ACME HOUSING (I) P. LTD,MUMBAI vs. DCIT CEN CIR 9, MUMBAI

In brief, the relevant facts are that the assessee is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of builders and developers. The assessee-company is a part of Acme Group comprising of various concerns, which was subject to a search action under section 132(1) of the Act on 24/07/2008. In the ensuing assessment proceedings, the Assessing Officer noticed that at the time of search at the office premises of the assessee-company, cash of Rs.12,30,000/- was found as per ‘ ‘Panchnama’ dated 25/07/2008 and 06/08/2008, out of which cash of Rs.12,00,000/- was seized. On being asked to explain the source of cash found, the assessee explained that the cash found at the time of search was duly accounted for in terms of the cash balances available in the books of account of different group entities, including the assessee- company. In para 5.1 of the assessment order, the Assessing Officer has reproduced the explanation of the assessee and the cash balance available as per the books of account of different entities as on 24/07/2008. The Assessing Officer accepted the contention of the assessee so far as it related to the cash balance appearing in the assessee-company’s books of account of Rs.7,61,153/-. The assessee’s explanation based on the cash balance available in the account books of three other entities namely, Acme Associates – Rs.1,81,364/-; Acme Combines – Rs.1,30,607/- and Parth Construction- 2,66,055/- was not accepted. Accordingly, the explanation regarding the cash of Rs.4,68,847/- (i.e. 12,30,000 minus Rs.7,61,153) was not found

Before us, the Ld. Representative for the assessee pointed out that the ‘Panchnamas’ dated 25/07/2008 and 06/08/2008, showing inventories of cash found itself show that the cash found was belonging not only to the assessee-company but also to other group concerns existing at the address. In this context, our reference has been invited to pages 35 to 38 of the Paper Book, wherein is placed copies of the relevant ‘Panchnamas’. It was, therefore, contended that the cash found at the time of search requires to be considered in the light of the cash balances available in the account book of the various group entities and, if it is considered in the said light, there would remain no difference. Apart therefrom, the Ld. Representative for the assessee also referred to the statement recorded under section 132(4) of the Act on 25/07/2008 of Shri Ketan Jayantilal Mehta, who was a partner in the Acme group concerns and also director in some of the group companies. By referring to the answer to Question No.5, the Ld. Representative for the assessee explained that the details of cash balances appearing in the books of account of the Acme Group was furnished as Annexure-D, which clearly shows the availability of cash balance in the three concerns explained during the assessment proceedings. On the aforesaid basis, it is sought to be contended that the cash balance of Rs.4,68,847/- could not be considered as unexplained within the meaning of section 69A of the Act.

We have carefully considered the rival submissions. In our considered opinion, explanation rendered by the assessee in the statement recorded at the time of search and also the manner in which the ‘Panchnamas’ have been prepared inventorising the cash found clearly establish that the cash balance to the extent of Rs.4,68,847/- could not be considered as unexplained within the meaning of section 69A of the Act. Quite clearly, even as per the ‘Panchnamas” prepared at the time of search, the inventory of cash found reveals that it was made with respect to the assessee company as well as other group concerns. In the statement recorded on 25/07/2008, the details of cash balances in the case of group concerns was also referred, which is appearing as Annexure-D to the statement, a copy of which is placed in the Paper Book. The said statement shows as much as 40 concerns and six individuals belonging to the group and their respective cash balances. Therefore, the cash found in the premises at the time of search ought to be examined with reference to the cash balances appearing in the books of account of the assessee group, especially because of the fact that even the ‘Panchnamas’ inventorising the cash refer to assessee-company as well as other group concerns. In our considered opinion, the Assessing Officer as well as the CIT(A) erred in not considering the explanation rendered by the assessee in its proper perspective. Considering the availability of cash balance in the books of account of other group concerns, namely, Acme

The next grievance of the assessee is with regard to a disallowance of Rs.6,48,588- made by the income tax authorities by invoking the provisions of section 14A of the Act. In this context, brief facts are that assessee was found to have made investment of Rs.9,64,99,723/- in shares and securities, on which it had earned exempt dividend income of Rs.2,48,712/-. The Assessing Officer was of the view that interest expenditure as well as administrative expenses relatable to the earning of exempt income was disallowable under section 14A of the Act, which was quantified at Rs.6,48,588/-. This disallowance has also been affirmed by the CIT(A) in a combined order for the earlier assessment year of 2008-09.

At the time of hearing, the Ld. Representative for the assessee contended that similar issue had come up before the Tribunal in the case of the assessee for the earlier assessment year vide order in & Others dated 15/5/2013 and the issue has been held against the assessee. Following the aforesaid submission of the assessee, the orders of the authorities below on this aspect are affirmed. Accordingly, assessee fails on this issue.

Ld. Departmental Representative appearing for the Revenue has no objection to the aforesaid plea of the assessee.

Accordingly, following the precedent in the assessee’s own case, by way of order of the Tribunal dated 15/5/2013(supra), we restore the matter back to the file of Assessing Officer, who shall pass an order afresh, keeping in mind the directions of the Tribunal in its order dated 15/05/2013(supra). Thus, on this aspect assessee succeeds for statistical purposes.

In the result, the appeal of the assessee is partly allowed.