M/S MARS COIONIZER P LTD ,RAIPUR vs. ACIT CENTRAL -II, RAIPUR

आदेश / O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by appeal-order dated 26.08.2019 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“CIT(A)”], which in turn arises out of assessment-order dated 30.03.2016 passed by learned ACIT-2, Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment- Year [“AY”] 2013-14, the assessee has filed this appeal on following ground:

“(1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the ‘loss’ shown at Rs. 18,09,968/- as per revised computation submitted before the ld. AO on 22.2.2016 Page 1 of 21

M/s Mars Colonizers Private Limited, Raipur vs. ACIT, Central-2, Bhopal. ITA No. 113/Ind/2020 – AY 2013-14

during assessment proceedings, in place of ‘total income’ shown at Rs. 56,90,030/- as per original return filed on 23.03.2014, thus, retraction of involuntary surrender made on ad hoc basis of Rs. 75 lakhs on survey u/s 133A, is liable to be considered judiciously, more so, in absence of any corroborative evidence/material found/brought on record by the ld. AO.” 2. The background facts leading to present appeal are such that the

assessee is a company engaged in the business of real estate developers and

contractors. A survey u/s 133A of the Act was conducted upon assessee-

company on 30.11.2012 alongwith searches u/s 132 on ‘Amrit Bindra

Group of Bhopal’ and ‘Mahendra Ahuja Group of Raipur’. During survey, the

statements of Shri Amit Ahuja, director of assessee, were recorded wherein

Shri Amit Gupta made a surrender of income of Rs. 75,00,000/-. Thereafter,

the assessee-company filed return of AY 2013-14 declaring a total income of

Rs. 56,90,030/- inclusive of the surrendered income of Rs. 75,00,000/-. The

case of assessee was then taken for scrutiny by statutory notices u/s

143(2)/142(1). During scrutiny-proceeding, vide letter dated 22.02.2016, the

assessee retracted surrender and also filed a revised computation of total

income excluding the additional income of Rs. 75,00,000/-, thus showing a

loss of Rs. 18,09,968/-. While completing assessment u/s 143(3), the AO

rejected assessee’s retraction-cum-revised computation and went ahead

with the total income of Rs. 56,90,030/- already declared in the return of

income. The AO also made a disallowance of Rs. 50,03,764/- out of interest

expenditure and determined total income at Rs. 1,06,93,794/-. Aggrieved,

the assessee carried matter in first-appeal and challenged the AO’s actions.

Although the CIT(A) deleted the disallowance of Rs. 50,03,764/- made by AO

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yet approved the AO’s action of completing assessment on the basis of returned income of Rs. 56,90,030/-. In essence, the CIT(A) did not grant any relief qua assessee’s claim of exclusion of surrendered income of Rs. 75,00,000/- rejected by AO. Therefore, the assessee continues to be aggrieved and for resolution of this solitary issue, has come in next appeal before us.

“��न 10) आज �दनांक 30/11/12 को आपके �यावसा�यक प�रसर म� सव�ण क� काय�वाह� के दौरान लेखा-पुि�तकाओं एवं द�तावेज� म� क�तपय �वसंग�तयां पाई गई है, �या आप इ�ह� �प�ट कर सकते ह� ॽ उ�तर- इस समय �य��क मेरे पास म� न ह� मेरा अकाउ�ट�ट है या चाट�ड� एकाउ�ट�ट है तथा �यो�क मुझे अकाउ�टस् �रलेटेड जानकार� पूव� �प से नह�ं है इस�लए

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मेर� ि�थ�त ऐसी नह�ं है �क मै आपको सार� जानका�रयां तुरंत उपल�ध करा सकूँ, परंतु अपनी मान�सक शां�त एवं क�तपय भूल�/�ु�टय� को �यान म� रखते हुए म� 75 लाख �पये का सर�डर ऑफर करता हूँ तथा आपसे यह अनुरोध करता हूँ �क इस सर�डर पर मेरे ऊपर �कसी �कार क� शाि�त आरो�पत नह�ं क� जाए । उपरो�त सर�डर आय चालू �व�त वष� म� मेर� कंपनी क� �नय�मत आय के अ�त�र�त होगा । इस पर बनने वाले टै�स के भुगतान हेतु म� कोटक ब�क का चैक �मांक 002079 जो �क �. 25 लाख का है ��तुत करता हूँ । कृपया इसे �वीकार कर� ।” Reading above question and reply word by word in open court, Ld. AR submitted that there is no single ‘incriminating material’ pointed by authorities and the surrender has been obtained on the basis of a vague question/confession of ‘क�तपय �वसंग�तयां/भूल�/�ु�टय�’. Ld. AR submitted that in

the very first sentence of his reply, Shri Amit Ahuja, clearly stated to authorities that he was not having accountant or chartered accountant at that time and he was not having knowledge relating to accounts, therefore he was not in a position to provide instant information and hence made surrender to secure mental peace and to avoid any type of penalty. Ld. AR submitted that the question raised by authorities and reply given by assessee’ director clearly demonstrates that it was an erroneous as well as involuntary surrender taken from assessee without recourse to any factual basis. He submitted that Shri Amit Ahuja was a young director of just 30 years at the relevant time and accepted surrender only to buy mental peace.

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explanatory, the assessee made a complete submission to AO. It was

submitted to AO that the return of income including additional income of

Rs. 75,00,000/- was filed under the advice of erstwhile counsel of Bhopal

since the case of assessee was also centralized in the Bhopal office of

Income-tax Department alongwith cases of searched groups. The counsel

suggested that the return of income has to be filed on the basis of the

surrender made in statements. But subsequently, the assessee engaged a

different counsel, Shri Sunil Kumar Agarwal, from Raipur. The new counsel

wanted to examine the documents impounded during survey. Therefore, on

behalf of assessee, this new counsel himself filed an application dated

05.01.2016 to the AO requesting for supply of impounded documents and

statements, copy of application is filed at Page 10 of PB. Thereafter, upon

examination of documents and statements supplied by AO, the new counsel

found that there was no discrepancy and the surrender was without any

factual foundation. Then, the retraction-letter dated 22.02.2016 was filed to

AO mentioning inter alia (i) that the survey was conducted upon assessee

alongwith simultaneous searches on Amrit Bindra Group and Mahendra

Ahuja Group and there was a pressure by survey-team to convert survey

into search, therefore the assessee had to make surrender to buy peace, (ii)

that the surrendered income was offered in the return of income under the

advice of consultant of Bhopal by passing a journal entry in accounts and

increasing stock of business from Rs. 646.89 lakhs to Rs. 721.89 lakhs, (iii)

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a detailed explanation of all pages of impounded documents i.e. LPS-1 (Page

1 to 59) and LPS-2 (Page 1 to 100) was filed in a tabular format. Further, a

detailed affidavit of Shri Amit Ahuja on stamp of Rs. 50/- duly solemnized

and notarized was also filed alongwith retraction-letter, copy of affidavit is

filed at Page 16-19 of PB. The assessee also filed a revised computation of

total income to AO after excluding the additional income of Rs. 75,00,000/-

wrongly offered in the return.

impounded documents being LPS-1 (Page 1 to 59) and LPS-2 (Page 1 to 100)

in a tabular format on Page No. 2 and 3 of aforesaid letter dated 22.02.2016.

He submitted that a careful reading of assessee’s explanation clearly shows

that there was nothing ‘incriminating’ in impounded documents. In the

explanation so filed, the assessee has also mentioned at concerned places

that the transactions reflected by documents pertained to earlier years

which had already been recorded in the books of account of relevant years.

Ld. AR also drew our attention to Page No. 20-173 of PB where the assessee

has filed the copies of all impounded documents. Referring to same, Ld. AR

showed that only Page No. 50-57 of LPS-1 (filed at Page 68-74 of PB) and

Page No. 82 to 89 of LPS-2 (filed at Page 159-173 of PB) were the documents

pertaining to financial year 2012-13 relevant to AY 2013-14 under

consideration, all other documents are either undated or relate to earlier

AYs 2009-10 to 2012-13. So far as the documents of AY 2013-14 under

consideration are concerned, Ld. AR submitted that Page No. 50-57 of LPS-1

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are the copies of a register maintained by assessee wherein the details of

registered-deeds handed over to the buyers were maintained and signatures

of buyers were taken as acknowledgement. Further, the Page No. 82 to 89 of

LPS-2 are the copies of certain registered-deeds executed between assessee

and buyers. The transactions relating to these registered-deeds are already

recorded in assessees’ books. Ld. AR questioned as to how these documents

are ‘incriminating material’ and how they reveal any kind of unaccounted

income? In nutshell, Ld. AR contended that there is no incriminating

material whatsoever in the impounded documents for AY 2013-14 under

consideration.

was made without any factual basis and it was involuntary and under forced

circumstances, (ii) that there is no single document in LPS-1 and LPS-2

which can be said to be ‘incriminating’. Even the AO has nowhere in

assessment-order mentioned any kind of incriminating material, (iii) that all

documents except Page No. 50-57 of LPS-1 and Page No. 82 to 89 of LPS-2

were not at all related to AY 2013-14 under consideration. Therefore, the

assessee made an authentic retraction and filed a revised computation

excluding the income of Rs. 75,00,000/-.

examine correct facts and then assess correct income as per law; the AO

cannot simply create estoppel by statements or take advantage of innocence

of assessee and assess income which was not there. To support this

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proposition, Ld. AR heavily relied upon following observations in Madan Lal

Mohan Lal Sakhala Vs. Addl. Cit (2023) 154 taxmann.com 178

(Mumbai – Trib) as also the CBDT Circular No. 14/XL-35 dated

11/04/1955 considered in these observations:

“4. We have heard both the parties and perused the records. It is not in dispute that the assessee has declared income of Rs.2,39,12,917/- which included capital gains of Rs.34,16,728/- which assessee has offered for taxation on sale of land. In the computation of income filed before the AO (a copy of which has been filed before us), it is discerned from perusal of page no. 4 of PB that the assessee had shown LTCG on sale of property [described therein as Agricultural Land] of land at Igatpuri dated 18.06.2009 which assessee has purchased on 09.11.2004 of Rs.28,05,017/- and net of sale at Rs.71,10,000/-. After indexation etc, the assessee has shown taxable @ 20% (LTCG) of Rs.34,16,728/-. And the AO after calling for the relevant documents in respect of sale of land has accepted the offer of tax from the assessee and accepted the return of income as returned by assessee. According to the assessee, he was on the bonafide belief that the sale of agricultural land would attract capital gain tax. However, only in year 2015 (on advice by Tax Consultant) that agricultural land if situated in the specified area as per Act are outside the purview of capital assets and so exempt from the levy of tax. In the light of the expert opinion, he had filed the appeal before the First Appellate Authority and due to which appeal couldn’t be filed in time and thus delay happened for 790 days for filing of appeal. According to the Ld. AR, the Ld. CIT(A) erred in not admitting the appeal of the assessee because not filing of appeal was not intentional/deliberate. According to the Ld. AR, merely because the assessee has offered LTCG on sale of agricultural land, the AO after examination of documents ought not to have levied tax even if due to ignorance assessee has offered it for tax. 5. Drawing our attention to the Article 265 Constitution of India which reads as under: -

“No tax shall be levied or collected except by authority of law.”

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wherein the Hon’ble High Court held that merely because income was inadvertently offered to tax, it no way take away the right of the assessee to contest the action of tax authority that the said income was not chargeable to tax. It would be gainful to reproduce the observation the Hon’ble High Court wherein it was held as under: -

“The problem arose because the petitioner in her return for the assessment year 1988-89 filed on June 30, 1988, offered the prize money of the lottery to tax rather a fundamental error of law on the part of the assessee, but that error of law once detected by the petitioner, it was urged before the Commissioner of Income-tax that the prize money earned by the petitioner could not be taxed under the Income-tax Act, 1961. It is true that it was at a later stage that such contention was raised by the petitioner, but the said contention was a pure question of law and the Commissioner of Income-tax ought to have considered the said contention on its merits and ought not to have declined to entertain it on the ground of delay. There cannot be any estoppel against the statute, Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a partly the relief that he is entitled to where the tax is levied or collected without authority of law.”

4.18 As per Article 265 of the Constitution of India, which reads as: - “no tax shall be levied or collected except by authority of law.”

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collected without authority of law, the assessee’s ignorance cannot be a ground to refuse examination of the claim made by the assessee. Even though, inadvertently assessee offered the LTCG on sale of land, he ought to have been allowed to urge the claim before the Ld. CIT(A) because there is no estoppel against law; and the Article 265 of the Constitution prohibits tax authority to collect tax without authority of law. Therefore, in the interest of justice and fair play, we set aside the impugned order of the Ld. CIT(A) and admit this issue in respect of sale of land at Igatpuri on which assessee has offered LTCG to the tune of Rs.34,16,728/- which assessee is now claiming to be exempt from taxation being agricultural land. We note that the issue raised before us is a mixed question fact and law which need to be adjudicated on the basis of relevant material/documents as to whether the assessee’s asset qualify to be agricultural land to claim the exemption or not. Since this issue has not been examined by the AO and Assessee didn’t get an opportunity to make such a claim during assessment stage, we rely on the decision of the Hon’ble Supreme Court in the case of Tin Box Company Vs. CIT (249 ITR 216) (SC) though in the context that if the assessee has not been granted proper opportunity before the AO, then it should be restored back to the AO for de novo assessment. However, the ratio can be applied in this case, and the Hon’ble Supreme Court held in the case of Tin Box Company (supra) has held as under: “It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus: "We will straightway agree with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard." That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.

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decision, the income of Rs. 75,00,000/- wrongly assessed by AO merely on

the basis of statement of assessee and without any factual basis, deserves to

be excluded from assessment. Ld. AR requested to delete the addition

made/sustained by lower-authorities to meet the ends of law and justice.

(i) The AO has noted on Page 6 of assessment-order that the assessee’s

director has made voluntary surrender during survey and also given

cheque of Rs. 25 lakh for payment of tax. This shows that the

surrender is voluntary and there is no coercion or duress exercised by

survey-team.

(ii) The assessee has voluntarily filed return and declared additional

income therein. The blame on erstwhile counsel is a self-made story of

assessee.

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(iii) The retraction is after-thought. Further, the retraction-letter had been

filed on 22.02.2016 after 3 years of survey and just before 1 month of

assessment getting time-barred. It is a settled judicial view that

retraction has to be within a reasonable time. Hence, retraction filed

by assessee cannot be accepted.

(iv) The AO has clearly noted on Page 6 of assessment-order that there

were incriminating documents but it is not possible for survey-officer

to find every detail of discrepancy. Therefore, the survey officials

required the assessee to explain the discrepancies but the assessee

himself chose to make surrender instead of explaining discrepancies

to officials.

(v) The AO has rightly noted on Page 7-8 of assessment-order that the

statement recorded u/s 133A itself is a piece of evidence and the

admission/surrender made therein has to be taken as correct.

thrust of argument, supported by following decisions, is such that the

retraction made after 2-3 years of surrender is not acceptable or the

retraction cannot make the statement unacceptable:

(i) PCIT Vs. Avinash Kumar Setia (2017) 81 Taxmann.com 476 (Delhi HC) (ii) Navdeep Dhingra Vs. CIT (2015) 56 Taxmann.com 75 (P&H HC)

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(iii) Sanjeev Agarwal Vs. ITSC (2015) 56 Taxmann.com 214 (Allahabad HC) (iv) Rajhans Towers (P) Ltd. Vs. CIT (2015) 56 Taxmann.com 67 (Delhi HC) (v) Bhagirath Aggarwal Vs. CIT (2013) 31 Taxmann.com 274 (Delhi) (vi) Bannalal Jat Constructions (P) Ltd. Vs. ACIT (2019) 106 Taxmann.com 128 (SC) (vii) Roshan Lal Sanchiti Vs. PCIT (2023) 150 Taxmann.com 228 (SC) (viii) Thiru A.J. Ramesh Kumar Vs. DCIT (2022) 139 Taxmann.com 190 (Madras HC) (ix) CIT Vs. MAC Public Trust (2022) 144 Taxmann.com 54 (Madras HC)

(i) That the AO issued first-query letter u/s 142(1) dated 17.12.2015

fixing the hearing on 04.01.2016. This fact is clearly borne out of the

first para of assessment-order itself. The assessee immediately

consulted the new counsel and the new counsel filed application dated

05.01.2016, as discussed earlier, to AO for providing documents and

statements. Thereafter, the retraction was made on 22.02.2016. These

facts cannot be disputed by anybody. Thus, there is no delay on the

part of assessee and even if it is construed as delay, there is a reason

that the assessee was not having impounded documents or

statements to make any analysis.

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(ii) That the letter dated 22.02.2016 is not a simple retraction. The

assessee has also given full explanation qua all pages of impounded

documents.

(iii) That majority of the judicial decisions relied by Ld. DR are related to

searches u/s 132 whereas the assessee’ case involved a survey. It is

accepted in several decisions that the statements made during survey

are not sacrosanct.

orders of lower-authorities as also the documents held on record in the light

of judicial rulings relied upon by parties. At first, we find that during survey

the statement of assessee’s director were recorded wherein he made a

surrender of income of Rs. 75,00,000/- and in the return of income filed

after survey, the assessee included additional income of Rs. 75,00,000/- by

passing a journal entry increasing the value of closing stock from Rs. 646.89

lakhs to Rs. 721.89 lakhs. However, during assessment-proceeding, the

assessee filed a revised computation of total income excluding the income of

Rs. 75,00,000/- after re-consultation from another counsel who filed re-

traction letter on behalf of assessee alongwith affidavit of assessee, after

examination of impounded documents and statements. In the letter so filed,

the assessee also submitted a detailed explanation on all pages of

impounded documents to show that there was nothing incriminating.

During hearing before us also, Ld. AR for assessee has referred contents of

impounded papers and successfully showed a vital point that majority of

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papers do not belong to AY 2013-14 under consideration and it is only that

Page No. 50-57 of LPS-1 and Page No. 82 to 89 of LPS-2 bear the dates falling in financial year 2012-13 relevant to AY 2013-14 under consideration. Therefore, all other documents have no relevance to AY 2013- 14 under consideration. So far as the Page No. 50-57 of LPS-1 is concerned, they are the copies of a register maintained by assessee containing the

details of registered-deeds handed over to the buyers. Further, the Page No. 82 to 89 of LPS-2 are the copies of registered-deeds executed between assessee and buyers. These documents are not incriminating documents.

Thus, we find that there is no incriminating document relevant to AY 2013- 14 under consideration. Even in the assessment-order also, the AO has not

referred any incriminating material. The AO has made addition only on the basis of surrender having been made by assessee’s director. From perusal of Q.No. 10 and reply o of statements, as re-produced earlier, one can easily

find that there is no incriminating material referred therein. The surrender was taken/made on a generalized or vague questioning of ‘क�तपय

�वसंग�तयां/भूल�/�ु�टय�’. Even during hearing before us, Ld. DR for revenue is

not able to pinpoint any incriminating material having been discovered by authorities. Ld. DR is only harping on the surrender made by assessee’s

director and relying upon the orders of lower-authorities ignoring the crucial fact that there is no basis or material to sustain the taxability of

surrendered income. Therefore, the case of assessee is fully covered by Madan Lal Mohan Lal Sakhala (supra) wherein, taking note of Article 265

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of the Constitution and CBDT Circular No. 14/XL-35 dated 11/04/1955, it

was accepted thus:

“9…..Since Article 265 of the Constitution of India prohibit tax to be collected without authority of law, the assessee’s ignorance cannot be a ground to refuse examination of the claim made by the assessee. Even though, inadvertently assessee offered the LTCG on sale of land, he ought to have been allowed to urge the claim before the Ld. CIT(A) because there is no estoppel against law; and the Article 265 of the Constitution prohibits tax authority to collect tax without authority of law. Therefore, in the interest of justice and fair play, we set aside the impugned order of the Ld. CIT(A) and admit this issue in respect of sale of land at Igatpuri on which assessee has offered LTCG to the tune of Rs.34,16,728/- which assessee is now claiming to be exempt from taxation being agricultural land.” 15. For immediate reference, we extract below the relevant portion of

Circular No. 14/XL-35 dated 11/04/1955 reading as under:

Central Board of Direct Taxes Circular No. 14 (XL-35)

Miscellaneous—Refund and reliefs due to assessees — Departmental attitude towards

Dated: 11/04/1955

The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interest and convenience. It appears that these instructions are not being uniformly followed.

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particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :— (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.” 16. Therefore, in the light of decision in Madan Lal Mohan Lal Sakhala

(supra), we are inclined to accept assessee’s claim that the income of Rs.

75,00,000/- surrendered during survey but having no factual basis cannot

be taxed by revenue authorities even if the same had been wrongly offered

by assessee in return. In that view of matter, we direct the AO to modify

assessment-order and exclude the impugned income from taxation. The

assessee’s ground is allowed.

noted earlier, the assessee has accounted impugned income by passing

a journal entry of Rs. 75,00,000/- in books of account whereby the

closing-stock of AY 2013-14 had been increased from Rs. 646.89 lakhs

to 721.89 lakhs. Since we have directed the AO to exclude the income

of Rs. 75,00,000/- in AY 2013-14, it would reduce closing stock by

same amount. Correspondingly, the opening stock of subsequent AY

2014-15 would have to be reduced. Therefore, the AO shall be entitled

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to reduce the opening stock of AY 2014-15 by Rs. 75,00,000/- and give

necessary effect in accordance with the provisions of law.

Order pronounced in open court on 04.04.2024.

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore िदनांक /Dated : 04.04.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

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