Venad Properties (P) Limited & Ors. vs Deputy Commissioner Of Income Tax

PER SATBEER SINGH GODARA, JM:

The instant batch of seven cases involves the three asse sses herein M/s Ve nad Properties Private Limited, Adarsh Kumar and S. Kr ishna Kumar, HUF. This co mpany’s/appellant’s in the ITA Nos. 1342/DEL/2000, 4087 & 4088/DEL/2001, 3550/Del/2002, IT(SS)A No. 12/Del/2011 in the company/appellant’s name arises against the Co mmissioner of Income Tax(Appeals), New Delhi’s order no. 46/1999-2000, 14/2001-02, 13/2001-02, 54/2002-03 dated 19.10.2001,10.06.2002, 24.12.2 010 w hereas the latter twin assessees have preferred their single appeal each IT(SS)A Nos. 183/Del/2003 & 325/Del/2025 against the Commissioner of Income Tax (Appeals) order dated 11.01.1982 & 09.10.2001 ; respectively. Relevant proceedings herein are u/s 158BC r.w .s. 143(3) of the Income Tax Act, 1961; hereinafter referred to as, “the Act” .

Heard bo th the parties. Case files per use d. We procee d assessee/assessment year -wise for the sake of brev ity and convenience.

We notice during the course of hearing that the impugne d search herein happe ns to be the common one carried out by the learned departmental authorities on 06.11 .1996. And that so far as the assessee/company’ s first and foremost twin assessment years 1996-97 and 1997-98 having as many ITA Nos. 1342/Del/2010 & ITA No. 4387/Del/2001 are concerned, there does not appear to be much a dispute between the parties that the Assessing Officer has framed his assessments in issue inter alia making only “protective” additions in its hands for the reason that he had already added the same o n substantive basis in the other assessment year(s). T he Revenue is indeed very fair in not disputing this clinching factual position. That being the case, we hereby quote Lalji Haridas Vs. ITO (1961) 43 ITR 387 (SC) wherein the ir lordships have settled the law long back that such a protective additio n gets attracted only in an instance whe n there any doubt in the learned Assessing Officer’s mind as to in whose hands a particular item of income ought to be taxed. We hereby reiterate the fact that that lear ned departmental authorities have admittedly made the very addition(s) o n protective and substantive basis in the assessee ’s hands o nly. We thus find no reason to sustain these protective additio n(s) in the assessee’s instant former twin appeals ITA No. 1342/Del/2000 for A.Y. 1996-97& ITA No. 4087/De l/2001 in assessment year 1997-98 which are hereby accepted in very terms therefore.

The assessee pleads the following substantive grounds in the instant appeal:

Both the parties next invite our attention to the learne d CIT(A) impugned lower appellate discussion upholding the Assessing Officer’s assessment findings; as follows:

It is in this factual backdrop that the Reve nue ve hemently supports the above impugned findings inter alia disallowing/adding the assessee’s business expenses., interest on loans, de preciation and miscellaneous expenses involving varying sums.

Mr. Khandelwal on the other hand, takes us to the assessment discussion at page 1 para 2 itself that the assessee had duly derived income from purchase/development and sale of landed properties for the relevant previous year. These admitted assessment findings have gone unrebutted fro m the Revenue side. The fact also remains that the assessee does not appear to have pleaded and pro ved its busine ss expenditure claim of Rs. 8,90,939/- to the entire satisfaction o f the learned lower authorities. Be that as it may, we are of the co nsidered view that a lump sump disallowance o f Rs. 1 lakh only wo uld be just and proper w ith a rider that the same shall no t be treated as a precedent. The assessee gets relief of Rs. 7,90,939/- in other words.

Next comes the tw in additions of loan cre dits as well as interest thereupon. Learned Assessing Officer at page 5 in paragraphs 11 & 12 observes that its creditors are Sh. Padam Kumar and Smt. Vimla Padam Kumar who se genuineness and creditworthiness could not be proved. The assessee, on the other hand, has all along claimed both of them to be its directors only which has gone unrebutted from the Revenue side before us. We are of the considered view in this factual backdrop that in absence of any serious issue of identity, ge nuineness and creditworthiness, bo th the learne d lower authorities’ impugne d action treating the corresponding credits coming from the assessee’s directors’ side as well as the interest thereupon, could not have been added as unexplained and no t allowable. We thus dele te the impugned unexplained loan credits addition of Rs 6,64,045/- and interest payments amounting to Rs. 10,74,682/-, in very terms.

The third issue between parties herein is that of depreciatio n disallowance amo unting to Rs. 1 ,8 7,774/-. The Re venue case in support thereof is that the assessee had not carried out any actual business activity so as to be entitled for the same. We have already dealt with the very findings in the preceding paragraphs against the department(supra). We thus find merit in the asse ssee’s/company’s claim re garding the depreciatio n amount of Rs. 18,77,774 /- which is hereby accepted.

Learned counsel does not press for miscellaneous expenses written-off amount re lief of Rs. 6,804/- keeping in mind smallness thereo f. Upheld accordingly. This assessee’s appeal ITA No. 4088/Del/2001 is partly allowed.

Both the parties submit very fairly that the asse ssee has raised its twin substantive grounds inter alia claiming interest expe nses amounting to Rs. 10,53,188/- and unexplained cash credits/loans of Rs. 30,000/- borrowed from Mrs. Supr iya Vijay Kumar ; respectively. There does no t appear to be an issue between the parties that lear ned CIT(A) detailed discussion in para 4.2 at page 3 herein relies upon the corresponding findings in the preceding asse ssment years 1996-97 to 1998-99 wherein the assessee has already succeeded(supra). W e accordingly dele te the impugned interest disallowance of Rs. 1 0,53,188/- in very terms.

Now comes the latter issue of unexplained cash credits/loans of R s. 30 ,000/- coming fro m Mrs. Supriya Vijay Kumar, director which is hereby deleted as per our pre ceding detailed discussion. Learned counsel does not press for the assessee’s remaining grounds. Its instant appeal ITA No. 3550/Del/2002 is partly accepted.

Both the parties very fairly submit before us that the assessee/appellant seeks to reverse the learned lower authorities’ respective findings inter alia making various additions of unsecured loans, payments in foreign-exchange and expe nses depo sited to P/L account in the former category and those based on the alleged seized documents MA- 20, 52 , 51 , 54 etc under the latter head involving varying sums. Learne d counsel’s first and foremo st argument is that the above former category deals w ith those items which already formed part of the assessee’s books audited very well before the search which has not been disputed at the Reve nue’s behest. So far as the latter head is concerned, the assessee’s case is that the sear che d premise s is at Thir uvananthapuram does not happen to be its office; and therefore, the learned departmental authorities ought to have invoked section 158BD of the Act. And also the said alle ged material nowhere indicates its undisclosed income so as to be assessed in its hands. He takes us to some r eceipts issue d by the Thiruvananthapuram Tennis Club to buttress the point that the assessee company nowhere finds any mention therein. The Revenue in the other hand submits that some of the said seized documents carry the assessee’s name as well. The fact however remains that section 292C of the Act carrying presumption of correctness qua such seized documents does not apply qua the third party. And that the learned departmental authorities have admittedly failed to corroborate the said seized documents with the help of such supportive evidence against the assessee all along. Faced with this situation, we, hereby quote (2 026) 188 taxmann.com 391 (Delhi) Sun Aero Limited vs PCIT deciding the very question in the assessee’s favour and against the department that the special provision of Chapter XIV (B ) is aimed to pro vide the mode of assessment of undisclo sed inco me which has been actually de te cted as a result of search. Their lordships further referred to par a 18 in ACIT vs Hotel Blue Moon (2010) 321 ITR 362(SC) whilst deciding the instant issue against the de partment. We ho ld in this factual backdrop that all the se impugne d additions made in the assessee’s hands in both former and latter head (supra) in law and in facts. The same are accordingly directed to be deleted. Its instant appeal IT(SS)A No. 12/Del/2004 succeeds therefore.

The assessee’s sole substantive ground raised in the instant appeal challenges the learned lower authorities’ action making sectio n 68 unexplained cash credits addition of Rs. 21.60 lakhs involving 10 parties for the relevant block period. That being the case, learned counsel refers to the assessee’s statement of affairs as on 31.03.1993, 1994 & 1995 as well as the corresponding “computations” the he had been duly disclosing these loans all along very well before the date of se arch herein i.e. 06.11.1996. We thus rely o n our preceding detailed discussion to conclude that such an additio n based on the assessee’s already disclosed books o f account is not sustainable. Deleted accordingly. This assessee’s appeal IT(SS)A No. 183/Del/2003 is allowed

We notice at the outset that the sole substantive issue between the parties herein is that of correctness o f the learned Assessing Officer’s sectio n 154 rectification order date d 09.10.2001 that the assessee is not entitled for deduction o f its disclosed income from undisclosed one in light of sectio n 158BB(1)(c) of the Act. We are of the co nsidered view that such a debatable issue requiring detailed adjudication could hardly form subject matter of section 154 rectificatio n in light of T.S. Balaram, ITO vs. Vo lkart Brothers & others (SC) 82 ITR 50. We accor dingly reject the Revenue’s vehement contentions supporting the same in very terms. This assessee’s appeal IT(SS) A No. 325/Del/2025 is accepted. No other ground or argument has been pressed before us.

These three assessees’ respective appeals ITA Nos. 1342/DEL/2000, 4087/DEL/2001 are allowed & ITA No. 4088/DEL/2001 with ITA No. 3550/Del/2002 are partly allowed. IT(SS)A No. 12/Del/2011 & IT(SS)A Nos. 183/Del/2003 & 325/Del/2025 are allowed; in abo ve terms. A copy o f this common or der be placed in the respective case files.