Iapl/604/2012 Of Commissioner Of Income Tax v. M/S Jeet Construction Company

-Court No. 35 Case :- INCOME TAX APPEAL No. - 604 of 2012Appellant :- Commissioner Of Income TaxRespondent :- M/S Jeet Construction CompanyCounsel for Appellant :- Manu Ghildyal,S.S.C. I.T.Counsel for Respondent :- R.R. Agrawal,Kartikeya Saran,Suyash Agarwal with Case :- INCOME TAX APPEAL No. - 81 of 2013Appellant :- Commissioner Of Income TaxRespondent :- M/S Jeet Construction Co.Counsel for Appellant :- S.S.C. I.T.,Manu GhildyalCounsel for Respondent :- Kartikeya Saran Hon'ble Bharati Sapru,J.Hon'ble Rohit Ranjan Agarwal,J. (Per Hon'ble Rohit Ranjan Agarwal,J.) 1.These two connected appeals, under Section 260-A ofthe Income Tax Act (hereinafter called as 'Act') arise out ofjudgment and order dated 31.10.2011 passed by Income TaxAppellate Tribunal, Delhi Bench “D” New Delhi (hereinaftercalled as 'ITAT') in ITA No. 26/Del/2011 and order dated19.10.2012 passed in ITA No. 39/Del/2012 for the blockassessment year 1997-98 to 2003-04. 2.Income Tax Appeal No. 604 of 2012 was admitted on22.05.2012 on substantial question of law nos. 1 and 2, and on11.02.2019 additional substantial question of law nos. 4 and 5were added, which are hereasunder: “(1) Whether the Ld. Income Tax Appellate Tribunalwas correcting in law in deleting the Addition ofRs.3,82,66,276/- and Rs.1,00,00,000/- by holding thatadditions in fresh assessment cannot exceed the additions made in the set aside assessment ignoringthat the assessment was completed according to thedirection of Ld. ITAT itself to frame the assessment onthe basis of seized material and documents u/S158BB(1) of the IT Act, 1961. Whether such findings ofITAT are according to the provisions of Income Tax Act,1961. (2) Whether Ld. Income Tax Tribunal has erred in lawin deleting the addition made by the AO ofRs.6,38,500/- u/S 69 C of the IT Act 1961 ignoring thatonus to prove legality and date of such expenditurelied upon assessee solely for which opportunities weregiven by the AO. Whether onus to prove the date ofsuch expenditure was ever lying upon the department. (4) Whether the ITAT is legally justified in reversing theconcurrent finding of fact of the authorities belowwithout appreciating the material on record? (5) Whether the ITAT is legally justified in reversing theconcurrent findings of fact of the authorities below inthe absence of fresh material placed before it?” 3.Income Tax Appeal No. 81 of 2003 was admitted on15.01.2014 on substantial question of law nos. 1 and 2, whichare hereasunder:- “(1) Whether on the facts and circumstances of thecase, the Ld. ITAT, New Delhi was justified in law indeleting the penalty imposed by the A.O. forRs.3,05,58,009/- u/s 158 BFA (2) of the Income TaxAct, 1961 ignoring that matter related to relevantadditions made during assessment for the same blockA.Ys. 1997 to 2003-04 was subjudice before Hon'bleHigh Court, Allahabad which has also been admittedby the Hon'ble High Court Allahabad vide order dated22.05.2012 in Appeal No. 604 of 2012. (2) Whether the ITAT has erred in law in deleting thepenalty imposed under Section 158 BFA (2) when theassessee did not fulfill any of the conditions prescribedin the Section.” 4.Both the appeals are being heard together and decidedby a common order. 5.The brief facts of the case are, that respondent-assesseebeing a partnership firm was engaged in business of civil [3] (2) Whether the ITAT has erred in law in deleting thepenalty imposed under Section 158 BFA (2) when theassessee did not fulfill any of the conditions prescribedin the Section.” 4.Both the appeals are being heard together and decidedby a common order. 5.The brief facts of the case are, that respondent-assesseebeing a partnership firm was engaged in business of civil [3] construction. A search and seizure was conducted underSection 132 of the Income Tax Act on 23.12.2002, in theresidential premises of working partner of the firm, BaljeetSingh Bakshi, Arvind Puri and Baldev Singh Bakshi. Searchwas also carried on the business premises of the firm andanother shared business premises situated at 187-A/ AbuLane, Meerut. During the course of search, severalincriminating materials, along with some books of accountspertaining to the firm was seized. As the seized materialneeded verification, Assessing Officer issued notice on16.09.2004 under Section 158 BD of the Act on the assessee,which was served on 20.09.2004. The Assessing Officer foundthat assessee could not produce books of accounts andvouchers and thus, he reached to the conclusion thatexpenses debited by the assessee in trading and profit andloss account for various years of the block period could not beverified, thus, the books of accounts were rejected. AssessingOfficer applied rate of 8% in order to ascertain the income forthe block period and estimated the same at Rs.51,44,968/-.This, however, was done by the Assessing Officer withoutgiving credit to the income already returned by the assessee. 6.Against the assessment order an appeal was filed beforeCIT (Appeals), who on 13.08.2007 deleted the addition ofRs.51,44,968/- on the ground that provisions of Section 44 ADwere not applicable to the facts of the case. However, oneaddition in respect of illegal payments of commissionaggregating to Rs.5,88,500/- in addition to levy of surcharge,credit of pre-paid taxes etc. was confirmed. 7.Against the aforesaid order, the assessee as well as theRevenue preferred appeals before the ITAT against theconfirmation of addition of Rs.5,88,500/- as well as on thedeletion of the addition made by the AO. 8.On 11.11.2008, the ITAT dismissed the appeal of theRevenue for block period 1997-98 to 2003-04 in respect of alladditions except estimation of income of Rs.51,44,968/-, whilethe ITAT remanded back the matter to the Assessing Officer forre-examination and re-deciding the matter in the light ofobservation so made as regards the assessee's appeal. TheITAT remanded the matter to the AO with the direction tocompute income under Section 158 BD (1) and decide theissue of unexplained expenditure of Rs.5,88,500/- with thespecific direction. 9.Assessing Officer in remand proceeding completed theassessment on 31.12.2009 by making an addition on accountof unexplained expenditure Rs.3,82,66,276/- suppression ofreceipts and inflation of expenses Rs.1,00,00,000/- and illegalpayments of Rs.6,38,500/-. Thus, the assessing authorityadded Rs.4,89,476/- on account of undisclosed income whileallowing credit for amount declared in block return atRs.4,00,000/-. 10.Aggrieved by the said order an appeal was preferredbefore CIT (Appeals) by the assessee, the CIT (Appeals) on16.03.2011 confirmed the action of the AO in initiatingproceedings under Section 158 BD of the Act and completedthe assessment at an income of Rs.4,85,04,776/-. Further, theCIT(Appeals) deleted the addition of Rs.6,38,500/- which was the commission paid by the assessee. 10.Aggrieved by the said order an appeal was preferredbefore CIT (Appeals) by the assessee, the CIT (Appeals) on16.03.2011 confirmed the action of the AO in initiatingproceedings under Section 158 BD of the Act and completedthe assessment at an income of Rs.4,85,04,776/-. Further, theCIT(Appeals) deleted the addition of Rs.6,38,500/- which was the commission paid by the assessee. 11.Against the said order, two appeals were filed before theITAT, one by the assessee, ITA No. 26 (Del) of 2011 and theother ITA No. 28 (Del) of 2011 by the Department. The Tribunalon 31.10.2011 allowed the appeal of the assessee whiledismissed the appeal of the Revenue on the ground thatwhere the income had already been assessed or return ofincome has been filed, that income cannot be taken asundisclosed income. The Tribunal also recorded a categoricalfinding that Assessing Officer instead of working outundisclosed income, as per the provisions of Section 158 BDhad totalled up amount mentioned in various annexures, whichaccording to the assessee are part of the contract work doneby him. No evidence was found to suggest that the assesseehad been indulging in construction business outside books ofaccount. Further, the Tribunal had recorded a finding thatmerely because ITAT remanded the matter to AssessingOfficer, the total of all the entries whether recorded in regularbooks of accounts or without any date would constitute incomeof the assessee, that to undisclosed income. The Tribunal hadremanded the matter with a direction to complete assessmentunder Section 158 BD based on seized material, but theAssessing Officer determined the taxable income ofRs.4,82,66,276/- as against addition of Rs.51,44,968/- has putthe assessee in more adverse situation which is not permittedin law, and the addition cannot be made under Section 158 BDof the Act merely on presumption that assessee had earnedundisclosed income and had incurred expenses outside thebooks of accounts. 12.We have heard learned counsel for the parties andperused the material on record. 13.We find that the Tribunal has recorded a finding in regardto the additions made by the Assessing Officer which wasconfirmed by the CIT (Appeals), which was based only onmere assumption and not on any material recovered duringsearch and seizure. The Tribunal had recorded a categoricalfinding that addition cannot be made merely on presumptionthat assessee had earned undisclosed income and incurredexpenses outside books of account, which need nointerference being finding of fact, the appeal lacks merit and ishereby dismissed. 14.The question of law is, therefore, answered in favour ofthe assesseee and against the Revenue. Order Date :- 16.10.2019V.S.Singh