×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal in ITA No.688/Mum/2018 & CO No.71/Mum/2019 for A.Y.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-52, Mumbai in appeal No.CIT(A)-52/IT-368/DCIT4(1)/2016-17 dated 03/11/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/12/2016 by the ld. Dy.Commissioner of Income Tax 4(1), Mumbai (hereinafter referred to as ld. AO). Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidate order, for the sake of convenience.
2. The only issue to be decided in these two appeals is as to whether the addition of Rs.8,70,00,000/ could be made in the facts and circumstances of the case in the hands of the assessee.
3. The brief facts of this issue are that the assessee is an individual engaged in the business of civil contract and labour contract. The assessee had filed its return of income in the A.Y.2015-16 on 27/05/2016 declaring total income of Rs.1,12,82,240/-. The assessee is running a proprietary concern in the name and style of M/s. M.J. Construction and Senghani Associates.
3.1. A search and seizure action was carried out u/s.132 of the Act in the Runwal Group of cases and assessee being a labour contractor of Runwal Group was also covered in the said search action. In the course of said search action carried out in the premises of the assessee, certain incriminating documents were found and seized wherein it was noticed that certain unaccounted payments made in cash by the assessee were found. The assessee explained at the time of search itself in the form of statement that the source of these unaccounted payments are unaccounted receipts of Rs.8,70,00,000/- from M/s. Runwal Developers Pvt. Ltd., for the contract work carried out for them. In other words, in the course of search of the assessee unaccounted labour payments in cash to the extent of Rs.8,70,00,000/- was found, for which the assessee explained the source as unaccounted receipts for the very same amount of Rs.8,70,00,000/- from Runwal Developers Pvt. Ltd The assessee also stated before the ld. AO that the seized documents in the form of listed paper component labour payments made in cash were found for the whole amount of Rs. 8,70,00,000/- at the time of search. Despite the fact the assessee came forward to state in his statement recorded during search that he had received a sum of Rs.8,70,00,000/- in cash from Runwal Developers Pvt. Ltd. and had passed on the same as labour payments in cash for the very same sum of Rs.8,70,00,000/-. In other words, the assessee has stated that he had merely acted as post office in this regard and there is no question of any income in his hands for the said transaction. The ld. AO however, did not consider the statement of the assessee and treated the entire gross sum of Rs.8,70,00,000/- as undisclosed income of the assessee and added the same to the total income in the assessment.
3.2. Before the ld. CIT(A), the assessee argued that the ld. AO himself had quoted and relied upon the statement given by the assessee wherein assessee had confirmed that the page Nos. 36 to 64 of Annexure A1 i.e. seized papers relate to the payment made to the labourers and labour contractors. The assessee had also confirmed that he had received total amount of Rs.8,70,00,000/- in cash as gross receipts for work done for Runwal Group and had passed on the same as labour payments for the contract work executed on behalf of Runwal Group. It was pleaded that this submission of the assessee was made in the form of a statement recorded during the course of search and it was accepted by the search team which is evident from the fact that no further questions were posted by the search team on the assessee. It was pleaded that once the same has been accepted as genuine by the search team, the ld. AO ought not to have taken a divergent stand and added the same to the income of the assessee treated the same as payments made out of undisclosed income by the assessee. The assessee alternatively pleaded before the ld. CIT(A) that he being a Civil Contractor profit from the unaccounted contract receipts of Rs.8,70,00,000/- alone could be estimated at the rate of 8% and a sum of Rs.69.60 lakhs may be added as unaccounted income of the assessee. It was also pleaded by the assessee that in the line of business of labour contractor, labourers have to be paid on a periodic basis which is normally weekly / daily and if the labour contractors are not paid in time by the client, labourers cannot be paid in time and this may result in stoppage of work. So, the clients of labour contractors ensure that payments to the latter are not delayed. Accordingly, the claim of the assessee made in his statement on oath at the time of search action that M/s. Runwal Developers Ltd., had made contract payments in cash as per temporary arrangement with the assessee cannot be rejected unless there is some specific evidence to show otherwise. The ld. CIT(A) observed that Runwal Group in the hands of M/s RDPL has offered amounts of Rs. 7,36,15,000/-, Rs. 6,69,62,205/- and Rs. 1,25,00,000/- for taxation as additional income on account of undisclosed sales of shops, residential premises etc. in its project 'Runwal Anthurium' for A.Ys. 2014- 15 and 2015-16 respectively. M/s RDPL has not retracted from the said disclosure except that it claims that the said amount of on-money is taxable in the year when the flats/shops are sold and revenue is recognized. Thus, M/s. RDPL was in possession of aggregate funds to the