explanation below section 158BB(1) and the Explanation below section 158BB(1) and the proviso to the same section, which were proviso to the same section, which amended by the Finance Act, 2002, with amended by the Finance Act, 2002, with retrospective effect from 1st July, 1995 as well retrospective effect from 1st July, 1995 as well as clarification issued by CBDT vide Circular as clarification issued by CBDT vide Circular no. 8 of 2002 dated 27th August, 2002. We no. 8 of 2002 dated 27th August, 2002. We noticed that the issue is also covered in favour noticed that the issue is also covered in favour of the assessee by the decision of ITAT Pune cision of ITAT Pune Bench in the case of Control Touch Electronics Bench in the case of Control Touch Electronics (Pune) Pvt. Ltd. v. ACIT 77 ITD 522 wherein it (Pune) Pvt. Ltd. v. ACIT 77 ITD 522 wherein it has been held that undisclosed income u/s has been held that undisclosed income u/s 158BB should be computed after allowing 158BB should be computed after allowing deduction under Chapter VIA. Respectfully deduction under Chapter VIA. Respectfully following the abov following the above decision of ITAT in the case e decision of ITAT in the case of Control Touch Electronics (Supra), of Control Touch Electronics (Supra), we we confirm the order of the CIT(A).” 3.1 Further, on a Miscellaneous Application Miscellaneous Application filed by the filed by the Revenue that revised grounds filed by the Revenue vide their letter dated that revised grounds filed by the Revenue vide their letter dated that revised grounds filed by the Revenue vide their letter dated 30/12/2006 were not considered and adjudicated, The Tribunal ot considered and adjudicated, The Tribunal ot considered and adjudicated, The Tribunal vide order passed on 19/12/2008 in MA No. 509/M/2008 , recalled vide order passed on 19/12/2008 in MA No. 509/M/2008 , recalled vide order passed on 19/12/2008 in MA No. 509/M/2008 , recalled its order dated 9/4/2008 passed in the appeal of the Revenue. The its order dated 9/4/2008 passed in the appeal of the Revenue its order dated 9/4/2008 passed in the appeal of the Revenue relevant finding of the Tribunal recalling its order dated 9/4/2008 relevant finding of the Tribunal recalling its order dated 9/4/2008 relevant finding of the Tribunal recalling its order dated 9/4/2008 are reproduced as under: ced as under:

“3. Briefly, the facts of the case are that the ITAT has 3. Briefly, the facts of the case are that the ITAT has 3. Briefly, the facts of the case are that the ITAT has decided the appeals filed by the revenue vide IT(SS)A No.s decided the appeals filed by the revenue vide IT(SS)A No.s decided the appeals filed by the revenue vide IT(SS)A No.s 578/M/04 & 580/M/04 for the block period 01.04.95 to 578/M/04 & 580/M/04 for the block period 01.04.95 to 578/M/04 & 580/M/04 for the block period 01.04.95 to

M/s J.B. Boda & Co. Pvt. Ltd. 5 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

C7.11.2001 in respect of J.B. Boda Offshore Survey C7.11.2001 in respect of J.B. Boda Offshore Survey C7.11.2001 in respect of J.B. Boda Offshore Surveyors and Adjustors P. and Adjustors P. Ltd. and M/s J.B. Boda & Co Put. Ltd., s J.B. Boda & Co Put. Ltd., respectively vide original order dated 9th April, 2008. The respectively vide original order dated 9th April, 2008. The respectively vide original order dated 9th April, 2008. The assessee filed M.A. No. 320 assessee filed M.A. No. 320/N/08, which arose out of /N/08, which arose out of IT(SS)A No. 580/M/04 and decided on 4th July, 2003. A No. 580/M/04 and decided on 4th July, 2003. A No. 580/M/04 and decided on 4th July, 2003. Now the revenue has filed M.A. pointing out that the Now the revenue has filed M.A. pointing out that the Now the revenue has filed M.A. pointing out that the revised grounds filed by the Revenue on 10.10.06 have revised grounds filed by the Revenue on 10.10.06 have revised grounds filed by the Revenue on 10.10.06 have not been decided. It is pertinent to note that this fact has not been decided. It is pertinent to note that this fact has not been decided. It is pertinent to note that this fact has not been pointed out by the revenue neither at the time of not been pointed out by the revenue neither at the time of not been pointed out by the revenue neither at the time of hearing and deciding the original appeal nor at the time of hearing and deciding the original appeal nor at the time of hearing and deciding the original appeal nor at the time of Miscellaneous Applica ous Application filed by the assessee and the tion filed by the assessee and the same were not found on record. The same were not found on record. The Ld. DR filed a photo DR filed a photo copy of acknowledgment, showing these revised grounds copy of acknowledgment, showing these revised grounds copy of acknowledgment, showing these revised grounds of appeal have been filed on 30.10.2006. On enquiry from of appeal have been filed on 30.10.2006. On enquiry from of appeal have been filed on 30.10.2006. On enquiry from registry, it is noticed that the revenue has filed the registry, it is noticed that the revenue has filed the registry, it is noticed that the revenue has filed these revised grounds in appeal section and the same entered at revised grounds in appeal section and the same entered at revised grounds in appeal section and the same entered at S.No. 900, dated 30.10.06 in the diarize register of appeal S.No. 900, dated 30.10.06 in the diarize register of appeal S.No. 900, dated 30.10.06 in the diarize register of appeal section. The relevant extract of the diarize script th section. The relevant extract of the diarize script th section. The relevant extract of the diarize script the registry has been kept on reco registry has been kept on record. Non-adjudication of adjudication of grounds of appeal amounts grounds of appeal amounts to mistake apparent from to mistake apparent from record, which rectifiable u/s 254(2). We, accordin record, which rectifiable u/s 254(2). We, accordin record, which rectifiable u/s 254(2). We, accordingly, recall the above order of I recall the above order of ITAT dated 9.4.08 and modified TAT dated 9.4.08 and modified dated 4' July, 2008 for the limited purpose to adjudicate dated 4' July, 2008 for the limited purpose to adjudicate dated 4' July, 2008 for the limited purpose to adjudicate the following revised grounds of appeal of revenue: the following revised grounds of appeal of revenue: the following revised grounds of appeal of revenue: “1. On t 1. On the facts and in the circumstances of the case he facts and in the circumstances of the case and in law, the Ld. CIT(A) erre and in law, the Ld. CIT(A) erred in deleting the d in deleting the addition, of R addition, of Rs. 2,34,24,148/- for AY 1996-97, made 97, made on account of e on account of excess deduction claimed u/s 80 xcess deduction claimed u/s 80-O of the Income the Income-tax Act, 1961. 2. On the facts and in the circu 2. On the facts and in the circumstances of the case mstances of the case and in law, the Ld. CIT(A) erred in deleting the and in law, the Ld. CIT(A) erred in deleting and in law, the Ld. CIT(A) erred in deleting addition of the sum of Rs.2,34,24, addition of the sum of Rs.2,34,24,148/- for the AY for the AY 1996-97 without appreciating the fact that the 97 without appreciating the fact that the 97 without appreciating the fact that the Finance Act, 2002 has amended the reievent Finance Act, 2002 has amended the reievent Finance Act, 2002 has amended the reievent provisions provisions provisions retrospectively retrospectively retrospectively w.e.f. w.e.f. w.e.f. 17.1.1995 17.1.1995 17.1.1995 to t t provide that env I eypense, deduction or allowance provide that env I eypense, deduction or allowance provide that env I eypense, deduction or allowance claimed which is found teleg shall be included in the claimed which is found teleg shall be included in the claimed which is found teleg shall be included in the undisclosed income. undisclosed income.

M/s J.B. Boda & Co. Pvt. Ltd. 6 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

M/s J.B. Boda & Co. Pvt. Ltd. 7 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

adjudicated by the Tribunal and thus the Trib adjudicated by the Tribunal and thus the Tribunal should restrict unal should restrict adjudication of additional ground No. 4 and 5 only. But, the adjudication of additional ground No. 4 and 5 only. But, the adjudication of additional ground No. 4 and 5 only. But, the Tribunal in in in order order order passed passed passed on on on 11/02/2011 11/02/2011 11/02/2011 in MA No. 283/Mum/2010, rejected this request holding that Act does not rejected this request holding that Act does not rejected this request holding that Act does not permit for rectification of order passed u/s 254(2) of the Act. permit for rectification of order passed u/s 254(2) of the Act. permit for rectification of order passed u/s 254(2) of the Act.

4.1 Thus, the appeal of the Revenue is before us for adjudicating Thus, the appeal of the Revenue is before us for adjudicating Thus, the appeal of the Revenue is before us for adjudicating above five revised grounds. revised grounds.

M/s J.B. Boda & Co. Pvt. Ltd. 8 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

5.1 A search and seizure action u/s 132 of the Act was carried out search and seizure action u/s 132 of the Act was carried out search and seizure action u/s 132 of the Act was carried out in the case of M/s J.B. Boda group of cases on 07.11.2001. During J.B. Boda group of cases on 07.11.2001. During J.B. Boda group of cases on 07.11.2001. During the course of search proceedings, Shri C.V. Sheth the course of search proceedings, Shri C.V. Sheth, Senior Executive Senior Executive Director of the assessee Director of the assessee-company, who was working for group f was working for group for last 50 years, stated on oath u/s 132(4) of the Act on 8/11/2001 last 50 years, stated on oath u/s 132(4) of the Act on 8/11/2001 last 50 years, stated on oath u/s 132(4) of the Act on 8/11/2001 that certain credit credit credit balances balances balances of of of insurance insurance insurance companies companies companies and outstanding expenses in India were appearing in books of account outstanding expenses in India were appearing in books of account outstanding expenses in India were appearing in books of account for a long period and period and non-moving and thus became non became non-existence. He admitted that those liabilities of Rs. 11.74 crores already admitted that those liabilities of Rs. 11.74 crores already admitted that those liabilities of Rs. 11.74 crores already ceased and no longer payable, payable, therefore same was offered to tax as therefore same was offered to tax as undisclosed income. His statement was further affirmed by Shri undisclosed income. His statement was further affirmed by Shri undisclosed income. His statement was further affirmed by Shri J.B. Boda chairman of the group or chairman of the group or Director of the assessee Director of the assessee- company and total undisclosed income of Rs. 16,15,21,267/ and total undisclosed income of Rs. 16,15,21,267/ and total undisclosed income of Rs. 16,15,21,267/- for the entire Group was offered in his statement dated 9/11/2001 u/s the entire Group was offered in his statement dated 9/11/2001 u/s the entire Group was offered in his statement dated 9/11/2001 u/s 132(4) of the Act. The The breakup of the said disclosure during the breakup of the said disclosure during the course of search proceedings made is reproduced as under: of search proceedings made is reproduced as under: of search proceedings made is reproduced as under: Name of the Company Block Period/Asst. Disclosure made on Disclosure made on Amount (Rs.) Year account of J.B. Boda & Co. Pvt. Ltd. Block Period None None existent existent i.e. i.e. 10,03,72,942/- 01/04/1995 to seized seized liabilities liabilities of of 07/11/2001 credit balances in $ credit balances in $ and UK pound -do- Non-existent existent dues dues 1.66 crores payable to the Indian payable to the Indian Insurance Companies Insurance Companies -do- AY 1996-97 Deduction u/s 80- -O 2,31,59,273/- wrongly claimed Total 14,01,31,215/- Crowe Boda & Co. Pvt. AY 1996-97 & 1997- Deduction u/s 80- -O 1,08,07,912/- Ltd. 98 wrongly claimed J.B. Boda Surveyors Pvt. AY 1996-97 & 1997- Deduction u/s 80- -O 82,71,381/- Ltd. 98 wrongly claimed

M/s J.B. Boda & Co. Pvt. Ltd. 9 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

J.B. Boda Offshore AY 1996-97 & 1997- Deduction u/s 80- -O 12,47,411/- Surveyors & Adjustors 98 wrongly claimed Pvt. Ltd. J.B. Boda & Bros Pvt. AY 1996-97 Deduction u/s 80- -O 14,35,290/- Ltd. wrongly claimed Total 16,18,93,209/- 5.2 The breakup of Rs.14,01,32,215/ The breakup of Rs.14,01,32,215/- offered in respect of the offered in respect of the assessee company was as under: assessee company was as under:

“4.4 ….. Thus the break Thus the break-up of the undisclosed income is as under: up of the undisclosed income is as under: a. Long standing creditors in US $ Long Rs.7,27,35,250/ Rs.7,27,35,250/- b. Long standing creditors in St. Pound Long standing creditors in St. Pound Rs.2,76,37,692/ Rs.2,76,37,692/- c. Dues payable to Indian Companies Dues payable to Indian Companies Rs.1,66,00,000/ Rs.1,66,00,000/- d. On account of erroneous claim of On account of erroneous claim of Rs.3,21,59,273/ Rs.3,21,59,273/- deduction u/s 80-O deduction u/s 80 Total Total Rs.14,01,32,215/ Rs.14,01,32,215/- 5.3 Consequent to the search action, notice u/s 158BC of the Act Consequent to the search action, notice u/s 158BC of the Act Consequent to the search action, notice u/s 158BC of the Act was issued to assessee on 25.02.2002. In response, the assessee was issued to assessee on 25.02.2002. In response was issued to assessee on 25.02.2002. In response filed return of income in prescribed Form No. 2B for block period filed return of income in prescribed Form No. 2B for block period filed return of income in prescribed Form No. 2B for block period (from 01.04.1995 to 07.11.2001) on 26.03.2002 declaring total (from 01.04.1995 to 07.11.2001) on 26.03.2002 declaring total (from 01.04.1995 to 07.11.2001) on 26.03.2002 declaring total undisclosed income of Rs.11,73,76,489/ isclosed income of Rs.11,73,76,489/-. The detail of said . The detail of said undisclosed income declared undisclosed income declared alongwith foot note is reproduced for is reproduced for ready reference as under: ready reference as under:

Previous Year Asstt. Year Asstt. Year Total Income Total return Total Total income including loss assessed/ret assessed/ret including undisclosed urn income urn income undisclosed income income computed u/s 158BB of (in Rs.) Total Income Total Loss Total Income Total Income Total Loss (A) (B) (C) (D)

M/s J.B. Boda & Co. Pvt. Ltd. 10 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

1st 1996-97 97 256,416,836 -- 15,674,552 15,674,552 -- 2nd 1997-98 98 34,311,650 34,311,650 -- 3rd 1998-99 99 -- 7,545,290 7,545,290 -- 4th 1999-2000 2000 17,820,762 17,820,762 5th 2001-01 01 8,881,354 8,881,354 6th 2001-02 02 -- 16,109,739 16,109,739 -- 7th upto -- 38,700,000 38,700,000 -- 07.11.2001 Total 256,419,836 139,043,347 139,043,347 Total Undisclosed Income for the Block period = (A Total Undisclosed Income for the Block period = (A Total Undisclosed Income for the Block period = (A - C) + (D - B) =117,376,489/ B) =117,376,489/- NOTE:- 1. This figure has been arrived at after reconciling the figure has been arrived at after reconciling the figure has been arrived at after reconciling the various accounts having credit balances as far as various accounts having credit balances as far as various accounts having credit balances as far as possible. In addition there are corresponding debit possible. In addition there are corresponding debit possible. In addition there are corresponding debit balances standing in party's accounts aggregating to balances standing in party's accounts aggregating to balances standing in party's accounts aggregating to Rs.22,780,431/ Rs.22,780,431/- in respect of whom the assessee has in respect of whom the assessee has no hope of recovery as balance is outstanding for more than 6 hope of recovery as balance is outstanding for more than 6 hope of recovery as balance is outstanding for more than 6 years. 2)The above credits are offered to tax, however if any 2)The above credits are offered to tax, however if any 2)The above credits are offered to tax, however if any claim arise on account of these balances written back at claim arise on account of these balances written back at claim arise on account of these balances written back at any time the same shall be allowed as a deduction from any time the same shall be allowed as a deduction from any time the same shall be allowed as a deduction from profit of the busine profit of the business of the year of payment of such claim ss of the year of payment of such claim 3)The assessee had claimed deduction under Section 80 3)The assessee had claimed deduction under Section 80 3)The assessee had claimed deduction under Section 80-0, in the original returns filed for the period covered by the in the original returns filed for the period covered by the in the original returns filed for the period covered by the block retur, at 50% of the convertible foreign exchange block retur, at 50% of the convertible foreign exchange block retur, at 50% of the convertible foreign exchange brought into India. The assessee's entitlem brought into India. The assessee's entitlement to the ent to the deduction has been accepted by the department in all the deduction has been accepted by the department in all the deduction has been accepted by the department in all the years. In the course of the search . statements had been years. In the course of the search . statements had been years. In the course of the search . statements had been recorded of the assessee's employees wherein it has been recorded of the assessee's employees wherein it has been recorded of the assessee's employees wherein it has been stated that a stated that an erroneous deduction under 80-O has been has been claimed. The assess claimed. The assessee submits that the deduction has ee submits that the deduction has been correctly claimed and allowed in the original been correctly claimed and allowed in the original been correctly claimed and allowed in the original assessment proceedings and hence in the present return assessment proceedings and hence in the present return assessment proceedings and hence in the present return the deduction as earlier claim has not been withdrawn. the deduction as earlier claim has not been withdrawn. the deduction as earlier claim has not been withdrawn. “4) In respect of additional income offered. which is In respect of additional income offered. which is In respect of additional income offered. which is also received in convertible foreign exchange, the ceived in convertible foreign exchange, the ceived in convertible foreign exchange, the assessee is entitled to a deduction Us. 80 assessee is entitled to a deduction Us. 80-0 of the 0 of the

M/s J.B. Boda & Co. Pvt. Ltd. 11 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

Income Tax Act 1961, which may be considered at Income Tax Act 1961, which may be considered at Income Tax Act 1961, which may be considered at the time of assessment for the Assessment Years the time of assessment for the Assessment Years the time of assessment for the Assessment Years 1996-97, 1997 97, 1997-98.” 5.4 In above foot note foot note no. 4 to the undisclosed income computed, to the undisclosed income computed, the assessee mentioned that assessee was entitled for deduction the assessee mentioned that assessee was entitled for deduction the assessee mentioned that assessee was entitled for deduction u/s 80-O of the Act O of the Act in respect of additional income declared for in respect of additional income declared for assessment year 1996 assessment year 1996-97 and 1997-98, which might be considered which might be considered at the time of the assessmen at the time of the assessment for block period.

M/s J.B. Boda & Co. Pvt. Ltd. 12 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

However, due to subsequent decision of the Special to allowed. However, due to subsequent decision of the However, due to subsequent decision of the Bench of the Tribunal in the case of Bench of the Tribunal in the case of M/s M/s Petroleum International ltd vs DCIT Spl Range-9 9 in in ITA ITA No. No. 9882/Mum/95, where where it is held that deduction u/s 80 u/s 80-O should be allowed on net basis i.e. after reducing expenses incurred in India wed on net basis i.e. after reducing expenses incurred in India wed on net basis i.e. after reducing expenses incurred in India also, the assessee was advised to claim said deduction u/s 80 assessee was advised to claim said deduction u/s 80-O of assessee was advised to claim said deduction u/s 80 the Act on net basis the Act on net basis i.e. after reducing expenses incurred in Indian after reducing expenses incurred in Indian currency in India. The assessee claimed that The assessee claimed that in view of in view of above, sh C V Seth admitted during the course of search during the course of search and offered the and offered the withdrawal of claim u/s 80 of claim u/s 80-O in respect of AY 1996 O in respect of AY 1996-97. During assessment proceedings, t assessment proceedings, the assessee contended that this item of he assessee contended that this item of disclosure was not falling under definition disclosure was not falling under definition of the of the ‘undisclosed income’ and therefore, the assessee did not declare the said income and therefore, the assessee did not declare the said income and therefore, the assessee did not declare the said income for the purpose of the return of the block period. The Assessing for the purpose of the return of the block period. The Assessing for the purpose of the return of the block period. The Assessing Officer rejected the said claim of the assessee regarding claim of Officer rejected the said claim of the assessee regarding claim of Officer rejected the said claim of the assessee regarding claim of deduction u/s 80-O of the Act on net O of the Act on net basis vis-à- -vis gross basis. According to the Assessing According to the Assessing officer, the definition of the undisclosed the definition of the undisclosed income as amended by the Finance Act, 2002 income as amended by the Finance Act, 2002 include include any expenses, deduction or allowance claimed under this Act llowance claimed under this Act, which is found to be , which is found to be false. This amendment w . This amendment was introduced with retrospective effect as introduced with retrospective effect from 1st July, 1995. Thus, the AO held that this deduction u/s 80 July, 1995. Thus, the AO held that this deduction u/s 80 July, 1995. Thus, the AO held that this deduction u/s 80- O for AY 1996-97 was claimed 97 was claimed falsely, hence to be treated as hence to be treated as undisclosed income. The Ld AO in para 17 of the assessment order 17 of the assessment order

M/s J.B. Boda & Co. Pvt. Ltd. 13 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

dated 07.04.2004, comput computed the disallowance of deduction u deduction u/s 80- O of the Act as under: as under:

Gross Receipt Gross Receipt -- Rs.12,78,73,843 Add: Receipt in Foreign Exchange Receipt in Foreign Exchange -- Rs.11,18,53,134 Less: Expenses in Foreign exchange Expenses in Foreign exchange Rs.1,92,64,686 Net Receipt of Foreign exchange Net Receipt of Foreign exchange Rs.9,25,88,448 Net foreign exchange earned as Net foreign exchange earned as 72.40% % of gross receipt % of gross receipt 72.40% of Gross total income 72.40% of Gross total income Rs.4,57,40,152 (i.e. (i.e. 72.40% 72.40% of of Rs.6,31,77,006/-) Rs.6,31,77,006/ The amt. eligible for deduction The amt. eligible for deduction Rs.2,28,70,076 u/s 80-O @ 50% of above u/s 80 The deduction claimed by the The deduction claimed by the Rs.4,62,94,224 assessee assessee Less: Amount eligible for deduction Amount eligible for deduction Rs.2,28,70,076 u/s 80-O u/s 80 Amount of deduction to be Amount of deduction to be Rs.2,34,24,148 withdrawn withdrawn Undisclosed income on account of erroneous deduction Undisclosed income on account of erroneous deduction Undisclosed income on account of erroneous deduction claimed ofRs.2.34.24.148/ claimed ofRs.2.34.24.148/- is added to the undisclosed is added to the undisclosed income disclosed by the assessee. disclosed by the assessee.” 6.1 Further, the Assessing Officer also rejected the claim of the Further, the Assessing Officer also rejected the claim of the Further, the Assessing Officer also rejected the claim of the assessee for deduction u/s 80 assessee for deduction u/s 80-O of the Act in respect of undisclosed O of the Act in respect of undisclosed income of Rs.11,73,76,489/ income of Rs.11,73,76,489/- declared from non declared from non-moving long outstanding creditors. According to standing creditors. According to the Assessing Officer, no the Assessing Officer, no deduction was available to the assessee under provisions of section deduction was available to the assessee under provisions of section deduction was available to the assessee under provisions of section 158BC against undisclosed income. The relevant para of the order undisclosed income. The relevant para of the order undisclosed income. The relevant para of the order of the Assessing Officer is reproduced as under: of the Assessing Officer is reproduced as under:

“25. Further, section 158BC although part of a taxing 25. Further, section 158BC although part of a taxing 25. Further, section 158BC although part of a taxing statue, imposes no charge on the subject but deals merely statue, imposes no charge on the subject but deals merely statue, imposes no charge on the subject but deals merely with the machinery of assessment and in interpreting a with the machinery of assessment and in interpreting a with the machinery of assessment and in interpreting a

M/s J.B. Boda & Co. Pvt. Ltd. 14 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

provision of that kind, the rule, is that construction should provision of that kind, the rule, is that construction should provision of that kind, the rule, is that construction should be preferred which makes the be preferred which makes the machinery workable. Since machinery workable. Since the proceeding under section 158BC are for the benefit of the proceeding under section 158BC are for the benefit of the proceeding under section 158BC are for the benefit of the revenue and not an assessee and are aimed at the revenue and not an assessee and are aimed at the revenue and not an assessee and are aimed at gathering the 'undisclosed income' of an assessee, the gathering the 'undisclosed income' of an assessee, the gathering the 'undisclosed income' of an assessee, the same cannot be allowed to be converted as 'revisional' or same cannot be allowed to be converted as 'revisional' or same cannot be allowed to be converted as 'revisional' or 'review' proceeding at the instance of the assessee, proceeding at the instance of the assessee, proceeding at the instance of the assessee, thereby making the machinery unworkable. thereby making the machinery unworkable. 26. Further, in proceedings under Block assessment the 26. Further, in proceedings under Block assessment the 26. Further, in proceedings under Block assessment the jurisdiction of the assessing officer is confined to only to jurisdiction of the assessing officer is confined to only to jurisdiction of the assessing officer is confined to only to calculate the undisclosed income as defined in sec. calculate the undisclosed income as defined in sec. calculate the undisclosed income as defined in sec. 158B(b) and does not extent to revising, reopening or B(b) and does not extent to revising, reopening or B(b) and does not extent to revising, reopening or reconsidering the whole assessment or permitting the reconsidering the whole assessment or permitting the reconsidering the whole assessment or permitting the assessee to agitate questions, which have been decided in assessee to agitate questions, which have been decided in assessee to agitate questions, which have been decided in the original assessment proceedings. In other words the original assessment proceedings. In other words the original assessment proceedings. In other words assessing officer cannot make an order of assessing officer cannot make an order of reassessment reassessment inconsistent with the original order of assessment in inconsistent with the original order of assessment in inconsistent with the original order of assessment in respect of matters which are not subject matter of Block respect of matters which are not subject matter of Block respect of matters which are not subject matter of Block assessment. assessment. 7. On further appeal, the Ld. CIT(A) vide order dated 10.08.2004 On further appeal, the Ld. CIT(A) vide order dated 10.08.2004 On further appeal, the Ld. CIT(A) vide order dated 10.08.2004 allowed the claim of the assessee in respect of deduction u/s 80-O allowed the claim of the assessee in respect of deducti allowed the claim of the assessee in respect of deducti of the Act amounting to Rs.2,34,24,148/ of the Act amounting to Rs.2,34,24,148/-. According to the Ld. . According to the Ld. CIT(A), there is no incriminating material or evidence vis is no incriminating material or evidence vis is no incriminating material or evidence vis-à-vis withdrawal of deduction u/s 80 withdrawal of deduction u/s 80-O of the Act in res O of the Act in respect of assessment year 1996 assessment year 1996-97, claimed in the regular return of in the regular return of income filed and allowed by the Assessing officer u/s 143(1) of the Act, and allowed by the Assessing officer u/s 143(1) of the Act, and allowed by the Assessing officer u/s 143(1) of the Act, therefore, the Assessing Officer was not justified in treating the therefore, the Assessing Officer was not justified in treating the therefore, the Assessing Officer was not justified in treating the same as undisclosed income of the assessee same as undisclosed income of the assessee during block assessment proceedings. assessment proceedings. The observation of the Ld CIT(A) on observation of the Ld CIT(A) on the as under: issue in dispute are reproduced for ready issue in dispute are reproduced for ready reference as under:

M/s J.B. Boda & Co. Pvt. Ltd. 15 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

“15. In the case of the Assessee, the issue in question is 15. In the case of the Assessee, the issue in question is 15. In the case of the Assessee, the issue in question is the claim of deduction W/s. 80 the claim of deduction W/s. 80-O of the I.T. Act for the A. O of the I.T. Act for the A. Y.1996-97 which, according to the AO, was falsely 97 which, according to the AO, was falsely 97 which, according to the AO, was falsely claimed. In the A.Y. claimed. In the A.Y.1996-97, a detailed computation of the 97, a detailed computation of the Assessee's claim w/s. 80 Assessee's claim w/s. 80-0 had been furnished along with 0 had been furnished along with return of income. In this computation, the foreign exchange return of income. In this computation, the foreign exchange return of income. In this computation, the foreign exchange earnings had been reduced by the expenditure incurred in earnings had been reduced by the expenditure incurred in earnings had been reduced by the expenditure incurred in foreign exchange and the deduction was clai foreign exchange and the deduction was claimed on the med on the net earnings so determined. The claim of the Assessee had net earnings so determined. The claim of the Assessee had net earnings so determined. The claim of the Assessee had been accepted and the return had been proceed w/s. been accepted and the return had been proceed w/s. been accepted and the return had been proceed w/s. 143(1)(a) of the IT. Act. Therefore, all relevant materials on 143(1)(a) of the IT. Act. Therefore, all relevant materials on 143(1)(a) of the IT. Act. Therefore, all relevant materials on the basis of which the deduction w/s. 80 the basis of which the deduction w/s. 80-O had been O had been claimed, were placed claimed, were placed on record and were available with on record and were available with the AO to take a decision in the matter while processing the AO to take a decision in the matter while processing the AO to take a decision in the matter while processing the return. It thus appears that, the recomputation of the the return. It thus appears that, the recomputation of the the return. It thus appears that, the recomputation of the admissible deduction w/s. 80 admissible deduction w/s. 80-0 in the block-assessment assessment proceedings was the result of a change of opinion o proceedings was the result of a change of opinion o proceedings was the result of a change of opinion on the part of the AO and a difference between the AO and the part of the AO and a difference between the AO and the part of the AO and a difference between the AO and the Assessee in the method of computation to be adopted for Assessee in the method of computation to be adopted for Assessee in the method of computation to be adopted for determining determining the sum on which the deduction was the sum on which the deduction was admissible. It further appears admissible. It further appears that is change of opinion of opinion came about from the decision of the came about from the decision of the Special Bench of Special Bench of the Mumbai ITAT in the case of Petroleum India International Mumbai ITAT in the case of Petroleum India International Mumbai ITAT in the case of Petroleum India International Mumbai Mumbai vs. vs. DCIT DCIT Special Special Range Range 9 9 in in ITA ITA No. No. 9882/BOM/95 dated 25.06.1999 and the decision of the 9882/BOM/95 dated 25.06.1999 and the decision of the 9882/BOM/95 dated 25.06.1999 and the decision of the Mumbai High Court in the case of M/s. Asian Cable Mumbai High Court in the case of M/s. Asian Cable Mumbai High Court in the case of M/s. Asian Cable Corporation Ltd, 252 ITR 537. I Corporation Ltd, 252 ITR 537. It was on the basis of this t was on the basis of this order that the assessment in the case of a sister concern, order that the assessment in the case of a sister concern, order that the assessment in the case of a sister concern, M/s.J.B. Boda Offshore Surveyors and Adjusters Pvt. M/s.J.B. Boda Offshore Surveyors and Adjusters Pvt. M/s.J.B. Boda Offshore Surveyors and Adjusters Pvt. Ltd. for the A.Y. 1997 for the A.Y. 1997-98 was first completed and the 98 was first completed and the assessment for the A.Y. assessment for the A.Y. 1996-97 was reopened and 97 was reopened and reassessed. 16. In such a situation, it could not be said that the claim In such a situation, it could not be said that the claim In such a situation, it could not be said that the claim of deduction us. 80 of deduction us. 80-0 made by the Assessee in the return 0 made by the Assessee in the return for the A.Y.1996 for the A.Y.1996-97 and most importantly, in the block 97 and most importantly, in the block- assessment proceedings, was patently false. It also could assessment proceedings, was patently false. It also could assessment proceedings, was patently false. It also could not be said that the Assesse not be said that the Assessee had failed to disclose or e had failed to disclose or would not disclose any information or material, which would not disclose any information or material, which would not disclose any information or material, which were relevant or critical for the computation of the were relevant or critical for the computation of the were relevant or critical for the computation of the admissible admissible admissible deduction deduction deduction under under under the the the said said said section. section. section. Consequently, once a claim of deduction could not be said Consequently, once a claim of deduction could not be said Consequently, once a claim of deduction could not be said

M/s J.B. Boda & Co. Pvt. Ltd. 16 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

to be false, it co to be false, it could not be brought within the purview of uld not be brought within the purview of the definition of undisclosed income us. 158B(b) of the I.T. the definition of undisclosed income us. 158B(b) of the I.T. the definition of undisclosed income us. 158B(b) of the I.T. Act. And hence, it could not be a subject matter of the Act. And hence, it could not be a subject matter of the Act. And hence, it could not be a subject matter of the block-assessment proceedings. assessment proceedings. 17. On the other hand, there was no incriminating material 17. On the other hand, there was no incriminating material 17. On the other hand, there was no incriminating material or evidence found in course of the search, nor was there ce found in course of the search, nor was there ce found in course of the search, nor was there any information available with the AO which would any information available with the AO which would any information available with the AO which would confirm or even indicate that, the Assessee's claim of confirm or even indicate that, the Assessee's claim of confirm or even indicate that, the Assessee's claim of deduction us. 80 deduction us. 80-0 for the said assessment year covered 0 for the said assessment year covered by the block by the block-period, was fraudulent or was base period, was fraudulent or was based on incorrect or even incomplete information. Thus, in the incorrect or even incomplete information. Thus, in the incorrect or even incomplete information. Thus, in the absence of any evidence, neither could the claim of absence of any evidence, neither could the claim of absence of any evidence, neither could the claim of deduction us. 80 deduction us. 80-0 be treated as a false claim nor could 0 be treated as a false claim nor could the difference in the claim of the Assessee and the the difference in the claim of the Assessee and the the difference in the claim of the Assessee and the deduction computed by the AO, be tr deduction computed by the AO, be treated as the eated as the undisclosed income of the Assessee as contemplated u/s. undisclosed income of the Assessee as contemplated u/s. undisclosed income of the Assessee as contemplated u/s. 158BB(1) of the I.T. 158BB(1) of the I.T. Act 18. Section 158BA (1) lays down the basis of a special 18. Section 158BA (1) lays down the basis of a special 18. Section 158BA (1) lays down the basis of a special procedure for assessment of search cases, which is the procedure for assessment of search cases, which is the procedure for assessment of search cases, which is the subject matter of Chapter XIV subject matter of Chapter XIV-B According to this se According to this section, where a search has taken place w/s. 132 or any books where a search has taken place w/s. 132 or any books where a search has taken place w/s. 132 or any books or documents have been requisitioned ws.132A then, "the have been requisitioned ws.132A then, "the have been requisitioned ws.132A then, "the Assessing Assessing Officer Officer shall proceeded to to assess assess the the undisclosed income in accordance with the provisions undisclosed income in accordance with the provisions undisclosed income in accordance with the provisions of this chapter," This undisclosed inco this chapter," This undisclosed income is to be assessed at me is to be assessed at a special rate as specified in section 113, as provided for a special rate as specified in section 113, as provided for a special rate as specified in section 113, as provided for by sub-section (2) to section 158BA. section (2) to section 158BA. With the undisclosed With the undisclosed income being the lone subject matter of this Chapter, income being the lone subject matter of this Chapter, income being the lone subject matter of this Chapter, section 158BB provides the method of computation of section 158BB provides the method of computation of section 158BB provides the method of computation of undisclosed income for the block period. Sub sed income for the block period. Sub-section (1) to section (1) to this section clearly says that "The undisclosed income of this section clearly says that "The undisclosed income of this section clearly says that "The undisclosed income of the block period shall be the aggregate of the total income the block period shall be the aggregate of the total income the block period shall be the aggregate of the total income of the previous years falling within the block period of the previous years falling within the block period of the previous years falling within the block period computed, in accordance with the computed, in accordance with the provisions of Chapter IV, provisions of Chapter IV, on the basis of evidence found as result of search or on the basis of evidence found as result of search or on the basis of evidence found as result of search or requisition of books of account or documents and such requisition of books of account or documents and such requisition of books of account or documents and such other materials or information as are available with the other materials or information as are available with the other materials or information as are available with the Assessing officer..." It is Assessing officer..." It is therefore, absolutely clear that the therefore, absolutely clear that the A.O, while completing the block assessment has to confine A.O, while completing the block assessment has to confine A.O, while completing the block assessment has to confine himself only to the undisclosed income of the block period, himself only to the undisclosed income of the block period, himself only to the undisclosed income of the block period,

M/s J.B. Boda & Co. Pvt. Ltd. 17 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

and this undisclosed income is to be computed only on the and this undisclosed income is to be computed only on the and this undisclosed income is to be computed only on the basis of evidence found as a result of search us. 132 of basis of evidence found as a result of search us. 132 of basis of evidence found as a result of search us. 132 of the IT.Act or the requ the IT.Act or the requisition of books of account u/s. isition of books of account u/s. 132A.” 7.1 The Ld. CIT(A) Ld. CIT(A) further relied on the various decisions of the relied on the various decisions of the Hon’ble Courts on the issue Hon’ble Courts on the issue-in-dispute and deleted the said dispute and deleted the said addition made by the Assessing Officer observing as under: addition made by the Assessing Officer observing as under: addition made by the Assessing Officer observing as under:

M/s J.B. Boda & Co. Pvt. Ltd. 18 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

admissible deduction u/s. 80 admissible deduction u/s. 80-O and thereby, treat the and thereby, treat the difference as the undisclosed income of the Assessee for ference as the undisclosed income of the Assessee for ference as the undisclosed income of the Assessee for the A. Y. 1996 the A. Y. 1996-97, covered by the block-period. Decision 28. In view of the above detailed discussion, it is held that, 28. In view of the above detailed discussion, it is held that, 28. In view of the above detailed discussion, it is held that, the block-assessment order failed to establish that the assessment order failed to establish that the assessment order failed to establish that the claim of the claim of the Assessee us. 80-O of the IT. Act for the A. Y. of the IT. Act for the A. Y. 1996-97, was false. There was no evidence available with 97, was false. There was no evidence available with 97, was false. There was no evidence available with the AO to prove the falsity of the Assessee's claim. All the AO to prove the falsity of the Assessee's claim. All the AO to prove the falsity of the Assessee's claim. All relevant materials necessary for deciding on the deduction relevant materials necessary for deciding on the deduction relevant materials necessary for deciding on the deduction admissible w/s.80 admissible w/s.80-O were already on record and we O were already on record and were available to the AO in course of the regular assessment available to the AO in course of the regular assessment available to the AO in course of the regular assessment proceedings for the said assessment years. Therefore, proceedings for the said assessment years. Therefore, proceedings for the said assessment years. Therefore, there was absolutely no basis for either treating the claim there was absolutely no basis for either treating the claim there was absolutely no basis for either treating the claim of the Assessee as representing his undisclosed income of the Assessee as representing his undisclosed income of the Assessee as representing his undisclosed income u/s. 158B(b) or for determin s. 158B(b) or for determining the undisclosed income ing the undisclosed income under the provisions of section 158BB(1) of the I.T. Act. under the provisions of section 158BB(1) of the I.T. Act. under the provisions of section 158BB(1) of the I.T. Act. Consequently, the addition of the sum of Rs.2,34,24,148/ Consequently, the addition of the sum of Rs.2,34,24,148/ Consequently, the addition of the sum of Rs.2,34,24,148/- for the A.Y.1996 for the A.Y.1996-97 being the difference hetween the claim 97 being the difference hetween the claim of the Assessee and the amount computed by the AO, wil of the Assessee and the amount computed by the AO, wil of the Assessee and the amount computed by the AO, will stand deleted.” stand deleted.”. 7.2 Further, regarding the claim of deduction u/s 80 Further, regarding the claim of deduction u/s 80 Further, regarding the claim of deduction u/s 80-O of the Act income of Rs.11,73,76,489/-, the Ld. in respect of undisclosed in respect of undisclosed income of Rs.11,73,76,489/ CIT(A) referred to the CBDT Circular No. 8 of 2002 dated CIT(A) referred to the CBDT Circular No. 8 of 2002 dated CIT(A) referred to the CBDT Circular No. 8 of 2002 dated 27.08.2002 and held that said Circular provided for allowance of 27.08.2002 and held that said Circular provided for 27.08.2002 and held that said Circular provided for deduction under Chapter deduction under Chapter-VIA of the Act, while calculating the while calculating the undisclosed income for the block period and directed the Assessing undisclosed income for the block period and directed the Assessing undisclosed income for the block period and directed the Assessing Officer to take action for allowing the said deduction. The relevant Officer to take action for allowing the said deduction. The relevant Officer to take action for allowing the said deduction. The relevant finding of the Ld. CIT(A) is reproduced as u finding of the Ld. CIT(A) is reproduced as under:

“Findings:

M/s J.B. Boda & Co. Pvt. Ltd. 19 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

M/s J.B. Boda & Co. Pvt. Ltd. 20 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

32.1 In such a situation where both the amended 32.1 In such a situation where both the amended 32.1 In such a situation where both the amended provisions of the Explanation as well as the proviso provisions of the Explanation as well as the proviso provisions of the Explanation as well as the proviso to section 158BB(1) as well as the clarification issued by the section 158BB(1) as well as the clarification issued by the section 158BB(1) as well as the clarification issued by the CBDT through the aforesaid circular, clearly provide for CBDT through the aforesaid circular, clearly provide for CBDT through the aforesaid circular, clearly provide for the allowance of deduction under Chapter VI the allowance of deduction under Chapter VI-A, and which A, and which is further reinforced by the provisions of section 158BH, is further reinforced by the provisions of section 158BH, is further reinforced by the provisions of section 158BH, there remains no sco there remains no scope for denial of the deduction W/s.80 pe for denial of the deduction W/s.80- 0 on the undisclosed income declared by the Assessee in 0 on the undisclosed income declared by the Assessee in 0 on the undisclosed income declared by the Assessee in the block-return. return. Decision: 33. In view of the above discussion, it is held that the 33. In view of the above discussion, it is held that 33. In view of the above discussion, it is held that Assessee was fully entitled to the deduction w/s.80 Assessee was fully entitled to the deduction w/s.80 Assessee was fully entitled to the deduction w/s.80-O of the IT. Act, on the of the IT. Act, on the undisclosed income of undisclosed income of Rs.11,73,76,489/ Rs.11,73,76,489/- declared in the block return. The declared in the block return. The A.O is directed to take action accordingly.” A.O is directed to take action accordingly.” (Emphasis supplied externally) (Emphasis supplied externally) 7.3 Against the said order of the Ld. CIT(A) dated 10.08.2004 Against the said order of the Ld. CIT(A) dated 10.08.2004 Against the said order of the Ld. CIT(A) dated 10.08.2004, both the Revenue and the assessee preferred appeal before the Tribunal. the Revenue and the assessee preferred appeal before the Tribunal. the Revenue and the assessee preferred appeal before the Tribunal. The Tribunal decided the appeal of the Revenue on 9/4/2008 , The Tribunal decided the appeal of the Revenue The Tribunal decided the appeal of the Revenue which subsequently, , on a miscellaneous application filed by the on a miscellaneous application filed by the Revenue has been recalled Revenue has been recalled vide order dated 19/12/2008 in MA No vide order dated 19/12/2008 in MA No. 509/M/2008 and relevant part of which we have already and relevant part of which we have already and relevant part of which we have already reproduced above.

7.4 The Assessing Officer he Assessing Officer on 1/4/2005 gave effect to the order of gave effect to the order of the Ld. CIT(A) dated 10.08.2004 and allowed the deduction u/s 80- the Ld. CIT(A) dated 10.08.2004 and allowed the deduction u/s 80 the Ld. CIT(A) dated 10.08.2004 and allowed the deduction u/s 80 O of the Act amounting to Rs.4,09,18,041/ O of the Act amounting to Rs.4,09,18,041/-, notwit , notwithstanding the fact department had not accepted the decision of the CIT(A) dated fact department had not accepted the decision of the CIT(A) dated fact department had not accepted the decision of the CIT(A) dated 10/08/2004. Simultaneously, the Assesing Officer approached to 10/08/2004. Simultaneously, the Assesing Officer approached to 10/08/2004. Simultaneously, the Assesing Officer approached to

M/s J.B. Boda & Co. Pvt. Ltd. 21 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

the ld CIT(A) with an application seeking rectification of apparent the ld CIT(A) with an application seeking rectification of apparent the ld CIT(A) with an application seeking rectification of apparent mistake in the order dated 10/08/2004 of the mistake in the order dated 10/08/2004 of the CIT(A). The Ld CIT(A) CIT(A). The Ld CIT(A) issued a show cause notice to the assessee and after giving an use notice to the assessee and after giving an use notice to the assessee and after giving an opportunity of being heard, the nity of being heard, the Ld. CIT(A) vide order dated vide order dated 26/02/2008 rectified the order 26/02/2008 rectified the order dated 10.08.2004 of the CIT(A) and of the CIT(A) and the finding of the CIT(A) in order dated 10/08/2004 of the CIT(A) in order dated 10/08/2004 of the CIT(A) in order dated 10/08/2004 that assessee was entitled for deduction u/s 80 deduction u/s 80-O of the Act in respect of the O of the Act in respect of the undisclosed income of Rs.11,73,76,489/ undisclosed income of Rs.11,73,76,489/- , was withdrawn and was withdrawn and further direction was issued to the Assessing Officer to verify further direction was issued to the Assessing Officer to verify further direction was issued to the Assessing Officer to verify whether the conditions laid down u/s 80 onditions laid down u/s 80-O of the Act were O of the Act were fulfilled by the assessee in respect of its claim of deduction. The relevant by the assessee in respect of its claim of deduction. The relevant by the assessee in respect of its claim of deduction. The relevant finding of the Ld. CIT(A) in order u/s 154 dated 26.02.2008 is finding of the Ld. CIT(A) in order u/s 154 dated 26.02.2008 is finding of the Ld. CIT(A) in order u/s 154 dated 26.02.2008 is reproduced as under: reproduced as under:

“8. I have carefully considered the written submissions I have carefully considered the written submis I have carefully considered the written submis on record and the order of my predecessor CIT(A), dated on record and the order of my predecessor CIT(A), dated on record and the order of my predecessor CIT(A), dated 10.08.2004. My predecessor CIT(A) has given a finding in 10.08.2004. My predecessor CIT(A) has given a finding in 10.08.2004. My predecessor CIT(A) has given a finding in the appeal order mentioned above, that the appellant is the appeal order mentioned above, that the appellant is the appeal order mentioned above, that the appellant is entitled to deduction us.800 of the I.T.Act, on the entitled to deduction us.800 of the I.T.Act, on the entitled to deduction us.800 of the I.T.Act, on the undisclosed income of Rs.1173 undisclosed income of Rs.1173764891- declared in the declared in the block return but he did not verify himself or by way of a block return but he did not verify himself or by way of a block return but he did not verify himself or by way of a remand report, whether the conditions laid down in remand report, whether the conditions laid down in remand report, whether the conditions laid down in section 800, have been met by the tion 800, have been met by the appellant. In my view, appellant. In my view, this is a mistake apparent from record, and the AO is this is a mistake apparent from record, and the AO is this is a mistake apparent from record, and the AO is directed to directed to verify whether the conditions laid down in verify whether the conditions laid down in section 800 were fulfiled by the appellant. section 800 were fulfiled by the appellant.” 7.5 Further, an appeal filed by the Further, an appeal filed by the assessee, against the order against the order 26/02/2008 of the ld CIT(A) challenging the validity of dated 26/02/2008 of the ld CIT(A) challenging the validity of 26/02/2008 of the ld CIT(A) challenging the validity of

M/s J.B. Boda & Co. Pvt. Ltd. 22 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

rectification action of ld CIT(A), has bee rectification action of ld CIT(A), has been rejected by the Tribunal n rejected by the Tribunal on 23/01/2009 in IT(SS)A No. 40/Mum/2008. on 23/01/2009 in IT(SS)A No. 40/Mum/2008.

7.6 Consequent to the order of the Ld. CIT(A) dated 26.02.2008, Consequent to the order of the Ld. CIT(A) dated 26.02.2008, Consequent to the order of the Ld. CIT(A) dated 26.02.2008, the Ld. Assessing Officer the Ld. Assessing Officer after giving the opportunity to the assessee giving the opportunity to the assessee and after verification, verification, withdrawn the claim of deduction u/s 80 withdrawn the claim of deduction u/s 80-O of the Act on 30/07/2009, on 30/07/2009, observing as under:

5.In view of the above facts and circumstances of the 5.In view of the above facts and circumstances of the 5.In view of the above facts and circumstances of the caseand on perusal of block return of income alongwith caseand on perusal of block return of income alongwith caseand on perusal of block return of income alongwith various statements recorded u/s. 132(4) of the IT. Act various statements recorded u/s. 132(4) of the IT. Act various statements recorded u/s. 132(4) of the IT. Act during the course of search proceedings reveals the ng the course of search proceedings reveals the ng the course of search proceedings reveals the following :- (i)The undisclosed income declared by the assessee (i)The undisclosed income declared by the assessee (i)The undisclosed income declared by the assessee companyin its return for the block period consisting of companyin its return for the block period consisting of companyin its return for the block period consisting of credit balances in US $ and UK Pound amounting to Rs. credit balances in US $ and UK Pound amounting to Rs. credit balances in US $ and UK Pound amounting to Rs. 10,03,72,942/ 10,03,72,942/- appearing in the balance sheet right from lance sheet right from prior to the block period which was never brought to India prior to the block period which was never brought to India prior to the block period which was never brought to India by the assessee company. Further an amount of Rs. by the assessee company. Further an amount of Rs. by the assessee company. Further an amount of Rs. 1,66,00,000/ 1,66,00,000/- which consists of dues payable to Indian which consists of dues payable to Indian Indian Insurance Companies which were showing as Indian Insurance Companies which were showing as Indian Insurance Companies which were showing as liabilities have cea liabilities have ceased to exist (Refer answer to question sed to exist (Refer answer to question No. 10 of the statement of Shri C.V.Sheth recorded on No. 10 of the statement of Shri C.V.Sheth recorded on No. 10 of the statement of Shri C.V.Sheth recorded on 8.11.01) (ii)During the course of search operation statement )During the course of search operation statement )During the course of search operation statement us.132(4) of the Act were recorded. When the questions us.132(4) of the Act were recorded. When the questions us.132(4) of the Act were recorded. When the questions were asked pertaining to long standing credits were asked pertaining to long standing credits were asked pertaining to long standing credits in their accounts Shri C.V. Sheth, Sr. Executive Director of the accounts Shri C.V. Sheth, Sr. Executive Director of the accounts Shri C.V. Sheth, Sr. Executive Director of the assessee company, in his statement u/s.132(4) dated assessee company, in his statement u/s.132(4) dated assessee company, in his statement u/s.132(4) dated 8.11.2001 admitted that the credit entries included in the 8.11.2001 admitted that the credit entries included in the 8.11.2001 admitted that the credit entries included in the total liabilities in the balance sheet were outstanding for a total liabilities in the balance sheet were outstanding for a total liabilities in the balance sheet were outstanding for a long period of tim long period of time had become"non-existent" i.e. had existent" i.e. had ceased to exist. ceased to exist.

M/s J.B. Boda & Co. Pvt. Ltd. 23 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

(iii) ShriB.J.Boda, Chairman of the J.B.BodaGroup of ShriB.J.Boda, Chairman of the J.B.BodaGroup of ShriB.J.Boda, Chairman of the J.B.BodaGroup of Companies. confirmed this statement of Shri C.V. Sheth, in Companies. confirmed this statement of Shri C.V. Sheth, in Companies. confirmed this statement of Shri C.V. Sheth, in response to question No. 2 of his statement dated 9.11.01. response to question No. 2 of his statement dated 9.11.01. response to question No. 2 of his statement dated 9.11.01. (iv)In the course of post search (iv)In the course of post search enquiries the assessee enquiries the assessee wasasked to provide a partywise disclosure of the wasasked to provide a partywise disclosure of the wasasked to provide a partywise disclosure of the outstanding liabilities that have become non outstanding liabilities that have become non-existent and existent and have ceased to exist. Shri C.V.Sheth the Sr. Executive have ceased to exist. Shri C.V.Sheth the Sr. Executive have ceased to exist. Shri C.V.Sheth the Sr. Executive Director of the Company has provided the said break Director of the Company has provided the said break Director of the Company has provided the said break-up vide his lette vide his letter dated 15.1.02 and the same has been r dated 15.1.02 and the same has been confirmed by Shri B.J. Boda in response to question No. 3 confirmed by Shri B.J. Boda in response to question No. 3 confirmed by Shri B.J. Boda in response to question No. 3 of the statement dated 21.1.02. (The details of break of the statement dated 21.1.02. (The details of break of the statement dated 21.1.02. (The details of break-up of liabilities are mentioned in this order at Para 4.1.). liabilities are mentioned in this order at Para 4.1.). liabilities are mentioned in this order at Para 4.1.). The long outstanding non The long outstanding non-existent liabilities or credit or credit balances standing in the balance sheet of the assessee balances standing in the balance sheet of the assessee balances standing in the balance sheet of the assessee company from company from the dates prior to 31.3.1995 which had prior to 31.3.1995 which had ceased to exist had been ceased to exist had been declared as undisclosed income as undisclosed income in the block return of income. in the block return of income. (vi)The (vi)The (vi)The undisclosed undisclosed undisclosed income income income of of of Rs. Rs. Rs. 11,73,76,489/ 11,73,76,489/- 11,73,76,489/ represented the foreign currency/Indian currency credit represented the foreign currency/Indian currency credit represented the foreign currency/Indian currency credit balances shown as outstanding labilities in the balance balances shown as outstanding labilities in the balance balances shown as outstanding labilities in the balance sheet which have become non sheet which have become non-existent and had ceased to existent and had ceased to exist. By surrendering these non exist. By surrendering these non-existent and non existent and non-moving liabilities the assessee company liabilities the assessee company has made only book entry has made only book entry and the same has been written back through the book and the same has been written back through the book and the same has been written back through the book entries.These amount cannot be considered as amount entries.These amount cannot be considered as amount entries.These amount cannot be considered as amount eligible for deduction u/s. 80 eligible for deduction u/s. 80-0. (vii) The assessee has nowhere established that these The assessee has nowhere established that these The assessee has nowhere established that these foreign foreign currency/Indian currency/Indian currency currency credi credit t balances balances represented income eligible for deduction u/s. 80 represented income eligible for deduction u/s. 80 represented income eligible for deduction u/s. 80-0 of the Income-tax Act, 1961. Assessee was also not able to tax Act, 1961. Assessee was also not able to tax Act, 1961. Assessee was also not able to produce necessary certificate from RBI as proof that this produce necessary certificate from RBI as proof that this produce necessary certificate from RBI as proof that this amount had been brought into India in convertible foreign amount had been brought into India in convertible foreign amount had been brought into India in convertible foreign exchange as deduct exchange as deduction us. 80-0 is allowable only on that 0 is allowable only on that part of the eligible income which is brought into India in part of the eligible income which is brought into India in part of the eligible income which is brought into India in convertible foreign exchange. convertible foreign exchange.

M/s J.B. Boda & Co. Pvt. Ltd. 24 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

(viii) The requisite conditions for allowability of deduction ) The requisite conditions for allowability of deduction ) The requisite conditions for allowability of deduction u/s. 80-0 of the Income 0 of the Income-tax Act, 1961 in respect of credit tax Act, 1961 in respect of credit balances in Indian currency has also not been satisfied. s in Indian currency has also not been satisfied. s in Indian currency has also not been satisfied. (ix)The undisclosed income of Rs.11,73,76,489/ (ix)The undisclosed income of Rs.11,73,76,489/- is profits chargeable to tax u/s. 41(1) of the Act which cannot be chargeable to tax u/s. 41(1) of the Act which cannot be chargeable to tax u/s. 41(1) of the Act which cannot be considered as income earned in foreign exchange for the considered as income earned in foreign exchange for the considered as income earned in foreign exchange for the purpose of deduction u/s.80 purpose of deduction u/s.80-0 of the Act. 6.For an income to be eligible for deduction us.80 6.For an income to be eligible for deduction us.80 6.For an income to be eligible for deduction us.80-0 thefollowing conditions have to be satisfied thefollowing conditions have to be satisfied- [a]the income should be received by the assessee by [a]the income should be received by the assessee by [a]the income should be received by the assessee by way of royalty way of royalty In fact w.e.f. 1.4.1998 this section has become even In fact w.e.f. 1.4.1998 this section has become even In fact w.e.f. 1.4.1998 this section has become even more restrictive and only inco more restrictive and only income received by the me received by the assessee from the gist of a foreign state or foreign assessee from the gist of a foreign state or foreign assessee from the gist of a foreign state or foreign enterprise for the use outside India of any patent, enterprise for the use outside India of any patent, enterprise for the use outside India of any patent, invention, design or registered trade mark is invention, design or registered trade mark is invention, design or registered trade mark is considered and such income should be received in considered and such income should be received in considered and such income should be received in convertible foreign exchange. convertible foreign exchange. [b]such [b]such income should be received in convertible income should be received in convertible foreign exchange foreign exchange [c]such income should be received within a period of [c]such income should be received within a period of [c]such income should be received within a period of 6 months from the end of previous year. 6 months from the end of previous year. 6.2. As discussed in detail in para 4 of this order, it is the 6.2. As discussed in detail in para 4 of this order, it is the 6.2. As discussed in detail in para 4 of this order, it is the fact of the case that the assessee had of fact of the case that the assessee had offered additional fered additional income for tax as a result of search on account of long income for tax as a result of search on account of long income for tax as a result of search on account of long outstanding credit balances which were non credit balances which were non-existent. These amounts were not received / receivable by a tie, These amounts were not received / receivable by a tie, These amounts were not received / receivable by a tie, sine assessee from the Govt. of Foreign State or Foreign sine assessee from the Govt. of Foreign State or Foreign sine assessee from the Govt. of Foreign State or Foreign Enterprises, in Enterprises, in consideration for the use outside India of for the use outside India of any patent, invention, designor any patent, invention, designor registered trade mark and trade mark and such income is received in convertible foreign exchange in such income is received in convertible foreign exchange in such income is received in convertible foreign exchange in India or having been received in convertible delanange India or having been received in convertible delanange India or having been received in convertible delanange outside India, or having been converted int outside India, or having been converted into convertible o convertible foreign exchange outside India is brought into India by or foreign exchange outside India is brought into India by or foreign exchange outside India is brought into India by or behalf of theassessee in accordance with any law for the behalf of theassessee in accordance with any law for the behalf of theassessee in accordance with any law for the time being in force for regulating payments and dealings in time being in force for regulating payments and dealings in time being in force for regulating payments and dealings in

M/s J.B. Boda & Co. Pvt. Ltd. 25 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

foreign exchange but were in fact liabilities payable by the foreign exchange but were in fact liabilities payable by the foreign exchange but were in fact liabilities payable by the assesse which ceased to exist i.e. which was no longer se which ceased to exist i.e. which was no longer se which ceased to exist i.e. which was no longer payable by the assessee to various parties. payable by the assessee to various parties. 6.3. The fact that these liabilities which had ceased to 6.3. The fact that these liabilities which had ceased to 6.3. The fact that these liabilities which had ceased to exist and which had been offered as additional income exist and which had been offered as additional income exist and which had been offered as additional income was not eligible for deduction u/s. 80 was not eligible for deduction u/s. 80-0 is also ev 0 is also evident from the fact that the assessee has Itself not claimed the from the fact that the assessee has Itself not claimed the from the fact that the assessee has Itself not claimed the deduction in its computation of total undisclosed income deduction in its computation of total undisclosed income deduction in its computation of total undisclosed income filed with the Block return. filed with the Block return. 6.4. The assessee has also not furnished a certificate in 6.4. The assessee has also not furnished a certificate in 6.4. The assessee has also not furnished a certificate in the prescribed form No. 10HA along with the Ret the prescribed form No. 10HA along with the Ret the prescribed form No. 10HA along with the Return of Income certifying that the deduction has been correctly Income certifying that the deduction has been correctly Income certifying that the deduction has been correctly claimed in accordance with the provisions of Section 80 claimed in accordance with the provisions of Section 80 claimed in accordance with the provisions of Section 80-0. Hence, even the condition of 2nd proviso to Section 80 Hence, even the condition of 2nd proviso to Section 80 Hence, even the condition of 2nd proviso to Section 80-0 has not been fulfilled by the assessee. has not been fulfilled by the assessee. 6.5 From the above, it is seen that t 6.5 From the above, it is seen that the additional income he additional income (cession of liabilities) offered for tax in the block return is (cession of liabilities) offered for tax in the block return is (cession of liabilities) offered for tax in the block return is itself not eligible for deduction u/s.80 itself not eligible for deduction u/s.80-0. None of the 0. None of the conditions laid down in Section 80 conditions laid down in Section 80-0 has been fulfilled by 0 has been fulfilled by the assessee. Therefore, the assessee is not entitled fo the assessee. Therefore, the assessee is not entitled fo the assessee. Therefore, the assessee is not entitled for deduction u/s.80 deduction u/s.80-0 of the I.T.Act, 1961. 7.In view of the findings given in para 7.In view of the findings given in para-4, 5 & 6 it is 4, 5 & 6 it is clearthat the undisclosed income of Rs.11,73,76,489/ clearthat the undisclosed income of Rs.11,73,76,489/ clearthat the undisclosed income of Rs.11,73,76,489/- offered for tax during the course of search and seizure offered for tax during the course of search and seizure offered for tax during the course of search and seizure operation by the assessee company on account of operation by the assessee company on account of operation by the assessee company on account of non- existent and non existent and non-moving credit balances appearing in the moving credit balances appearing in the Balance Sheet as on 31.3.1995 which is prior to block Balance Sheet as on 31.3.1995 which is prior to block Balance Sheet as on 31.3.1995 which is prior to block period is not at all eligible for claiming any deduction us. period is not at all eligible for claiming any deduction us. period is not at all eligible for claiming any deduction us. 80-0 of theI.T. Act as neither the income is eligible for 0 of theI.T. Act as neither the income is eligible for 0 of theI.T. Act as neither the income is eligible for deduction u/s.80 deduction u/s.80-0 nor has the assessee company fulfilled has the assessee company fulfilled any of the conditions laid down in Section 80 any of the conditions laid down in Section 80 any of the conditions laid down in Section 80-0 for claiming such deduction. Accordingly the deduction claiming such deduction. Accordingly the deduction claiming such deduction. Accordingly the deduction allowed amounting to Rs.4,09,18,041/ allowed amounting to Rs.4,09,18,041/- vide order giving vide order giving effect to CIT(A)'s order passed on 1.4.2005 is hereby effect to CIT(A)'s order passed on 1.4.2005 is hereby effect to CIT(A)'s order passed on 1.4.2005 is hereby withdrawn. 8.Subject 8.Subject 8.Subject to to to the the the above above above remarks, remarks, remarks, total total total income income income of of of theassessee is computed as under: theassessee is computed as under:-

M/s J.B. Boda & Co. Pvt. Ltd. 26 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

Total undisclosed income as per Total undisclosed income as per Rs. 7,64,58,448/ Rs. 7,64,58,448/- order order giving giving effect effect dated dated 01/04/2005. Add: Deduction wrongly allowed Add: Deduction wrongly allowed Rs.4,09,58,448/ Rs.4,09,58,448/- withdrawn as discussed above. withdrawn as discussed above. Assessed undisclosed income, as Assessed undisclosed income, as Rs.11,73,76,489/ Rs.11,73,76,489/- declared by the assessee declared by the assessee 8. Aggrieved with the above finding of the Ld. Assessing Officer, Aggrieved with the above finding of the Ld. Assessing Officer, Aggrieved with the above finding of the Ld. Assessing Officer, the assessee filed appeal before the Ld. CIT(A) the assessee filed appeal before the Ld. CIT(A), who , who upheld the disallowance in order dated 31/12/2009 in order dated 31/12/2009 observing as under: observing as under:

“9. I have considered the facts and submissions. I have 9. I have considered the facts and submissions. I have 9. I have considered the facts and submissions. I have gone through the issue. gone through the issue. The issue to be decided is whether The issue to be decided is whether the appellant is entitled tothe deduction u/s.80 the appellant is entitled tothe deduction u/s.80- -0 on the outstanding credit balances which are offered to tax by the outstanding credit balances which are offered to tax by the outstanding credit balances which are offered to tax by the assessee consequent to search operations or not. The A.O. essee consequent to search operations or not. The A.O. essee consequent to search operations or not. The A.O. has very categorically has held that the appellant has very categorically has held that the appellant has very categorically has held that the appellant company is not entitled for the deduction /s.80 company is not entitled for the deduction /s.80- company is not entitled for the deduction /s.80-O of the I.T. Act for the following reasons: I.T. Act for the following reasons: 1. The assesse had offered additional income for tax as a 1. The assesse had offered additional income for tax as a 1. The assesse had offered additional income for tax as a result of search on account of long outstanding credit result of search on account of long outstanding credit result of search on account of long outstanding credit balances which were non existent. balances which were non existent. These amounts were These amounts were not received/receivable by the assessee not received/receivable by the assessee from the Govt. of from the Govt. of Foreign State or Foreign Enterprises, in consideration for Foreign State or Foreign Enterprises, in consideration for Foreign State or Foreign Enterprises, in consideration for the use outside India of any p the use outside India of any patent, invention, design or atent, invention, design or registered trade mark and such income is received in registered trade mark and such income is received in registered trade mark and such income is received in convertible foreign exchange in India or having been convertible foreign exchange in India or having been convertible foreign exchange in India or having been received in convertible foreign exchange outside India is received in convertible foreign exchange outside India is received in convertible foreign exchange outside India is brought into India by or behalf of the assessee in brought into India by or behalf of the assessee in brought into India by or behalf of the assessee in accordance wi accordance with any law for the time being in force for th any law for the time being in force for regulating payments and dealings in foreign exchange but regulating payments and dealings in foreign exchange but regulating payments and dealings in foreign exchange but were in fact liabilities payable by the assessee which were in fact liabilities payable by the assessee which were in fact liabilities payable by the assessee which ceased to exist i.e. which was no longer payable by the ceased to exist i.e. which was no longer payable by the ceased to exist i.e. which was no longer payable by the assessee to various parties. assessee to various parties. 2. The fact that 2. The fact that these liabilities which had ceased to exist these liabilities which had ceased to exist and which had been offered as additional income was not and which had been offered as additional income was not and which had been offered as additional income was not eligible for deduction u eligible for deduction u/s.80-O is also evident from the fact O is also evident from the fact

M/s J.B. Boda & Co. Pvt. Ltd. 27 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

that the assessee has itself not claimed the deduction in that the assessee has itself not claimed the deduction in that the assessee has itself not claimed the deduction in the computation of total undisclose the computation of total undisclosed income filed with the d income filed with the Block return 3. The assessee has also not furnished a certificate in the 3. The assessee has also not furnished a certificate in the 3. The assessee has also not furnished a certificate in the prescribed form No.10HA along with the return of income prescribed form No.10HA along with the return of income prescribed form No.10HA along with the return of income certifying that the deduction has been correctly claimed in certifying that the deduction has been correctly claimed in certifying that the deduction has been correctly claimed in accordance with the provisions of section 8 accordance with the provisions of section 80-0. Hence, 0. Hence, even the condition of 2nd provision to Section 80 even the condition of 2nd provision to Section 80-0 has not 0 has not been fulfilled by the assessee." been fulfilled by the assessee." 9.1Section 80 9.1Section 80-0 is different from section 80HH and 80I. 0 is different from section 80HH and 80I. Section 80HH and 801 deals with the deductions based Section 80HH and 801 deals with the deductions based Section 80HH and 801 deals with the deductions based on the income from the undertakings wherea on the income from the undertakings whereas deduction s deduction u/s.80-O is based on the certain income received from O is based on the certain income received from O is based on the certain income received from foreign enterprises which are listed in section 80 foreign enterprises which are listed in section 80 foreign enterprises which are listed in section 80-0. In section 80HH and 80 section 80HH and 80- if the income determined during the if the income determined during the assessment is higher, the appellant company may be assessment is higher, the appellant company may be assessment is higher, the appellant company may be entitled to a higher entitled to a higher deduction. But in section 80-0 of the IT. 0 of the IT. Act if any further income is added in the assessment then Act if any further income is added in the assessment then Act if any further income is added in the assessment then such income will be entitled to deduction under section such income will be entitled to deduction under section such income will be entitled to deduction under section 80- O only if the following conditions are satisfied: only if the following conditions are satisfied: (i) income should be an income listed in sectio income should be an income listed in sectio income should be an income listed in section 80-0 of the IT. of the IT. Act. (ii) The income should have been received in The income should have been received in The income should have been received in convertible foreign exchange. convertible foreign exchange. 9.2 During the appellate proceedings the assessee 9.2 During the appellate proceedings the assessee 9.2 During the appellate proceedings the assessee company was requested by me to prove that the company was requested by me to prove that the company was requested by me to prove that the outstandings gs which which were were offered offered as as income income are are commission recei commission receipts for technical services done. Inspite of pts for technical services done. Inspite of sufficient time given, the appellant could not prove that the sufficient time given, the appellant could not prove that the sufficient time given, the appellant could not prove that the outstanding amounts were commission earned by the outstanding amounts were commission earned by the outstanding amounts were commission earned by the assessee company. assessee company. Further, it is seen that the income now offered and Further, it is seen that the income now offered and Further, it is seen that the income now offered and assessed in the block assessme assessed in the block assessment was not all brought into nt was not all brought into India within the time allowed by the RBI. The income India within the time allowed by the RBI. The income India within the time allowed by the RBI. The income assessed does not satisfy the condition (i) listed above and assessed does not satisfy the condition (i) listed above and assessed does not satisfy the condition (i) listed above and

M/s J.B. Boda & Co. Pvt. Ltd. 28 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

hence it is not eligible for deduction u/s.80 hence it is not eligible for deduction u/s.80-O of the I.T. O of the I.T. Act. Further, these are the credit balances outstandin Further, these are the credit balances outstandin Further, these are the credit balances outstanding in the name of various foreign parties i.e. the amounts are name of various foreign parties i.e. the amounts are name of various foreign parties i.e. the amounts are payable by the appellant company to foreign parties and payable by the appellant company to foreign parties and payable by the appellant company to foreign parties and hence there is no question of receiving these amounts in hence there is no question of receiving these amounts in hence there is no question of receiving these amounts in India in convertible foreign exchange by the assessee India in convertible foreign exchange by the assessee India in convertible foreign exchange by the assessee company. I am in full agree I am in full agreement with the .O.'s observations/findings ment with the .O.'s observations/findings in the impugned order. In view of the A.O.'s findings and in the impugned order. In view of the A.O.'s findings and in the impugned order. In view of the A.O.'s findings and coupled with my above observations, I am fully convinced coupled with my above observations, I am fully convinced coupled with my above observations, I am fully convinced that the income offered in the block assessment is not the that the income offered in the block assessment is not the that the income offered in the block assessment is not the income which are listed in Section income which are listed in Section-80-O of the IT. Act and the income offered in the block assessment is not Act and the income offered in the block assessment is not Act and the income offered in the block assessment is not at all entitled for deduction u/s.80 at all entitled for deduction u/s.80-0 of the I.T. Act. 0 of the I.T. Act. 9.3 I uphold the A.O.'s action. I uphold the A.O.'s action.” 8.1 Aggrieved with the above finding, the assessee is before the Aggrieved with the above finding, the assessee is before the Aggrieved with the above finding, the assessee is before the Tribunal by way of Tribunal by way of appeal in IT(SS)A No. 18/Mum/2010, appeal in IT(SS)A No. 18/Mum/2010, raising grounds, which are reproduced are reproduced as under:

1 a) The learned CIT (A) erred in upholding the action The learned CIT (A) erred in upholding the action The learned CIT (A) erred in upholding the action of the Assessing Officer in withdrawing deduction us. 80'' of the Assessing Officer in withdrawing deduction us. 80'' of the Assessing Officer in withdrawing deduction us. 80'' of Rs. 4,09,18,041/ of Rs. 4,09,18,041/- on the ground that the appellant on the ground that the appellant company had not fulfilled any of the conditions laid down ny had not fulfilled any of the conditions laid down ny had not fulfilled any of the conditions laid down in Income TaxAct 1961 to claim deduction under section in Income TaxAct 1961 to claim deduction under section in Income TaxAct 1961 to claim deduction under section 80'0 b) He denied the deduction us. 80'0' of the Income Tax Act, He denied the deduction us. 80'0' of the Income Tax Act, He denied the deduction us. 80'0' of the Income Tax Act, 1961 as according to him the appellant company had: 1961 as according to him the appellant company had: 1961 as according to him the appellant company had: i. not claimed the deduction us not claimed the deduction us. 80'' in the computation of . 80'' in the computation of total undisclosed income filed with the Block Return total undisclosed income filed with the Block Return total undisclosed income filed with the Block Return without appreciating the appellant's note to claim the without appreciating the appellant's note to claim the without appreciating the appellant's note to claim the deduction in the Return of Income in the absence of deduction in the Return of Income in the absence of deduction in the Return of Income in the absence of assessed blockincome assessed blockincome

M/s J.B. Boda & Co. Pvt. Ltd. 29 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

ii. the second provision to section 80°' was n ii. the second provision to section 80°' was not complied ot complied with by the appellant without appreciating that the same with by the appellant without appreciating that the same with by the appellant without appreciating that the same was inserted only by the Finance Act, 1999 w.e.f. was inserted only by the Finance Act, 1999 w.e.f. was inserted only by the Finance Act, 1999 w.e.f. 1.6.1999 and hence not applicable for A.Y. 1996 1.6.1999 and hence not applicable for A.Y. 1996 1.6.1999 and hence not applicable for A.Y. 1996-97 & 1997-98. iii. the sundry creditors written back and offered to tax the sundry creditors written back and offered to tax the sundry creditors written back and offered to tax were liabilities payable by the appellant company which were liabilities payable by the appellant company which were liabilities payable by the appellant company which ceased to exist without appreciating the fact that the same ceased to exist without appreciating the fact that the same ceased to exist without appreciating the fact that the same were non-trading liabilities which were never debited to trading liabilities which were never debited to trading liabilities which were never debited to the profit and loss account o the profit and loss account of the appellant and it was not f the appellant and it was not a case that all of them ceased to exist. a case that all of them ceased to exist. iv. the appellant company had failed to prove the iv. the appellant company had failed to prove the iv. the appellant company had failed to prove the outstanding amounts as commission earned for technical outstanding amounts as commission earned for technical outstanding amounts as commission earned for technical services even when it was placed before him that the services even when it was placed before him that the services even when it was placed before him that the credit balances of credit balances of reinsurance /ceding companies written reinsurance /ceding companies written back and offered to tax could only partake the character of back and offered to tax could only partake the character of back and offered to tax could only partake the character of brokerage income i.e. the only business income of the brokerage income i.e. the only business income of the brokerage income i.e. the only business income of the appellant and eligible for deduction us. 80'0'. appellant and eligible for deduction us. 80'0'. 8.2. Before us, the assessee has filed Before us, the assessee has filed on additional gro additional ground vide undated letter, which which is reproduced as under:

On facts and in the circumstances of the case and in law, On facts and in the circumstances of the case and in law, On facts and in the circumstances of the case and in law, the order passed bu Assessing Officer dated 23.06.08 is the order passed bu Assessing Officer dated 23.06.08 is the order passed bu Assessing Officer dated 23.06.08 is invalid and bad in law being contrary io directions of invalid and bad in law being contrary io directions of invalid and bad in law being contrary io directions of Commissioner of Income Tax (App Commissioner of Income Tax (Appeals) in the order eals) in the order dated21.02.08 passed us 154 of the ITA and hence liable dated21.02.08 passed us 154 of the ITA and hence liable dated21.02.08 passed us 154 of the ITA and hence liable to be set aside" to be set aside" 8.3 The assessee has also filed The assessee has also filed another additional another additional ground vide letter dated 20/10/2022, letter dated 20/10/2022, which is reproduced as under: which is reproduced as under:

“On the facts and circumstances of the case On the facts and circumstances of the case and in law, and in law, the alleged undisclosed income of Rs. 11, 73,76,489, being the alleged undisclosed income of Rs. 11, 73,76,489, being the alleged undisclosed income of Rs. 11, 73,76,489, being cessation of liabilities is not chargeable to tax in view of cessation of liabilities is not chargeable to tax in view of cessation of liabilities is not chargeable to tax in view of the judgement of the Hon'ble Supreme Court in the case of the judgement of the Hon'ble Supreme Court in the case of the judgement of the Hon'ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1). CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1). CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1).

M/s J.B. Boda & Co. Pvt. Ltd. 30 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

The assesse The assessee craves leave to add, alter, amend, or e craves leave to add, alter, amend, or withdraw any of its grounds of appeal and to submit such withdraw any of its grounds of appeal and to submit such withdraw any of its grounds of appeal and to submit such statements, documents and papers as may be considered statements, documents and papers as may be considered statements, documents and papers as may be considered necessary either at or before the appeal hearing. necessary either at or before the appeal hearing.” 9. We have heard rival submission of the parties on th We have heard rival submission of the parties on th We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record, including dispute and perused the relevant material on record dispute and perused the relevant material on record paper book filed by the assessee containing pages 1 to 286. paper book filed by the assessee containing pages 1 to 286. paper book filed by the assessee containing pages 1 to 286.

9.1 As far as revised revised ground Nos. 1 to3 of the appeal of the of the appeal of the Revenue are concerned, Revenue are concerned, the ld Counsel in his written note the ld Counsel in his written note submitted as under:

“3. Insofar as the addition of Rs. 2,34,24,148 is 3. Insofar as the addition of Rs. 2,34,24,148 is 3. Insofar as the addition of Rs. 2,34,24,148 is concerned, it is submitted that the same arose due to the concerned, it is submitted that the same arose due to the concerned, it is submitted that the same arose due to the fact that the assessee had claimed a deduction of fact that the assessee had claimed a deduction of fact that the assessee had claimed a deduction of Rs.4,62,94,224 U/s. 80 Rs.4,62,94,224 U/s. 80-0 in its return of income for the 0 in its return of income for the A.Y. 1996-97, by 97, by reducing only expenses incurred in reducing only expenses incurred in foreign currency from the total foreign commission (para 6 foreign currency from the total foreign commission (para 6 foreign currency from the total foreign commission (para 6 of block assessment order), whereas the AO sought to of block assessment order), whereas the AO sought to of block assessment order), whereas the AO sought to allow a deduction of Rs. 2,28,70,076 only, after further allow a deduction of Rs. 2,28,70,076 only, after further allow a deduction of Rs. 2,28,70,076 only, after further reducing expenses incurred in India (para 17 of bloc reducing expenses incurred in India (para 17 of bloc reducing expenses incurred in India (para 17 of block assessment order). It was submitted before the AO and assessment order). It was submitted before the AO and assessment order). It was submitted before the AO and the CIT(A) that the basis of the assessee's claim were the the CIT(A) that the basis of the assessee's claim were the the CIT(A) that the basis of the assessee's claim were the decisions of the Tribunal in its own case for the AYs 1987 decisions of the Tribunal in its own case for the AYs 1987 decisions of the Tribunal in its own case for the AYs 1987- 88 and 1988 88 and 1988-89, wherein it was held that the deduction 89, wherein it was held that the deduction was to be granted on a gros was to be granted on a gross basis. It was only by virtue s basis. It was only by virtue of the subsequent reversal of law by the Special Bench in of the subsequent reversal of law by the Special Bench in of the subsequent reversal of law by the Special Bench in the case of Petroleum India International vs. DCIT (ITA the case of Petroleum India International vs. DCIT (ITA the case of Petroleum India International vs. DCIT (ITA 9882/Bom/95) and the Bombay High Court in CIT vs. 9882/Bom/95) and the Bombay High Court in CIT vs. 9882/Bom/95) and the Bombay High Court in CIT vs. Asian Cable Corporation Ltd. (2002) (262 IT 537), Asian Cable Corporation Ltd. (2002) (262 IT 537), Asian Cable Corporation Ltd. (2002) (262 IT 537), wherein it was held that deduction is to be allowed on net basis was held that deduction is to be allowed on net basis was held that deduction is to be allowed on net basis that the addition was made. In this regard, it is submitted that the addition was made. In this regard, it is submitted that the addition was made. In this regard, it is submitted that the difference in interpretation of law cannot lead to that the difference in interpretation of law cannot lead to that the difference in interpretation of law cannot lead to an income being classified as 'undisclosed income' as an income being classified as 'undisclosed income' as an income being classified as 'undisclosed income' as defined in section 158B(b). defined in section 158B(b). More particularly, the AO's More particularly, the AO's allegation that this difference in interpretation has led to allegation that this difference in interpretation has led to allegation that this difference in interpretation has led to the assessee's claim for deduction to be 'false' is incorrect the assessee's claim for deduction to be 'false' is incorrect the assessee's claim for deduction to be 'false' is incorrect

M/s J.B. Boda & Co. Pvt. Ltd. 31 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

as the Supreme Court has held in the case of Cement as the Supreme Court has held in the case of Cement as the Supreme Court has held in the case of Cement Marketing Co. of India Ltd. vs. ACT (1980) (124 ITR 1 Marketing Co. of India Ltd. vs. ACT (1980) (124 ITR 1 Marketing Co. of India Ltd. vs. ACT (1980) (124 ITR 15) that for a claim to be 'false', it has to be demonstrated that that for a claim to be 'false', it has to be demonstrated that that for a claim to be 'false', it has to be demonstrated that the basis of the claim was malafide. In the instant case, it the basis of the claim was malafide. In the instant case, it the basis of the claim was malafide. In the instant case, it cannot be said that the assessee's claim was based on cannot be said that the assessee's claim was based on cannot be said that the assessee's claim was based on any malafide intention as the basis of making such claim any malafide intention as the basis of making such claim any malafide intention as the basis of making such claim was the order pass was the order passed by the Tribunal in its own case for ed by the Tribunal in its own case for the AYs 1987 the AYs 1987-88 and 1988-89. Basis the aforesaid facts, Basis the aforesaid facts, the CIT(A) in his order dated 10th August, 2004 allowed the CIT(A) in his order dated 10th August, 2004 allowed the CIT(A) in his order dated 10th August, 2004 allowed the issue in assessee's favour. The Department's appeal the issue in assessee's favour. The Department's appeal the issue in assessee's favour. The Department's appeal against the said order of the CIT(A) was dismisse against the said order of the CIT(A) was dismisse against the said order of the CIT(A) was dismissed by the ITAT in its order dated gth April, 2008 (pg. 83 of ITAT in its order dated gth April, 2008 (pg. 83 of ITAT in its order dated gth April, 2008 (pg. 83 of paperbook), paperbook), paperbook), although although although the said the said the said order order order was recalled was recalled was recalled subsequently by the ITAT in its order dated 19th subsequently by the ITAT in its order dated 19th subsequently by the ITAT in its order dated 19th December, 2008 (pg. 141 of the paperbook) as the revised December, 2008 (pg. 141 of the paperbook) as the revised December, 2008 (pg. 141 of the paperbook) as the revised grounds filed by the Department with resp grounds filed by the Department with respect to the ect to the second addition were not considered. Nevertheless, the second addition were not considered. Nevertheless, the second addition were not considered. Nevertheless, the ratio of the Tribunal's decision while deciding the issue in ratio of the Tribunal's decision while deciding the issue in ratio of the Tribunal's decision while deciding the issue in the the the assessee's assessee's assessee's favour, favour, favour, which which which was was was based based based on on on the the the judgements of the High Court has remained the same as judgements of the High Court has remained the same as judgements of the High Court has remained the same as the the said said legal legal position position has has not n ot been been reversed reversed subsequently. subsequently. 4. It is further submitted that the basis of making this 4. It is further submitted that the basis of making this 4. It is further submitted that the basis of making this addition was only the statement of Mr. CV Sheth and no addition was only the statement of Mr. CV Sheth and no addition was only the statement of Mr. CV Sheth and no incriminating material was found in the course of the incriminating material was found in the course of the incriminating material was found in the course of the search, which could lead to such an addition. In this search, which could lead to such an addition. In this search, which could lead to such an addition. In this regard, reliance is placed on the judgement of the Delhi d, reliance is placed on the judgement of the Delhi d, reliance is placed on the judgement of the Delhi High Court in the case of CIT vs. Harjeev Aggarwal (2016) High Court in the case of CIT vs. Harjeev Aggarwal (2016) High Court in the case of CIT vs. Harjeev Aggarwal (2016) (290 CTR 263) wherein it was held that a statement (290 CTR 263) wherein it was held that a statement (290 CTR 263) wherein it was held that a statement recorded under section 132 of the Act without any other recorded under section 132 of the Act without any other recorded under section 132 of the Act without any other material found in the course of the sea material found in the course of the search cannot rch cannot constitute incriminating material for making an addition in constitute incriminating material for making an addition in constitute incriminating material for making an addition in a block assessment under section 158BB of the Act. a block assessment under section 158BB of the Act. a block assessment under section 158BB of the Act.” 9.2 We find that Tribunal find that Tribunal while adjudicating ground No. 1 and 2 of while adjudicating ground No. 1 and 2 of the appeal in order dated 9/04/2008 the appeal in order dated 9/04/2008 (which has been subsequently which has been subsequently ecalled on 19/12/2008) had adjudicated the issue relying the recalled on 19/12/2008) had adjudicated the issue relying the ecalled on 19/12/2008) had adjudicated the issue relying the finding of the Tribunal finding of the Tribunal dated 22/02/2008 in the case of M/s in the case of M/s JB

M/s J.B. Boda & Co. Pvt. Ltd. 32 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

Boda Surveyors Pvt. Ltd in IT(SS)A No.579/Mum/2004, who Ltd in IT(SS)A No.579/Mum/2004, who was also subjected to search proceedings and similar claim of also subjected to search proceedings and similar claim of also subjected to search proceedings and similar claim of withdrawal of section 80 f section 80-O of the Act in respect of one of the O of the Act in respect of one of the assessment year of year of block period was though offered during the block period was though offered during the course of the search proceedings course of the search proceedings, however same was not declared however same was not declared for the purpose of return filed for the block period. The relevant for the purpose of return filed for the block period. The relevant for the purpose of return filed for the block period. The relevant in the case of M/s J B ground raised and finding of the Tribunal finding of the Tribunal in the case of Boda Surveyors P Ltd (supra) Boda Surveyors P Ltd (supra) is reproduced as under: under:

“GROUNDS: GROUNDS: "I. On the facts and circumstances of the case and in On the facts and circumstances of the case and in On the facts and circumstances of the case and in law. the learned CIT(A) erred in deleting the law. the learned CIT(A) erred in deleting the law. the learned CIT(A) erred in deleting the additions of (Rs.22,47,563/ additions of (Rs.22,47,563/- for the A.Yr. 1996 for the A.Yr. 1996-97 and of Rs. 40,94,623/ and of Rs. 40,94,623/-for the AY. 1997-98) made on 98) made on account of excess deduction claimed us. 80-0 of the account of excess deduction claimed us. 80 account of excess deduction claimed us. 80 Income tax Act, 1961. Income tax Act, 1961. 2. On the facts and circumstances of the case and in 2. On the facts and circumstances of the case and in 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the law, the learned CIT(A) erred in deleting the law, the learned CIT(A) erred in deleting the additions additions of the sums of Rs.22,47,563%- for the A. for the A. Yr. 1996 Yr. 1996-97 and of Rs.40,94,623/-for the AX. 1997 for the AX. 1997- 98 totaling to Rs.63,42,186/ 98 totaling to Rs.63,42,186/- without appreciating without appreciating that the Finance Act, 2002 has amended the that the Finance Act, 2002 has amended the that the Finance Act, 2002 has amended the relevant provisions retrospectively w.e.f. 17.1.1995 relevant provisions retrospectively w.e.f. 17.1.1995 relevant provisions retrospectively w.e.f. 17.1.1995 to provide that a to provide that any expense, deduction or allowance ny expense, deduction or allowance claimed, which is found false shall be included in claimed, which is found false shall be included in claimed, which is found false shall be included in the undisclosed income." the undisclosed income." FINDINGS:~ FINDINGS:~ "4. After hearing the learned Counsel for the After hearing the learned Counsel for the After hearing the learned Counsel for the assessee, we de not find any merit in the grounds assessee, we de not find any merit in the grounds assessee, we de not find any merit in the grounds raised by the Revenue. No doubt, secti raised by the Revenue. No doubt, section 1588(b) on 1588(b) was was was amended amended amended by by by Finance Finance Finance Act, Act, Act, 2002 2002 2002 with with with retrospective effect from it July, 1995 by which the retrospective effect from it July, 1995 by which the retrospective effect from it July, 1995 by which the

M/s J.B. Boda & Co. Pvt. Ltd. 33 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

scope of the expression, "undisclosed income" was scope of the expression, "undisclosed income" was scope of the expression, "undisclosed income" was enlarged so as to bring the cases within the net of enlarged so as to bring the cases within the net of enlarged so as to bring the cases within the net of undisclosed income where in excess deduction or undisclosed income where in excess deduction or undisclosed income where in excess deduction or allowance claimed under the Act is found to be wance claimed under the Act is found to be wance claimed under the Act is found to be false. However, computation of undisclosed income false. However, computation of undisclosed false. However, computation of undisclosed has to be made u/s. 158BB has to be made u/s. 158BB which provides that which provides that undisclosed undisclosed income shall shall be be computed comput in accordance with the pro accordance with the provisions of the Act on the visions of the Act on the basis basis of evidence found as a result of search as. result of search as. requisition of hooks of accounts, or o isition of hooks of accounts, or other documents documents and such, other materi and such, other materials" add, information, which nformation, which are available are available with the Assessing Officer and with the Assessing Officer and relatable to such evidence Therefore, both the relatable to such evidence Therefore, both the relatable to such evidence Therefore, both the provisions have to be read together. I provisions have to be read together. If both the f both the provisions are read together, then the assessment provisions are read together, then the assessment provisions are read together, then the assessment can be made on account of undisclosed income only can be made on account of undisclosed income only can be made on account of undisclosed income only an the basis of material found in the course of an the basis of material found in the course of an the basis of material found in the course of search or other evidence related to the evidence search or other evidence related to the evidence search or other evidence related to the evidence found in the course of search. Consequently, the found in the course of search. Consequently, the found in the course of search. Consequently, the falsity of the claim of the assessee must have nexus falsity of the claim of the assessee must have nexus falsity of the claim of the assessee must have nexus with the evidence found in the course of search: In with the evidence found in the course of search: In with the evidence found in the course of search: In the present case, no material whatsoever was found the present case, no material whatsoever was found the present case, no material whatsoever was found in the course of search which can indicate the falsity in the course of search which can indicate the falsity in the course of search which can indicate the falsity of the claim of the assessee. The word 'false' of the claim of the assessee. The word of the claim of the assessee. The word presupposes the fraudulent act an the part of the presupposes the fraudulent act an the part of the presupposes the fraudulent act an the part of the assessee. The perusal of the record shows that the assessee. The perusal of the record shows that the assessee. The perusal of the record shows that the claim of the assessee was based on the earlier claim of the assessee was based on the earlier claim of the assessee was based on the earlier decision of the Tribunal in the case of J.B. Boda and decision of the Tribunal in the case of J.B. Boda and decision of the Tribunal in the case of J.B. Boda and Company Put. Ltd. and the Assessing Officer had Company Put. Ltd. and the Assessing Officer had Company Put. Ltd. and the Assessing Officer had also allowed such claim u/s. 143(3) as is apparent o allowed such claim u/s. 143(3) as is apparent o allowed such claim u/s. 143(3) as is apparent from the original order of assessm from the original order of assessment pertaining to ent pertaining to Assessment Year 1996 Assessment Year 1996-97: The computation of mputation of income also shows that income also shows that assessee had specifically assessee had specifically mentioned that the claim of the assessee was based mentioned that the claim of the assessee was based mentioned that the claim of the assessee was based on the decis on the decision of the Tribunal. Therefore, the claim ion of the Tribunal. Therefore, the claim of the assessee was bonafide and cannot be of the assessee was bonafide and cannot be of the assessee was bonafide and cannot be considered as false. Therefore, in our opinion, the considered as false. Therefore, in our opinion, the considered as false. Therefore, in our opinion, the learned CIT(A) was justified in deleting the addition learned CIT(A) was justified in deleting the addition learned CIT(A) was justified in deleting the addition made by Assessing Officer. The order of learned made by Assessing Officer. The order of learned made by Assessing Officer. The order of learned CIT(A) is therefo CIT(A) is therefore upheld."

M/s J.B. Boda & Co. Pvt. Ltd. 34 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

9.3 Thus, the Tribunal (supra) held that Thus, the Tribunal (supra) held that there was there was no falsity in the claim of the assessee for deduction u/s 80 claim of the assessee for deduction u/s 80-O of the Act made O of the Act made on gross receipt basis in regular assessment proceedings. in regular assessment proceedings. in regular assessment proceedings. The parties submitted that the decision of the Tribunal is still in operation and submitted that the decision of the Tribunal is still in operation and submitted that the decision of the Tribunal is still in operation and not reversed by the Hon’ble High Court. not reversed by the Hon’ble High Court. In the instant case In the instant case also, the claim for deduction u/s 80 claim for deduction u/s 80-O of the Act on gross basis was made in O of the Act on gross basis was made in regular assessment for AY 1996 regular assessment for AY 1996-97 on bonafide belief of issue bonafide belief of issue decided in favour of the assessee by the Tribunal in AY 1987-88 decided in favour of the assessee by the Tribunal in AY 1987 decided in favour of the assessee by the Tribunal in AY 1987 and 1988-89. Since, the Since, the issue in dispute in the instant case is issue in dispute in the instant case is identical to the issue decided by the Tribunal in the case of M/s JB identical to the issue decided by the Tribunal in the case of M/s JB identical to the issue decided by the Tribunal in the case of M/s JB Boda Surveyor p Ltd (supra), Boda Surveyor p Ltd (supra), therefore, respectfully following the efore, respectfully following the finding of the Tribunal finding of the Tribunal (supra) therevised Ground No Ground Nos. 1 to 3 of the appeal of the Revenue are dismissed. appeal of the Revenue are dismissed.

M/s J.B. Boda & Co. Pvt. Ltd. 35 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

order dated 31.12.2009 therefore, those grounds of the Revenue are order dated 31.12.2009 therefore, those grounds of the Revenue are order dated 31.12.2009 therefore, those grounds of the Revenue are rendered infructuous, infructuous, hence same are dismissed.

11.1 The first additional ground additional ground raised was not pressed was not pressed before us and therefore same is is dismissed as infructuous.

11.2 The second additional ground raised being legal in nature and .2 The second additional ground raised being legal in nature and .2 The second additional ground raised being legal in nature and does not require investigation of fresh facts and hence admitted for does not require investigation of fresh facts and hence admitted for does not require investigation of fresh facts and hence admitted for adjudication in view of settled principles as held in the case of in view of settled principles as held in the case of in view of settled principles as held in the case of Hon’ble Supreme Court in the case of NTPC Ltd reported in 220 Hon’ble Supreme Court in the case of NTPC Ltd reported in 220 Hon’ble Supreme Court in the case of NTPC Ltd reported in 220 ITR 283(SC).

12.1 We find that the Assessing Officer has made e find that the Assessing Officer has made only only comment in respect of claim made by a foot note to the return of income, to respect of claim made by a foot note to the return of income respect of claim made by a foot note to the return of income support his observation his observation that assessee had not seriously claimed not seriously claimed

M/s J.B. Boda & Co. Pvt. Ltd. 36 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

this deduction in the return of income. The finding of the Assessing this deduction in the return of income. The finding of the Assessing this deduction in the return of income. The finding of the Assessing Officer is reproduced as under: Officer is reproduced as under:

“6.3. The fact 6.3. The fact that these liabilities which had ceased to that these liabilities which had ceased to exist and which had been offered as additional income exist and which had been offered as additional income exist and which had been offered as additional income was not eligible for deduction u/s. 80 was not eligible for deduction u/s. 80-O is also evident O is also evident from the fact that the assessee has itself not. claimed the from the fact that the assessee has itself not. claimed the from the fact that the assessee has itself not. claimed the deduction in its computation of total undi deduction in its computation of total undisclosed income sclosed income filed with the Block return. filed with the Block return.” 12.2 It is not the case that in the block return no undisclosed It is not the case that in the block return no undisclosed It is not the case that in the block return no undisclosed income was declared and the assessee wanted to make claim income was declared and the assessee wanted to make claim income was declared and the assessee wanted to make claim against any future income to be assessed by the Assessing Officer against any future income to be assessed by the Assessing Officer against any future income to be assessed by the Assessing Officer but in the case assessee had already declared undisclosed income but in the case assessee had already declared undisclosed income but in the case assessee had already declared undisclosed income and did not claim deduction in the return of income and claim was not claim deduction in the return of income and claim was not claim deduction in the return of income and claim was left open for the Assessing officer to decide at his discretion. left open for the Assessing officer to decide at his discretion. left open for the Assessing officer to decide at his discretion. However, we find that admissibility of claim has we find that admissibility of claim has been been accepted by the Ld. CIT(A) in order dated 26/02/2008 and matter was restored in order dated 26/02/2008 and matter was restored in order dated 26/02/2008 and matter was restored to the AO for verifying the eligibility of conditions of section 80-O of to the AO for verifying the eligibility of conditions of section 80 to the AO for verifying the eligibility of conditions of section 80 the Act . The CIT(A) in impugned order dated 31/12/2009 has not the Act . The CIT(A) in impugned order dated 31/12/2009 the Act . The CIT(A) in impugned order dated 31/12/2009 given any specific finding on this issue and therefore this ground is given any specific finding on this issue and therefore this ground is given any specific finding on this issue and therefore this ground is infructuous and dismissed accordingly. infructuous and dismissed accordingly.

M/s J.B. Boda & Co. Pvt. Ltd. 37 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

Finance Act, 1999 w.e.f. 01.06.1999 and hence same is not nce Act, 1999 w.e.f. 01.06.1999 and hence same is not nce Act, 1999 w.e.f. 01.06.1999 and hence same is not applicable for assessment year 1996 applicable for assessment year 1996-97 and 1997-98. 98.

13.1 The relevant part of the section 80 The relevant part of the section 80-O is reproduced as under: O is reproduced as under:

“Provided further that no deduction under this section Provided further that no deduction under this section Provided further that no deduction under this section shall be allowed unless the shall be allowed unless the assessee furnishes a assessee furnishes a certificate, in the prescribed form, along with the return of certificate, in the prescribed form, along with the return of certificate, in the prescribed form, along with the return of income, certifying that the deduction has been correctly income, certifying that the deduction has been correctly income, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. claimed in accordance with the provisions of this section. claimed in accordance with the provisions of this section.” 13.2 Before the ld CIT(A) the assessee submitted as Before the ld CIT(A) the assessee submitted as under: under:

“7.5 Further, with regard to A.O.'s observation at para 6.4 7.5 Further, with regard to A.O.'s observation at para 6.4 7.5 Further, with regard to A.O.'s observation at para 6.4 of the order that "The assessee has also not furnished a of the order that "The assessee has also not furnished a of the order that "The assessee has also not furnished a certificate in the prescribed Form No. 10HA along with the certificate in the prescribed Form No. 10HA along with the certificate in the prescribed Form No. 10HA along with the Return of Income certifying that the deduction has been Return of Income certifying that the deduction has been Return of Income certifying that the deduction has been correctly claimed correctly claimed in accordance with the provisions of in accordance with the provisions of section 80-O. Hence, even the condition of 2nd proviso to O. Hence, even the condition of 2nd proviso to O. Hence, even the condition of 2nd proviso to section 80-0 has not been fulfilled by the assessee." the 0 has not been fulfilled by the assessee." the 0 has not been fulfilled by the assessee." the appellant submitted that second proviso to section 80 appellant submitted that second proviso to section 80 appellant submitted that second proviso to section 80-0 which requires furnishing of certificate in Fo which requires furnishing of certificate in Form 10HA was rm 10HA was inserted by Finance Act 1999 w.e.f. 1.06.1999 whereas inserted by Finance Act 1999 w.e.f. 1.06.1999 whereas inserted by Finance Act 1999 w.e.f. 1.06.1999 whereas the deduction u/s 80 the deduction u/s 80-0 has been claimed with reference to 0 has been claimed with reference to A.Y. 1996-97 and 1997 97 and 1997-98 included in the Block Period. 98 included in the Block Period. Since the prescribed form was not applicable for A.Y. Since the prescribed form was not applicable for A.Y. Since the prescribed form was not applicable for A.Y. 1996-97 and 1997 97 and 1997-98 the same was not submitted while same was not submitted while filing the block return. The appellant submitted that in any filing the block return. The appellant submitted that in any filing the block return. The appellant submitted that in any case, the benefit of an incentive provision cannot be denied case, the benefit of an incentive provision cannot be denied case, the benefit of an incentive provision cannot be denied to an assessee merely on account of a technical lapse, if to an assessee merely on account of a technical lapse, if to an assessee merely on account of a technical lapse, if the assessee is otherwise entitled to it in la the assessee is otherwise entitled to it in law.” 13.3 With regards to above submission ith regards to above submission, the ld CIT(A) made his , the ld CIT(A) made his observation as under: observation as under:

“3. The assessee has also not furnished a certificate in the 3. The assessee has also not furnished a certificate in the 3. The assessee has also not furnished a certificate in the prescribed form No.10HA along with the return of income prescribed form No.10HA along with the return of income prescribed form No.10HA along with the return of income certifying that the deduction has been correctly cl certifying that the deduction has been correctly cl certifying that the deduction has been correctly claimed in

M/s J.B. Boda & Co. Pvt. Ltd. 38 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

accordance with the provisions of section 80 accordance with the provisions of section 80-0. Hence, 0. Hence, even the condition of 2nd provision to Section 80 even the condition of 2nd provision to Section 80-0 has not 0 has not been fulfilled by the assessee." been fulfilled by the assessee." 13.4 However, we are of the opinion that the assessee is claiming However, we are of the opinion that the assessee is claiming However, we are of the opinion that the assessee is claiming this deduction u/s 80 this deduction u/s 80-O of the Act in the return of income filed for t in the return of income filed for the block period and not the block period and not in any return of income filed for return of income filed for assessment year 1996 assessment year 1996-97 and 1997-98, and therefore, the provisions of the Finance Act 1999 which have been introduced provisions of the Finance Act 1999 which have been introduced provisions of the Finance Act 1999 which have been introduced w.e.f. 01.06.1999 are applicable in respect of claim of deduction u/s w.e.f. 01.06.1999 are applicable in respect of claim of deduction u/s w.e.f. 01.06.1999 are applicable in respect of claim of deduction u/s 80-O of the Act made in the return of income filed for the block ct made in the return of income filed for the block ct made in the return of income filed for the block period from 01.04.1995 to 07.11.2001. Accor period from 01.04.1995 to 07.11.2001. Accordingly, we uphold the dingly, we uphold the finding of the Ld. CIT(A) that assessee has not fulfilled the said finding of the Ld. CIT(A) that assessee has not fulfilled the said finding of the Ld. CIT(A) that assessee has not fulfilled the said condition of proviso to section 80 condition of proviso to section 80-O of the Act.

14.1 Regarding the claim Regarding the claim of sundry creditors written off of sundry creditors written off, the ld CIT(A) has summariz summarized the submission of the assessee as under: of the assessee as under:

“7. In this regard, during the appellate proceedings, the 7. In this regard, during the appellate proceedings, the 7. In this regard, during the appellate proceedings, the appellant submitted that the appellant company is appellant submitted that the appellant company is appellant submitted that the appellant company is engaged in the busines engaged in the business of reinsurance broking. It receives s of reinsurance broking. It receives premiums and claims on behalf of its clients premiums and claims on behalf of its clients - ceding and ceding and

M/s J.B. Boda & Co. Pvt. Ltd. 39 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

reinsurance reinsurance reinsurance companies companies companies and and and after after after deducting deducting deducting its its its commission/ brokerage therefrom, the balance amounts commission/ brokerage therefrom, the balance amounts commission/ brokerage therefrom, the balance amounts are required to be paid to reinsurance / ceding companies are required to be paid to reinsurance / ceding companies are required to be paid to reinsurance / ceding companies as the case may be, upon completion of various formalities the case may be, upon completion of various formalities the case may be, upon completion of various formalities which take several years as per appellant's experience. It which take several years as per appellant's experience. It which take several years as per appellant's experience. It was submitted that for processing the claims and was submitted that for processing the claims and was submitted that for processing the claims and payments, substantial time is taken due to various payments, substantial time is taken due to various payments, substantial time is taken due to various reasons such as receipt of documents rela reasons such as receipt of documents relating to claims ting to claims made by parties and submitting the same to the made by parties and submitting the same to the made by parties and submitting the same to the satisfaction of the reinsuring company for settlement of satisfaction of the reinsuring company for settlement of satisfaction of the reinsuring company for settlement of claim by them etc, thereby resulting in continuing of claim by them etc, thereby resulting in continuing of claim by them etc, thereby resulting in continuing of balances in clients accounts with the assessee company. balances in clients accounts with the assessee company. balances in clients accounts with the assessee company. So also there would be debi So also there would be debit balances remaining to be t balances remaining to be recovered from various companies due to payments made recovered from various companies due to payments made recovered from various companies due to payments made by the assessee company and due to the settlement by by the assessee company and due to the settlement by by the assessee company and due to the settlement by insurance insurance companies insurance companies companies on on on net net net basis basis basis (payables (payables (payables less less less recoveries) as per international practice. It was contended recoveries) as per international practice. It was contended recoveries) as per international practice. It was contended that due to th that due to this practice of the assessee company, the last is practice of the assessee company, the last balance sheet of the assessee company drawn before the balance sheet of the assessee company drawn before the balance sheet of the assessee company drawn before the date of search i.e. 7.11.2001 showed amounts payable date of search i.e. 7.11.2001 showed amounts payable date of search i.e. 7.11.2001 showed amounts payable and recoverable pertaining to earlier years. In the search and recoverable pertaining to earlier years. In the search and recoverable pertaining to earlier years. In the search proceedings carried proceedings carried out on the assessee company, the pany, the credit balances outstanding were offered as undisclosed credit balances outstanding were offered as undisclosed credit balances outstanding were offered as undisclosed income. 7.1 Further, the appellant submitted that credit balances Further, the appellant submitted that credit balances Further, the appellant submitted that credit balances written back by the appellant company had never entered written back by the appellant company had never entered written back by the appellant company had never entered its Profit & Loss Account These credit balances merely Loss Account These credit balances merely represent amounts held by the appellant on behalf of its represent amounts held by the appellant on behalf of its represent amounts held by the appellant on behalf of its clients - reinsurance/ceding companies. Therefore, creditor reinsurance/ceding companies. Therefore, creditor reinsurance/ceding companies. Therefore, creditor written back in the present case are not in the nature of written back in the present case are not in the nature of written back in the present case are not in the nature of trade creditors since the appellant ha trade creditors since the appellant had never claimed d never claimed deduction deduction deduction or or or allowance allowance allowance thereof thereof thereof in in in the the the past. past. past. The The The commission brokerage income earned out of transactions commission brokerage income earned out of transactions commission brokerage income earned out of transactions with such reinsurance/ceding companies which were with such reinsurance/ceding companies which were with such reinsurance/ceding companies which were standing as creditors in the books of the appellant has standing as creditors in the books of the appellant has standing as creditors in the books of the appellant has already been offered to tax and already been offered to tax and deduction u/s 80 deduction u/s 80-O had been claimed and allowed on such income in the been claimed and allowed on such income in the been claimed and allowed on such income in the respective years. Further, in the block assessment, AO has respective years. Further, in the block assessment, AO has respective years. Further, in the block assessment, AO has treated the entire claim/premium amounts to be the treated the entire claim/premium amounts to be the treated the entire claim/premium amounts to be the undisclosed income of the appellant. So far as nature of undisclosed income of the appellant. So far as nature of undisclosed income of the appellant. So far as nature of such undisclosed i such undisclosed income is concerned, the appellant ncome is concerned, the appellant

M/s J.B. Boda & Co. Pvt. Ltd. 40 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

submitted that it can only partake the character of submitted that it can only partake the character of submitted that it can only partake the character of brokerage' income. brokerage' income. 7.2 The appellant stated that the undisclosed income of The appellant stated that the undisclosed income of The appellant stated that the undisclosed income of the appellant company can never be treated as profits the appellant company can never be treated as profits the appellant company can never be treated as profits chargeable u/s 41(1) of the Income Tax Ac chargeable u/s 41(1) of the Income Tax Act, 1961 as held t, 1961 as held by the AO since section 41(1) deals with cessation of by the AO since section 41(1) deals with cessation of by the AO since section 41(1) deals with cessation of trading liabilities whereas creditors written back by the trading liabilities whereas creditors written back by the trading liabilities whereas creditors written back by the appellant are not trade creditors as explained above. It appellant are not trade creditors as explained above. It appellant are not trade creditors as explained above. It was submitted that these amounts were held by the was submitted that these amounts were held by the was submitted that these amounts were held by the appellant company in appellant company in a fiduciary capacity and therefore a fiduciary capacity and therefore the credit balances on such account cannot be compared to the credit balances on such account cannot be compared to the credit balances on such account cannot be compared to trade creditors which amounts if written back come within trade creditors which amounts if written back come within trade creditors which amounts if written back come within the scope of provisions of sec. 41(1) of the IT Act 1961. The the scope of provisions of sec. 41(1) of the IT Act 1961. The the scope of provisions of sec. 41(1) of the IT Act 1961. The appellant submitted that as the whole basis appellant submitted that as the whole basis of AO's finding is incorrect and without the proper appreciation of finding is incorrect and without the proper appreciation of finding is incorrect and without the proper appreciation of facts, the allegation made by the A.O. is ill facts, the allegation made by the A.O. is ill-founded. founded.” 14.2 Before us the ld counsel of the assessee has filed written Before us the ld counsel of the assessee has filed written Before us the ld counsel of the assessee has filed written submission, which is reproduced as under: submission, which is reproduced as under:

“Addition of Addition of Rs. Rs. 11,73,76,489- write 11,73,7 write back back of of creditors- 5. Insofar as the aforesaid addition is concerned, the 5. Insofar as the aforesaid addition is concerned, the 5. Insofar as the aforesaid addition is concerned, the assessee had offered the above sum as undisclosed assessee had offered the above sum as undisclosed assessee had offered the above sum as undisclosed income in the course of the search on account of the income in the course of the search on account of the income in the course of the search on account of the fact that this amount represented creditors, which were that this amount represented creditors, which were that this amount represented creditors, which were outstanding for a long period of time and the assessee did outstanding for a long period of time and the assessee did outstanding for a long period of time and the assessee did not foresee the possibility of such payables being not foresee the possibility of such payables being not foresee the possibility of such payables being crystalised into payments. The details of these creditors crystalised into payments. The details of these creditors crystalised into payments. The details of these creditors and the breakup thereof is contained in para 3.2 of the and the breakup thereof is contained in para 3.2 of the and the breakup thereof is contained in para 3.2 of the CIT(A) order dated 31* December, CIT(A) order dated 31* December, 2019. Out of the 2019. Out of the aforesaid sum payable to 136 insurance/reinsurance aforesaid sum payable to 136 insurance/reinsurance aforesaid sum payable to 136 insurance/reinsurance companies which was then written back, a sum of Rs. companies which was then written back, a sum of Rs. companies which was then written back, a sum of Rs. 7,27,35,250 represented sum payable in USD, a sum of 7,27,35,250 represented sum payable in USD, a sum of 7,27,35,250 represented sum payable in USD, a sum of Rs. 2,76,37,692 represented sum payable in pounds and Rs. 2,76,37,692 represented sum payable in pounds and Rs. 2,76,37,692 represented sum payable in pounds and a sum of Rs. 1,66,00,000 rep a sum of Rs. 1,66,00,000 represented payables to Indian resented payables to Indian companies in rupees. It was submitted before both the companies in rupees. It was submitted before both the companies in rupees. It was submitted before both the lower authorities that the assessee never claimed a lower authorities that the assessee never claimed a lower authorities that the assessee never claimed a deduction for this amount, and, therefore an addition deduction for this amount, and, therefore an addition deduction for this amount, and, therefore an addition

M/s J.B. Boda & Co. Pvt. Ltd. 41 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

under section 41 could not be made on the basis of the under section 41 could not be made on the basis of the under section 41 could not be made on the basis of the write back. I write back. In fact, the AO (on pg. 4 of his order) and the n fact, the AO (on pg. 4 of his order) and the CIT(A) (on pg. 11 and 14) note this contention of the CIT(A) (on pg. 11 and 14) note this contention of the CIT(A) (on pg. 11 and 14) note this contention of the assessee, and do not dispute it. assessee, and do not dispute it. 6. In this regard, the assessee has four arguments, each of 6. In this regard, the assessee has four arguments, each of 6. In this regard, the assessee has four arguments, each of which is without prejudice to and in the alternate to the which is without prejudice to and in the alternate to the which is without prejudice to and in the alternate to the other i) whether it is income chargeable to tax under the other i) whether it is income chargeable to tax under the other i) whether it is income chargeable to tax under the Act?, i) whether it is undisclosed income as per section Act?, i) whether it is undisclosed income as per section Act?, i) whether it is undisclosed income as per section 158B of the Act?, iii) whether the income can be taxed in 158B of the Act?, iii) whether the income can be taxed in 158B of the Act?, iii) whether the income can be taxed in the block assessment, only on the basis of the statement the block assessment, only on the basis of the statement the block assessment, only on the basis of the statement recorded under section 132 recorded under section 132 of the Act, without any of the Act, without any incriminating material? and iv) if the aforesaid three incriminating material? and iv) if the aforesaid three incriminating material? and iv) if the aforesaid three questions are answered against the assessee, whether it questions are answered against the assessee, whether it questions are answered against the assessee, whether it is eligible for deduction under section 80 is eligible for deduction under section 80-0 of the Act on 0 of the Act on such income. such income. Whether it is income chargeable to tax under th Whether it is income chargeable to tax under th Whether it is income chargeable to tax under the Act? 7. The taxability of write back of creditors can be 7. The taxability of write back of creditors can be 7. The taxability of write back of creditors can be considered either under section considered either under section 28(iv) or under section 41 28(iv) or under section 41 of the Act. Insofar as section 41 is concerned, it is an of the Act. Insofar as section 41 is concerned, it is an of the Act. Insofar as section 41 is concerned, it is an undisputed factual position that the assessee has not undisputed factual position that the assessee has not undisputed factual position that the assessee has not claimed any deduction on ac claimed any deduction on account of such creditors, count of such creditors, therefore, the question of taxing the write back does not therefore, the question of taxing the write back does not therefore, the question of taxing the write back does not arise. Insofar as section 28(v) is concerned, it is submitted arise. Insofar as section 28(v) is concerned, it is submitted arise. Insofar as section 28(v) is concerned, it is submitted that as held by the Hon'ble Supreme Court in the case of that as held by the Hon'ble Supreme Court in the case of that as held by the Hon'ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1), CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1), CIT vs. Mahindra and Mahindra Ltd. (2018) (404 ITR 1), for an income to be taxable under section 28(iv), two for an income to be taxable under section 28(iv), two for an income to be taxable under section 28(iv), two conditions have to be satisfied conditions have to be satisfied- i) a benefit must arise in i) a benefit must arise in the course of the business and ii) such benefit should be in the course of the business and ii) such benefit should be in the course of the business and ii) such benefit should be in a form, other than money. a form, other than money. The first test is satisfied in the The first test is satisfied in the present case as a b present case as a benefit has accrued to the assessee in enefit has accrued to the assessee in the course of its business, but the second test, in the the course of its business, but the second test, in the the course of its business, but the second test, in the humble submission of the assessee, has not been humble submission of the assessee, has not been humble submission of the assessee, has not been satisfied. As held by the Supreme Court in Mahindra & satisfied. As held by the Supreme Court in Mahindra & satisfied. As held by the Supreme Court in Mahindra & Mahindra (supra), cancellation of a liability which was Mahindra (supra), cancellation of a liability which was Mahindra (supra), cancellation of a liability which was payable in cash is tantamount to a cash receipt (para 13) ble in cash is tantamount to a cash receipt (para 13) ble in cash is tantamount to a cash receipt (para 13) and such a benefit cannot be brought to tax under section and such a benefit cannot be brought to tax under section and such a benefit cannot be brought to tax under section 28(iv) as the second limb of the section, i.e. 'whether 28(iv) as the second limb of the section, i.e. 'whether 28(iv) as the second limb of the section, i.e. 'whether convertible into money or not' fails. In the present case, the convertible into money or not' fails. In the present case, the convertible into money or not' fails. In the present case, the

M/s J.B. Boda & Co. Pvt. Ltd. 42 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

creditors which have been creditors which have been written back were to be paid in written back were to be paid in cash cash cash (USD, (USD, (USD, pounds pounds pounds and and and rupees). rupees). rupees). Therefore, Therefore, Therefore, their their their cancellation, as held by the Supreme Court is a benefit in cancellation, as held by the Supreme Court is a benefit in cancellation, as held by the Supreme Court is a benefit in cash and will be outside the purview of section 28(iv) of cash and will be outside the purview of section 28(iv) of cash and will be outside the purview of section 28(iv) of the Act. Similarly, in the context of section 40A(5), wher the Act. Similarly, in the context of section 40A(5), wher the Act. Similarly, in the context of section 40A(5), wherein the same expression 'whether convertible into money or the same expression 'whether convertible into money or the same expression 'whether convertible into money or not' was employed, the Supreme Court in the case of CIT not' was employed, the Supreme Court in the case of CIT not' was employed, the Supreme Court in the case of CIT vs. Mafatlal Gangabhai & Co. P. Ltd. (1996) vs. Mafatlal Gangabhai & Co. P. Ltd. (1996) (219 ITR 644) (219 ITR 644) held that payments in cash will not be covered by the held that payments in cash will not be covered by the held that payments in cash will not be covered by the section. It is further submit section. It is further submitted that the ratio of the ted that the ratio of the aforesaid two judgements of the Supreme Court will apply aforesaid two judgements of the Supreme Court will apply aforesaid two judgements of the Supreme Court will apply the moment there is a cancellation of a liability which was the moment there is a cancellation of a liability which was the moment there is a cancellation of a liability which was to be repaid in cash and that it does not make a difference to be repaid in cash and that it does not make a difference to be repaid in cash and that it does not make a difference whether that liability was owed to a bank or a trade whether that liability was owed to a bank or a trade whether that liability was owed to a bank or a trade creditor. Reliance in this regard is placed on the decision of creditor. Reliance in this regard is placed on the decision of creditor. Reliance in this regard is placed on the decision of the Tribunal in the case of Infrastructure Logistics P. the Tribunal in the case of Infrastructure Logistics P. the Tribunal in the case of Infrastructure Logistics P. Ltd. vs. JCIT (2022) (196 ITD 153) (Panaji), wherein the ratio of vs. JCIT (2022) (196 ITD 153) (Panaji), wherein the ratio of vs. JCIT (2022) (196 ITD 153) (Panaji), wherein the ratio of the Supreme Court in the case of Mahindra and Mahindra the Supreme Court in the case of Mahindra and Mahindra the Supreme Court in the case of Mahindra and Mahindra (supra) was appl (supra) was applied to a case of write back of trade ied to a case of write back of trade creditors and addition under section 28(iv) was deleted. creditors and addition under section 28(iv) was deleted. creditors and addition under section 28(iv) was deleted. Whether it is undisclosed income? Whether it is undisclosed income? 8. Without prejudice to the above, it is submitted that the 8. Without prejudice to the above, it is submitted that the 8. Without prejudice to the above, it is submitted that the write back of creditors can in no circumstance fall within write back of creditors can in no circumstance fall within write back of creditors can in no circumstance fall within the definition of undisclosed income contained in section ition of undisclosed income contained in section ition of undisclosed income contained in section 158B(b) of the Act, which presupposes a default of non 158B(b) of the Act, which presupposes a default of non 158B(b) of the Act, which presupposes a default of non- disclosure on the part of the assessee. In this case, the disclosure on the part of the assessee. In this case, the disclosure on the part of the assessee. In this case, the creditors were duly disclosed in the assessee's books of creditors were duly disclosed in the assessee's books of creditors were duly disclosed in the assessee's books of accounts. Therefore, there is no info accounts. Therefore, there is no information or facts which rmation or facts which were withheld by the assessee and which can lead to the were withheld by the assessee and which can lead to the were withheld by the assessee and which can lead to the characterization of write back of creditors as undisclosed characterization of write back of creditors as undisclosed characterization of write back of creditors as undisclosed income. It is submitted that while the assessee had offered income. It is submitted that while the assessee had offered income. It is submitted that while the assessee had offered the aforesaid sum as undisclosed income in its return of the aforesaid sum as undisclosed income in its return of the aforesaid sum as undisclosed income in its return of income, it is a settled position in law that ncome, it is a settled position in law that there is no there is no estoppel against law [Peerless General Finance and estoppel against law [Peerless General Finance and estoppel against law [Peerless General Finance and Investment Co. Investment Co. Ltd. vs. CIT (2019) (416 ITR 1) (SC), Ltd. vs. CIT (2019) (416 ITR 1) (SC), Balmukund Acharya vs. DCIT (2009) Balmukund Acharya vs. DCIT (2009) (310 ITR 310), CIT (310 ITR 310), CIT vs. Tata Power Solar Systems Ltd. (2017) (2 vs. Tata Power Solar Systems Ltd. (2017) (298 CTR 197) 98 CTR 197) (Bom)] and the assessee can resile from its own offer of (Bom)] and the assessee can resile from its own offer of (Bom)] and the assessee can resile from its own offer of income if such withdrawal is in accordance with the law. income if such withdrawal is in accordance with the law. income if such withdrawal is in accordance with the law.

M/s J.B. Boda & Co. Pvt. Ltd. 43 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

Whether the addition as undisclosed income can be Whether the addition as undisclosed income can be Whether the addition as undisclosed income can be made solely on the basis of a statement recorded made solely on the basis of a statement recorded made solely on the basis of a statement recorded under section 132? under section 132? 9. It is reiterated that no incriminating material was found terated that no incriminating material was found terated that no incriminating material was found during the search pertaining to any of the additions and during the search pertaining to any of the additions and during the search pertaining to any of the additions and both the additions are based solely on the statement both the additions are based solely on the statement both the additions are based solely on the statement recorded in the course of the search. It is submitted that as recorded in the course of the search. It is submitted that as recorded in the course of the search. It is submitted that as held by the Delhi High Court in the held by the Delhi High Court in the case of Harjeev case of Harjeev Aggarwal (supra), an addition cannot be sustained basis Aggarwal (supra), an addition cannot be sustained basis Aggarwal (supra), an addition cannot be sustained basis only on the statement recorded in the course of the only on the statement recorded in the course of the only on the statement recorded in the course of the search.” 14.3 In our opinion it is the assessee who has treated those sundry In our opinion it is the assessee who has treated those sundry In our opinion it is the assessee who has treated those sundry creditors as non-moving and non moving and non-existence liability and existence liability and declared the same as undisclosed undisclosed income in the return of income filed income in the return of income filed for the block period. Therefore, it is irrelevant whether same were liabilities block period. Therefore, it is irrelevant whether same were liabilities block period. Therefore, it is irrelevant whether same were liabilities written back under section 41(1) of the Act or section 28(iv) of the written back under section 41(1) of the Act or section 28(iv) o written back under section 41(1) of the Act or section 28(iv) o Act. The Assessing officer has never questioned this action of the Act. The Assessing officer has never questioned this action of the Act. The Assessing officer has never questioned this action of the assessee of declaring undisclosed income of Rs. 11,73,76,489/-. It assessee of declaring undisclosed income of Rs. 11,73,76,489/ assessee of declaring undisclosed income of Rs. 11,73,76,489/ was a matter within the domain of the assessee was a matter within the domain of the assessee as as how it treated the said non-moving moving creditors as undisclosed inco creditors as undisclosed income for the purpose of return filed for block period purpose of return filed for block period and whether same were nd whether same were routed through profit and loss account or not. The Assessing Officer ugh profit and loss account or not. The Assessing Officer ugh profit and loss account or not. The Assessing Officer has not expressed any doubt on the undisclosed income already any doubt on the undisclosed income already any doubt on the undisclosed income already declared in the return of block period. Thus, it is declared in the return of block period. Thus, it is irrelevant whether relevant whether same falls under section 41(1) of the Act or falls under section 28(iv) same falls under section 41(1) of the Act or falls under section 28(iv) same falls under section 41(1) of the Act or falls under section 28(iv) of the Act. This issue is not arising of the Act. This issue is not arising from order of lower authorities from order of lower authorities and now after more than 20 years from filing of income for the block and now after more than 20 years from filing of income for the block and now after more than 20 years from filing of income for the block period, the assessee is rai period, the assessee is raising a plea, taking complete turn from his sing a plea, taking complete turn from his

M/s J.B. Boda & Co. Pvt. Ltd. 44 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

position he took in the return of income. Therefore, the contention position he took in the return of income. Therefore, the contention position he took in the return of income. Therefore, the contention that said item of sundry balances were undisclosed income or not that said item of sundry balances were undisclosed income or not that said item of sundry balances were undisclosed income or not cannot be considered now, when no remedy has been left with cannot be considered now, when no remedy has been left with cannot be considered now, when no remedy has been left with Revenue for taking Revenue for taking corrective action, if any, hence hence ground No. 1(b)(iii) & additional ground raised are 1(b)(iii) & additional ground raised are dismissed as infructuous. dismissed as infructuous.

15.1 Regarding the issue in dispute of Regarding the issue in dispute of deduction u/s 80 deduction u/s 80-O of the Act, it is important to reproduce the sai important to reproduce the said section in existence during d section in existence during relevant period as under: relevant period as under:

“Deduction in respect of royalties, etc. from certain “Deduction in respect of royalties, etc. from certain “Deduction in respect of royalties, etc. from certain foreign enterprises : foreign enterprises :- (1) Where the gross total income of an assessee, being an (1) Where the gross total income of an assessee, being an (1) Where the gross total income of an assessee, being an Indian company or a person (other Indian company or a person (other than a company) who than a company) who is resident in India, includes any income by way of is resident in India, includes any income by way of is resident in India, includes any income by way of royalty, commission, fees or any similar payment received royalty, commission, fees or any similar payment received royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or by the assessee from the Government of a foreign State or by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside a foreign enterprise in consideration for the use outside a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret ny patent, invention, model, design, secret ny patent, invention, model, design, secret formula or process, or similar property right, or information formula or process, or similar property right, or information formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, concerning industrial, commercial or scientific knowledge, concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to experience or skill made available or provided or agreed to experience or skill made available or provided or agreed to be made available or provided t be made available or provided to such Government or o such Government or enterprise by the assessee, or in consideration of technical enterprise by the assessee, or in consideration of technical enterprise by the assessee, or in consideration of technical or professional services rendered or agreed to be rendered or professional services rendered or agreed to be rendered or professional services rendered or agreed to be rendered

M/s J.B. Boda & Co. Pvt. Ltd. 45 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

outside India to such Government or enterprise by the outside India to such Government or enterprise by the outside India to such Government or enterprise by the assessee, and such income is received in convertible assessee, and such income is received in convertible assessee, and such income is received in convertible foreign exchange in India, or having been received in exchange in India, or having been received in exchange in India, or having been received in convertible foreign exchange outside India, is brought into convertible foreign exchange outside India, is brought into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with India, by or on behalf of the assessee in accordance with India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments any law for the time being in force for regulating payments any law for the time being in force for regulating payments and dealings in foreign exchange and dealings in foreign exchange, there shall be allowed, , there shall be allowed, in accordance with and subject to the provisions of this in accordance with and subject to the provisions of this in accordance with and subject to the provisions of this section, a deduction of an amount equal to fifty per cent of section, a deduction of an amount equal to fifty per cent of section, a deduction of an amount equal to fifty per cent of the income so received in, or brought into, India in the income so received in, or brought into, India in the income so received in, or brought into, India in computing the total income of the assessee. computing the total income of the assessee.” 15.2 Before the Ld CIT(A) e Ld CIT(A), the assessee contested that prior to , the assessee contested that prior to amendment of section 80 f section 80-O w.e.f. 1/04/1998, the scope of section , the scope of section 80-O included fee for technical services and the assessee had been O included fee for technical services and the assessee had been O included fee for technical services and the assessee had been providing such services of broking in providing such providing such services services of broking of broking in relation in relation insurance/ relation insurance/ insurance/ reinsurance in past and there has been no change in the nature of past and there has been no change in the nature of past and there has been no change in the nature of services rendered by them. Therefore, under similar circumstances, services rendered by them. Therefore, under similar circumstances, services rendered by them. Therefore, under similar circumstances, there can be no denial of deduction u/s 80 there can be no denial of deduction u/s 80-O of the Act for AY O of the Act for AY 1996-97 and 1997-98. 98.

15.3 The ld CIT(A) after considering submission of The ld CIT(A) after considering submission of the assessee The ld CIT(A) after considering submission of rejected the claim of the assessee observing as under: rejected the claim of the assessee observing as under: rejected the claim of the assessee observing as under:

“9. I have considered the facts and submissions. I have 9. I have considered the facts and submissions. I have 9. I have considered the facts and submissions. I have gone through the issue. gone through the issue. The issue to be decided is whether The issue to be decided is whether the appellant is entitled to the appellant is entitled to the deduction u/s.80- -0 on the outstanding cr outstanding credit balances which are offered to tax by the edit balances which are offered to tax by the assessee consequent to search operations or not. The A.O. assessee consequent to search operations or not. The A.O. assessee consequent to search operations or not. The A.O. has very categorically has held that the appellant has very categorically has held that the appellant has very categorically has held that the appellant company is not entitled for the deduction u/s.80 company is not entitled for the deduction u/s.80 company is not entitled for the deduction u/s.80-O of the I.T. Act for the following reasons: I.T. Act for the following reasons: 1. The assesse had offered additional income for tax 1. The assesse had offered additional income for tax 1. The assesse had offered additional income for tax as a result of search on account of long outstanding as a result of search on account of long outstanding as a result of search on account of long outstanding

M/s J.B. Boda & Co. Pvt. Ltd. 46 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

credit balances which were non existent. These credit balances which were non existent. These credit balances which were non existent. These amounts were not received/receivable by the amounts were not received/receivable by the amounts were not received/receivable by the assessee from the Govt. of Foreign State or Foreign assessee from the Govt. of Foreign State or Foreign assessee from the Govt. of Foreign State or Foreign Enterpr Enterprises, in consideration for the use outside ises, in consideration for the use outside India of any patent, invention, design or registered India of any patent, invention, design or registered India of any patent, invention, design or registered trade mark and such income is received in trade mark and such income is received in trade mark and such income is received in convertible foreign exchange in India or having been convertible foreign exchange in India or having been convertible foreign exchange in India or having been received in convertible foreign exchange outside received in convertible foreign exchange outside received in convertible foreign exchange outside India is brought India is brought into India by or behalf of the into India by or behalf of the assessee in accordance with any law for the time assessee in accordance with any law for the time assessee in accordance with any law for the time being in force for regulating payments and dealings being in force for regulating payments and dealings being in force for regulating payments and dealings in foreign exchange but were in fact liabilities in foreign exchange but were in fact liabilities in foreign exchange but were in fact liabilities payable by the assessee which ceased to exist i.e. payable by the assessee which ceased to exist i.e. payable by the assessee which ceased to exist i.e. which was no longer pay which was no longer payable by the assessee to able by the assessee to various parties. various parties. 2. The fact that these liabilities which had ceased to 2. The fact that these liabilities which had ceased to 2. The fact that these liabilities which had ceased to exist and which had been offered as additional exist and which had been offered as additional exist and which had been offered as additional income was not eligible for deduction u income was not eligible for deduction u/s. s. 80-O is also evident from the fact that the assessee has also evident from the fact that the assessee has also evident from the fact that the assessee has itself not cl itself not claimed the deduction in the computation aimed the deduction in the computation of total undisclosed income filed with the Block of total undisclosed income filed with the Block of total undisclosed income filed with the Block return return 3. The assessee has also not furnished a certificate 3. The assessee has also not furnished a certificate 3. The assessee has also not furnished a certificate in the prescribed form No.10HA along with the in the prescribed form No.10HA along with the in the prescribed form No.10HA along with the return of income certifying that the deduction has return of income certifying that the deduction has return of income certifying that the deduction has been correc been correctly claimed in accordance with the tly claimed in accordance with the provisions of section 80 provisions of section 80-0. Hence, even the condition 0. Hence, even the condition of 2nd provision to Section 80 of 2nd provision to Section 80-0 has not been 0 has not been fulfilled by the assessee." fulfilled by the assessee." 9.1 Section 80 Section 80-0 is different from section 80HH and 80I. 0 is different from section 80HH and 80I. Section 80HH and 801 deals with the deductions based Section 80HH and 801 deals with the deductions based Section 80HH and 801 deals with the deductions based on the income from the undertakings whereas deduction on the income from the undertakings whereas deduction on the income from the undertakings whereas deduction u/s.80-O is based on the certain income received from O is based on the certain income received from O is based on the certain income received from foreign enterprises which are listed in se foreign enterprises which are listed in section 80 ction 80-0. In section 80HH and 80 section 80HH and 80- if the income determined during the if the income determined during the assessment is higher, the appellant company may be assessment is higher, the appellant company may be assessment is higher, the appellant company may be entitled to a higher deduction. But in section 80 entitled to a higher deduction. But in section 80-0 of the IT. 0 of the IT. Act if any further income is added in the assessment then Act if any further income is added in the assessment then Act if any further income is added in the assessment then

M/s J.B. Boda & Co. Pvt. Ltd. 47 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

such income such income will be entitled to deduction under section will be entitled to deduction under section 80- O only if the following conditions are satisfied: only if the following conditions are satisfied: (i) income should be an income listed in section 80 income should be an income listed in section 80 income should be an income listed in section 80-0 of the IT. of the IT. Act. (ii) The income should have been received in The income should have been received in The income should have been received in convertible foreign exchange. convertible foreign exchange. 9.2 During the 9.2 During the appellate proceedings the assessee appellate proceedings the assessee company was requested by me to prove that the company was requested by me to prove that the company was requested by me to prove that the outstandings gs which which were were offered offered as as income income are are commission receipts for technical services done. Inspite of commission receipts for technical services done. Inspite of commission receipts for technical services done. Inspite of sufficient time given, the appellant could not prove that the sufficient time given, the appellant could not prove that the sufficient time given, the appellant could not prove that the outstanding amounts were commission earned by the nding amounts were commission earned by the nding amounts were commission earned by the assessee company. assessee company. Further, it is seen that the income now offered and Further, it is seen that the income now offered and Further, it is seen that the income now offered and assessed in the block assessment was not all brought into assessed in the block assessment was not all brought into assessed in the block assessment was not all brought into India within the time allowed by the RBI. The income India within the time allowed by the RBI. The income India within the time allowed by the RBI. The income assessed does not satisfy the c assessed does not satisfy the condition (i) listed above and ondition (i) listed above and hence it is not eligible for deduction u/s.80 hence it is not eligible for deduction u/s.80-O of the I.T. O of the I.T. Act. Further, these are the credit balances outstanding in the Further, these are the credit balances outstanding in the Further, these are the credit balances outstanding in the name of various foreign parties i.e. the amounts are name of various foreign parties i.e. the amounts are name of various foreign parties i.e. the amounts are payable by the appellant company to foreign partie payable by the appellant company to foreign partie payable by the appellant company to foreign parties and hence there is no question of receiving these amounts in hence there is no question of receiving these amounts in hence there is no question of receiving these amounts in India in convertible foreign exchange by the assessee India in convertible foreign exchange by the assessee India in convertible foreign exchange by the assessee company. I am in full agreement with the .O.'s observations/findings I am in full agreement with the .O.'s observations/findings I am in full agreement with the .O.'s observations/findings in the impugned order. In view of the A.O.'s findings and in the impugned order. In view of the A.O.'s findings and in the impugned order. In view of the A.O.'s findings and coupled with coupled with my above observations, I am fully convinced my above observations, I am fully convinced that the income offered in the block assessment is not the that the income offered in the block assessment is not the that the income offered in the block assessment is not the income which are listed in Section income which are listed in Section-80-O of the IT. Act and the income offered in the block assessment is not Act and the income offered in the block assessment is not Act and the income offered in the block assessment is not at all entitled for deduction u/s.80 at all entitled for deduction u/s.80-0 of the I.T. Act. he I.T. Act. 9.3 I uphold the A.O.'s action. I uphold the A.O.'s action.

M/s J.B. Boda & Co. Pvt. Ltd. 48 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

15.4 Before us the ld Counsel Before us the ld Counsel of the assessee filed a written the assessee filed a written submission as under: submission as under:

“Deduction under section 80 Deduction under section 80-O- 10. Without prejudice to any of the above, it is submitted 10. Without prejudice to any of the above, it is submitted 10. Without prejudice to any of the above, it is submitted that out of the sum of Rs. that out of the sum of Rs. 11,73,76,489, the assessee is 11,73,76,489, the assessee is entitled to deduction under section 80 entitled to deduction under section 80-0 of the Act on the 0 of the Act on the sum of Rs. 10,03,71,942 (Rs. 7,27,35,250 (write back of sum of Rs. 10,03,71,942 (Rs. 7,27,35,250 (write back of sum of Rs. 10,03,71,942 (Rs. 7,27,35,250 (write back of creditors payable in USD) and Rs. 2,76,37,692 (write back creditors payable in USD) and Rs. 2,76,37,692 (write back creditors payable in USD) and Rs. 2,76,37,692 (write back of of of creditors creditors creditors payable payable payable in in in pounds)). pounds)). pounds)). The The The assessee's assessee's assessee's submissions qua satisfaction of the provisions of section issions qua satisfaction of the provisions of section issions qua satisfaction of the provisions of section 80-0 of the Act are noted in para 7 of the order passed by 0 of the Act are noted in para 7 of the order passed by 0 of the Act are noted in para 7 of the order passed by the CIT(A). In para 9 of his order, the CIT(A) has held that In para 9 of his order, the CIT(A) has held that In para 9 of his order, the CIT(A) has held that deduction under section 80 deduction under section 80-0 cannot be allowed as the 0 cannot be allowed as the alleged undisclosed income i alleged undisclosed income is not in the nature of s not in the nature of commission income and that the assessee has not brought commission income and that the assessee has not brought commission income and that the assessee has not brought such income into India. In this regard, it is submitted that such income into India. In this regard, it is submitted that such income into India. In this regard, it is submitted that section 80-0 as it stood at the relevant time and as 0 as it stood at the relevant time and as 0 as it stood at the relevant time and as reproduced on page 16 of the CIT(A's order covered not reproduced on page 16 of the CIT(A's order covered not reproduced on page 16 of the CIT(A's order covered not only commission income, but also any fees or any similar mission income, but also any fees or any similar mission income, but also any fees or any similar payment payment payment received received received in in in consideration consideration consideration of of of technical technical technical or or or professional services rendered or agreed to be rendered professional services rendered or agreed to be rendered professional services rendered or agreed to be rendered outside India. Therefore, the case of the assessee certainly outside India. Therefore, the case of the assessee certainly outside India. Therefore, the case of the assessee certainly falls within the parameters of section 8 falls within the parameters of section 80-0 of the Act. 0 of the Act. Insofar as the allegation of the CIT(A) that there is no Insofar as the allegation of the CIT(A) that there is no Insofar as the allegation of the CIT(A) that there is no receipt in the hands of the assessee, it is submitted receipt in the hands of the assessee, it is submitted receipt in the hands of the assessee, it is submitted that cancellation of liability is itself tantamount to receipt. In cancellation of liability is itself tantamount to receipt. In cancellation of liability is itself tantamount to receipt. In this regard, reliance is placed on Mahindra & Mahindra this regard, reliance is placed on Mahindra & Mahindra this regard, reliance is placed on Mahindra & Mahindra (supra) wherein cancellation of liability was equated with wherein cancellation of liability was equated with wherein cancellation of liability was equated with a cash receipt in the following words a cash receipt in the following words- "Hence, waiver of "Hence, waiver of loan by the creditor results in the debtor having extra cash loan by the creditor results in the debtor having extra cash loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the in his hand. It is receipt in the hands of the in his hand. It is receipt in the hands of the debtor/assessee". To the same effect is debtor/assessee". To the same effect is the decision of the the decision of the Chandigarh Tribunal in the case of Jai Pal Gabba vs. ITO Chandigarh Tribunal in the case of Jai Pal Gabba vs. ITO Chandigarh Tribunal in the case of Jai Pal Gabba vs. ITO (2019) (178 IT'D 357) wherein it was held (2019) (178 IT'D 357) wherein it was held -"So far as the "So far as the argument of the Ld. argument of the Ld. Counsel for the assessee that waiver Counsel for the assessee that waiver of loan does not constitute a receipt, we are again not in of loan does not constitute a receipt, we are again not in of loan does not constitute a receipt, we are again not in agreement with the Ld. Counsel for the assessee regarding ement with the Ld. Counsel for the assessee regarding ement with the Ld. Counsel for the assessee regarding this contention also. Simply to say that the waiver of the this contention also. Simply to say that the waiver of the this contention also. Simply to say that the waiver of the

M/s J.B. Boda & Co. Pvt. Ltd. 49 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

loan amount does not constitute a receipt, in our view, will loan amount does not constitute a receipt, in our view, will loan amount does not constitute a receipt, in our view, will not be appropriate as it may lead to absurd, confusing and not be appropriate as it may lead to absurd, confusing and not be appropriate as it may lead to absurd, confusing and unintended interpretati unintended interpretation. In our view, if the donor gives to on. In our view, if the donor gives to a donee certain amount directly or indirectly it does not a donee certain amount directly or indirectly it does not a donee certain amount directly or indirectly it does not make a difference. To elaborate further, if the donor firstly, make a difference. To elaborate further, if the donor firstly, make a difference. To elaborate further, if the donor firstly, give some amount as a loan and then waive of or give some amount as a loan and then waive of or give some amount as a loan and then waive of or relinquish the right to recover the said amount, relinquish the right to recover the said amount, then, in our then, in our view, on the date of such remission or relinquishment, the view, on the date of such remission or relinquishment, the view, on the date of such remission or relinquishment, the nature of such loan changes from loan to receipt /gift". nature of such loan changes from loan to receipt /gift". nature of such loan changes from loan to receipt /gift". Therefore, it is submitted that cancellation of a liability Therefore, it is submitted that cancellation of a liability Therefore, it is submitted that cancellation of a liability results in a receipt in the hands of the debtor and results in a receipt in the hands of the debtor and results in a receipt in the hands of the debtor and therefore, the therefore, the assessee is entitled to deduction under assessee is entitled to deduction under section 80-0 on the amount of Rs. 10,03,71,942. 0 on the amount of Rs. 10,03,71,942. 11. For the sake of completeness, it is submitted that there 11. For the sake of completeness, it is submitted that there 11. For the sake of completeness, it is submitted that there is no bar on the assessee to make a claim for deduction is no bar on the assessee to make a claim for deduction is no bar on the assessee to make a claim for deduction under chapter VI under chapter VI-A of the Act on an income which i A of the Act on an income which is added in block assessment. This has been affirmed by the in block assessment. This has been affirmed by the in block assessment. This has been affirmed by the Tribunal in the assessee's own case in MA no. Tribunal in the assessee's own case in MA no. Tribunal in the assessee's own case in MA no. 320/M/2008 (pg. 123 of the legal compilation) wherein 320/M/2008 (pg. 123 of the legal compilation) wherein 320/M/2008 (pg. 123 of the legal compilation) wherein having regard to the Explanation to section 158BB and having regard to the Explanation to section 158BB and having regard to the Explanation to section 158BB and several decisions, it has been held that th several decisions, it has been held that the assessee is e assessee is entitled to claim deduction under chapter VI entitled to claim deduction under chapter VI-A in block A in block proceedings. This order of the Tribunal has not been proceedings. This order of the Tribunal has not been proceedings. This order of the Tribunal has not been recalled and has become final. recalled and has become final.” 15.5 We find that assessee has primarily made two submissions. We find that assessee has primarily made two submissions. We find that assessee has primarily made two submissions. Firstly, the undisclosed income declared in the return for the block the undisclosed income declared in the return for the block the undisclosed income declared in the return for the block period has been earned from the technical or professional services period has been earned from the technical or professional services period has been earned from the technical or professional services rendered. Secondly, the cancellation of liability, results in a receipt , the cancellation of liability, results in a receipt , the cancellation of liability, results in a receipt in the hands of the assessee, therefore the assessee is eligible for in the hands of the assessee, therefore the assessee is in the hands of the assessee, therefore the assessee is deduction u/s 80-O in respect of undisclosed income declared in O in respect of undisclosed income declared in O in respect of undisclosed income declared in the return of the block period. the return of the block period.

15.6 We have considered submission and arguments of both sides We have considered submission and arguments of both sides We have considered submission and arguments of both sides on this issue. We are the opinion that firstly, the undisclosed on this issue. We are the opinion that , the undisclosed

M/s J.B. Boda & Co. Pvt. Ltd. 50 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

income has been declared by way of writing off of as non-moving income has been declared by way of writing off of as non income has been declared by way of writing off of as non outstanding foreign creditor in the books of account of the assessee. outstanding foreign creditor in the books of account of the assessee. outstanding foreign creditor in the books of account of the assessee. The ld CIT(A) asked the assessee to substantiate that outstanding The ld CIT(A) asked the assessee to substantiate that The ld CIT(A) asked the assessee to substantiate that credits declared as undisclosed income are commission receipts for credits declared as undisclosed income are commission credits declared as undisclosed income are commission technical services, but the assessee failed in doing so. In our technical services, but the assessee failed in doing so. technical services, but the assessee failed in doing so. opinion, the credit balance in the case of the assessee might be opinion, the credit balance in the case of the assessee might be opinion, the credit balance in the case of the assessee might be from three sources. Firstly, brokerage commission income, from three sources. Firstly, brokerage commission income, from three sources. Firstly, brokerage commission income, secondly, premium amount collected from insurers but not paid to secondly, premium amount collected from insurers but not p secondly, premium amount collected from insurers but not p re-insurers, thirdly insurance claims received from re insurance claims received from re-insurer but insurance claims received from re not paid to insurer. not paid to insurer. Before the lower authorities, the assessee Before the lower authorities, the assessee submitted that as regard to commission income from brokerage submitted that as regard to commission income from brokerage submitted that as regard to commission income from brokerage relevant to AY 1996 evant to AY 1996-97 and 1997-98, the assessee had already , the assessee had already claimed section deduction deduction u/s 80-O of the Act in the regular return O of the Act in the regular return of income filed. Regarding the non of income filed. Regarding the non-moving creditor, the assessee moving creditor, the assessee himself has submitted that those were not routed through profit himself has submitted that those were not routed through profit himself has submitted that those were not routed through profit and loss account and and loss account and those amounts were belonging to those were belonging to those parties. In the footnote to the computation of und rties. In the footnote to the computation of undisclosed income in isclosed income in block return, the assessee has mentioned that ab , the assessee has mentioned that above credits were ove credits were offered to tax, however, if any claim arise on account of those , however, if any claim arise on account of those , however, if any claim arise on account of those balances written bac balances written back at any time, the same shall be allowed , the same shall be allowed as deduction from profit of the business of the year of payment of such deduction from profit of the business of the year of payment of such deduction from profit of the business of the year of payment of such claim. This undertaking of the assessee it undertaking of the assessee itself shows that the self shows that the undisclosed income declared is not undisclosed income declared is not arising from any technical or from any technical or professional services and arising only by way treating the professional services and arising only by way treating t professional services and arising only by way treating t

M/s J.B. Boda & Co. Pvt. Ltd. 51 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

outstanding balances of dues of foreign parties written off in its outstanding balances of dues of foreign parties written off in its outstanding balances of dues of foreign parties written off in its books of account.

15.7 Secondly, we also note that the assessee himself has admitted e also note that the assessee himself has admitted e also note that the assessee himself has admitted that money of outstanding creditor had been b that money of outstanding creditor had been brought into India on rought into India on 10/03/2002. The relevant observati . The relevant observation of ld CIT(A) is reproduced as on of ld CIT(A) is reproduced as under:

“7.3 With regard to the A.O's view that the undisclosed With regard to the A.O's view that the undisclosed With regard to the A.O's view that the undisclosed income income of of Rs.11,73,76,489/- Rs.11,73,76,489/ represented represented the the non- non moving/long outstanding credit balances which have been moving/long outstanding credit balances which have been moving/long outstanding credit balances which have been written back through the book entries and the appellant written back through the book entries and the appellant written back through the book entries and the appellant has not brought any amount in convertible foreign has not brought any amount in convertible foreign has not brought any amount in convertible foreign exchange in India, the appellant submitted that monies exchange in India, the appellant submitted that monies exchange in India, the appellant submitted that monies were lying abroad and were brought into India on were lying abroad and were brought into India on were lying abroad and were brought into India on 10.03.2002 i.e. before filing of the block return. 10.03.2002 i.e. before filing of the block return. The appellant observed that at para 6 on page 11 of The appellant observed that at para 6 on page 11 of The appellant observed that at para 6 on page 11 of the impugned order, the AO while specifying the conditions for impugned order, the AO while specifying the conditions for impugned order, the AO while specifying the conditions for eligibility of deduction us eligibility of deduction us 80-0 has stated as under: 0 has stated as under: "In fact we.f. 01.04.1998 this section has become "In fact we.f. 01.04.1998 this section has become "In fact we.f. 01.04.1998 this section has become even more restrictive and only income received by even more restrictive and only income received by even more restrictive and only income received by the assessee from the govt of a foreig the assessee from the govt of a foreign state or n state or foreign enterprise for the use outside India of any foreign enterprise for the use outside India of any foreign enterprise for the use outside India of any patent, invention, design or registered trade mark is patent, invention, design or registered trade mark is patent, invention, design or registered trade mark is considered and such income should be received in considered and such income should be received in considered and such income should be received in convertible foreign exchange." convertible foreign exchange." 15.8 When the money has been brou When the money has been brought in India only on ght in India only on 10/03/2002, then ld CIT(A) is correct in holding that the assessee , then ld CIT(A) is correct in holding that the assessee , then ld CIT(A) is correct in holding that the assessee has not brought the money into India within the time allowed by the has not brought the money into India within the time allowed by the has not brought the money into India within the time allowed by the RBI, and so the assessee is not eligible for deduction for this reason RBI, and so the assessee is not eligible for deduction for this reason RBI, and so the assessee is not eligible for deduction for this reason also.

M/s J.B. Boda & Co. Pvt. Ltd. 52 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

15.9 We find the provisions of section 80 We find the provisions of section 80-O for granting deduction granting deduction in respect of profession and technical services has been amended in respect of profession and technical services has been amended in respect of profession and technical services has been amended w.e.f 1/4/1998 as under: as under:

“80-O. "[Where the gross total income of an assessee, "[Where the gross total income of an assessee, being an Indian company *or a person (other than a being an Indian company *or a person (other than a being an Indian company *or a person (other than a company) who is resident in company) who is resident in India]], includes any income includes any income received by the assessee from the Government of received by the assessee from the Government of received by the assessee from the Government of a foreign State or foreign enterprise in consideration for the use" State or foreign enterprise in consideration for the use" State or foreign enterprise in consideration for the use" outside India of any patent, invention, design' or registered outside India of any patent, invention, design' or registered outside India of any patent, invention, design' or registered trade mark] "[*] "and such income is received in convertib trade mark] "[*] "and such income is received in convertib trade mark] "[*] "and such income is received in convertible foreign exchange in India, or having been received in foreign exchange in India, or having been received in foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been convertible foreign exchange outside India, or having been convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, converted into convertible foreign exchange outside India, converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in is brought into India, by or on behalf of the assessee in is brought into India, by or on behalf of the assessee in accordance with any law accordance with any law for the time being in force for for the time being in force for regulating payments and dealings in foreign exchange, regulating payments and dealings in foreign exchange, regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to there shall be allowed, in accordance with and subject to there shall be allowed, in accordance with and subject to the provisions of this section, "La deduction of an amount the provisions of this section, "La deduction of an amount the provisions of this section, "La deduction of an amount equal to (i) forty per cent for an as (i) forty per cent for an assessment year beginning on the eginning on the 1st day of April, 2001; st day of April, 2001; (ii) thirty per cent for an assessment year beginning on the ) thirty per cent for an assessment year beginning on the ) thirty per cent for an assessment year beginning on the 1st day of April, 2002; April, 2002; (iii) twenty per cent for an as ) twenty per cent for an assessment year beginning on sessment year beginning on the 1st day of st day of April, 2003; (iv) ten per cent for an as (iv) ten per cent for an assessment year beginning on the nning on the 1st day of April, st day of April, 2004, of the income so received" in, or brought into, India, in of the income so received" in, or brought into, India, in of the income so received" in, or brought into, India, in computing the total income of the assessee and no computing the total income of the assessee and no computing the total income of the assessee and no deduction shall be allowed in respect of the as deduction shall be allowed in respect of the assessment sessment year beginning on the 1 year beginning on the 1st day of April, 2005 and st day of April, 2005 and any subsequent assessment year]” bsequent assessment year]”

M/s J.B. Boda & Co. Pvt. Ltd. 53 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

14.10 The assessee is before us in respect of undisclosed income for The assessee is before us in respect of undisclosed income for The assessee is before us in respect of undisclosed income for the block period as result of search dated 7/11/2001. The return of the block period as result of search dated 7/11/2001. The return of the block period as result of search dated 7/11/2001. The return of undisclosed income for block period is distinct from the regular undisclosed income for block period is distinct from the regular undisclosed income for block period is distinct from the regular return of income. The asses return of income. The assessee has declared the undisclosed see has declared the undisclosed income post the search income post the search action and claiming deduction against the action and claiming deduction against the said undisclosed income, thus, said undisclosed income, thus, under amended provisions also, the under amended provisions also, the assessee is not eligible for making any claim assessee is not eligible for making any claim, even for a moment we even for a moment we presume that the receipt the receipt were from professional or technical from professional or technical services.

M/s J.B. Boda & Co. Pvt. Ltd. 54 IT(SS) No. 580/M/2004 & 18/M/2010 IT(SS) No. 580/M/2004 & 18/M/2010

Copy of the Order forwarded to forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai