M/S MOTIA CONSTRUCTIONS LTD.,ZIRAKPUR vs. DCIT, PATIALA

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 20.09.2012 of the Commissioner of Income Tax (Appeals)-1, Ludhiana [hereinafter referred to as ‘CIT (A)’]

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 2 business relation with the then Director of the Company Shri Pawan

Bansal. During search action, cash worth Rs. 62,75,000/- was found at

his premises. Apart from that, certain incriminating documents

evidencing unaccounted transactions of Assessee Company in respect of

difference in construction / sale of flats were also found. The statement

of Shri R.M. Singla was recorded during the search action and in his

statement recorded on 7.5.2008, he stated that out of the cash found at

his premises, Rs. 40 lacs belonged to the assessee company. Summons

were also issued u/s 131 of the Act to Shri Pawan Bansal, the then

director of the assessee company, whose statement was also recorded on

10.5.2008, wherein, he confirmed that cash of Rs. 40 lacs found at the

premises of Shri R.M. Singla belonged to the assessee company. When

confronted with other documents found, Shri Pawan Bansal, surrendered

a sum of Rs. 150 lacs as additional income of the company which

included cash of Rs. 40 lacs owned up by Shri Pawan Bansal on behalf

of the assessee company. Therefore, total surrender by Shri Pawan

Bansal, on behalf of the assessee was at Rs. 150 lacs i.e. Rs. 40 lacs

found cash with Shri R.M. Singla plus Rs. 110 lacs on account of

unexplained transactions relating to the construction and sale of flats.

Thereafter, a search action was carried out at the premises of the

assessee company also on 25.2.2009 during which the assessee

company again surrendered the additional sum of Rs. 85 lacs on account

of difference in sale and construction of flats. Thereafter, the assessee

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 3 company filed return of income for the assessment year under

consideration and disclosed the surrendered amount at Rs. 1.95 crores

instead of total surrender of Rs. 2.35 crores. The assessee company did

not add amount of Rs. 40 lacs which was found at the premises of Shri

R.M. Singha but owned by the assessee company through its director.

The assessee company further claimed deduction u/s 80IB in respect of

the surrendered income of Rs. 1.95 crores reflected in the Profit & Loss

account.

the assessee explained that the cash given to Shri R.M. Singla was out

of the cash available in the books of the company. That the assessee

never changed its stand that the cash of Rs. 40 lacs was given to Shri

R.M.Singla by the assessee company, however, the same was

inadvertently surrendered as unaccounted, whereas, the same was duly

accounted for in the account books of the company. In respect of the

claim of deduction u/s 80IB of the Act, it was submitted that the

surrendered income represented the business income of the assessee.

That since the assessee was involved in housing development business

and the said income was derived from business of developing housing

project, hence, the assessee was entitled to claim deduction u/s 80IB(1)

of the Act on the said surrendered income. The Assessing Officer,

however, did not agree with the aforesaid contention raised by the

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 4 assessee. The Assessing Officer observed that the director of the

assessee in his statement had admitted that the aforesaid amount for Rs.

40 lacs found from the premises of Shri R.M. Singla, was unaccounted

income of the assessee company. Further, in respect of claim of

deduction u/s 80IB, the Assessing Officer rejected the contention of

the assessee on the ground that unless the assessee establishes a clear

link between unaccounted income and its housing project, the same

would not be eligible for deduction u/s 80IB of the Act.

assessee preferred appeal before the CIT(A), however, the CIT(A)

dismissed the appeal of the assessee by upholding the findings of the

Assessing Officer. The assessee, thus, has come in appeal before us,

with the following grounds of appeal:-

b) That the Ld. CIT (A) is not justified in not accepting the book results in which entries of such cash of Rs. 40 lacss was duly recorded.

c) Without prejudice to above, (i) The appellant disputes the quantum of addition.

(ii) That the Ld. CIT (A) is not justified in not allowing the deduction u/s. 80-IB (10) on addition of Rs. 40 Lacs being eligible for deduction.

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 5 2. a) That the Ld. CIT (A) is not justified in confirming the disallowance of deduction u/s. 80-IB (10) on the surrendered amount of Rs. 195 Lacs.

b) That the Id. CIT (A) is not justified in not treating the surrendered amount of Rs. 195 Lacs as income from Housing Project being eligible for deduction u/s. 80-IB (1) .

c) Without prejudice to above, the appellant disputes the quantum of deduction u/s. 80-IB (10).

Representatives of both the parties and have gone through the record.

Ground No.1: 6. Vide this ground, the assessee has contested the

addition of Rs. 40 lacs which was found in cash from the premises of

one Shri R.M. Singla and further owned up by the assessee company

through its director. The Ld. Counsel for the assessee in this respect

has invited our attention to page 10 of the paper book which is copy of

the reply filed to the Assessing Officer during the assessment

proceedings. In para 2 of the said reply, it has been stated that after

search, the assessee company reconciled the amount of cash found with

Shri R.M. Singla and noted that the said amount was duly recorded as

an ‘imprest’ given to Shri Pawan Bansal, the then Managing Director of

the company in the books of account of the company and the surrender

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 6 of Rs. 40 lacs was wrongly made as the same was duly verifiable and

explainable. The Ld. counsel in this respect has submitted that the said

amount of Rs. 40 lacs was further given by Shri Pawan Bansal to Shri

R.M. Singhla for purchase of the property. That there was no

discrepancy between the statements of Shri R.M.Singla and Shri Pawan

Bansal recorded during the course of search and investigation

proceedings. During the course of search of proceedings on 7.5.2008,

Shri R.M. Singla stated that cash of Rs. 40 lacs belonged to the assessee

company which was given to him by Shri Pawan Bansal. When Shri

Pawan Bansal was confronted, he duly admitted that he had paid Rs. 40

lacs to Shri R.M. Singla, on behalf the company. However, Shri Pawan

Bansal surrendered the said amount as ‘unexplained income’ but later on

when the accounts were reconciled, it was found that the said amount of

cash was duly recorded in the books of account of the company and

shown to be paid to Shri Pawan Bansal and had never been used for

other purposes. However, the same has not been received back till date

as the same was seized by the Department. It, has therefore, been

submitted that only because during the statement of Shri Pawan Bansal,

he inadvertently under the wrong impression without consulting the

accounts had offered the said amount addition income of the assessee,

however, the source of the said amount had been duly explained by the

assessee company from its books of account / cash book.

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 7 7. The Ld. DR on the other hand, has submitted that there is no

allegation that the statement of Shri Pawan Bansal recorded in the

course of post survey action / proceedings was recorded under any

threat or coercion. That he himself had surrendered the said amount as

‘unaccounted income’ of the company. He therefore, has relied upon the

findings of the lower authorities.

In this case, there is no discrepancy or contradiction in the statement of

Shri R.M. Singla and Shri Pawan Bansal, the then Managing Director of

the company. Shri R.M.Singla during the search action stated that

amount for Rs. 40 lacs belonged to the assessee company which was

promptly confirmed by Shri Pawan Bansal that the said amount belonged

to the assessee company. However, when the accounts of the company

were consulted, it was found that the said amount of cash was duly

recorded as an ‘imprest’ given to Shri Pawan Bansal which was further

handed over by Shri Pawan Bansal to Shri R.M.Singla. Search action

later on was also conducted at the premises of the assessee company

and no other cash was found during the course of search action. There

is no evidence that the cash amount of Rs. 40 lacs given as an ‘imprest’

to Shri Pawan Bansal has been used for some other purposes. Shri

Pawan Bansal on the date of search, during the search action at the

premises of Shri R.M.Singla promptly admitted that the cash of Rs. 40

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 8 lacs has been given by him to Shri R.M. Singla on behalf of the assessee

company. All the facts relating to the aforesaid cash of Rs. 40 lacs have

been duly explained and further the explanation given by the assessee in

this respect inspires confidence as neither there is any difference in

respect of the amount in question nor in respect of the source of the

same. The books of account of the assessee are dully audited by the

auditor and no defect has been found in the same by the Revenue

authorities.

In view of this, the assessee rightly did not offer the said amount

of Rs. 40 lacs as its additional income. The addition made / confirmed

by the lower authorities in respect of the aforesaid amount, therefore, is

not sustainable in the eyes of law and the same is accordingly ordered to

be deleted.

action of the lower authorities in not allowing deduction u/s 80IB (10)

of the Act in respect of the surrendered amount of Rs. 195 lacs . It is

undisputed fact that the surrendered amount of Rs. 195 lacs was not on

account of any cash or other valuable article or thing found at the

premises of the assessee company, rather, the said surrendered was

made on account of certain documents found showing unaccounted

construction / sales of flats. It has also not been disputed that the

assessee has been constructing a housing project which was eligible for

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 9 deduction u/s 80IB of the Act. The documents found during search

action clearly revealed that the same related to the business activity /

business profits of the assessee company. There is no evidence to link

the aforesaid surrender with any other income from any other source of

the assessee, as the nature of the income / surrender is duly revealed

from the documents found and seized during the search action. The Ld.

counsel for the assessee has also invited our attention to the page 6 of

the paper book, which is a letter of surrender, wherein, it has been

clearly stated that Rs. 85 lacs have been surrendered to cover up

discrepancy found during the course of search including the difference

in sale of flats / construction.

The facts on the file itself speaks that the aforesaid surrender was

out of the unexplained profits of the assessee company from its housing

projects. There is no allegation that the said income is belonging to any

other project or activity of the assessee. The discrepancy, if any, found

was in respect of the accounts of the housing project of the assessee

because of which the aforesaid surrender was made. Hence, the said

income can safely be said to be belonged to the housing project business

of the assessee. Having held so, the assessee is accordingly eligible

to claim exemption u/s 80IB of the Act on the said income. We,

therefore, do not find any justification on the part of the lower

authorities for denying deduction of the assessee in respect of the

aforesaid income. The impugned order of the CIT(A) on this issue is set

ITA No. 1228-Chd-2012- M/s Motia Construction Ltd, Zirakpur 10 aside and the Assessing Officer is accordingly directed to allow deduction u/s 80IB of the Act to the assessee on the aforesaid amount of

Rs. 195 lacs.

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 27.12.2019 “आर.के.”

आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar