Principal vs. M/S Geetanjali Builders Pvt. Ltd.

ITA-169-2018 (1) THE HIGH COURT OF MADHYA PRADESH: JABALPUR (Division Bench) ITA No. 169/2018 Principal Commissioner of Income Tax-1 …..............Appellant Vs. M/s Geetanjali Builders Pvt. Ltd. …........ Respondent ------------------------------------------------------------------------------------------- Coram: Hon’ble Shri Justice Ajay Kumar Mittal, Chief Justice Hon’ble Shri Justice Vijay Kumar Shukla, Judge ------------------------------------------------------------------------------------------- Appearance: Shri Sanjay Lal, Advocate for the appellant/Revenue. ------------------------------------------------------------------------------------------- JUDGMENT (Oral) [09.01.2020] Per: Ajay Kumar Mittal, Chief Justice: This appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961 (in short "the Act") against an order dated 19.06.2018 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Jabalpur (for brevity “the Tribunal”) in ITA No.134/JAB/2015 whereby the appeal filed by the appellant-Revenue against an order dated 13.02.2015 passed by the Commissioner of Income Tax (Appeals)-I [hereinafter referred to as “the CIT(A)”] deleting certain additions made by the Assessing Officer in respect of Assessment Year 2010-11 was dismissed. 2. The appellant-Revenue has claimed the following substantial questions of law for determination by this Court:- 1. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in upholding the decision of the Ld. ITA-169-2018 (2) CIT(A) in deleting the addition of Rs.3,82,24,844/- made by the Assessing Officer on the basis of impounded loose papers, holding it as double addition without appreciating the fact that papers relating to A.Y. 2010-11 were taken into consideration by the Assessing Officer along with papers where no date was mentioned and the onus was on the assessee to explain each and every paper found in the possession of the assessee? 2. Whether on the facts and circumstances and in law, ITAT was justified in not considering the decision of Hon’ble Apex Court in the case of Chuharmal vs. CIT (1988) 172 ITR 250/38 Taxmann 190 wherein the Hon’ble Apex Court held that Section 110 of the Evidence Act stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner is on the person who affirms that he is not the owner? 3. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in upholding the decision of the Ld. CIT(A) in deleting the addition of Rs.3,82,24,844/- made by the Assessing Officer on the basis of impounded loose papers, relying on the affidavit of the assessee that only one project “Shanti Residency” was under construction without appreciating the fact that at the time of survey, more than one projects were in progress, the facts of which was admitted by one of Director Shri Rahul Saraf at the time of survey proceedings? 4. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in upholding the decision of the Ld. CIT(A) in deleting the addition of Rs.3,82,24,844/- made by the Assessing Officer on the basis of the impounded loose papers without appreciating the fact that the Assessing Officer had considered impounded material for A.Y. 2009-10 and A.Y. 2010-11 separately and, therefore, order of ITAT is perverse on the facts? ITA-169-2018 (3) 5. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in upholding the decision of the Ld. CIT(A) in deleting the addition of Rs. 3,13,166/- made on account of expenses incurred outside the books of accounts without appreciating the fact that the addition was made on the basis of impounded material which were not recorded in the books of accounts of the assessee? 6. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in upholding the decision of the Ld. CIT(A) in deleting the addition of Rs.10,81,612/- made on account of expenses incurred outside the books of accounts without appreciating the fact that the addition was made on the basis of unrecorded transactions appearing in the impounded material sources of which were not explained for which deduction is not allowable as per the provisions of the Income Tax Act, 1961?” 3. Briefly stated, the facts of the case are that a survey operation was conducted against the assessee on 15.04.2010 wherein certain loose papers and registers were impounded from its premises. The assessee had filed its return of income on 09.10.2010 for the assessment year 2010-11 with declared income of Rs.27,53,030/-. The case was selected for scrutiny assessment and after completing the necessary procedure, the assessment was completed under Section 143(3) of the Act vide order dated 20.03.2013 (Annexure A-1) at an income of Rs.4,23,72,652/- as against declared income of Rs.27,53,030/-. As the assessee failed to explain the papers and they were found unrecorded in the books of accounts, the Assessing Officer made addition of Rs.3,82,24,854/-. For the same reasons, an addition of Rs.3,13,168/- was made in respect of the expenses incurred and further addition of Rs.10,81,612/- was made on account of difference in sales. Being aggrieved by the order of the Assessing Officer, the assessee preferred an ITA-169-2018 (4) appeal before the CIT(A). The CIT(A) vide order dated 13.02.2015 (Annexure A-2) deleted the addition of Rs.3,82,24,844/- on the ground that the addition made was double addition on same impounded papers for two assessment years i.e. 2009-10 and 2010-11 for a single project. The addition of Rs.3,13,166/- made on the basis that the expenditure was incurred outside the books of accounts also stood deleted by the CIT(A) by accepting that the seized papers on the basis of which this was sought to be added pertained to sub-contractors etc. in which case, copy of written explanation dated 26.12.2011 for financial year 2008-09 was submitted. The ITRs of sub- contractors showing 8% N.P. was also referred. Further, in relation to addition of Rs.10,81,612/-, the CIT(A) accepted the explanation of the assessee that the addition was sought to be made on the basis of estimate and it was not established that it pertained to project other than Shanti Residency. It was also taken into consideration by the CIT(A) that once the profit was calculated by applying NP/GP rate then the expenses were deemed to have been taken care of. Against the order of the CIT(A), the Revenue filed an appeal before the Tribunal, which was dismissed by the Tribunal vide order dated 19.06.2018 (Annexure A-3) thereby upholding the order of the CIT(A). In this manner, the present appeal has been filed by the appellant- Revenue. 4. Learned counsel for the appellant has assailed the impugned order inter alia on the ground that the onus was on the assessee to explain each and every paper found in his possession and since he failed to explain the loose papers impounded during the survey proceedings and the same were found to be unrecorded in his books of accounts, therefore, rightly the addition of Rs.3,82,24,844/- was made by the Assessing Officer in that ITA-169-2018 (5) behalf. To bolster this argument, learned counsel has placed reliance upon the Supreme Court decision in Chuharmal vs. Commissioner of Income Tax, M.P. Bhopal (1988) 172 ITR 250 (SC) = (1988) 3 SCC 588. It was further contended that during the survey, loose papers belonging to all the six sites relating to assessment years 2009-10, 2010-11 and 2011-12 were impounded. The Assessing Officer had taken into consideration the loose papers relating to the assessment year 2010-11. The CIT(A) in its order for the assessment year 2009-10 enhanced an amount of Rs.68,37,180/- to the addition of Rs.36,62,800/- made by the Assessing Officer on account of loose papers for the relevant year but in the assessment order nowhere it is mentioned that all the loose papers pertained to the assessment year 2009- 10. The Assessing Officer had sought clarification from the assessee vide notice dated 12.03.2013 to specify the bundle no. and page no. of the loose papers. In response, the assessee in his written submission explained the said papers but did not point out that the said papers belong to the assessment year 2009-10. It was further contended that at the time of survey more than one project were in progress but only on the basis of the affidavit of the assessee that only one project was under construction which was although contradicted by the statement of one of the Director Shri Rahul Saraf, the CIT(A) deleted the addition of Rs.3,82,24,844/-. This fact has not been appreciated by the learned Tribunal. Similarly, with regard to deletion of the additions of Rs.3,13,166/- and Rs.10,81,612/-, learned counsel argued that the Tribunal has not properly appreciated that these additions were made on the basis of the unrecorded transactions which were apparent from the impounded material and books of accounts of the assessee. ITA-169-2018 (6) 5. We have heard learned counsel for the appellant and perused the impugned orders. 6. The question Nos.1 to 4 relate to deletion of addition of Rs.3,82,24,844/- by the CIT(A) and upheld by the learned Tribunal. 7. The question that the onus was on the assessee to explain each and every paper found in his possession does not arise in the present case. In the present case, the assessee had filed its return of income for the assessment year 2010-11 declaring total income of Rs.27,53,030/- on 09.10.2010. Thereafter, the case was selected for scrutiny. During the course of survey some loose papers and registers are said to have been impounded from the premises of the assessee. The papers relating to F.Y. 2009-10 were taken into consideration by the Assessing Officer along with the papers where no date was mentioned and after considering the written submissions made by the assessee and verifying with the books of the assessee, the Assessing Officer assessed the income at Rs.4.23 Crores and made the aforesaid additions (Rs.3,82,24,844 + Rs.3,13,166 + Rs.10,81,612) totalling to Rs.3,96,19,622/- with the observation that the assessee failed to explain the papers, which were also found not recorded in the books of account. Before the CIT(A) it was contended by the assessee that during the survey conducted on 15.04.2010 only one project namely, Shanti Residency was going on. The Assessing Officer made addition of Rs.36.62 Lac which was further enhanced by the CIT(A) by Rs.68.37 Lac vide order dated 10.09.2013. In this manner, the total addition was confirmed of Rs.1.05 Crores and further addition was confirmed at Rs. 2 Lac under Section 68 of the Act. Having observed so, the CIT(A) found that the present assessment (A.Y. 2010-11) ITA-169-2018 (7) was based on the same set of papers on the basis of which additions were made and confirmed in the assessment year 2009-10. It was noted that the assessee had filed second appeal against the decision of the CIT(A) relating to the assessment year 2009-10. Thus, there was double addition on same papers for two assessment years for a single project. The papers were forwarded to the Assessing Officer but no effort was made by him to cross- check the same. The second remand report was called for, which was received from the Assessing Officer on 29.01.2015. The assessee also submitted his affidavit regarding the facts in accordance with Rule 10 of the Appellate Tribunal Rules, 1963 as the fact whether one project was going on or there were multiple projects could not be proved in any other manner. Considering thus, the CIT(A) held that the case of the Department for addition of Rs.3,82,24,844 was not established and the addition made was double addition and therefore, was deleted. The relevant extract of the findings recorded by the CIT(A) reads as under:- “3.1 I have considered the written submissions and the claims and counter claims of both the AO and assessee. What appears apparent is that there is addition based on seized papers, at one time on percentage basis, and on the other occasion paper wise. It is clear from the contention of the assessee that the only basis for claiming by the AO that there were multiple projects running, is the chart showing six different entries, five of which actually pertain only to receipts from sale. It is factually verified from the final accounts submitted by the assessee that there was no additional cost incurred in course of the year and the cost was shown only on opening balance. Only the realization of receipts from sale of plots, shops etc., is shown, all of which have been offer to tax and have been added in addition to the GP rate addition by the AO and further enhancement by the CIT(A) in A. Yr. 2009-10. 3.2 I find force in the contention of the AR that once the entire project is covered, it is immaterial whether expenses, pertained to A.yr. 2009-10 or 2010-11 because once income is estimated by application of either GP ITA-169-2018 (8) or NP rate then all the expenses and receipts are deemed to have been taken care of. It is also a fact that the seized papers do not prove that multiple projects were run. The AO has also not been able to deny that the seizure was on the site of Shanti Residency project/HO and not on any other site. In fact, it could have been easy to gather physical evidence of running of sites by way of spot investigation which was not done, or which, if done, has not yielded a result in conformity with the conclusions which have been drawn by the AO. Even if for argument sake, it is assumed that there was likelihood of multiple projects, all could not pertain to the instant A. Yr. If so how none of them were brought to tax in any manner in A. Yr. 2009-10 is a moot point. 3.3 It is further observed that the assessee has submitted an affidavit in line with the spirit of law embodied in rule 10 of Appellate Tribunal Rule 1963. In case of facts not (decisively) proven either way, an affidavit is a useful tool of evidence which can be utilized for drawing conclusions on insufficient premises when neither direct evidence nor preponderance of probabilities operate and apply. In the instant case the contention of the assessee is in fact, stronger because it has been demonstrated that there is complete absence of positive proof on the part of the department. It is trite law that the onus of proof lies on the party making the affirmative claim. It is not for the opposite party to prove the negative unless and until mandated by law (for example u/s 68). 3.4 The case of the assessee is further strengthened by the fact that it supported its contentions and claims by further submitting another affidavit that in order to by peace and bring the legislation to an amicable end it is willing to withdraw the appeal before Hon’ble ITAT for A. Yr. 2009-10, if this double addition plea is accepted. Although the law does not mandate any agreement between the revenue/appellate authority and the tax payer, the fact that the assessee is willing to put an amicable end to the litigation is definitely a relevant point which is required to be considered in the decision making process. Scanned copy of the affidavit is given as under.” Thereafter, relying upon the judgment reported as (2006) 100 TTJ (Del) 665 (Bansal Strips (P) Ltd. And others vs. ACIT), on the point that the Assessing Officer has to act fairly as a reasonable person and not arbitrarily ITA-169-2018 (9) or capriciously on conjectures and surmises, the CIT(A) concluded as under:- “3.6. In view of complete absence of positive proof on part of the AO, failure to conduct field investigation to establish the conclusion drawn, failure to rebut the forceful contentions made on the aspect of double addition by the assessee, I am inclined to hold that the case of the department is not established and on facts on record, the addition made is indeed double addition. Accordingly, addition made is directed to be deleted.” 8. In Chuharmal‘s case (supra), which has been relied upon by the appellant, the assessee therein did not adduce any evidence and also did not prove that the wrist-watches which were seized from his possession did not belong to him. It was in such circumstances, the Supreme Court held that a legitimate inference could be drawn that the assessee was the owner of the wrist-watches and had income which was invested in purchasing the wrist- watches and the value thereof must be deemed to be the income of the assessee. However, in the case in hand, once it was found that there was double addition on same papers for two assessment years for a single project, it cannot be said that the assessee had failed to explain the loose papers despite the onus was placed upon him to prove the loose papers. In this view of the matter, no benefit can be derived by the Revenue from the judgment in Chuharmal‘s case (supra), which is distinguishable on facts and is not applicable in the present case. 9. Further, we do not find any force in the submission advanced by the appellant that at the time of survey more than one project was in progress. The CIT(A) specifically observed that the Assessing Officer had failed to prove that the seizure was in respect of site different from Shanti Residency project and no effort was made by him to make spot inspection to prove that ITA-169-2018 (10) at the time of survey other projects of the assessee were also running. The Assessing Officer had also not been able to substantiate that there was really any other project running at the same time, otherwise the Assessing Officer ought to have subjected them to tax in the assessment year 2009-10 as well, which had not been done. 10. As regards the argument of the learned counsel in respect of deletion of addition of Rs.3.13 Lac on the basis of the expenditure made out of books of accounts, it is gathered that the CIT(A) deleted the said addition accepting the plea of the assessee that the papers pertaining to the expenses shown in those papers were not part of his accounts but were related to the sub- contractors and the sub-contractors had also filed ITRs showing 8% NP. The CIT(A) also deleted the addition of Rs.10,81,612/- on the ground that the Revenue failed to substantiate that the papers pertained to project other than Shanti Residency and there was reason to believe that when the profit was calculated on the basis of the NP/GP rate then there was nothing to separate the expenses therefrom. The relevant extract of the findings recorded by the CIT(A) in regard to deletion of addition of Rs.3.13 Lac and Rs.10,81,612/- is as under:- “4. This ground is related to addition of Rs.3.13 Lacs on the basis of expenditure made out of books of accounts. These are claimed to be new set of papers pertaining to expenses not recorded in books. It is the claim of the assessee that these are actually papers pertaining to sub-contractors etc. and do not pertain to it. It is further the claim of the AR that the statements of these sub-contractors were recorded. It appears that what assessee wants to say is that various payments which were made to sub- contractors were further made to various parties on site by sub-contractors. Hence, no entry was made in the books of the assessee because papers were not part of its accounts. ITA-169-2018 (11) On this issue the AO has merely reiterated that the additions were made correctly and has relied on the assessment order. In assessment order AO has mentioned that assessee FAILED to prove any explanation in respect of these papers. I find this factually incorrect. The AR has submitted copy of written explanation dated 26/12/2011 for F. Yr. 2008-09 in which this explanation was given. Also fact of sub-contractors filing ITRs showing 8% NP was also referred. This is also covered by judgment in the case of Bansal Strips (supra). This addition is accordingly directed to be deleted. (Relief Rs.3,13,166/-) GOA 4: This ground is regarding addition of Rs.10,81,612/- on loose papers serial no.1 to 5 which are clearly labelled as estimate. The relevant discussion appears in the order of the AO on page 16 and the same is reproduced as under:- *** *** *** The assessee has strongly assailed this addition by reproducing the seized documents in written submission dated 13/08/2014 and has contended that once the profit is calculated by applying NP/GP rate then expenses are deemed to be taken care of. Further, the assessee has strongly relied on the nature of the papers stating that it can be clearly seen that the seized papers are clearly captioned as estimate. Along with this fact, there being only one project running also is a relevant fact. I find it ironical that papers which were being contested by the assessee that they are not germane to the estimation of income are now being relied upon for their veracity in order to buttress its contention that the addition should not be made. Be that as it may, the force in the contention of the assessee is clear. The aspect of papers being captioned as estimate and not being established as pertaining to project other than Shanti Residency are uncontroverted. The NP rate argument too is unassailable. Hence, based on above reasoning the addition is directed to be deleted.” 11. On the appeal of the Revenue, the learned Tribunal found that the Revenue had not brought any material to rebut the findings of the CIT(A) ITA-169-2018 (12) and thus, the findings recorded by the CIT(A) in deleting all the three additions being the findings of fact rendered after thorough and detailed analysis of the material on record by the CIT(A), were affirmed by the Tribunal. 12. Keeping in view the findings recorded by the CIT(A) which have been affirmed by the learned Tribunal and considering the same on the touchstone and anvil of the arguments advanced by the learned counsel for the appellant/Revenue, we find no reason to differ as no illegality or perversity has been pointed out by learned counsel for the Revenue in the aforesaid findings of fact, which may warrant interference by this Court. 13. In view of the foregoing reasons, no substantial questions of law, as claimed, arise in this appeal. Consequently, the appeal being sans substance, the same is dismissed. (Ajay Kumar Mittal) (Vijay Kumar Shukla)

Chief Justice Judge S/ Digitally signed by SACHIN CHAUDHARY Date: 2020.03.17 14:52:54 +05'30'