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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri G. Manjunatha & Shri Ravish Sood
P a g e | 2 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. O R D E R
PER RAVISH SOOD, JM
The present cross appeals filed by the assessee and the revenue are directed against the order passed by the CIT(A)-40, Mumbai, dated 25.02.2014, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 28.03.2018. As a common issue is involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. The assessee has assailed the impugned order on the following grounds of appeal before us:
“Being aggrieved by the order of the learned Commissioner of Income Tax, Appeal - 40, this appeal petition is submitted on the following grounds , which it is prayed may be considered independently without prejudice to one another.
1. On the facts and circumstances of the case and in law, learned Commissioner of Income Tax, appeal-40, Mumbai erred in confirming part addition of Rs.1,88,04,000/- to the total income of the appellant as unexplained expenditure/investment in capital assets on the grounds that there appears to be no direct correlation of the expenditure vis-à-vis seized records. The addition is bad in law and the same needs to be cancelled.
2. The appellant company craves leave to add, to amend, alter/delete and/or modify the above ground of appeal on or before the final date of hearing.”
2. On the other hand the revenue has challenged the order passed by the CIT(A) on the following grounds of appeal:
“1. Whether on the facts and circumstances of the case and in law, the CIT(A) was correct in holding that the reliance placed by the assessee on the seized papers was acceptable without appreciating the fact that the assessee was not able to prove the nexus between the capital expenses in cash and cash from bogus bills? 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was correct in applying the three case law of Biren V. Salva vs. ACIT (2006)100 TTJ 1006; the decision of Supreme Court in the case of Dhakeshwari Cotton Mills 26 ITR 775; and the Kerala High Court in the case of CIT vs. P. D. Abrahan Alias Appachan 349 ITR 442, even though the facts of the cases applied and the instant case are completely different?
P a g e | 3 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. 3. The appellant craves to leave, to add, to amend and / or to alter any of the grounds of appeal, if need be.
4. The appellant therefore, prays that on the grounds stated above, the order of the CIT(A)-40, Mumbai, may be set aside and that of the Assessing Officer restored. 2. Briefly stated, the assessee company belongs to “Kanakia group”, which is engaged in construction, real estate, hospitality business etc. The assessee company is engaged in hotel business and operates a hotel, viz. Hotel Courtyard Marriot. Search and seizure proceedings under Sec. 132 of the Act were carried out on 29.03.2011 on “Kanakia group”, and the directors of the group entities were also covered. Subsequent to the search proceedings the assessee company surrendered an amount of Rs.4,41,26,298/-towards „bogus bills‟ booked during various years in its „books of account‟, viz. A.Y 2008-09 (Rs. 1,85,64,923/-); A.Y 2009-10 (Rs. 2,49,59,227/-); A.Y 2010-11 (Rs. 2,99,538/-); and A.Y 2011-12 (Rs. 3,02,609/-). The A.O while framing the assessment observed that the assessee company had made unexplained investments in various capital assets by incurring expenditure in cash. The explanation of the assessee that the cash received back against payment made towards „bogus purchases‟ was used to make investments in the aforesaid assets was not subscribed by the A.O, who rejected the same. On the contrary, it was observed by the A.O that the investments made by the assessee could be from receipt of “On money” on sale of flats etc. Thus, the A.O treated the unexplained investment/expenditure on contribution/furnishing of Hotel Courtyard Mariott of Rs. 3,88,78,000/- as the income of the assessee from undisclosed sources, and brought the same to tax under the head „Other sources‟ in the hands of the assessee company. Accordingly, the A.O after inter alia making the aforesaid addition assessed the case at a loss of Rs. 226,69,88,299/-, which was allowed P a g e | 4 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. to be carried forward, vide his order dated 28/03/2013 passed u/s 143(3) of the Act.
3. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The assessee inter alia assailed the addition of Rs.3,88,78,000/- made by the A.O towards unexplained investment/expenditure in acquisition of „capital assets‟. It was observed by the CIT(A), that the investment/expenditure of Rs.3,88,78,000/- was incurred by the assessee in respect of construction/furnishing of Hotel Courtyard Marriot during the year, as under:
Sr. No. Particulars Amount 1. Flooring Rs.1,26,52,000/- 2. Bathroom fittings & Plumbing Rs. 74,22,000/- 3. Electrical fittings Rs. 79,80,001/- 4. Furniture & fittings Rs.1,08,24,000/- Total Rs.3,88,78,000/- The assessee in order to buttress his claim that the cash which was received back by it against payments made towards „bogus purchases‟ was used to make investments in the aforesaid assets, relied on the contents of a „diary‟ that was seized during the course of the search proceedings from its office premises on 24.05.2011, viz. Annexure A2- Page 13. On a perusal of the aforesaid seized „diary‟, it was observed by the CIT(A), that the same revealed the details of cash received back by the assessee against the payments made towards „bogus bills‟ and the expenditure incurred out of the said amount, as under:
“HimanshuBhai Lacs Bal with You-1/4/09 Against various purchase bills 1242.39 +Received till 30/09/09 purchase bills 700.12 1942.51 Less: Paid capex – meriott P a g e | 5 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. Flooring 126.52 Bathroom fitting and plumbing 74.22 Paid New Atrium Office- CMI 26.47 Plastering 24.63 Plumbing 8.86 59.96 260.70 Bal with U 1681.81” On the basis of the aforesaid facts as were discernible from the seized diary, viz. Annexure A2 - Page 13, it was noticed by the CIT(A) that an amount of Rs.1,26,52,000/- was incurred by the assessee in respect of flooring of the Hotel Courtyard Marriot. Further, it was observed by him that an amount of Rs.74,22,000/- was incurred by the assessee in respect of bathroom fittings and plumbing etc. Accordingly, it was noticed by the CIT(A) that a perusal of the aforesaid seized „diary‟, viz. Annexure A2 - Page-13, revealed that an investment aggregating to Rs.2,00,74,000/- [Rs. 1,26,52,000/- (+) Rs. 74,22,000/-] was made by the assessee towards construction/furnishing of Hotel Courtyard Marriot. In the backdrop of the aforesaid facts, the CIT(A) was persuaded to accept the claim of the assessee that the investment/expenditure of Rs.2,00,74,000/- incurred towards construction/furnishing of Hotel Courtyard Marriot was made from the cash that was received back by the assessee against the payments made towards „bogus bills‟. Accordingly, the CIT(A) was of the view that as a perusal of the seized diary, viz. Annexure A2- Page 13 clearly revealed that the investment/expenditure of Rs. 2,00,74,000/- made/incurred by the assessee towards construction/furnishing of Hotel Courtyard Marriot was sourced from the cash that was received back against the payments made towards „bogus bills‟, therefore, the explanation of the assessee to the said extent did merit acceptance. At the same time it was observed by the CIT(A), that as there was no direct correlation of the expenditure aggregating to Rs.1,88,04,000/- incurred by the assessee towards construction/furnishing of the Hotel P a g e | 6 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. Courtyard Marriot, viz. (i) electrical fittings: Rs.79,80,001/-; and (ii) furnishing and fittings: Rs.1,08,24,000/-, therefore, the source of the investment/expenditure to the said extent had remained unexplained. Accordingly, the CIT(A) upheld the addition to the extent of Rs.1,88,04,000/-.
That both the assessee and the revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee took us through Page 13 of Annexure A2 i.e the extract of the „diary‟ that was seized during the course of the search proceedings from the office premises of the assessee on 24.05.2011. Also, a typed copy of the said seized „diary‟ was placed on our record by the assessee. It was submitted by the ld. A.R, that the assessee during the course of the search proceedings had declared an undisclosed income of Rs.4,41,26,298/- in respect of „bogus purchases‟ which were debited in its „books of accounts‟, and accordingly had reduced the said amount from the cost of the building. It was submitted by the ld. A.R, that the cash received back by the assessee against payments made towards „bogus purchases‟ was spent on the construction/furnishing of Hotel Courtyard Marriot. In order to fortify his aforesaid contention, it was submitted by the ld. A.R that the „source‟ of the investment/expenditure made by the assessee towards the construction/furnishing of the hotel building was clearly discernible from the seized document viz. Annexure A2 – Page 13. In fact, it was submitted by the ld. A.R, that the A.O had most arbitrarily perused the contents of the seized document viz. Annexure A2 – Page 13. It was submitted by the ld. A.R, that though the A.O on the basis of the contents of the aforesaid seized document viz. Annexure A2 - Page 12 had gathered the details as regards the investment made by the assessee towards construction/furnishing of the Hotel Courtyard P a g e | 7 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. Marriot, but had most arbitrarily shut his eyes to the fact that the said investment, as per the said seized document itself was clearly stated to have been sourced from the cash that was received back by the assessee against the payments made towards „bogus bills‟. In sum and substance, it was the claim of the ld. A.R, that a partial reading of the aforesaid seized document, viz. Annexure A2 – Page 13 and drawing of adverse inferences on the said basis in the hands of the assessee did not merit acceptance. It was the claim of the ld. A.R, that now when the investment made by the assessee towards construction/furnishing of the Hotel Courtyard Marriot was being inferred and brought to tax on the basis of the contents of the said seized document, viz. Annexure A2 – Page 13, therefore, it was not permissible on the part of the A.O not to take cognizance of the „source‟ of such investment/expenditure that was clearly stated in the said seized document itself. Apart there from, it was averred by the ld. A.R, that the conviction of the A.O that the investment made by the assessee towards construction/furnishing of the hotel building was sourced out of „On money‟ received on sale of property was totally misconceived and bereft of any basis. It was submitted by the ld. A.R, that as the assessee was only engaged in construction of a hotel building viz. “Courtyard Marriot” and was not into the business of real estate, therefore, the aforesaid observation of the A.O was liable to be discarded. Further, it was submitted by the ld. A.R, that the CIT(A) by failing to take cognizance of the remaining part of the seized document viz. Annexure A2- Page 13, wherein the „source‟ of the balance investment of Rs.1,88,04,001/- towards construction/furnishing of the hotel building was clearly stated to have been made from the amounts received back by the assessee against the payments made towards „bogus bills‟, had thus erred in sustaining the addition to the said extent. Accordingly, it was submitted by the ld. A.R, that now P a g e | 8 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. when the „source‟ of the investment made by the assessee towards construction/furnishing of the Hotel Courtyard Marriot was clearly explained to have been made out of the declared undisclosed income of Rs. 4,41,26,298/- pertaining to „bogus bills‟ which were booked by the assessee in its „books of accounts‟, therefore, there was no justification for the A.O to have made any further addition in respect of the same.
Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had failed to substantiate the „source‟ of the investment made towards construction/furnishing of the Hotel Courtyard Marriot, therefore, the A.O had rightly made an addition of Rs.3,88,78,000/- in its hands. It was submitted by the ld. D.R that the assessee had failed to establish an inextricable nexus between the investment made towards the construction/furnishing of the Hotel Courtyard Marriot and the undisclosed income declared by it towards „bogus purchases‟. In order to fortify his aforesaid contention the ld. D.R took us through the relevant observations of the A.O.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Admittedly, during the course of the search and seizure proceedings conducted on “Kanakia group” which was engaged in construction, real estate, hospitality business, etc., a „diary‟ viz. Annexure A2 was seized from the office premises of the assessee. Before adverting any further, in our considered view, it would be relevant to dwell on the aspect as regards the reliability of the contents of the documents which are found and seized during the course of the search proceedings conducted on an assessee. As per Sec.292C of the P a g e | 9 ITA No.3186 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. Act, where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in possession or control of any person in the course of search proceedings conducted under Sec.132 of the Act, it may, in any proceeding under this Act, be presumed, viz. (i) that, such books of account, other documents, money, bullion, jewellery, or other valuable article or thing belong or belongs to such person; (ii) that, the contents of such books of account and other documents are true; and (iii) that, the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in handwriting of, any particular person, are in that persons handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. Also, a similar presumption in respect of books of account, other documents, money, bullion, jewellery or other valuable article or thing which are or is found in the possession or control of any person in the course of the search proceedings conducted under Sec.132 can be traced in sub-section (4A) of Sec. 132 of the Act.
Now, in the case before us, a „diary‟, viz. Annexure A-2 was seized during the course of the search proceedings from the office premises of the assessee company. Admittedly, a perusal of Page 13 of the said seized document viz. Annexure A2, reveals as under:
Particulars Rs.(in lacs) Balance with you as on 01.04.2009 against‟ 1,242,39 Various purchase bills Add: Received up to 30.09.2009 purchase bills 700.12 1,942.51 Less: Capex Meriott Flooring 126.52 Bathroom Fittings & Plumbing 74.22 200.74 P a g e | 10 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. Paid for new atrium office Civil 26.47 Flooring 24.63 Plumbing 8.86 59.96 260.70 Bal with U1681.81 Add: Received up to 31.03.2010 against various 642.79 Purchase bills 2,324.60 Less: Capex Marriot Electrical Fittings 79.80 Furniture & Interiors 108.24 188.04 Capex new Attrium office furnishing Civil 45.29 Flooring 62.72 Plumbing 27.84 Aluminium Fittings 48.24 Electrical Fittings 52.22 236.31 424.35 Balance with you 1,900.25”
As is discernible from the aforesaid seized document, it can safely be gathered, that the investment made by the assessee towards construction/furnishing of Hotel Courtyard Marriot was sourced from the cash that was received back by it against the payments made towards „bogus purchases. On a perusal of the orders of the lower authorities, we find that the director of the assessee company which had booked „bogus purchases‟ aggregating to Rs.4,41,26,298/- in A.Y. 2008-09 to A.Y. 2011-12 in its „books of accounts‟, had admitted the said fact in his statement recorded on 24.04.2011. In fact, Shri Rasesh B. Kanakia, director of the assessee company in his statement recorded under Sec. 132(4) on 24.05.2011 had made a disclosure towards „bogus purchases‟ aggregating to Rs.4,41,26,298/- in the hands of the assessee company. Further, the assessee in order to give consequential effect to its aforesaid disclosure of „bogus purchases‟ had reduced the amount of Rs.4,41,26,298/- from the cost of the hotel building. Also, the assessee which had admittedly paid Rs. 15,57,913/- as brokerage on booking of such „bogus bills‟ and a P a g e | 11 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. further amount of Rs. 36,90,385/- as other unexplained expenditure, had disallowed an amount of Rs. 52,48,298/- in its computation of income for the year under consideration. On a perusal of the contents of the seized document, viz. Annexure A2 – Page 13, it stands revealed, that the details of day-to-day transactions of receipt of cash against the payments made towards „bogus purchases‟, and the investment made out of the said amount towards construction/furnishing of Hotel Courtyard Marriot, along with the balance amount on various dates is therein found mentioned. We find that the A.O adopting a self-suiting approach had though accepted part of the contents of the seized document i.e to the extent the same revealed that the assessee had made investment towards construction/furnishing of the hotel building viz. Hotel Courtyard Marriot, however, he had whimsically declined to take cognizance of the fact that the said investment, as per the said seized document, was sourced from the cash that was received back by the assessee against the payments made towards „bogus purchases‟. In our considered view, the aforesaid self-suiting and half hearted approach adopted by the A.O does not merit acceptance. As observed by us hereinabove, Sec.292C clearly envisages a presumption that where any books of account or other documents are found in the possession or control of any person in the course of a search conducted under Sec.132 of the Act, it may, in any proceeding under this Act, be presumed, that the contents of such books of account and other documents are true. Admittedly, the presumption envisaged under the aforesaid statutory provision is a rebuttable one, but in the absence of any material proving to the contrary the contents thereof have to be accepted as such. We find that though the A.O on the basis of the contents of the aforesaid seized document viz. Annexure A2 – Page 13 had gathered the details as regards the unexplained investment aggregating to P a g e | 12 ITA No.3186 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. Rs.3,88,78,000/- made by the assessee towards construction/furnishing of Hotel Courtyard Marriot during the year under consideration, viz. (i) flooring: Rs.1,26,52,000/-; (ii) bathroom fittings& plumbing: Rs.74,22,000/-; (iii) electrical fittings: Rs.79,80,001/-; and (iv) furniture and fitting: Rs.1,08,24,000/-, however, he had most arbitrarily declined to take cognizance of the fact, that the said investment, as was discernible from the seized document was sourced from the amounts which were received back by the assessee against the payments made towards „bogus purchases‟. In sum and substance, though the A.O had drawn adverse inferences as regards the unexplained expenditure/investment made by the assessee, as was gathered by him from a perusal of the contents of the aforesaid seized document viz. Annexure A2 – Page 13, however, he had declined to consider the „source‟ of the said investment, despite the fact, that the same too was clearly discernible therefrom.
8. We have given a thoughtful consideration to the facts of the case in the backdrop of the settled position of law, and are unable to persuade ourselves to subscribe to the view taken by the A.O. In our considered view, the contents of a „seized document‟ are to be read in toto, and it is not permissible on the part of an A.O to dissect the same and therein summarily accept the same in part and reject the other part. Apart there from, the assumption of the A.O that the investment made by the assessee towards construction/furnishing of Hotel Courtyard Marriot may have been sourced out of „On money‟ received on sale of flats, in our considered view, is not only an unsubstantiated view but also baseless. We find that the A.O had not placed on record any „material‟ which could support his said claim. In fact, we find substantial force in the claim of the ld. A.R, that as the assessee was only engaged in the business of operating Hotel Courtyard Marriot, therefore, in the absence of any supporting „material‟, there was no P a g e | 13 ITA No.3186 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. justifiable reason on the part of the A.O to hold that the investment made towards construction/furnishing of the hotel building was sourced from „On money‟ on sale of flats. In our considered view, the observation of the A.O as regards the „source‟ of the investment made by the assessee is devoid of any logical reasoning. We find that the approach adopted by the A.O for drawing of adverse inferences in the hands of the assessee had rightly been vacated by the CIT(A), observing as under:
I have considered the facts of the case, submissions and contention of the appellant and order of the A.O. The expenditure of Rs. 3,88,78,000/- had apparently been incurred during the year, on the following items, in respect of construction/furnishing of Marriot Hotel :- Flooring : Rs. 1,26,52,000/- Bathroom Fittings & Plumbing : Rs. 74,22,000/- Electrical fittings : Rs. 79,80,001/- Furniture & Fittings : Rs. 1,08,24,000/- Rs. 3,88,78,000/- 9. The appellant in this regard brought my attention to Page 13 of Annexure-2 seized during the course of search from its office premises on 24/5/2011. This paper apparently shows the details of cash generated on account of bogus purchases and expenditure incurred out of such cash. These details are reproduced once again as under: - “HimanshuBhai Lacs Bal with You-1/4/09 Against various purchase bills 1242.39 +Received till 30/09/09 purchase bills 700.12 1942.51 Less: Paid capex – meriott Flooring 126.52 Bathroom fitting and plumbing 74.22 Paid New Atrium Office- CMI 26.47 Plastering 24.63 Plumbing 8.86 59.96 260.70 Bal with U 1681.81” 10. From the above details available in the seized records, it is clear that an amount of Rs.1 26,52,000/- had been incurred in respect of flooring of Hotel Marriot. Further, an amount of Rs.74,22,000/- has been P a g e | 14 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd.
incurred in respect of bathroom fittings and plumbing, etc., totalling to Rs.2,00,74,000/-. Therefore, to this extent, the details of expenditure incurred out of cash generated through bogus purchases, are available in the seized papers itself, and, therefore, claim of the appellant in this regard has to be allowed, out of total amount of Rs.3,88,78,000/-. Though the AC has argued in the assessment order that this expenditure might have been incurred out of unexplained sources, since very specific details are available in the seized papers, claim to the extent of Rs2,00,74,000/-should be allowed. 1 1 . I n t hi s r eg ar d, I woul d l i ke t o r e ly upon th e j udg e me nt o f H o n b l e Supreme Court in the case of Dhakeswari Cotton Mills Ltd. vs. CIT [26 ITR 775(SC)], relevant portion of which is reproduced as under :- “As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there that agreement ends; because it is equally clear that in making the assessment under sub-s. (3) of s. 23 of the Act, the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Sec.23(3).”
Similarly, in the case of the CIT vs. P.D. Abraham Alias Appachan [349 ITR 442], the Hon‟ble Kerala High Court held as under:- “Learned Senior Standing Counsel appearing for the Revenue contended that when an expenditure is claimed by the assessee, it is for the assessee to prove the some by identifying the payees and by proving that the payments were genuine and were in fact made to the payees. However, the contention raised by the assessee's counsel which found acceptance with the first appellate authority as well as the Tribunal is th at de tails of unaccounted income and de tails of unaccounted payments were collected from the seized records and if evidence collected during search is believed there is no justification for the Department to believe partly as regards income and to disbelieve as regards expenditure...... When the Department relies on the seized records for estimating undisclosed income, we see no reason why the expenditure stated therein should be disbelieved merely because there is no written agreement and that payments were not made through cheques or demand drafts. Even when unaccounted income is determined from business carried on clandestinely or not, the statute does not authorize assessment of anything other than „undisclosed income‟ which has to be arrived at after allowing expenditure incurred by the assessee whether it be accounted in the regular books or not.”
Further, in the case of Biren V. Savia vs. ACIT (2006) 100 TTJ (Mumbai)1006,it has been held that – “The principle is that a document found in search should be treated as genuine with respect to all the entries recorded therein. The Revenue is not justified in taking a view that only a part of the contents, i.e., the names of the borrowers is correct and not the names of lenders. Entire documents should read as a whole and contents of entire documents should be treated as correct or rejected as a whole” - Navjivan Oil Mills vs. CIT (2001)170 CTR (GuI) 224: (2001) 252 ITR 417 (Guj), Kantilal Bros. vs. Asstt. CIT (1995) 51 TTJ (Pune) 513 : (1995) 52 ITD 412 (Pune), Glass Lines Equipment Co. Ltd. vs. CIT (2001) 170 CTR (Guj) 470: (2002) 253 ITR 454 (Guj), Mehta Parikh & Co. vs. CIT (1956) 30 ITR 181 (SC) and Chander Mohan Mehta vs. Asstt. CIT (Inv.) (1999) 65 1TJ (Pune) 327: (1999) 71 ITD 245 (Rune) applied.”
It has also been brought to my notice by the appellant that the Hon'ble Settlement Commission, Mumbai Bench, had allowed capitalization of various expenses out of bogus purchases in the case of M/s. Kanakia Spaces Pvt. Ltd., appellant's sister concern, under identical circumstances.
P a g e | 15 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd.
In view of the above discussion and respectfully following the above judgments. I hold that deduction for expenditure to the extent of Rs.2,00,74,000/- should be allowed to the appellant.” Accordingly, finding ourselves to be in agreement with the view taken by the CIT(A), we uphold his order to the extent he had deleted the addition of Rs.2,00,74,000/-made by the A.O. The Grounds of appeal
No. 1 & 2 raised by the revenue are dismissed.
9. We shall now advert to the contention advanced by the ld. A.R that the CIT(A) has erred in sustaining the addition of Rs.1,88,04,000/- as an unexplained investment/expenditure in the hands of the assessee. On a perusal of the order of the CIT(A), it stands revealed that the aforesaid addition was sustained by him, for the reason, that no direct correlation of the expenditure vis-à-vis the seized records was discernible therefrom. It is the claim of the ld. A.R before us, that the CIT(A) while concluding as hereinabove had erroneously confined himself only to a part of the seized document viz. Annexure A2 – Page 13, and resultantly on account of misconceived facts had restricted the relief to the assessee only to the extent of Rs.2,00,74,000/- out of the total addition of Rs.3,88,78,000/-. In order to fortify his aforesaid contention, the ld. A.R took us through Page 6-7 of the order of the CIT(A). It was submitted by the ld. A.R, that the part of the contents of Page 13 of the seized „diary‟ viz. Annexure A2 which clearly revealed that the source of the balance investment/expenditure of Rs. 1,88,04,000/- towards construction/furnishing of Hotel Courtyard Marriot was sourced out of the cash received back by the assessee against the payments made towards „bogus purchases‟, had inadvertently remained omitted to be considered by the CIT(A).
10. We have given a thoughtful consideration to the contention advanced by the Ld. A.R and find substantial force in the same. A P a g e | 16 & 3098/Mum/2014 AY. 2011-12 DCIT,CC-23 Vs Kanakia Hospitality Pvt. Ltd. perusal of the seized annexure viz. Annexure A2 – Page 13 (copy placed on record) clearly reveals that the „source‟ of the balance investment of Rs.1,88,04,000/- made by the assessee towards construction/furnishing of the Hotel Courtyard Marriot, was from the cash that was received back by the assessee against the payments made towards „bogus purchases‟. In fact, we are in agreement with the contention advanced by the ld. A.R, that inadvertently the remaining part of the seized document viz. Annexure A2 – Page 13 had remained omitted to be considered by the CIT(A). As observed by us hereinabove, a perusal of the seized document, to the extent, the same is relevant in context of the investment of Rs. 1,88,04,000/- made by the assessee towards construction/furnishing of Hotel Courtyard Marriot, reads as under:
Balance with you 1,681.81 Add: Received up to 31.03.2010 against various 642.79 Purchase bills 2,324.60 Less: Capex Marriot Electrical Fittings 79.80 Furniture & Interiors 108.24 188.04 Capex new Attrium office furnishing Civil 45.29 Flooring 62.72 Plumbing 27.84 Aluminium Fittings 48.24 Electrical Fittings 52.22 236.31 424.35 Balance with you 1,900.25