PER I.C.SUDHIR, JM The assessee has questioned First Appellate Order on the following grounds :-
1. The learned CIT(A) erred in law and on facts in confirming the addition of Rs.25 lacs which was paid by the appellant as compensation to JBA Enterprises (P) Ltd. in respect of an agriculture plot without confronting the evidences placed on record or bringing any adverse material. Thus, the addition must be deleted.
2. The learned CIT(A) erred in law and on facts in confirming addition of Rs.1,00,000/- ignoring the fact that said sum was received as advance as per the agreement to sell and was not a part of liability for which no confirmation were filed. Thus, the addition must be deleted.
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2. Besides above, the assessee has also moved application for allowing the following additional grounds for the adjudication of the Tribunal :- The additions in the impugned assessment order passed u/s 153A are bad in law and on facts because (a) the additions were not based on any books of account or other material not produced in the course of original assessment but which could alleged to have been found in the course of search or an undisclosed income or property discovered therein (b) as the assessment proceedings were not abated but were already completed.
3. The Ld. AR submitted that the issue raised in the additional grounds are purely legal in nature which goes to the root of the matter and adjudication of which does not required consideration of fresh material outside the record. In support, he placed reliance on several decisions including :-
(i) National Thermal Power Company Ltd. vs CIT (1998) 229 ITR
383 (SC)
(ii) CIT vs Bhagwati Printers Pvt. Ltd. (2006) 102 TTJ 480(Del.)
(iii) Director of Income Tax (Exemption) vs Arunodya (2006) 286 ITR 383 (Del.) Ld. DR opposed the above application. He submitted that no such issues were raised before the authority below.
4. Considering the above submissions, we find substance in the contention of the Ld. AR that the issues raised in the additional grounds are legal in nature which goes to the root of the matter and adjudication of the same does not need
I.T.A .No.-160/Del/2012 consideration of fresh material outside the record. We thus allow the application of the assessee for adjudication of these additional grounds by the Bench.
5. Ld. AR submitted that the issues raised in the additional grounds are fully covered by the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. vs DCIT, ITA No.-5018 to 5022 & 5059/2010 (Assessment Years 2004-05 to 2009-2010) order dated 06.07.2012 (a copy has been supplied). He contended that additions made in the assessment framed u/s 153A in question are not based on the books of accounts or other material not produced in the course of original assessment but which could be alleged to have been found in the course of search and as such undisclosed income or property discovered there in and the original assessment proceedings were not awaited but were already completed.
6. Ld. DR objected the above submissions of the Ld. AR with this contention that the facts in the case of All Cargo Global Logistics Ltd. vs DCIT (supra) are different as in that case, assessment u/s 143(3) was already framed whereas in the case of present assessee, no assessment u/s 143(3) was there prior to the search. He placed reliance on the following decisions :- (a) 117 ITD 74 (Del.) Shiv Nath Rai Hari Narayan India Ltd. vs DCIT (b) 114 ITD 305 (Del.) Ms. Shyam Lata Kaushik Vs. ACIT.
7. Having gone through the orders of the authorities below and the decisions relied upon, we find that on the question as to whether on the facts and in law, scope of assessment u/s 153A encompasses additions, not based on any incriminating material found during the course of search was raised before the
I.T.A .No.-160/Del/2012 Special Bench of the Tribunal in the case of M/s All Cargo Global Logistics Ltd. vs DCIT (supra) and following answers have been given by the Special Bench :- (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessment shall be made for each of the six assessment years separately; (b) in other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means :-
(i) books of accounts, other documents, found in the course of search but not produced in the course of original assessment; and
(ii) undisclosed income or property discovered in the course of search. Since from the orders of the authorities below, it is not clear as to whether assessment u/s 143(3) was already framed on the return of income if any filed by the assessee before the search conducted in the case of the assessee and others on 31.07.2008. We thus in the interest of justice, set aside the matter to the file of the Ld. CIT(A) to decide the issues raised in the additional grounds in view of the above contentions of the parties and the decisions relied upon by them after affording opportunity of being heard to them. The additional grounds are thus allowed for statistical purposes. Ground No-1
8. The relevant facts are that the assessee had returned short term capital gain on selling of the properties situated at Zindapur. The said property was claimed to have been purchased for Rs.13,55,000/- on 31.10.2003. It was claimed that
I.T.A .No.-160/Del/2012 initially this property was agreed to be sold for Rs.27 lacs to one M/s JBA Enterprises Pvt. Ltd. vide agreement to sale dated 16.04.2004. However later on the assessee did not perform his past of the agreement with M/s JBA Enterprises Pvt. Ltd. and as per the terms of said agreement to sale, the assessee had to pay a compensation of Rs.25 lacs to the said proposed buyer. Such payment was claimed to have been made in the subsequent FY i.e in the AY 2006-07 by the appellant. It was submitted and claimed by the assessee that ultimately this property was sold for Rs.56.58 lacs vide agreement dated 21.09.2004. The assessee claimed Rs.25 lacs allegedly paid to M/s JBA Enterprises Pvt. Ltd. towards the cost of property. It was further claimed by the assessee that in his overall deal, it has earned more money. The AO did not agree with the above claim of the assessee which has also been upheld by the Ld. CIT(A). The assessee has thus questioned the addition of Rs.25 lacs made and confirmed by the authorities below which was claimed by the assessee as a cost paid to M/s JBA Enterprises Pvt. Ltd..
9. In support of the ground, the Ld. AR submitted that there is no dispute on above facts of the case but the authorities below have made and upheld the addition in question without examining the buyer M/s JBA Enterprises Pvt. Ltd. who was compensated by making payment of Rs.25 lacs to them by the assessee as per the terms of the agreement to sale between the assessee and M/s JBA Enterprises Pvt. Ltd. on failure of the assessee to sale the property to them. The authorities below instead have preferred to sustain the addition of Rs.25 lacs on the
I.T.A .No.-160/Del/2012 basis of surmises that Rs.25 lacs might have not been paid being an excessive amount for the purpose.
10. The Ld. DR, on the other hand, tried to justify the orders of the authorities below on the issue. He submitted that no evidence was furnished by the assessee in support of his claim of payment of Rs.25 lacs to M/s JBA Enterprises Pvt. Ltd. The agreement to sale enterprise with M/s JBA Enterprises Pvt. Ltd. was also not registered and clause 2 of the said agreement regarding payment of Rs.25 lacs by the assessee to them in case of failure of the assessee to sale the property to them is also absurd and against the general practice of payments of double of the amount paid as an advance against the dealing to the buyer in case of failure on the part of the seller to sale the property to the agreed buyer.
11. Considering the above submissions, we find that the AO had denied the claimed cost of Rs.25 lacs allegedly paid to M/s JBA Enterprises Pvt. Ltd. on the breach of the agreement to sale of the property in question to them by the assessee on the following grounds :-
(i) As per clause 1 of the agreement to sell with M/s JBA Enterprises Pvt. Ltd. The sale was to be completed within are month i.e by 15.05.2004. However, assessee sold it subsequently on 21.09.2004. What happened in the gap of more than 4 months is not explained.
(ii) If the assessee were to pay any real compensation to the said first buyer namely JBA Enterprises P. Ltd. The assessee would have paid it immediately an termination of the agreement and not in the next financial year as claimed. There is no evidence of such payment made even in next financial year.
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(iii) The transaction pertaining to compensation of Rs. 25 lacs on a deal of property for sale for Rs. 27 lacs sounds totally illogical and is not as per normal terms and conditions of such transactions. Generally as per business practice double of the amount paid as initial advance is kept as compensation on back-tracking by any party. IN this case cash advance of Rs. 1 lacs was claimed to have been paid by M/s JBA Enterprises.
(iv) The arrangement between assessee and the JBA Enterprises does not appear to be genuine and bonafide. Hence the claim of the assessee towards the same is rejected as apart from assessees were claim on this there is no concrete evidence which could justify the said claim. The so called agreement to sell filed by the assessee is not even Property signed on behalf of the said company. Generally such documents bear the seal & stamp of the company which is also missing in this case.
(v) As per the provisions of Income Tax Act, as assessee can claim a deduction towards to cost of acquisition or cost of improvement of a capital asset. The so called payment of Rs.25,00,000/- is neither a cost of acquisition nor a cost of improvement. If at all it is paid, it can not be deducted from the cost of consideration while computing the short term capital gains.
12. There is no doubt that pre-ponderance of human probabilities has got very important role to play in the matters of Income Tax Act and that is the reason behind the decisions of Honble Courts to have been pleased to hold time and again that provisions of evidence act are not strictly applicable in the cases under Income Tax Act. Even before the Tribunal, the assessee has not been able to
I.T.A .No.-160/Del/2012 convincingly meet out the above objections raised by the AO on the genuineness of the claimed cost of Rs.25 lacs. Even, we are unable to convince ourselves that in an agreement to sale the property for Rs.27 lacs, the proposed seller in default will have to pay Rs. 25 lacs as compensation to the proposed buyer in terms of the agreement between the two on the payment of advance of Rs. 1 lac only. We fully agree with the observation of the AO that generally as per business practice double of the advance amount (paid as initial amount to confirm the deal) is paid by the seller in default. In the present case, an advance of Rs. 1 lac was claimed to have been paid in cash by M/s JBA Enterprises. In such a case, where the assessee makes an unusual claim which is against human probability, onus lies heavily on the claimant assessee to establish genuineness of such claim to which the assessee has thoroughly failed to prove in the present case. Obviously M/s JBA Enterprises is an interested party to such an agreement. Hence even their confirmation of receipt of payment of Rs.25 lacs was not sufficient to establish the alleged claim of the assessee. Under these circumstances, we do not find reason to interfere with the orders of the authorities below in this regard. The same is upheld. Ground No. 1 is accordingly rejected. Ground No-2
13. The AO made an addition of Rs.14 lacs on account of unexplained liabilities. He noted that the assessee had shown liabilities of Rs.39 lacs in his balance sheet filed with the return. He was asked to file confirmation etc. in support of which the assessee vide his letter dated 21.12.2010 claimed that the
I.T.A .No.-160/Del/2012 amount represented Rs. 25 lacs payable to M/s JBA Enterprises Pvt. Ltd. and balance was payable to Rite pack Pvt. Ltd. & Kiwi Foods India Pvt. Ltd. The assessee claimed to have returned back the same in the next FY. However, the assessee had also submitted that there was no confirmation available. The AO noted that these concerns belong to the same group and assessee hold shares also in Kiwi Foods Pvt. Ltd. Under these circumstances, the AO doubted the claimed liability and payment in absence of the confirmations. The AO noted further that the assessee had reconciled his balance-sheet as on 31.03.2005. The said liabilities were represented by similar amount somewhere in assessment only then a balance sheet reconciles. Since the assessee had failed to prove the genuineness of such liabilities, the AO treated the same as undisclosed credits in the books of the assessee and made an addition. Since addition of Rs.25 lacs was already made on account of cost claimed to have been paid to M/s JBA Enterprises, the AO made addition on this account at Rs.14 lacs i.e the balance amounts. The Ld. CIT(A) has restricted the addition of Rs.1,50,000/-. In ground No-2, under consideration the assessee has questioned the action of the Ld. CIT(A) in confirming the addition to the extent of Rs. 1 lac. In support of the ground, the Ld. AR submitted that the Ld. CIT(A) has confirmed the addition of Rs. 1 lac ignoring the fact that the said sum was received as advance as per the agreement to sale and was not a part of liability for which no confirmations were filed.
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14. Having gone through the orders of the authorities below on the issue, we find that the Ld. CIT(A) has dealt with the issue in para No-(iii) at page no-7 & 8 of the first appellate order. We find that the Ld. CIT(A) has already deleted Rs. 1 lac out of the addition of Rs. 14 lacs made by the AO with this observation that the amount was received as advance as per the agreement to sale. Hence, it deserves to be corrected. Since the amount of Rs.1,50,000/- out of the remaining addition of Rs. 13 lacs was not explained by the assessee before the Ld. CIT(A), the Ld. CIT(A) has sustained the addition of Rs. 1,50,000/- out of the claimed liability. We thus find that there is no infirmity in the first appellate order as claimed by the assessee in ground No-2. The ground is accordingly rejected.
15. In the result, the appeal is partly allowed for statistical purposes. Order pronounced in the Open Court on 27.11.2012. Sd/- Sd/- (T.S.KAPOOR) (I.C.SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27/11/2012 *Amit Kumar* Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI