(Prayer: Tax Case Appeals against the order of the Income Tax Appellate Tribunal, A Bench, Chennai, dated 18.10.2005 passed in I.T.A.Nos. 291/Mds/ 1999 and 1718, 1820/ Mds/ 1999 for assessment years 1995-96 and 1996-97.)
CHITRA VENKATARAMAN, J.
1. The assessee has filed the above appeals as against the order of the Income Tax Appellate Tribunal for the assessment years 1995-96 and 1996-97. The T.C.(A).No. 1150 of 2006 was admitted on the following substantial questions of law:-
"(i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the interest under Section 234B is leviable even if there was no liability to pay advance tax is fastened on assessee, since at the due dates of payment of advance tax, the assessee was incurring losses and could not have comprehended taxable income at a later date?
2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the levy of interest under Section 234B is consequential?. "
2. The T.C.(A).Nos. 1151 and 1152 of 2006 were admitted on the following substantial questions of law:-
"(i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the addition of Rs.86,50,250/- as receipt of on money transaction?
(ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the notings, even without corroborating evidence to the fact of receipt of on money by the appellant, would be conclusive for making an addition in the hands of the appellant?
(iii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in not considering the alternative submission that if at all any additional to income should be made, only 8% of Rs.86,50,250/-, which being the profit element of the appellant should be added, as per section 44AD of Income Tax Act, 1961?"
3. T.C.No.1152 of 2006 was also admitted on the following substantial question of law, in addition to the above substantial questions of law:-
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in upholding the addition on value of salvaged scrap material as income?"
4. The above Tax Case (Appeals) are arising out of the order of the Tribunal relating to Revenue's appeal as well as assessee's appeal. As far as T.C.No.1150 of 2006 is concerned, it is seen from the facts narrated that the assessee is engaged in the business of sales of granite after manufacturing/ processing the same as well as in development of property. It is seen from the facts that the business premises of the assessee firm and the residential premises of the partners were searched on 21.4.1995. During the search, the department seized certain documents which disclosed unaccounted income in the form of receipt in addition to the accounted income with receipts, thereby resulting in the estimation of assessment on best judgment basis. On going through the averment and on the basis of the documents thus seized, on the assessment made thereon, the Assessing Officer levied interest under Section 234B of the Act. Aggrieved both on the quantum of assessment and on the levy of interest, the assessee went on appeal before the Commissioner of Income Tax (Appeals). In considering the claim of the assessee, the Appellate Authority pointed out that the method of accounting followed by of the assessee based on the completion of project for the purpose of arriving at the income could not be accepted and the percentage completion method alone had to be adopted in arriving at the assessable income of the assessee. The Commissioner of Income Tax (Appeals) held that since the assessee was engaged in the activity of civil construction, Section 44AD of the Act was applicable. Consequently, the assessment was directed to be redone by the Assessing Officer. However, as regards the method of accounting, the Commissioner of Income Tax (Appeals) modifiedthe order of the Assessing Officer. Aggrieved by this, the Revenue went on appeal, so too the assessee.
5. As far as the estimation of income on the basis of pro rata construction is concerned, the Tribunal pointed out that when unaccounted income on the basis of the diary had been considered for addition, the expenditure noted therein also had to be considered for the purpose of deduction. Thus, agreeing with the assessee on this issue, the Appellate Tribunal remanded the assessment back to the Officer to find out how much of the expenditure was allowable expenditure with respect to the particular project as claimed by the assessee. In the light of the above remand, the interest levy under Section 234B was also remanded back to work out the same depending on the outcome of the assessment proceedings. Aggrieved by this, the assesee has come before this Court on appeal questioning the interest levy under Section 234 B of the Act.
6. In this connection, learned counsel for the assessee placed reliance on the decision reported in 217 ITR 72 – RANCHI CLUB LTD v. C.I.T. which was confirmed by the Apex Court in 247 ITR 209 – C.I.T. v. RANCHI CLUB LIMITED. We do not find the decision relied on by the assessee would be of any assistance, since on a reading of the said decision, it is clear that what was decided therein was with reference to Section 234A, even though there is reference about 234B, the entire reading of the judgment shows that it was concerned about the levy of interest under Section 234A.
7. As far as the present case is concerned, as already pointed out when the quantum assessment itself was remanded particularly with reference to the expenditure vis-a-vis unaccounted money, the liability to pay the interest has to await the assessment to be computed in terms of the directions of the Tribunal. In the circumstances, we do not find any justifiable ground to interfere with the order of the Tribunal andthe Tax Case (Appeal) No. 1150 of 2006 fails and the same is dismissed.
8. As far as the assessment relating to assessment year 1996-97 is concerned, a perusal of the order of the assessment shows that at the time of search, the Revenue seized loose sheets vide A/Gs PLO/2 containing slips of paper marked 1 to 26 and A G PLO/1 containing 1 to 30 slips of paper which relating to the workings to allotment of shops, payment details etc both in cash and cheque.
9. As far as the sale of two shops to one J.B. Exports is concerned, the assessee admitted to have received cash of Rs.25.86 lakhs, the sum which was found at the time of search. The statement marked in 39 of A/GS / PLO/1 in respect of shop Nos. G6 and G7 showed the cheque portion of the two shops as to the tune of Rs.86.50 lakhs. Further the sum of Rs.86.50 was noted under cash column. The assessee pointed out that their Accountant misheard the rate per sq.ft for the shops sold to M/s.J.B. Exports, consequently, there was repeated entries of Rs.86.50 lakhs under cheque payment and another under cash payment. On enquiring P.Nagarajan, the Officer pointed out that the reply was evasive. However, the statement shows that there were 15 parties other than J.B. Exports, who had paid Rs.2.69 lakhs in cheque and a further sum of Rs.1.82 crores as cash payment. Pointing out to the identical workings in both the slips marked 10 in the seized bunch relating to the transactions of J.B.Exports, the Officer came to the conclusion that the unaccounted portion of the transaction was to the tune of Rs.86.50 lakhs and hence, the stand of the assessee that the income to be estimated could be to the tune of moneyactually seized viz. to the extent of Rs.25.86 could not be accepted.Aggrieved by the addition of Rs.86.50 lakhs, the assessee went on appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) pointed out to the slips relating to G6 and G7 and held that unaccounted portion, could be Rs.42.86 lakhs alone and not Rs.86.50 lakhs. To that end, the Officer was directed to deal with further addition. Apart from this, there was yet another addition regarding Rs.1,17,350/- towards sale of scrap at the time of demolition of old building. The Commissioner of Income Tax (Appeals) however rejected the assessee's contention as regards the receipt on account of scrap sale. Aggrieved by this aspect, the assessee went on appeal. Thus, there were two appeals before the Tribunal, one at the instance of the assessee on the amount of Rs.1,17,350/- and another at the instance of the Revenue, allowing the assessee's appeal restricting the cash transaction to Rs.42.86 lakhs.
10. As far as the Revenue's appeal is concerned, the Tribunal pointed out that the search took place on 21.4.1995 just one day after the receipt of Rs.42.86 lakhs but Rs.27 lakhs was only found at the time of search. Considering the fact that the assessee had not substantiated its statement as regards the noting in the pencil as regards the cash position of the transaction in respect of sale in the case of J.B.Exports, that the assessee had not examined the Accountant who was stated to have misheard the quotation, the Tribunal held that the assessment made by the Assessing Officer treating the on money transaction at Rs.86.50 lakhs as noted in the seized materials was correct. Consequently, it set aside the order of the Commissioner of Income Tax (Appeals) and restored the order of the Assessing Officer. The Tribunal however observed that the fact that cash of Rs.25.86 lakhs alone was seized, was not a ground to accept that money transactions was only to the tune of Rs.25.86 lakhs. It held that since the seized material clearly pointed out that the cash transactions was to the tune of Rs.86.50 lakhs, the claim of the assessee could not be accepted.
11. As far as the assessee's appeal in respect of Rs.1,17,350/- was concerned, it reaffirmed the view of the Commissioner of Income Tax (Appeals) as well as the Officer. Aggrieved by this, present appeals by assessee.
12. As far as the portion of the order of the Tribunal restoring the assessment of income to the tune of Rs.86.50 lakhs is concerned, learned counsel for the assessee pointed out that the Commissioner of Income Tax (Appeals) had gone through the slips only to come to the conclusion that cash transactions could not be treated as Rs.86.50 lakhs. He further pointed out that it is not as though the Commissioner of Income Tax (Appeals) had restricted the addition only to the extent of seized cash, on the other hand, it had made addition to the tune of Rs.42.86 lakhs. Reiterating the contention taken before the authorities, learned counsel pointed out that when the assessee's Accountant had wrongly noted the rate of sq. ft, there being no material at the hands of the Revenue, the addition as ordered by the Tribunal is unsustainable. Reiterating the reasoning of the Commissioner of Income Tax (Appeals) learned counsel sought for cancellation of the order of the Tribunal.
13. Heard learned counsel for the assessee as well as learned Standing counsel for the Revenue and perused the materials available on record.
14. We do not find any justifiable ground to interfere with the order of the Tribunal. Firstly the assessee does not dispute the fact that there was search in the premises. During the search, certain loose sheets were seized. These slips indicated the business transaction of the assessee. One particular transaction was the sale to JB Exports in respect of two shops viz., G6 and G7. Thus, the assessee does not as a matter of fact disputes that the seized materials related to its business transaction recovered at the time of search conducted in the business premises of the assessee. The only challenge made by the assessee herein as to the order of the Tribunal confirming the order of the Assessing Officer is that the unaccounted portion could not be held to be an extent of Rs.86 lakhs. We do not find that there is justifiable ground to accept this plea. The assessee does not dispute the fact as regards notings in the slips, which pointed out to the cheque payment to the tune of Rs.86.50 lakhs, accounted for sale consideration and on an identical sum of Rs.86.50 lakhs being noted as cash transaction. The consistent case of the assessee is that the cash payment seized at the time of search was to the extent of Rs.25.86 lakhs and that even going by the notings in the slips in respect of G6 and G7, the assessee had received to the extent of Rs.42.86 lakhs, hence, the addition could be only to that extent. The assessee submitted that there are no materials to show that the assessee had received further sum. We do not think such reasoning merits any consideration. The assessee does not dispute the noting of the cash position at Rs.86.50 lakhs. Merely because the cash found at the time of search was of Rs.26 lakhs only the same would not per sejustify the contention of the assessee that the seized materials could not form the basis of the assessment treating the cash payment of the transaction at Rs.84.50 lakhs.
15. Even though learned counsel for the assessee submitted that the rate adopted per sq.ft in respect of sale to J.B. Exports was much more than what had been considered for others, and that the Accountant misheard the rate, we find that at no point of time, the assessee had taken steps to examine their accountant nor had let in any evidence to substantiate what could be the correct value per sq.ft if sold to J.B.Exports. The fact that the Revenue recovered Rs.25.80 lakhs at the time of search and they had received 50% of the cash payment alone would not discredit what had been noted in the seized materials noting on the cash payment of the transaction.
16. In the circumstances, we do not find any justification to accept the plea of the assessee. Consequently, the appeal fails.
17. As regards the addition of Rs.1,17,350/- is concerned, the sale of scrap materials being pure question of law and no fresh materials being placed before this Court even for relooking the matter, we have no hesitation in rejecting the case of the assessee. In the circumstances, TC(A).No.1151 and 1152 of 2006 are dismissed. No costs.