DEPUTY COMMISSIONER OF INCOME-TAX vs. SHRADDHA CONSTRUCTIONS & POWER GENERATION PVT. LTD.,, PUNE

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

These are the cross appeals filed by the parties against the order of CIT(A)-12, Pune, dated 30-01-2015 for the A.Y. 2011-12.

We shall take up the appeal of the Revenue first.

ITA No.461/PUN/2015 – By Revenue A.Y. 2011-12

“1. On the facts and circumstances of case and in law, the Ld.CIT(A) was not justified in allowing rent paid to Raj Infrastructure on account of machinery hired as it is clearly noticeable that excessive payment was made by the assessee company.

the business of execution of irrigation contracts and generation of

energy from the windmills. There was search and seizure action

u/s.132 of the Act on the Shraddha Group of cases on 08-09-2010.

Mr.Shivajirao Bagwan Jadhav is a Managing person for this group.

Search resulted in disclosure of unaccounted income of Rs.10.99 crores

on account of on-money payments in purchase of lands, suppression of

closing stock etc. Assessment was completed on the assessed income of

Rs.6.68 crores (rounded off). Apart from other additions, AO made

various additions and they include the addition of Rs.1,61,94,464/- on

account of unpaid commission as well as the buffer disclosure of Rs.50

lakhs and others. Grounds raised by the assessee in this appeal

revolves around this addition of Rs.1,61,94,464/-. Further, the

Revenue raised the issue relating to rent paid to M/s. Raj

Infrastructure, disallowance of interest, buffer disclosure of Rs.50

lakhs.

issues raised in Ground Nos. 1 to 3 by the Revenue appeal stands

covered and therefore, they are required to be dismissed. In this regard,

Ld. Counsel filed a copy of the order of Tribunal in assessee’s own case

vide the order of the Tribunal in ITA No.495/PUN/2015, dated 11-04-

2018 for the A.Y.2009-10.

Revenue vide Ground No. 1 as well as 2 and 3 are identical to the

grounds raised by the Revenue in the group concern vide ITA

No.459/PUN/2015 for the A.Yrs. 2009-10, dated 11-04-2018. Ground-

wise adjudication is taken up in the following paragraphs.

rentals paid to M/s.Raj Infrastructure Developers, the Tribunal while

dealing with the same issue in the case of its sister concern - Shraddha

Constructions & Power Generation Pvt. Ltd., dismissed the appeal of the

Revenue and in favour of the assessee. Relevant finding of the Tribunal

(supra) is extracted here as under for the sake of completeness :

“8. On hearing both the sides on this issue, we find the undisputed facts include that the assessee hired 2 excavators for the business purpose of the assessee, the payment made by the assessee by way of banking channels to M/s. Raj Infrastructure Developers, taxability of the same in both the hands etc. It is the suspicion of the AO that the rental payments qua the cost of acquisition of the assets by the owner of the assets are on higher side. However, no information is brought on to the record that the payment of rent of Rs.2,50,000/- per vehicle is excessive or unreasonable. Infact, there is an evidence from the assessee’s side to demonstrate that there are cases of obtaining a quotation of A.K. Constructions and Manisha Infrastructure Pvt. Ltd. to the tune of Rs.3,25,000/- and 3,40,000/- respectively per Ex-300 excavator per month (pages 64A, 64B and 64C of the paper book are relevant). Letter dt. 26-03-2013 addressed by the Ld. AR to the DCIT, Circle-2(1) constitutes forwarding of the quotations received from A.K. Constructions and Manisha Infrastructure Pvt. Ltd. for comparison of reasonableness of rent paid by assessee to M/s. Raj Infrastructure Developers. Therefore, in our view, no case is made out by the AO to demonstrate that the payments made by the assessee constitutes excessive and unreasonable. Further, we examined the applicability of the decision of jurisdictional High Court in the case of CIT Vs. Salitho Ores (supra) and find the same is relevant for the following proposition :

“As long as expenditure is incurred bona fide in pursuit of a business and not by way of diversion of funds, it has to be allowed as a deduction’ entire lease rent paid by the assessee for hiring the dozers for using them in its business was allowable as a business expenditure even though assessee did not actually use 3 out of the 4 hired dozers.”

Following the same reasoning, we dismiss the ground raised by

the Revenue holding of the order of CIT(A) as fair and reasonable.

Accordingly, Ground No.1 raised by the Revenue is dismissed.

Nos. 2 and 3 relating to claim of interest disallowance, we find this

issue is also identical to the grounds raised by the Revenue in

No.459/PUN/2015 for the A.Yrs. 2009-10, dated 11-04-2018. The

Tribunal dismissed the appeal of the Revenue following the decision of

the Tribunal in assessee’s own case for the A.Yrs. 2006-07 & 2008-09.

The said finding is extracted here as under for the sake of

completeness:

“10. Referring to Ground Nos. 2 and 3 raised by the Revenue, Ld. Counsel for the assessee submitted that there is no dispute about the absence of any incriminating material on these two items of disallowance. Therefore, the CIT(A) is justified in deleting the additions for this legal reason also.

“As such, the regular assessment order dated 26-11-2008 (and the appeal filed against the same filed in year 2008) does not abate. In other words, the said appeal ought to continue as such, and the relief (if any) against the said appeal ought to be reaped in the said appeal only. It is submitted, an assessee ought not to get relief against the regular assessment in the search based appeal for such year, since such a year is not pending before the assessing authority.

additions on legal reasoning relating to absence of any incriminating material and unsustainability of such additions not supported by any incriminating material. As such, it is an admitted fact that the blank letter heads are the only seized material pertaining to this issue. We have already held that such blank letter heads do not amount to the incriminating material. Therefore, we are of the opinion that Ground No.1 of Revenue needs to be dismissed on this legal reasoning.

grounds raised by the Revenue for A.Y. 2009-10, Therefore, following

the same reasoning given by the Tribunal, we hold that the order of

CIT(A) is fair and reasonable. Accordingly, the Ground Nos. 2 and 3

raised by the Revenue are dismissed.

Rs.50 lakhs reflected by the assessee subsequently. CIT(A) granted

relief on this issue. Therefore, the Revenue is in appeal.

that requires detailed analysis in the revenue appeal relates to the

deletion of addition of Rs.50 lakhs disclosed by the assessee towards

omissions or commissions if any during the search action. Ld. Counsel

for the assessee submitted that this is a case where the Revenue could

have examined all the details before assessment is made. Infact AO has

sufficient time after retraction for scanning the seized material for want

of discovery of omissions and commissions. Further, it is the case of

the assessee that there is no incriminating material to demand the

additional disclosure of Rs.50 lakhs from the assessee. The disclosure

of Rs.50 lakhs offered by the assessee during search action is purely a

adhoc declaration on account of pressures of the investigating officer

during search action. He also submitted that in the absence of any

incriminating material the investigating officer should not have taken

disclosures in view of the CBDT Circular No.286/2/2003, dated

10-03-2003. Considering the same, he submitted that the decision of

CIT(A) is fair and reasonable and does not call for any interference.

Alternatively, it is the submission of the Ld. Counsel that matter

can be remanded to the file of AO for applying the following decisions :

(a) DCIT Vs. Shri Shivaji Bhagwanrao Jadhav – ITA Nos. 680 to 682/PUN/2015, ITA No.699/PUN/2015 and CO No.10/PUN/2018, dated 25-04-2018 (b) ACIT Vs. Jayant Hiralal Shah – ITA No.546/PN/2012, dated 25-06- 2013 (c) DCIT Vs. Sanmukhdas Wadhwani 85 ITD 734 (Nagpur Tribunal) (d) Poonawalla Investments and Industries Pvt. Ltd. – ITA No.1685/PUN/2015, dated 18-04-2018

orders of the Revenue, we find this issue also stands decided in favour

of the assessee by virtue of order of Tribunal in the case of Serum

Institute of India Ltd. Vs. DCIT in ITA Nos. 985 & 986/PUN/2015 dated

28-11-2017 for A.Yrs. 2006-07 & 2007-08. In this regard, we find it

relevant to extract the finding given by the Tribunal from Para Nos. 28

to 41 here as under :

“28. Ground no.5 relates to inclusion of income of an amount of Rs.1 crore which was offered as contingency in the statement u/s.132(4) of the act. Relevant facts are that the assessee was covered u/s.132 of the Act and the same resulted in disclosure of undisclosed income. Details are given in Para nos. 13 and 13.1 (pages 55 to 60) of the order of CIT(A). Accordingly, Rs. 1 crore was offered against the contingencies if any to be set off against the discrepancies/omissions. While filing the return of income, and adhering to the said statement u/s.132(4) of the Act, said amount of Rs. 1 crore was offered as undisclosed income of the assessee for the year. Accordingly, the same was taxed although no specific discrepancies/omissions were brought to the notice of the assessee. Assessee did not raise any issue before the AO. However, before the CIT(A), assessee submits that said contingency of Rs.1 crore should not be taxed and the same is required to be excluded from the undisclosed income offered by the assessee. CIT(A) rejected the said demand of the assessee as per the discussion given in para 13.2 of his order. Thus, CIT(A) decided this issue against the assessee.

“12. We find merit in the alternate contention of the Ld. Counsel for the assessee that the amount of Rs.75 lakhs offered to tax in the statement recorded u/s.132(4) be set off against the disallowance calculated under the provisions of section 14A r.w. Rule 8D. Admittedly, the assessee had made disclosure of Rs.75 lakhs voluntarily as additional income under the head “Contingencies” to cover any other errors, omissions or discrepancies. The submission of the Ld. Counsel for the assessee that the amount of Rs.75 lakhs was voluntarily offered and there was no detection of any incriminating material or undisclosed income could not be controverted by the Ld. Departmental Representative. We, therefore, find merit in the submission of the Ld. Counsel for the assessee that the amount of Rs.75 lakhs offered by the assessee as undisclosed income to cover any errors, omissions or discrepancies in computing the

taxable income should be set off against the disallowance made u/s.14A r.w. Rule 8D of the I.T. Act. We, therefore, set aside the order of the CIT(A) and direct the AO to restrict the disallowance u/s.14A r.w. Rule 8D to Rs.18,19,294/- i.e. (Rs.93,24,674 – Rs.75,00,000/-). Grounds of appeal No.1 to 3 by the assessee are accordingly partly allowed.

Legal scope on the sanctity of returned income – if the assessed income be less than the returned income.

“However, failure or inability of the Revenue to frame a fresh assessment should not place the assessee in a more dis- advantageous position than he would have been in if a fresh assessment were made. In a case where the assessee chooses to deposit, by way of abundant caution, advance tax or tax on self assessment which is in excess of his liability on the basis of the return furnished or, if there is an arithmetical error or inaccuracy, it is open to the assessee to claim refund of the excess tax paid in the course of the assessment proceedings. He can certainly make such a claim before the concerned authority calculating the refund. Similarly, if the assessee has, by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the assessing authority, which, if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the concerned authority in a case where a refund is due and payable, and the authority concerned, on being satisfied, shall grant appropriate relief.”

“Held, that the circular in question refers to assessments which are to be made u/s.143(3) of the Act. The circular directs that in a particular type of cases, i.e. in scrutiny cases u/s.143(3) of the Act, the income can neither be assessed at a figure lower than the returned income nor the loss assessed at a figure higher than the loss nor further refund given except what was due on the basis of the returned income. Thus, by issuance of the circular, the quasi- judicial officer is directed to assess cases of particular nature in a particular manner. The Assessing Officer being bound by it had abdicated his function and did not act independently and, therefore, there was no question of alternative remedy which was a futile remedy. In fact, the jurisdiction had been exercised by the Central Board of Direct Taxes by issuing the circular and, therefore, the order of the Assessing Officer was without jurisdiction. The court had to exercise its jurisdiction under article 226. The order of the Assessing Officer to the extent it stated that the total income would be the returned income, was to be set aside, with a direction to the Assessing Officer to make assessment without keeping in mind the Central Board of Direct Taxes Circular dated 31-10-1989.”

“7. In view of the above, we do not find any reason to interfere with the Tribunal’s ultimate conclusion in allowing the assessee’s appeal. Though some of the observations may not appeal to us, nevertheless, for the reasons somewhat different from those recorded by the Tribunal we come to the same conclusion. Decision of the Apex Court in case of Shelly Products & Others (supra), was rendered in very different background. It was a case where the assessee had filed return. Assessee had paid self assessment tax on the income disclosed in the return. Tribunal on appeal by the assessee held that the order of the assessment passed by the Assessing Officer was ab-initio void since he had no jurisdiction to deal with such proceedings. Revenue sought reference before the High Court. When such reference was pending, the assessee applied to the department for refund of the tax paid. It was in this background the Apex Court expressed the opinion that liability to pay income tax does not depend on assessment being made and failure or inability to frame fresh assessment after earlier assessment is set aside or nullified in appropriate proceedings, does not disentitle the assessee to claim refund of the advance tax and tax paid on self assessment because to that extent the assessee had admitted his liability to pay tax in accordance with law. Facts of the present case are therefore, different. In case of hand, the assessment was not rendered null. In fact such assessment, which according to the order of CIT(Appeals) had become final tax liability of the assessee, came lower than that declared by him in the return filed.”

(1) To sum up, from the above, it is obvious that the fetters imposed by the CBDT, on the AOs, when it comes to assessing the income of assessee lower than the returned income, are held ultra vires. Further, the Hon’ble Apex Court also held that the taxes paid by the assessee as a matter of abundant caution, i.e. by way of Advance or Self Assessment Taxes, needs to be refunded after due verification of the claims.

(2) Ld. Counsel for the assessee filed various decisions of the Tribunal demonstrating that the ‘contingency’ disclosure are entitled to refund after due verification. In this regard, Ld. Counsel for the assessee filed written note on ‘Contingency issue’ stating that the return of income filed by the assessee constitutes a notional undisclosed income as part of the total income. The same should not become an impediment for assessing the income of the assessee based on the principles relating to the Real Income theory. According to him, the income offered by the assessee in the return of income is not sacrosanct and what matters is the AO’s finding on the assessed income of the assessee. The assessed income can be lower than the returned income. Relying on the decision of Nagpur Bench of the Tribunal in the case of DCIT Vs. Sanmukhdas Wadhwani 85 ITD 734, Shri R.S. Abhyankar, Ld. Counsel for the assessee submitted that where the assessee himself returned his undisclosed income on adhoc basis without giving any break-up for the same and when the subsequent working submitted by him reveals that the undisclosed income actually assessable in the hands of the assessee is lower than the returned income, the same has to be assessed at such lower income based on the concept of Real Income. Only condition specified in the said decision relates to the verification and correctness of the statements so submitted giving the detailed working before the AO. Relevant portion is extracted as under :

"12. It is observed that a similar issue in the context of regular assessment arose for consideration before the Hon'ble Delhi High Court in the case of CIT v. Bharat General Insurance Co. Ltd. [1971] 81 ITR 303 wherein it was held by their Lordships that even if an assessee declares an income in the return, the Assessing Officer cannot assess it merely on that basis and he has to consider its taxability in the light of other circumstances de hors the admission made in the return. In the case of Narayanan v. Gopal AIR 1960 SC 235, the Hon'ble Supreme Court has held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. It is well- established that the object of an assessment is to determine the correct income and consequently the correct tax liability. In our opinion, this settled position equally holds good in the matter of block assessment also since the scope of undisclosed income assessable in the block assessment is specifically provided and the procedure for determination of such income is also clearly laid down. In these circumstances, any amount which is not assessable as undisclosed income for the block period cannot be assessed as such merely for the reason that the same was declared by the Assessee in the return for block period and there cannot be such estoppel against the statute. It, therefore, follows that if the assessee commits a patent mistake of fact or law while filing his return of undisclosed income under section 158BC, he cannot be assessed on such incorrect income merely on the basis of admission made in the return.

are of the opinion that the same has to be assessed at such lower amount going by the concept of real income especially when the said working was verified and found to be correct by the Assessing Officer.”

"11. According to us, the Tribunal ought to have examined the issue as to whether the fact that assessee had made an admission with respect to an addition / disallowance in its original return or in the revised return would ipso facto bar the assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. This is so especially in view of the circumstances, that the Assessing Officer while making the additions /disallowances did not call upon the assessee to furnish any explanation. The upshot of the submission made by the learned counsel for the assessee, is that, had the assessee been given an opportunity by the Assessing Officer it could have demonstrated that no additions or disallowances were called for, in view of the binding precedents of Courts and/or Tribunal in respect of each of the addition/disallowance. The observations made in the Tax Audit Report could not have formed the basis of additions/ allowances by the Assessing Officer. On this aspect of the matter the observations in the judgment of the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 being apposite are extracted hereinbelow: It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. (p. 20).

11.1 We find that the Tribunal instead of examining the matter from this angle has repeated the order passed in the first round without due application of mind to the issues which called for adjudication.

assessment of assessee based on the facts of case and as per the provisions of Act. In other words, coming to the facts of the assessee, if the said sum of Rs. 1 crore is not assessable to tax as income of the assessee, the same ought not be assessed even if the assessed income comes to a lower figure qua the returned income.

“13.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . To sum up, the fresh claim made by the appellant during the present proceedings that such income of Rs.1,00,00,000/- may be excluded from the total income assessed by the Assessing Officer as no discrepancies were found during the assessment proceedings cannot be accepted as the additional income was offered voluntarily in the return of income. The alternate claim of the appellant for set off of such contingencies against other statutory disallowance made by the AO also cannot be accepted as discussed above. Ground of appeal No.8 stands rejected.”

The CIT(A) denied the claim of the assessee ignoring the settled legal propositions on the topic. The reasons given above by the CIT(A) are artificial and not supported by the legal precedents.

this assessment as the same does not have strength of any incriminating material. In other words, the AO made an unsustainable addition u/s.14A of the Act and taxed the said amount of Rs.1 crore-contingency income without making adjustment the said amount of Rs.1 crore. In any case, we deleted said disallowance u/s.14A of the Act. Therefore, the question of adjustment is only an academic exercise. Ignoring the same, we now have to decide that the said amount of Rs. 1 crore is assessable to tax in the light of the above legal scope relating to this addition.

establish the omissions and commissions before he proceeds to tax the

said buffer disclosure of Rs.50 lakhs. As such, AO did not examine this

aspect of the issue from this point of view. CIT(A)/AO are of the opinion

that the assessed income may not be less than the returned income.

AO mechanically taxed the same relying on the admission on the sworn

statements. The main arguments raised by the assessee’s counsel are

rejected and the alternate prayer for remanding the issue to the file of

AO is considered favourably. Therefore, with similar directions to the

AO, we remand the issue to the file of AO. Accordingly, this issue is

adjudicated pro tanto.

ITA No.570/PUN/2015 – By Assessee A.Y. 2011-12 15. Grounds raised by the assessee are as under :

“1. The Ld. CIT(A)-12, Pune erred in law and on facts in affirming addition of Rs. 1,61,94,464, alleging that payment of brokerage / commission relating to acquisition of land in AMBI & KADVE villages, merely based on incorrect statement given by Mr. Biradar (the then Liasioning Manager of the appellant). The learned CIT(A)-12, Pune and learned AO ought to have appreciated that the claim of said alleged brokerage / commission payment conflicts directly with the relevant papers found during the course of search u/s 132 of the ITA, 1961. 2. The Ld. CIT(A)-12, Pune and learned AO further erred in law and facts in keeping too much reliance on the incorrect information provided by Mr. Biradar during the course of search and especially drawing conclusions thereon without providing opportunity of his cross examination to the appellant company. 3. The Ld. CIT(A)-12, Pune and learned AO erred in placing reliance on incorrect statement of Mr. Biradar recorded during the course of search, without considering the statement of Mr. Shivajirao Jadhav, MD of the appellant company which was also recorded during the course of search. 4. The Ld. CIT(A)-12, Pune erred in law and on facts in affirming addition of Rs.1,61,94,464/- made by learned AO on the presumption that unpaid commission related to the acquisition of land in AMBI & KADVE villages have been paid in cash and has not been accounted for in the books of accounts irrespective of the fact that only Rs. 39,84,474/- was paid subsequently by cheque and as per agreement dated 22/02/2013.”

At the outset it is brought to our notice that there is delay of

16 days in filing the appeal. On considering the affidavit and the

contents therein, we find the delay is condonable considering the

small delay of only 16 days and admit the appeal for adjudication.

search & seizure action that the assessee purchased 472 Acres of land

at Village Ambi and Kadve. The purchases were done involving the

brokers. The search team seized some documents, copies of which are

placed at pages 7, 19, 20 of the paper book No.1 which stands

translated into English which are placed at pages 2 to 45 of the paper

book No.2. During the search action, on these papers, there was

recording of sworn statement from Mr.Biradar, the Manager, the

incharge of the Land Acquisition. According to Mr. Biradar, the

assessee made total cash payments amounting to Rs.3,54,48,750/- in

connection with the purchase of the said lands of 472 acres outside the

books of account. Thereafter, the statement of Mr. Shivajirao B.

Jadhav, MD of the company was also recorded. When the above

statement of Mr.Biradar was confronted, Mr. Shivajirao B. Jadhav

disagreed with the assertion made in the statement of Mr. Biradar.

However, Mr. Shivajirao B. Jadhav agreed that the total unaccounted

cash payments works out to Rs.1,82,54,286/- only and not

Rs.3,54,48,750/-. Considering the differences, an amount of

Rs.1,61,94,464/- was added in the assessment. The details are

summarised as under :

a. Cash payments as per Mr. Biradar’s statement - Rs.3,54,48,750/- b. Less : Cash payment admitted by Mr. Jadhav -Rs.1,82,54,286/- c. Less : CHQ payment as observed in seized papers-Rs. 10,00,000/- d. Balance (i.e. amount of addition) - Rs.1,61,94,464/-

improve his case. Therefore, the assessee is in appeal before the

Tribunal with the grounds raised above.

stating that the entire amount needs to be deleted as the said addition

was made at the back of the assessee without granting any opportunity

to the assessee to rebut the same. Referring to the statement given by

Mr. Biradar, assessee submitted that the statement dated 09-09-2010

is not sacrosanct as the same was not put to cross examination by Mr.

Shivajirao B. Jadhav or any other concerned person before addition is

made. Asking for deletion of the said addition fully, Ld. Counsel relied

on the following judgments/decisions :

a. Andaman Timber Industries Vs. CIT - Civil Appeal No. 4228/2006, dated 02-09-2015 b. ITO Vs. M. Pirai Choodi 334 ITR 262 (SC) c. Anita Agarwal Vs. ITO – ITA No.2622/PN/2016

on this issue should be deleted. Further referring to seized papers, Ld.

Counsel submitted that the payments of cash made to the farmers for

buying 472 acres are evidenced by the vouchers and the same amounts

for only Rs.1,82,54,286/- and no evidence whatsoever is available in

support of the payments of cash of Rs.1,61,94,464/-. Referring to

pages 42, 44 of Paper Book No.2 and page 20 of Paper book No.1, Ld.

Counsel for the assessee submitted that there are contrary facts in

which case these documents constitutes dumb documents. Therefore,

the addition is illegal. He also mentioned that the AO’s observations are

confusing and the additions made on surmises are not sustainable.

Assessee made following prayer in the written submissions

“Prayer : Appellant submits, entire process of making addition of Rs.1,61,94,464/- was an imaginary exercise of the learned I.T. authorities which was concluded in an unfair manner, i.e. without recording appellant’s SAY on the matter and without granting CROSS of Mr. Biradar. In any case, the seized documents themselves demonstrate beyond doubt, the folly in making the said addition. As such, the Honourable ITAT may please delete the said addition and allow appellant’s appeal.”

written agreements signed between the assessee and the broker/agents

dated 22-02-2013 (subsequent to the search action), assessee

submitted that unpaid brokerage is only Rs.39,84,474/-. He also gave

following submissions in this regard giving commission details :

“e. Total commission comes to (RS.23,000 x 495 Acre = Rs.1,13,85,000/-) (i.e. One Crore Thirteen Lakh Eighty Five Thousand Only). Out of above, Rs.74,00,526/- (i.e. Seventy Four Lakhs Five Hundred and Twenty Six only) has been paid in cash to party of the Second Part for increased purchase rate by farmers and other expenses from time to time. Balance Rs.39,84,474/- is to be paid in cheque described as follows :

Sr.No. Name Commission Amount 1 Shri Nivangune Lahy Nivrutti 15,00,000 2 Shri Satpute Shrihari Genu 12,42,237 3 Shri Amrale Bhanudas Balu 12,42,237 Total 39,84,474

that assessee purchased agricultural lands of 472 acres and 26R for a

sum of Rs.7,08,97,500 @ Rs.1.50 lakhs per acre on 20-07-2010. The

total expenditure incurred works out to Rs.3,67,71,120/-. For

acquiring the above, 189 Hectares of land assessee paid cash of Rs.

1,05,10,625/- to the farmers and cash of Rs.74,00,526/- was paid to

the brokers out of payable amount of Rs.2,36,32,500/- Remaining

payable to the works as per page 43 works out to Rs.1,62,31,974/-. As

per page 42 and 43 of the paper book No.2, the total cash paid works

out to Rs.1,82,54,286/- and the remaining amount payable to the

brokers works out to Rs.1,62,31,974/-. Further, bringing our attention

to page 44 of the paper book, Ld. Counsel for the assessee submitted

that broadly the entries are similar to the ones available on page 42 and

43 with minor deviations. According to these papers, total cash

incurred is around Rs.1,92,67,027/- and the cash remaining payable to

the brokers works out to Rs.1,52,31,974/-. This is the position as on

20-07-2010. The date is appearing on the 5th column of the paper

provided in page 44 of the paper book.

Counsel that there is no evidence for entire cash payment of

Rs.2,36,32,500/- to the brokers. Therefore, the addition of

Rs.1,61,94,464/- made by the AO in the assessment is unsustainable

as the same lacks support of proof of payment of cash by the assessee

to the brokers. Further, he submitted that this is a case where

additions were made without granting opportunity as well as the cross-

examination benefit to the assessee. Further, the statement of

Mr.Biradar was not confronted by the assessee by way of cross

examination. He also mentioned that the matter can be remanded to

the file of AO and grant an opportunity of being heard to the assessee

on this issue as per the set principles of natural justice. For this

proposal, assessee’s counsel relied on various decisions.

AO and the CIT(A). He also relied on seized papers placed at pages 40

to 45 of the paper book No.2 stating that the translated pages 19,20,

37, 39 and 7 demonstrates the fact of payable of commission to the

brokers amounting to Rs.2,36,32,500/- at the fixed rate per acre.

Assessee has already paid sum of Rs.74,00,526/- is evident from the

expression “ Cash given” and an amount of Rs.1,52,37,374/- was also

quantified as appearing with the description “Remaining” (Page 45 of

the paper book No.2)

the cash payable is Rs.1,52,31,973/- after giving credit to the payment

of cash of Rs.74,00,526/- and cheque payments of Rs.10 lakhs.

DR for the Revenue submitted that the Supreme Court judgment in the

case of Andaman Timber (supra) is entirely different fats and is

inapplicable to the facts of the present case. This is the case where

search and seizure action u/s.132 was conducted and documents are

seized. The onus is on the assessee to discharge. Referring to the

statement of Mr. Biradar, Ld. DR for the Revenue submitted that the

said statement corroborates to the findings of the seized documents and

the contents mentioned on the seized documents and the pages 42 to

45 are relevant.

1,61,94,464/- and perused the orders of the Revenue as well as the

other documents placed before us. The following issues arise from the

same :

(1) If the seized papers indicate unpaid commission of

Rs.1,61,94,464/- to the brokers that requires addition in the

assessment.

(2) Is there any violation to the principles of natural justice by

not providing the opportunity of cross examination of Mr. Biradar

to Mr. Shivajirao B. Jadhav.

translated copies placed in the paper book and find the same are

relevant for extraction. Accordingly, the same is extracted here as

under :

A – Extract from Page 42 of the paper book : Mauje Ambi, Tal – Haveli, District – Pune Description of Agricultural land is as under Purchase of land Ambi - 185 Hectors 51R (464 Acres 17R) Kadve - 3 Hectors 29 R (8 Acres 9 R) -------------------------------------------- Total 189 Hectors 6 R (472 Acres 26R)

Total Amount - Rs.7,08,97,500/- (472 ares 26 R X Rs.1,50,000/- acres)

I. Cheque – Ambi + Kadve

Sr Name of the Measure of Total expen- Expenditures Remaining No Purchaser land Hec. R. ditures upto Date Pau. 20.07.2010 1 Amit Jadhav 16=03=54 31,20,035 31,20,035 0 2 M S Jadhav 00=89=66 1,76,525 1,76,525 0 3 Shraddha Energy 32=08=60 61,76,167 59,94,917 1,81,250 4 Sachin Gaikwad 20=46=83 40,81,327 39,98,077 83,250 5 Madhukar 21=88=09 42,49,100 42,49,100 0 Jadhav 6 Dnyaneshwar 21=78=92 42,89,384 42,89,384 0 Deshmukh 7 Sunder Rao 21=31=92 42,03,160 42,03,160 0 Deshmukh 8 K G Gaikwad 21=90=17 42,40,817 42,40,817 0 9 B B Jadhav 22=29=00 43,91,877 43,91,877 0 10 S V Katle 10=40=00 28,35,228 21,07,228 7,28,000 Total 189=06=71 3,77,63,620 3,67,71,120 9,92,500

II. Cheque – Other expenses and development expenses

A) Development expenses – Rs.14,13,749 ---------------- Total - Rs.14,13,749

B – Extract from Page 43 of the paper book :

III. Cash – Farmers and Commission A) Farmers expenses ––- Rs.1,05,10,625 - (79,28,750 + 21,81,875) B) Commission – Rs.74,00,526 - (Total – 2,36,32,500) (Paid – 74,00, 526) ------------------------------------- (Remaining – 1,62,31,974)

C) Other expenses – Rs,3,43,135 (Registration, Zone etc) ---------------------- Total Rs.1,82,54,286 ----------------------

C- Extract from Page 44 of the paper book :

Mauje Ambi, Tal – Haveli, District – Pune Description of Agricultural land is as under

Purchase of land Ambi - 185 Hectors 51R (464 Acres 17R) Kadve - 3 Hectors 29 R (8 Acres 9 R) -------------------------------------------- Total 189 Hectors 6 R (472 Acres 26R)

Total Amount - Rs.7,08,97,500/- (472 Acres 26 R X Rs.1,50,000/- acres)

I. Cheque – Ambi + Kadve

Sr Name of the Measure of Total expen- Expenditures Remaining No Purchaser land Hec. R. ditures upto Date Pau. 20.07.2010 1 Amit Jadhav 16=03=54 31,20,035 31,20,035 0

2 M S Jadhav 00=89=66 1,76,525 1,76,525 0 3 Shraddha Energy 32=08=60 61,76,167 59,94,917 1,81,250 4 Sachin Gaikwad 20=46=83 40,81,327 39,98,077 83,250 5 Madhukar 21=88=09 42,49,100 42,49,100 0 Jadhav 6 Dnyaneshwar 21=78=92 42,89,384 42,89,384 0 Deshmukh 7 Sunder Rao 21=31=92 42,03,160 42,03,160 0 Deshmukh 8 K G Gaikwad 21=90=17 42,40,817 42,40,817 0 9 B B Jadhav 22=29=00 43,91,877 43,91,877 0 10 S V Katle 10=40=00 28,35,228 21,07,228 7,28,000 Total 189=06=71 3,77,63,620 3,67,71,120 9,92,500

II. Cheque – Other expenses and development expenses

A) Development expenses – Rs.14,13,749 B) Agreement to sale – Shraddha - Rs.11,15,125 C) Agreement to sale – Amit - Rs. 50,000 --------------------- Total - Rs.25,78,874 ---------------------

D-Extract from Page 45 of the paper book :

III. Cash – Farmers and Commission D) Farmers expenses ––- Rs.1,05,10,625 - (79,28,750 + 21,81,875) E) Commission – Rs.84,00,526 - (Total – 2,36,32,500) (Cash given – 74,00,526) (Cheque – 10,00,000) -------------------------------------- (Remaining – 1,52,31,974)

C) Other expenses – Rs,5,55,876 (Registration, Zone etc) ---------------------- Total Rs.1,92,67,027 ---------------------- Summary – - Value of land - Rs.7,08,97,500 (Farmers expenses + commission) - Stamp duty and other – Rs.17,42,995 - Development expenses – Rs.14,13,749 - Agreement to sale (Shraddha + Amit) – Rs.11,65,125 - Other Expenses - Rs.5,55,876 -

The above documents suggest that undisputedly there is cash

payment to the brokers for land purchase. The payable total sum of

Rs.2,36,32,500/- is the undisputed figure. Payment of cash of

Rs.74,00,526/- is also uniformly mentioned in all these seized papers

repeatedly. After considering the cheque payment of Rs.10 lakhs, the

remaining cash payable of Rs.1,52,31,976/- is also evident from the

pages of the paper book. Whether the same is paid subsequently or not

is a matter of debate. Assessee’s counsel argues that the said amount

was not paid by the assessee in view of change in the terms and

conditions relating to the payment of commission to the brokers. In

support of the same, assessee relied on the documents dated

22-02-2013 granted after the date of search, i.e. 08-09-2010. These

agreements came into operation after the lapse of more than 2 years.

Revenue rejects the same stating that it is a case of an afterthought

aimed at defeating the evidentiary value of the seized papers. However,

it is a fact that the contents of this agreement were not thoroughly

examined by the AO. Brokers were not put to test under the provisions

of the Income-tax Act. The onus is on the assessee to demonstrate that

the contents are genuine. It is not mentioned as to whether the cash

paid amounting to Rs.74,00,526/- to the three brokers was offered to

tax in their returns or not. We cannot appreciate how the payments

made to the brokers prior to search are the facts and the remaining

payable amount to brokers after the search action are not real. How

and why the brokers backed out in not claiming their dues. There is

need for the assessee and the brokers to demonstrate the genuineness

of the said agreement dated 22-02-2013. Considering all these factors,

there is enough evidence to establish that the cash paid to the brokers

in connection with the purchase of lands appears to be

Rs.2,36,32,500/-. As such, assessee has not discharged the onus

which is cast on him as it is a search action u/s.132 of the Act and the

seized documents are obtained from the premises of the assessee.

AO in view of the failure of the AO in issuing show cause notice before

making addition of Rs.1,61,94,464/- without granting the benefit of

cross-examination of Mr. Biradar, we find there is lapse on the part of

the AO in issuance of final show cause notice before the addition of

Rs.1,61,94,464/- is made. AO should not make any addition without

informing the specific details of the addition proposed to be made in the

assessment order. It is also worth mentioning that the issue as a whole

is in the knowledge of the assessee but certainly not the specific issue of

making addition of Rs.1,61,94,464/-. The same is not approved. The

order of the AO, being judicial order, is expected to be made as per the

requirement of the law. The assessee has the right to know the mind of

the AO before making any addition in the assessment. Thus, the AO

shall examine the applicability of the cited Supreme Court judgment in

the case of Andaman Timber Industries (supra) and others.

Accordingly, we are of the opinion that the matter should be remanded

to the file of the AO. Ground Nos. 1 to 5 raised by the assessee are

allowed for statistical purposes.

purposes.

Order pronounced in the open court on this 09th the day of May, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य पुणे Pune; �दनांक Dated : 09th May, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. CIT(A)-12, Pune 4. CIT-12, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” Pune; 5. गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune