Case Law Details
Ashoka Infrastructure Ltd. Vs. Asst. CIT (ITAT Pune)
Claim of assessee was depreciation on the right to collect toll being infrastructure and not on the toll road, where the cost incurred for development and construction of infrastructure facility was a right in the nature of intangible asset falling within purview of section 32(1)(ii) of the Act, the assessee was entitled to depreciation on such intangible asset. The assessee undoubtedly, had expended on development, construction and maintenance of infrastructure facility for a specified period out of its own funds and after the end of specified period, the assessee was to transfer the said infrastructure facility to the Government of Maharashtra free of charge. In consideration of developing, constructing and maintaining the facility for specified period and thereafter, transferring it to the State Government, the assessee was granted the right to collect toll from motorists whoever use the said infrastructure facility during the specified period. The said right to collect toll was on account of assessee incurring the cost towards development, construction and maintenance of infrastructure facility, which was treated by the assessee as its intangible asset and on which, it claimed the depreciation under section 32(1)(ii) of the Act. Following the precedent referred to above, the assessee is entitled to claim the said deduction on intangible asset, in view of section 32(1) (ii) of the Act. The reason for which the said depreciation which was earlier allowed by the Tribunal in the case of assessee itself for assessment year 2007-08 and was allowed by the assessing officer in the order passed under section 143(3) of the Act relating to assessment year 2006-07, was denied by the assessing officer as the appeals were pending against the order of Tribunal is not correct approach. Further, the Commissioner (Appeals) has relied on the CBDT Circular date 23-4-2014, wherein the CBDT has laid down that instead of depreciation on the cost incurred by the assessee, the said cost should be amortized over a specified period and allowed in the hands of assessee. However, the expenditure incurred by the assessee is not revenue in nature and the same cannot be amortized over the period for which the assessee can collect the toll; the right to collect toll is capital expenditure incurred by the assessee and consequently, the assessee is entitled to claim depreciation on such intangible asset as provided under section 32(1)(ii) of the Act. Accordingly, we hold so. The assessee is thus, entitled to its claim. Thus, the second part of the order of assessing officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The assessing officer is directed to allow the claim of assessee of depreciation on such intangible asset under section 32(l1)(ii)of the Act.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This bunch of six appeals filed by the assessee are against consolidated order of Commissioner (Appeals)-I, Nashik, date 3-6-2014 relating to assessment years 2006-07 to 2011-12 against respective orders passed under section 143(3) read with section 153A/153B of the Income Tax Act, 1961 (in short the Act) respectively.
2. The issue arising in this bunch of appeals is in connection with search operation conducted at the premises of assessee. All the said appeals relating to the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.
3. First, we shall take up the appeal in ITA No. 1452/Pune/2014, wherein the assessee has raised the following grounds of appeal :–
“1. The learned Commissioner (Appeals) erred in confirming the assessment made under section 153A read with section 143(3) without realizing the fact that there was no incriminating material found relating to assessment year 2006-07. Therefore, it is prayed to hold that the assessment under section 153A and its confirmation in appeal, both are illegal and contrary to the provisions of law.
2. (i) The learned Commissioner (Appeals) erred in not allowing depreciation on ‘license/ right to collect toll’, as an intangible asset.
(ii) The learned Commissioner (Appeals) erred in confirming the amortization of road construction expenses, spread over the period of toll collection, on the basis of CBDT Circular No. 9 of 2014, date 23-4-2014, instead of allowing depreciation on toll collection rights/license to collect toll, as an intangible asset, as allowed in the original assessment under section 143(3).
(iii) The learned Commissioner (Appeals) erred in confirming the amortization of road construction expenses, spread over the period of toll collection, on the basis of CBDT Circular No. 9 of 2014, date 23-4-2014, instead of allowing depreciation on toll collection rights/license to collect toll, as an intangible asset, as allowed by the Tribunal, Pune Bench ‘B’ in appellant’s own case for assessment year 2007-08 and also in the host of other cases by the various Benches of Tribunal. He ought to have appreciated that the CBDT circular was not binding on him and ought not to have ignored the decisions of the Supreme Court in Keshavji Ravji & Co. Etc. Etc. (1990) 183 ITR 1 (SC), brought to his notice.
(iv) The learned Commissioner (Appeals) erred in not considering the appellant’s alternate plea before the assessing officer that it be allowed to recoup first the entire construction cost against the toll collected and then only the income determination exercise be done, relying on the ratio of decision of the Supreme Court in the case of Hoshiarpur Electric Supply Co. v. CIT (1961) 41 ITR 608 (SC) and considering the provisions of section 43(1) defining the term ‘actual cost’ vis-a-vis the concept of public private partnership.
Therefore, it is prayed either to allow depreciation, as claimed by appellant or to allow first the recoupment of entire construction cost against the toll collected and thereafter to determine income earned from toll collection.
3. (i) The learned Commissioner (Appeals) erred in confirming the addition of Rs. 85,83,978, made on the ground of suppression of toll collection @ 5 per cent of the recorded collection.
(ii) The learned Commissioner (Appeals) erred in confirming the addition of Rs. 85,83,978 on the ground of suppression of toll collection, without realizing the fact that there was no evidence supporting such allegation for the previous year relevant to assessment year 2006-07 and without appreciating the submissions made in this respect, particularly regarding the fact that there was no logic or reason for suppression of income from toll collected.
(iii) The learned Commissioner (Appeals) erred in confirming the extrapolation of the alleged suppression of toll receipts for assessment year 2006-07, on the basis of seized record relating to the period from 25-12-2009 to 19-4-2010, ignoring the submissions made by letter dt. 7-4-2014 and the Bombay High Court decision in the case of CIT v. Dr. M.K.E. Memon (2001) 248 ITR 310 (Bom).
(iv) The learned Commissioner (Appeals) erred in confirming the addition on the ground of suppression of toll receipts, by relying on the statements of the persons whose cross-examination was not allowed to appellant, in spite of specific request for the same.
(v) In any case and without prejudice to above, the learned Commissioner (Appeals) erred in adopting the rate of 5 instead of 4.79, as reflected in the seized papers, to estimate the alleged suppressed toll receipts.
(vi) Without prejudice to above, the learned Commissioner (Appeals) also erred in not allowing the expenses incurred, as evidenced by the seized diary @ 3.39, on the presumption that the payments noted against various authorities were for illegal purposes, without properly appreciating the explanation offered in this respect.”
4. Briefly, in the facts of the case, search and seizure operations under section 132 of the Act was conducted on the Ashoka Group of cases on 20-4-2010. The residential premises of the directors and the office premises of assessee company were covered under search action. The assessee had originally filed the return of income declaring total loss of Rs. 28,89,09,269. The assessment under section 143(3) of the Act was completed on 19-12-2008. In pursuance to the notice issued under section 153A of the Act, the assessee filed the return of income declaring total loss of Rs. 28,88,64,777. The assessee was 100 per cent subsidiary of M/s. Ashoka Buildcon Ltd. The assessee was incorporated with the object of executing an infrastructure project of Four Laning and Strengthening of Pune-Ahmednagar Road, SH 60 KM 10/600 to 64/000 with private finance on toll rights under Build, Operate and Transfer (BOT) basis. The assessee had completed the project during the year under consideration and had started operations on 6-7-2005 i.e., from the date from which the assessee operated its toll stations. The total toll collections for the year were Rs. 17,16,79,571 and after deducting various expenses and depreciation, there was loss of Rs. 3,02,28,758. During the course of search, certain evidence was found with Ms. Dipti Lokam, Junior Finance Officer of the assessee group posted at the office of M/s. Ashoka Buildcon Ltd., the flagship company of the assessee’s groups office at Pune, under which the assessee was found to be suppressing part of total receipts. The assessee was show-caused the proposal to estimate suppressed toll collection at 5 per cent of the total toll collection during the year. The assessee objected to the show-cause notice issued by the assessing officer on the following contentions :–
“(a) There is no short casting of toll receipts in the books of account.
(b) Ms. Lokam, the Jr. Finance Officer was handling cash for the entire group concerns.
(c) Rs. 1.71 lakh found with Ms. Lokam pertains to the toll collection of M/s. Ashoka Bridgeways for the period 17-4-2010 to 19-4-2010.
(d) The assessee had the benefit of carried forward losses and depreciation which could have easily negated the income effect if the entire toll would have been recorded.
(e) The benefits of the provision of section 80-IA(4) are available to the assessee.
(f) In case the statements of Shri Dungarwal and Ms. Lokam are relied upon, the assessee would like to cross-examine these persons.
(g) The logic behind arrival of the estimate of 5 per cent is not understood.
(h) The toll collections varied from day-to-day and was suspended for periods exceeding 100 days in the financial year 2010-11.
(i) Nowhere has Ms. Lokam deposed that the difference of Rs. 1.71 lakh represents suppressed toll collections.”
5. The assessing officer noted that during the course of search at the office premises of M/s. ABL at Market Yard, Pune, a message was transferred from mobile of Shri Sunil B. Raisoni to the mobile of Shri B. S. Rajpurohit, Asstt. Director of IT (Inv.), Pune. The said message was sent by Shri Jayesh Dongarwal, employee of the assessee to the Director, Shri Sunil B. Raisoni. The message Nos. 43 and 44 received on the mobile of Shri Sunil B. Raisoni, Director of the assessee company, contained the details of toll collection of various toll Nakas. The statement on oath of Shri Jayesh Dongarwal was recorded on 20-4-2010 at the office premises of assessee-company and he was asked to explain the message sent. In reply to question No. 12, he explained that this was the toll collection from various places reported to the director by him. He further explained that as per instructions received from the director, only that much amount was accounted for in the books of account as much told by Shri Sunil B. Raisoni, the balance cash lies with the cashier. On verification of the above message, it was seen that the receipt from Shirur Toll Naka showed cash receipt of Rs. 8.64 lakhs, whereas on physical verification of cash receipt on the date of search taken from the cashier Ms. Dipt! Lokam was Rs. 10.35 lakhs. In reply to question No. 3, Shri Jayesh Dungarwal had accepted that as per instructions from Shri Sunil B. Raisoni, toll collection was recorded. Thus, it was established that the assessee was suppressing its receipt of toll collection in its books of account. Thereafter, statement on oath of Ms. Dipti Lokam was also recorded on 20-4-2010. In reply to question No. 4, she stated that in Pune Region, there were six Toll Nakas, out of which she received cash of three Toll Nakas only i.e. (i) Ranjangaon Toll Naka of M/s. Ashoka Infrastructure Ltd., (ii) Koregaon Toll Naka of M/s. Ashoka Infrastructure Ltd. and (iii) Pandharpur Toll Naka of M/s. Ashoka Bridgeways. She further explained that on counting of cash, the same was deposited in the bank account. The assessee had three more Toll Nakas i.e. (i) Nagar Toll Naka (8 km) of M/s. Ashoka Buildon Ltd. (Nagar-Karmal (a), (il) Nagar Toll Naka (55 km) of M/s. Ashoka Bulldcon Ltd. (Nagar-Karmal (a) and (iii) Sheri Toll Naka of M/s. Ashoka Buildcon Ltd. (Sangli). She further stated that the employees of three other Toll Nakas directly deposited the cash in the bank accounts. The entry in respect of cash of various Toll Nakas was entered into computer at MIS Department. She further explained that she entered cash in the petty cash book in the tally programme. She admitted that as per directions of Shri Jayesh Dungarwal, she had deposited the cash received from Toll Nakas in the bank accounts. She also explained in reply to question No. 12 that Annex. A, Bundle No. 3, had been maintained for unaccounted cash receipts. In this cash book, official cash received from various Toll Nakas i.e., three Toll Nakas were recorded. Out of this, most of the cash was deposited in the bank and cash which was not deposited in the bank was unaccounted portion, out of which, unaccounted cash payments were being made by the assessee, which was recorded in the cash book and closing cash balance was arrived at. These unaccounted cash was generated from Toll Naka cash collections and other parties, which was recorded in rough cash book. Further, with regard to cash of Rs. 1.71 lakh found with Ms. Dipti Lokam, it was explained that the same pertains to toll collection of M/s. Ashoka Bridgeways for the period 17-4-2010 to 19-4-2010. As per the assessing officer, this appears to be an afterthought as the same was not mentioned on the date of search. Another contention raised by the assessee was that there was no need to suppress any receipts, since it had the benefit of carried forward losses and depreciation. The assessing officer brushed aside the same holding that if that was so, then the assessee could well record the entire toll collections. The assessing officer also observed that the assessee was not entitled to the deduction allowable under section 80IA(4) of the Act, since it was undisclosed income unearthed during the course of search. Further, an affidavit filed by Ms. Dipti Lokam was held to be an afterthought in order to negate the findings recorded in the search. The assessing officer concluded by holding that for working of estimated suppression, percentage of toll collection offered by the assessee should be the basis. Another reference was made to the diary marked as Annexure A, Bundle No. 3 (African Safari Note Book), which Ms. Dipti Lokam had admitted to be her handwritten record of daily cash received and paid. The assessing officer adopted 5 per cent of toll receipts offered by the assessee as suppressed toll collections for the year under consideration, which was assessed in the hands of assessee as income from other sources at Rs. 85,83,978.
6. The second issue which was considered by the assessing officer was the depreciation claimed on license to collect toll. The assessee in the return of income had claimed depreciation to the tune of Rs. 36,31,63,056 on an intangible asset being “License to Collect Toll”. The assessee had included the amount of licence in the gross block of assets at Rs. 1,53,02,06,225 being the first year’s opening value. The span of the said right as per the notification was 5-7-2005 to 30-6-2013 i.e., for the period of 8 years. The assessee claimed depreciation @ 25 per cent on the reducing balance method for income-tax purposes. The assessee’s claim in the original assessment order was disallowed, but the Commissioner (Appeals) reversed the same. The plea of assessee before the assessing officer during the course of proceedings under section 143(3) read with section 153A of the Act was that the said’ decision of Commissioner (Appeals) has become binding. He further submitted that the project on completion having been transferred to the right to toll collection, which is an asset and since the same was put to use, the assessee was entitled to claim the depreciation. The contention of assessee was rejected as further appeals have been filed by the Revenue against the orders of Tribunal and the appellate authorities. Therefore, without prejudice to the contention canvassed in the original assessment order, the fact that said intangible asset should finally end at a point of time when the notification period comes to a close, may run counter to the assessee’s argument upheld by the Commissioner (Appeals), was the finding of assessing officer and hence, depreciation claimed at Rs. 36.31 crores was disallowed for the following reasons :–
“(a) The right to collect toll is not a license;
(b) The assessee- road–attached to the said right is not owned by the assessee; and
(c) The assessee- road–is not used in the business of the assessee.”
7. The assessing officer further noted that admittedly, the assessee had spent the money for construction of infrastructure facility i.e., road, therefore, the assessee needs to be given the deduction for the expenses that it had incurred. The assessing officer was of the view that amortization of the whole expenses incurred by the assessee over a period of life of assets was most suitable method. Accordingly, the assessing officer computed the proportionate amortized expenditure at Rs. 10,77,44,154 to be allowed as deduction for the expenses incurred by the assessee for construction of infrastructure facility, i.e., road as per tabulated details under para 7.01 of the assessment order.
8. The Commissioner (Appeals) first decided the issue of claim of depreciation on “license to collect tolls”, where the assessing officer had allowed amortization of expenses incurred for the construction of infrastructure facility, i.e., road, proportionately over the period of life of assets. The claim of assessee before the Commissioner (Appeals) was that the Tribunal in assessment year 2007-08 vide order date 18-7-2013 had already allowed depreciation on the right/license to collect toll under section 32(1)(ii) of the Act treating the same as ah intangible asset. Vis-a-vis the CBDT Circular No. 9 of 2014, date 23-4-2014 1(2014) 102 DTR (St) 30 : (2014) 267 CTR (St) 109), treating the said expenditure as deferred revenue expenditure and advising the assessing officer to allow the amortization thereof in proportionate manner over and above the toll collection, was held to be not applicable to the assessee, since the said circular was sub-judice and under consideration of the Hon’ble High Court. The Commissioner (Appeals) observed that while deciding the appeals in the case of assessee’s group, he had followed the order of Tribunal in assessee’s own case for assessment year 2007-08. However, at that particular time, there was no scheme from CBDT giving clarification on treatment of expenditure incurred for development of rights/highways in Built–Operate–Transfer (BOT) Agreement under the Income Tax Act. The Circular No. 9 of 2014, date 23-4-2014, clarifies on claim of depreciation on Right to Collect Toll under section 32(1)(ii) of the Act and in case where the expenditure was incurred on development and construction of infrastructure facilities like roads, highways on BOT basis with right to collect toll, then the Board had clarified that since the assessee does not hold rights in the project except recovery of toll fees to recoup the expenditure incurred, it cannot therefore, be treated as owner of the property as either wholly or partly for the purpose of allow ability of depreciation under section 32(1)(ii) of the Act. Since there was no actual transfer of ownership and the assessee had only a right to develop and maintain such assets and hence, the assessee was not entitled to claim depreciation. It was further observed by the Commissioner (Appeals) that under the present provisions of the Act, the claim of depreciation on toll gates was not allowed due to non-fulfillment of ownership criteria in such cases. However, in the case of development of infrastructure facilities, the Board has allowed the spread over of expenditure incurred over the tenure of agreement. The Commissioner (Appeals) thus, held that the assessee’s claim was covered by the above referred CBDT circular and the clarification given by the Board does not lead any doubt whatsoever with regard to the issue of allow-ability of depreciation on right to collect toll under section 32(1)(ii) of the Act. In view thereof, the assessee’s claim of depreciation on right/license to collect toll treating the same as intangible assets was not accepted by the Commissioner (Appeals). However, the assessing officer having amortized the expenditure incurred by the assessee on development of road/highways on BOT basis, over a period of time, was set aside to the file of assessing officer to recalculate the same, in view of clarification given by the CBDT in paras 6 and 7 of its Circular date 23-4-2014.
9. In respect of next addition on suppression of toll collection, the Commissioner (Appeals) noted that the period comprised of construction and toll collection period was completed in two phases. While the first phase was completed on 5-7-2005, the second phase got completed on 31-12-2005. The Government of Maharashtra had issued the notification on 5-7-2005 in favour of the assessee for collection of toll from 6-7-2005 to 6-7-2013. Initially, the assessee had two booths at Ranjangaon Toll Naka and Koregaon Toll Naka, However, with effect from 17-3-2011, the assessee was operating at only one toll booth at Perne Phata. The Commissioner (Appeals) noted that on the basis of certain incriminating documents found from the assessee’s office at Pune, the assessing officer had made addition on account of suppression of toll @ 5 per cent of the toll collection shown by the assessee in its books of account for different assessment years starting from 2006-07 to 2011-12. The Commissioner (Appeals) noted that from the statement of Ms. Dipti Lokam and Annexure A, Bundle 3 (African Safari Note Book), wherein such undeclared toll receipts were found recorded, which were written by Ms. Dipti Lokam, contained cash receipts from various Toll Nakas. The Commissioner (Appeals) has scanned and placed the copies of some of pages of the said diary at pp. 20 and 22 of the appellate order. The Commissioner (Appeals) noted from the perusal of the said pages that total receipts in case of Ranjangaon and Koregaon Toll Nakas shown by the assessee in its regular books of account were different from that of figures reflected in the receipts side of the said rough cash book. The Commissioner (Appeals) also took note of the assessee’s submissions dt. 7-4-2014, under which the assessee itself had accepted the fact of urider-suppression of toll receipts in relation to the above two referred Toll Nakas i.e., Ranjangaon and Koregaon. Further, during the course of search, statement of Ms. Dipti Lokam was also recorded under section 132(4) of the Act on 20-4-2010. Ms. Dipti Lokam in her statement confirmed that she had been working with the group since 2001 and was handling all works related to cash which included counting of cash received on account of toll collection, deposit of the same in bank and making the cash vouchers and entering the transactions in cash book. Ms. Dipti Lokam was handling the cash receipts from Ranjangaon Toll Naka and Koregaon Toll Naka of Ashoka Infrastructure Ltd. and Pandharpur Toll Naka of M/s. Ashoka Bridgeways. Reference was made to the statement recorded of the said Ms. Dipti Lokam, in which she explained the manner of transferring of cash from Toll Nakas and she making entries in the rough cash book, which was found during the course of search for the period 25-12-2009 to 19-4-2010. The said annexure contained cash receipts and expenditure on toll basis. Further, reference was made to her statement, wherein she had confirmed that cash entries were not fully recorded in the regular books of account of the group. As regards the toll collection, she had stated that some portion of cash collection for Toll Nakas was not deposited in the bank which leads to the generation of unaccounted cash. Further, the Commissioner (Appeals) referred to the SMSes relating to Toll Nakas from the mobile of Shri Jayesh Dungarwal to the mobile of director of the assessee company Shri Sunil B. Raisoni. Shri Jayesh Dungarwal in his statement recorded on 20-4-2010 at assessee’s Pune office confirmed that he was supervising the work of collection of toll from Toll Nakas situated at various places and he also confirmed that Ms. Dipti Lokam was receiving cash which was brought to the office by employees of the assessee company from various Toll Nakas. In respect of SMSes sent by him to Shri Sunil B. Raisoni, it was explained that the director used to give instructions as to how much amount was to be accounted for in the books of account and balance cash remained with the cashier. He also confirmed that the director had instructed him to report less cash vis-a-vis actual cash received from Toll Nakas. He further confirmed that was the practice of under-reporting of cash which was followed by the company. All these contentions of assessee were rejected by the Commissioner (Appeals), in view of various evidences found and also the confirmations of Ms. Dipti Lokam and Shri Jayesh Dungarwal, which in turn, corroborated findings of the assessing officer. Hence, the contention of assessee to allow the expenditure, i.e., 3.39 per cent of total unrecorded toll collection was not accepted and was dismissed.
10. Another contention of the assessee that the annexure gave details of unrecorded toll for a limited period pertaining to assessment years 2010-11 and 2011-12 and therefore, no addition was required to be made for earlier years, was held to be not tenable by the cn\Aj. It was noted by him that the assessee was collecting toll pursuant to Notification dt. 5-7-2005 from 6-7-2005 onwards. He further observed that after taking into consideration the seized material, it was reasonable to conclude that the assessee was adopting the practice of under-reporting of toll collection since beginning, hence, this ground of assessee was dismissed. He also upheld the order of assessing officer in estimating 5 per cent of the total collection as unrecorded for assessment years 2006-07 to 2011-12. The next issue before the Commissioner (Appeals) was the addition of undisclosed income on account of collection as income from other sources. In view of the findings of assessing officer that unrecorded cash was on account of toll collection and also where the assessee had no other business activity, but collection of toll during the year under appeals and the seized material also reflects unaccounted cash on account of collection of toll, the Commissioner (Appeals) held that the assessing officer was not justified in treating the same as income from other sources. Accordingly, the assessing officer was directed to treat the addition made on account of suppression of toll collection under the head ‘Business income’ and was also directed to give set off of current/unabsorbed losses/unabsorbed depreciation as per the provisions of the Act.
11. Another two aspects which were decided by the Commissioner (Appeals) were grounds of Appeal Nos. 4 to 7 raised for assessment year 2008-09 and grounds of Appeal Nos. 4 to 6 raised in assessment year 2009-10 with regard to calculation of interest, set off of current losses/unabsorbed depreciation and giving credit of TDS. The Commissioner (Appeals) noted that the assessing officer had passed an order under section 154 of the Act, date 3-2-2014 for assessment year 2009-10, wherein TDS to the extent of Rs. 3,52,538 was allowed and the assessing officer had also recomputed the interest payable under sections 234B and 234C of the Act and had also allowed credit of TDS. Similarly, the assessing officer had also passed order under section 154 of the Act for assessment year 2008-09. In view of the same, the Commissioner (Appeals) held that the grounds of appeal raised by the assessee in giving credit of TDS and levy of interest under sections 234A, 234B and 234C of the Act stand resolved. As regards the set off of unabsorbed depreciation and business loss carried forward from assessment year 2006-07, the Commissioner (Appeals) directed the assessing officer to allow the same as per provisions of the Act after taking into consideration the decision with regard to the head under which the addition on account of suppression of toll was to be treated. Since the income on account of suppression of toll receipts was to be assessed under the head ‘Business income’, as per the Commissioner (Appeals), the assessing officer should consider the assessee’s request for set off of unabsorbed depreciation and unabsorbed business losses accordingly. Further, dealing with ad hoc declaration of Rs. 75 lakhs and Rs. 10 lakhs to cover all types of additions and dis allowances for assessment years 2010-11 and 2011-12, respectively, the Commissioner (Appeals) noted that the assessing officer had not given any set off of above referred declaration of additional income. The assessing officer had made the addition on account of suppressed toll collection. However, no other benefit of set off of additional income declared by the assessee was allowed by the assessing officer. The assessing officer was thus, directed to allow the set off of ad hoc additional income of Rs. 75 lakhs and Rs. 10 lakhs against additional income from suppression of toll collection for assessment years 2010-11 and 2011-12, respectively.
12. The assessee is in appeal against the order of Commissioner (Appeals).
13. The first issue raised in assessment year 2006-07 is that in the absence of any incriminating material found relating to assessment year 2006-07, no addition could be made under section 143(3) read with section 153A of the Act. The second issue raised by the assessee was against the order of Commissioner (Appeals) in not allowing depreciation on license/right to collect toll as an intangible asset. The next issue was against the addition on the ground of suppression of toll collection @ 5 per cent of recorded collections.
14. The learned Authorized Representative for the assessee pointed out that search on Ashoka Group was carried out on 20-4-2010. During the course of search, one diary was found, on which toll collections were noted for the period 25-12-2009 to 19-4-2010. The learned Authorized Representative for the assessee pointed out that the assessee had constructed road between Pune to Shirur, on which there were two Toll Nakas i.e., one at Ranjangaon and second at Koregaon, which later got amalgamated into one Toll Naka. The assessee had claimed depreciation on the said toll road being intangible asset. He pointed out that in assessment year 2006-07 in ttve riginal assessment proceedings, the assessment was completed under section 143(3) of the Act and depreciation on intangible asset was allowed to the assessee. In assessment year 2007-08, the said claim of assessee was rejected. However, the Tribunal vide order dt. 18-7-2013 allowed the claim of assessee. He pointed out that from assessment year 2008-09, no assessments were carried out. Referring to the order of assessing officer passed under section 143(3) read with section 153A of the Act, the learned Authorized Representative for the assessee pointed out that the assessing officer had denied the claim of depreciation made by the assessee. He further referred to the order of Commissioner (Appeals), who holds that depreciation was not to be allowed but because of CBDTs circular, cost was to be amortized over a period of ten years and consequently, the Commissioner (Appeals) upholds the order of assessing officer in amortizing the expenditure over a period of years. In respect of second issue, the learned Authorized Representative for the assessee pointed out that admittedly, toll receipts were not fully entered into books of account, for which evidence was found for a period of two years. The conclusion of the assessing officer is that about 5 per cent is not disclosed in the books of account and accordingly, the assessing officer estimates at 5 per cent of the total receipts for all the years covered under section 153A of the Act. Before the Commissioner (Appeals), the assessee’s claim was that since the evidence found was for a limited period, the same could not be applied for the period of six years covered under section 153A of the Act. The learned Authorized Representative for the assessee referred to the order of assessing officer and pointed out that up to 20-4-2010, there is only an estimation by the assessing officer which has been confirmed by the Commissioner (Appeals). The learned Authorized Representative for the assessee referred to the decision of Hon’ble Bombay High Court in North Kornataka Expressway Ltd. v. CIT (2015) 372 ITR 145 (Bom) and pointed out that in the facts of the said case, the assessee had claimed depreciation at toll road and not as intangible asset. The Hon’ble High Court has not decided the issue whether the assessee therein was entitled to claim the deprecation on intangible asset and the said issue has been left open. He further referred to the Mumbai Bench of Tribunal in Asstt. CIT v. West Gujarat Expressway Ltd. (2015) 154 ITD 103 (Mumbai – Trib.), which, in turn, had applied the ratio laid down by the Pune Bench of Tribunal in Asstt. CIT v. Ashoka Infraways (P) Ltd. (2013) 58 SOT 147 (Pune). He further referred to the circular on which the Commissioner (Appeals) had placed reliance and pointed out that the said circular was not binding on the assessee. He placed reliance on the ratio laid down by the Hon’ble Supreme Court in CIT v. Hero Cycles (P) IM.. Etc. Etc. (1997) 228 ITR 463 (SC) and Keshavji Ravji & Co. Etc. Etc. v. CIT (1990) 183 ITR 1 (SC). The learned Authorized Representative for the assessee pointed out that the right from the day one, the assessee was claiming the right to collect toll as intangible asset, hence, depreciation could not be denied in the proceeding carried out under section 153A of the Act.
15. The second aspect raised by the learned Authorized Representative for the assessee was that since the assessment was already completed in assessment years 2006-07 and 2007-08 vide order passed under section 143(3) of the Act and as no incriminating material relating to the said assessment years were found, the assessment could not be disturbed in the hands of assessee. In this regard, he placed reliance on the ratio laid down by the Honorable Bombay High Court in CIT v. Continental Warehousing Corporation/All Cargo Global Logistics Ltd. (2015) 374 ITR 645 (Bom). In respect of balance years, he pointed out that the assessee was entitled to claim depreciation on the right to collect toll being an intangible asset. In respect of unaccounted toll receipts, the learned Authorized Representative for the assessee pointed out that the evidence was found only in respect of period 25-12-2009 to 19-4-2010 and the assessing officer worked out unaccounted receipts on this account for the whole period covered under section 153A of the Act. He pointed out that Ms. Dipti Lokam was maintaining diary and apart from this, Smses were found and statement of Shri Jayesh Dungarwal was recorded, copy of which is placed at p. 162 of the Paper Book. He questioned the power of assessing officer whether he could estimate the turnover of earlier years on the basis of evidence found for the later years. He fairly admitted that for assessment year 2010-11, there was no issue against estimation of receipts in the hands of assessee. He stressed that where there was no admission of the director or employees that such practice was being followed in the earlier year, no estimation could be made in the hands of assessee in this regard. He placed reliance on the decision of Pune Bench of Tribunal in Dy. CIT v. Venkateshwara Hatcheries (P) Ltd. in ITA Nos. 742 to 745/Pn/2012, relating to assessment years 2003-04 to 2006-07 and in Venkateshwara Hatcheries (P) Ltd. v. Dy. CIT in ITA Nos. 753 to 755/Pn/2012, relating to assessment years 2003-04 to 2005-06, order date 24-7-2013 and Mumbai Bench of Tribunal in bunch of appeals with lead order in Asst. CIT v. Thakkar Popatlal Velji Sales Ltd. in ITA No. 5743/Mum/2010, relating to assessment year 2006-07, consolidated order dt. 8-5-2013, which in turn, has been confirmed by the Hon’ble Bombay High Court. He stressed that he was not admitting that extrapolation could be made for the assessment year 2010-11 as before the Commissioner (Appeals), the assessee had admitted the practice from May, 2009. He stressed that no extrapolation could be calculated for earlier year and the year of search except for up to 19-4-2010 and financial year 2009-10.
16. The learned Departmental Representative for the Revenue referring to the order of Commissioner (Appeals) pointed out that depreciation was disallowed in view of CBDT Circular No. 9 of 2014, issued on 23-4-2014 and instead, amortization of the cost was allowed over the period of operations. He referred to the contents of the said circular and pointed out that in view thereof, no depreciation is to be allowed in the hands of assessee. In respect of estimation of toll receipts, the learned Departmental Representative for the Revenue referred to the entries in the diary seized and also the admission of Ms. Dipti Lokam that she had made the entries in the said diary. Further, reliance was placed on the orders of assessing officer and Commissioner (Appeals). The learned Departmental Representative for the Revenue also placed reliance on the ratio laid down by the Hon’ble High Court of Delhi in CIT v. Chetan Das Lachman Das (2012) 254 CTR (Del) 392 for the proposition that the seized material could be relied upon to hold that there were similar transactions throughout the year. Our attention was drawn to the statement of Ms. Dipti Lokam, which is placed at p. 5 of the assessment order in this regard. He pointed out that the notings were from December to March, 2009 and the Commissioner (Appeals) at p. 19 of its order has referred to the addition made by the assessing officer at Rs. 1.60 crore which is 5 per cent of the total toll receipts for the financial year 2009-10. He further placed reliance on the decision of Pune Bench of Tribunal in ITO v. Vikrant Happy I lomes (P) Ltd. in ITA Nos. 1194 to 1200/Pn/2010, relating to assessment years 2002-03 to 2008-09 and Vikrant Happy Homes (P) Ltd. v. ITO in ITA Nos. 1315 and 1316/Pn/2010, relating to assessment years 2005-06 and 2008-09, order date 30-6-2014, wherein the issue was of evidence found for one year when the assessee admitted to the additions, additions were made in the hands of assessee.
17. We have heard the rival contentions and perused the record. Search under section 132 of the Act was conducted at the premises of assessee on 20-4-2010. The assessee was incorporated for executing infrastructure project of laying down four lanes and for strengthening of Pune- Ahmednagar road with private finance on toll rights under built-operate-transfer basis. On completion of the project, the operations started on 6-7-2005. The assessee for the year under consideration had collected toll to the extent of Rs. 17.16 crores and had claimed depreciation to the extent of Rs. 10,61,88,185. The said claim of depreciation on license to collect toll being an intangible asset, in view of Government notification granting such rights was claimed in the original return of income by the assessee. The assessment in the case of assessee for assessment year 2006-07 was completed under section 143(3) of the Act and the said claim was allowed. Further, in assessment year 2007-08, similar claim of depreciation on intangible asset was denied to the assessee. However, the Tribunal in ITA No. 989/Pn/2010, relating to assessment year 2007-08 vide order date 18-7-2013 had allowed the claim of depreciation on license to collect toll @ 25 per cent being intangible asset within the scope of section 32(1)(ii)of the Act.
18. The assessee made a similar claim in the return of income filed under section 143(3) read with section 153A of the Act. However, the assessing officer denied the said claim of assessee in all the years under consideration holding that the assessee was not the owner of road attached to the said right and the asset road was not used in the business of assessee. The assessing officer also held that the right to collect toll was not a license. The Commissioner (Appeals), on the other hand, relied on the circular issued by the CBDT giving clarification on treatment of expenditure incurred for development of roads/highways in Built-Operate-Transfer agreement. The CBDT vide Circular No. 9 of 2014, dt. 23-4-2014 gave clarification on claim of depreciation under section 32(1)(ii) of the Act and clarified that since the assessee does not hold any rights in the project except recovery of toll fees to recoup the expenditure incurred, it thus, cannot be treated as owner of property either wholly or partly for the purpose of allow ability of depreciation under section 32(1)(ii) of the Act. The CBDT denied the claim of depreciation but held the persons to be eligible for deduction on account of amortized cost incurred in creation of infrastructure facility of roads/highways over the period of concessional agreement (AIR) after excluding the time taken for creation of such facilities. In view of the said clarification of the CBDT, the assessee’s claim for depreciation on right/license to collect toll under section 32(1)(ii) of the Act, treating the same as intangible asset, was rejected and the order of assessing officer in amortizing the expenditure incurred on development of roads/highways on BOT basis, over the period of time involved was upheld by the Commissioner (Appeals). The assessee is in appeal against the order of Commissioner (Appeals) in this regard.
19. We find that besides the order of Tribunal in assessee’s own case in assessment year 2007-08, this issue further arose before the Mumbai Bench of Tribunal in Asst. CIT v. West Gujarat Expressway Ltd. (supra), which in turn, had referred to the ratio laid down by the Honorable Bombay High Court in Karnataka Expressway Ltd. v. CIT (supra) and it was decided the issue relating to the allow ability of depreciation on toll road, had left open, the issue of allowing depreciation on intangible asset being license granted to the assessee to collect toll over the road for particular period and it was held as under :–
“17. We have considered the rival contentions. So far as the reliance of the learned Authorized Representative on the article/clause 38.4 of the concession agreement between the assessee and the NHAI is concerned, we find that the identical clause was also there and relied upon in the case of North Karnataka Expressway Ltd. v. CIT (supra) which has also been reproduced in para 8 of the order of the Honorable Bombay High Court (supra). The relevant part of the order for the sake of convenience is reproduced as under :–
‘8 The appellant claimed that it was the owner of the toll road and the entire cost incurred for construction thereof was capitalized by the appellant in its books in the assessment year 2005-06 during which the construction of the toll road was completed. As the assessment year under consideration was the first year when the road became operational, the appellant claimed depreciation of Rs. 59.92 crores @ 10 per cent on the capitalized cost of the toll road. The appellant also filed necessary details of the claim of depreciation and a note was appended to the depreciation schedule stating that though the appellant was entitled to higher claim of depreciation on toll road, the claim is made @ 10 per cent. The right to claim higher depreciation is reserved. The appellant relied upon the standard concession document of the National Highway Authority of India and the clause therein that for the purpose of claiming tax depreciation, the property representing the capital investment made hy the concessionaire shall be deemed to he acquired and owned by the concessionaire’.’
18. The Hon’ble Bombay High Court, however, after discussing the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988 and various case law including that are strongly relied upon by the learned Authorised Representative e.g. Mysore Minerals Ltd. v. CIT (1999) 239 ITR 775 (SC), CIT v. Podar Cement (P) Ltd. Etc. (1997) 226 ITR 625 (SC) and CIT v. Noida Toll Bridge Company Ltd. (supra), has held that the national highways vest in the Union of India and if the Government for the purpose of development and maintenance of the whole or any part of the national highways enters into an agreement with private parties or that merely because the national highway is built, maintained, managed and operated by private entities, in no way affects the vesting of the national highway in the Union and that does not dilute or take away the ownership of the highway or its vesting in the Union. After discussing the various decisions of the Hon’ble Supreme Court and of the Hon’ble High Courts, the contention of the assessee in that case that it was the owner of the toll road has been rejected by the Hon’ble Supreme Court. Hence, the clause 38.4 relied upon by the assessee in the present case will not be of any help to the assessee in this regard.
19. However, so far as the alternative claim of the assessee that if the assessee is not found as owner of the toll road, his claim of depreciation be considered in relation to investments made as falling under the other categories of assets, is concerned, we would like to revert to the decision of the Honorable Bombay High Court in North Karnataka Expressway Ltd. v. CIT (supra), in this respect. We find the Honorable Bombay High Court, in para 24 of the said decision, has categorically observed that the claim of depreciation in the said case was not based on treating it as an intangible asset with a right to use the asset without being actual owner thereof. The issue under consideration was that whether the toll roads are not owned by the assessee and that he cannot claim any depreciation thereupon. Hence, the Honorable Bombay High Court has not discussed the issue relating to the claim of depreciation on the license for right to collect the toll as intangible asset. Further, the Honorable Bombay High Court in para 39 of the decision (supra) has observed that as per the provisions of National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the ownership of the toll road vests in Union , however, the term ‘owner’ as appearing in the Income Tax Act, 1961 has been defined widely and broadly for the purpose of the provisions of the Income Tax Act so as not to allow anybody to escape the provisions thereof by urging that he has a limited right or which is not akin to ownership, therefore his income should not be brought to tax. Similarly, if he can claim any deductions from his income which is comprising of profit and gain from his business, then, that deduction can be availed by him. It is for that limited purpose that the term ‘owner’ is defined in this manner in Income Tax Act, 1961.
The above observations of the Honorable Bombay High Court reveal that for the purpose of claiming deduction under Income Tax Act, the term ‘owner’ as defined under the Income Tax Act can be looked into. However, that cannot control, leave alone or overreach the National Highway Act, 1956 or the National Highway Authorities of India Act, 1988. The Honorable Bombay High Court further, in para 47 of the said order, has observed that the assessee can definitely claim depreciation on the investments. He has definitely invested in the projects of construction development and maintenance of the National Highways and such of the assets in the form of building, plant and machinery etc. The claim for depreciation can be validly raised and granted. That the Honorable High Court in the said case was only concerned with the claim on the land or a road itself. Further, in concluding para 52 of the order, the Honorable Bombay High Court has categorically clarified that the assessee’s claim for depreciation in respect of the building, plant and machinery and falling within the purview of sub-s. (1) of section 32 of the Income Tax Act, 1961, if considered and granted, shall not be affected by the decision of the Honorable Bombay High Court.
20. A careful reading of the entire decision of the Honorable Bombay High Court and in the light of the various observations made in judgment as discussed above, it is very clear that the Honorable Bombay High Court was concerned about the issue as to whether the assessee can claim itself as the owner of the toll road and the Honorable Bombay High Court has held that in view of the express provisions of the National Highway Act, 1956 and National Highway Authorities of India Act, 1988, the Union is the absolute owner of the National Highways as well as the toll roads built upon the land/National Highways in agreement and through the private parties and such private parties cannot claim themselves to be the owner of the toll road. However, the Honorable Bombay High Court has left upon the issue relating to the claim of depreciation, if otherwise eligible under the other provisions of the Income Tax Act.
21. The learned Authorized Representative, before us, has put the alternative claim that in view of the observations of the Honorable Bombay High Court either the investments made by the assessee be treated under the asset building, plant and machinery and depreciation be granted accordingly or the same be treated as intangible asset on the ground that the assessee has been granted license for right to collect the toll tax for a fixed period. Now the question before us is whether the assessee at this stage, can raise the alternative contention for claim of allowance of depreciation on the license authorizing him to collect the toll being an intangible asset or treating the project as plant and machinery ?
22. We may observe that the Honorable Bombay High Court in the case of Pruthvi Brokers & Shareholders (P) Ltd. (supra), while relying upon the various decisions of the Honorable Supreme Court and other Honorable High Courts, has held that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Honorable Bombay High Court while relying upon the decision of the Honorable Supreme Court in the case of Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC) has observed that the power of the Appellate CIT is Coterminous with that of the Income Tax Officer and an appellate authority while hearing appeal against the order of the subordinate authority, has all the powers which the original authority may have in deciding the questions before it, subject to the restrictions or limitations, if any, prescribed by statutory provisions. In the absence of any statutory’ provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. The appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed but could not have been raised at that stage. The words could not have been raised must be construed liberally and not strictly. It is open to the assessee to claim a deduction before the appellate authority which could not have been claimed before the assessing officer. The Honorable Bombay High Court has further observed that the decision of Honorable Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 157 Taxman 1 (SC), regarding the restriction of making the claim through a revised return was limited to the powers of the assessing authority and the said judgment does not impinge on the power or negate the powers of the appellate authorities to entertain such claim by way of additional ground. Reliance can also be placed in this regard on the decisions of the Tribunal in the case of PV. Ananthkrishnan v. Asst. CIT in ITA No. 1820/Mum/2011, decided on 5-5-2014 and in the case of The Presidency Co operative Housing Society Ltd. v. Asst. CIT in ITA No. 4051/M/2011 decided on 16-5-2014.
The present case is not a case where the assessee had not claimed any deduction on account of depreciation. The assessee has very much claimed the deduction of depreciation. However, he has claimed the same treating itself to be the owner of the toll road. Such a claim of the assessee has been allowed in the previous assessment years. The assessee was under bona fide belief that he has correctly claimed the deduction of depreciation on the toll road in view of the consistent findings of the Tribunal on this issue. However, due to the change of legal position in view of the law laid down by the Hon’ble Bombay High Court (supra), the assessee cannot be treated as the owner of the toll road. But, it is not disputed that the assessee has made investments on the project and he is entitled to claim deductions in this respect. The claim of deduction has been very much put by the assessee in the return of income but wrongly treating itself as owner of the road which claim as observed above was under bona fide belief and in view of the settled legal position as was there at the time of putting the claim. Even the assessing officer has also observed in the assessment order that it is a fact that the assessee company has incurred huge expenditure on the said project which cannot be treated as revenue expenditure allowable in one year as the same has resulted into providing enduring benefit to the assessee company, hence, the said amount would be eligible for amortization for the period of the concession agreement as it was allowed in the assessment years 2007-08 and 2008-09. It is also a fact that the said amortization of the expenses has not been accepted by the Tribunal and the assessee in the earlier assessment years has been granted deduction as depreciation treating the road as a capital asset.
23. In view of the above facts, it is not disputed or contested by the Revenue that the assessee is not entitled to any deduction. The only issue in dispute is as to under what head/ provision the deduction is to be allowed to the assessee. The Honorable jurisdictiond High Court of Bombay in the case of Balmukund Acharya v. Dy. CIT & Ors. (2009) 221 CTR (Bom) 440 : (2009) 17 DTR (Bom) 34 has held that the Hon’ble Apex Court and the various High Courts have ruled that the authorities under the Act are under obligation to act in accordance with law. Tax can be collected only as provided under the Act. If the assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes dues are collected. While holding so, the Honorable Bombay High Court has relied upon the various decisions e.g. S.R. Koshti v. CIT (2005) 276 ITR 165 (Guj), C.P.A. Yoosuf v. ITO (1970) 77 ITR 237 (Ker), CIT v. Bharot General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del), CIT v. Archana R. Dhanwatey (1982) 136 ITR 355 (Bom).
In view of the above discussed factual and legal position, we have no hesitation to hold that the assessee is entitled to put his alternate claim that the deduction allowable to him may be considered as allowable as depreciation treating the project/investments made under the head “Plant and machinery” or treating it as a right/license to collect the toll tax as intangible asset.”
20. The Mumbai Bench of Tribunal then, referred to the circular issued by CBDT vide No. 9 of 2014, date 23-4-2014 and observed as under :–
“24. Having held that the assessee is entitled to the deduction on the investments made by him, we now have to discuss as to under what head the said deductions can be claimed by the assessee. It is undisputed that in view of the agreement with the NHAI, the assessee has been given the right to develop and maintain the toll road and also the right to collect toll for a specified period without having actual ownership over the said toll road. The assessee has an express right/license for recovery of toll fee to recoup the expenditure. The said right brings to the assessee an enduring benefit during the period of agreement. This fact has also been discussed by the CBDT in Circular No. 9 of 2014, date 23-4-2014. The para 4 of which, for the sake of convenience, is reproduced as under :–
There is no doubt that where the assessee incurs expenditure on a project for development of roads/highways, he is entitled to recover cost incurred by him towards development of such facility (comprising of construction cost and other pre- operative expenses) during the construction period. Further, expenditure incurred by the assessee on such BOT projects brings to it an enduring benefit in the form of right to collect the toll during the period of the agreement. Honorable Supreme Court in the case of Madras Industrial Investment Corporation Ltd. v. CIT in (1997) 225 ITR 802 (SC) allowed spreading over of liability over a number of years on the ground that there was continuing benefit to the company over a period. Therefore, analogously, expenditure incurred on an infrastructure project for development of roads/ highways under BOT agreement may be treated as having been made/ incurred for the purposes of business or profession of the assessee and the same may be allowed to be spread during the tenure of concessionaire agreement.’
25. Having discussed the above-stated factual position, the CBDT has directed to treat the above expenditure as revenue expenditure and to amortize the same over the period of the agreement as allowable business expenditure. The assessee, however, has claimed that the same is a capital expenditure and it is entitled to deductions over the investments made as depreciation. A perusal of the above reproduced para 4 of the circular reveals that it is not disputed even by the Revenue authorities that in lieu of the investments made in the project, the assessee has been given right/license to collect the toll. It has also been specifically mentioned that it brings an enduring benefit in the form of right to the assessee. Having admitted the above position by the Revenue, now the question to be considered is whether any depreciation is allowable on such a right ?”
21. The Tribunal allowed the claim of assessee under section 32(1)(ii) of the Act i.e. depreciation on intangible assets holding as under :–
“26. As per section 32(1)(ii), depreciation is allowable on intangible assets like licenses, franchises or any other business or similar commercial rights of similar nature. The relevant part of the section for the sake of convenience is reproduced as under :–
‘32. Depreciation.–(1) In respect of depreciation of–
(i) buildings, machinery, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trade marks, licenses, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1-4-1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-
27. It is not disputed that the assessee has been given license/commercial right over the project to receive the toll. The assessee may not be the owner of the toll road, but he, certainly, is owner in possession of the right to collect the toll. The said right has been given to the assessee for a specified period with enduring benefit. It is also not disputed that on the expiry of the time period of the agreement, the said right of the assessee will cease to have effect which means it slowly will depreciate to the nil value. As per the provisions of the Income Tax Act, especially under section 32(1)(ii), the assessee is entitled to claim of depreciation on such type of rights. Such rights have been described as intangible assets under the Act and are eligible for claim of depreciation.
28. In view of the express provisions of the Act, we have no doubt to hold that the assessee is entitled to collect tax being an intangible commercial right under section 32(1)(ii) at the rate as has been prescribed under the relevant rules. Our above view is further supported by the decision of the Co-ordinate Pune Bench of the Tribunal in the case of Ashoka Infrastructure Ltd. v. ITO in ITA No. 989/Pn/2010 & ITA No. 1105/Pn/2010, wherein, the Tribunal while further relying upon another decision of the Co-ordinate Bench of the Tribunal in the case of Ashoka Infraways (P) Ltd. v. Asst. CIT in ITA Nos. 185 and 186/Pn/2012, date 29-4-2013, has held in clear terms that the claim of the assessee for depreciation on ‘license to collect toll’ being an ‘intangible asset’ falling within the scope of section 32(1)(ii) of the Act is liable to be upheld. The relevant part of findings of the Tribunal for the sake of convenience is reproduced as under :–
‘6. At the time of hearing, it was a common point between the parties that an identical issue has been considered by the Pune Bench of the Tribunal in the case of Ashoka Infraways (P) Ltd. v. Asstt. CIT vide ITA Nos. 185 and 186/Pn/2012, date 29-4-2013. As per the Tribunal following the precedents by way of various decisions of different Benches of the Tribunal mentioned therein, the claim of the assessee for treating the ‘license to collect toll’ as an intangible asset eligible for the claim of depreciation @ 25 per cent as per section 32(1)(ii) of the Act was justified. The following discussion in the order of the Tribunal date 29-4-2013 (supra) is relevant :–
7. Before us, it was a common point between the parties that the impugned issue has been adjudicated in favor of the assessee in the following decisions of the Tribunal :–
(i) Ashoka Buildcon Ltd. in ITA. No. 1302/Pn/2009, date 20-3-2012.
(ii) Kalyan Toll Infrastructure Ltd. in ITA. Nos. 201 and 247/Ind/2008, dt. 14-12-2010.
(iii) Dimension Construction (P) Ltd. in ITA Nos. 222, 223, 233 & 857/PN/2009, date 18-3-2011.
(iv) Ashofca Info (P) Ltd. (supra)
(v) Reliance Ports & Terminals Ltd. (supra).
8. The learned CIT-Departmental Representative appearing for the Revenue, has submitted that the ‘intangible assets’ eligible for depreciation in section 32(1)(ii) of the Act, are only those which are owned by the assessee and have been acquired after spending money. In the case of the assessee, by way of an agreement, assessee was awarded a work to construct a road by using own funds and the expenditure incurred was allowed to be reimbursed by permitting the assessee a concession to collect toll/fees from the motorists using the road. Therefore, it could not be said that such a right was within the purview of section 32(1)(ii) of the Act. However, the learned CIT(DR) has not contested the factual matrix that identical issue has been considered by our Co-ordinate Benches in the case of Ashoka BuUdcon Ltd. (supra), Kalyan Toll Infrastructure Ltd. (supra), Dimension Construction (P) Ltd. (supra) and Ashoka Info (P) Ltd. (supra).
9. On the other hand, the learned Representative for the respondent- assessee pointed out that the aforesaid argument set up by the Revenue has also been considered in the aforesaid precedents before concluding that the impugned ‘right to collect toll’ was an ‘intangible asset’ eligible for claim of depreciation @ 25 per cent as per section 32(1)(ii) of the Act.
10. We have carefully considered the rival submissions. Factually speaking, there is no dispute to the fact that the costs capitalized by the assessee under the head ‘License to collect toll’ have been incurred for development and construction of the infrastructure facility, i.e., Dewas Bypass Road. It is also not in dispute that the assessee was to build, operate and transfer the said infrastructure facility in terms of an agreement with the Government of Madhya Pradesh. The expenditure on development, construction and maintenance of the infrastructure facility for a specified period was to be incurred by the assessee out of its own funds. Moreover, after the end of the specified period, assessee was to transfer the said infrastructure facility to the Government of Madhya Pradesh free of charge. In consideration of developing, constructing, maintaining the facility for a specified period and thereafter transferring it to the Government of Madhya Pradesh free of charge, assessee was granted a Right to collect Toll’ from the motorists using the said infrastructure facility during the specified period. The said ‘Right to collect the Toll’ is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of ‘intangible asset’ falling within the purview of section 32(1)(ii) of the Act and has been found eligible for claim of depreciation. No decision to the contrary has been cited by the learned Departmental Representative before us and, therefore, we find no reasons to depart from the accepted position based on the aforesaid decisions.
11. So, however, the plea of the learned Departmental Representative before us is to the effect that the impugned right is not of the nature referred to in section 32(1)(ii) of the Act for the reason that the agreement with the Government of Madhya Pradesh only allowed the assessee to recover the costs incurred for constructing the road facility whereas section 32(1)(ii) of the Act required that the assets mentioned therein should be acquired by the assessee after spending money. The said argument in our view is factually and legally misplaced. Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(ii) permits allowance of depreciation on assets specified therein being ‘intangible assets’ which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective we find no justification for the plea raised by the Revenue before us.
12. In the result, we affirm the order of the Commissioner (Appeals) in holding that the assessee was eligible for depreciation on the ‘right to collect toll’, being an ‘intangible asset’ falling within the purview of section 32(1)(ii) of the Act following the aforesaid precedents.”
13. In terms of the aforesaid precedent, the claim of the assessee in the present case for depreciation on ‘License to collect Toll’, being an ‘intangible asset’ falling with the scope of section 32(1)(ii) of the Act is liable to be upheld. We hold so.
14. Insofar as the reliance placed by the Commissioner (Appeals) on the judgment of the Honorable Bombay High Court in the case of Techno Shares & Stocks Ltd. (supra) is concerned, it may only be noted that the said judgement has since been altered by the Honorable Supreme Court vide its order reported at Techno Shares & Stocks Ltd. & Ors. (supra). Accordingly, in view of the aforesaid discussion, we hereby allow the ground of Appeal No. 1. I raised by the assessee.’
29. In view of our observations made in the preceding paragraphs and also agreeing with the above reproduced findings of the Tribunal, we hold that the assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1)(ii)of the Act.”
22. The Tribunal in Asstt. CIT v. West Gujarat Expressway Ltd. (supra) further referring to the ratio laid down by the Hon’ble Bombay High Court held that since the assessee is not the owner of toll road, but has been given the right to develop, maintain and operate the toll road and to further collect the toll for the specified period, then this right is an intangible asset falling under section 32(1)(ii) of the Act and the alternate contention of assessee that the project be treated as plant & machinery and depreciation be allowed, was rejected vide para 30 of the order. Further, vide para 31, the Tribunal considered the contention of Revenue that investment made by the assessee be treated as revenue expenditure and be amortized for the period of agreement, was rejected holding that the investment made under the circumstances could not be said to be revenue in nature but was capital in nature, on which the assessee was entitled to claim the depreciation. Paragraph 31 of the order reads as under :–
“31. So far as the contention of the Revenue that the investment made by the assessee be treated as a revenue expenditure and be amortized for the period of the agreement, is concerned, we do not find any force in the same on the ground that not only the assessing officer but also the CBDT in the Circular (supra) as discussed above has admitted that the license of right to collect toll free has been given to the assessee in lieu of the investments made and that such a right brings to the assessee an enduring benefit. The investments made under such circumstances cannot be said to be of revenue in nature but, as discussed above, are of capital in nature. The assessee, thus, is entitled to claim depreciation on such type of capital asset.”
23. In the totality of the above-said facts and circumstances before us, where the claim of assessee was depreciation on the right to collect toll being infrastructure and not on the toll road, where the cost incurred for development and construction of infrastructure facility was a right in the nature of intangible asset falling within purview of section 32(1)(ii) of the Act, the assessee was entitled to depreciation on such intangible asset. The assessee undoubtedly, had expended on development, construction and maintenance of infrastructure facility for a specified period out of its own funds and after the end of specified period, the assessee was to transfer the said infrastructure facility to the Government of Maharashtra free of charge. In consideration of developing, constructing and maintaining the facility for specified period and thereafter, transferring it to the State Government, the assessee was granted the right to collect toll from motorists whoever use the said infrastructure facility during the specified period. The said right to collect toll was on account of assessee incurring the cost towards development, construction and maintenance of infrastructure facility, which was treated by the assessee as its intangible asset and on which, it claimed the depreciation under section 32(1)(ii) of the Act. Following the precedent referred to above, the assessee is entitled to claim the said deduction on intangible asset, in view of section 32(1) (ii) of the Act. The reason for which the said depreciation which was earlier allowed by the Tribunal in the case of assessee itself for assessment year 2007-08 and was allowed by the assessing officer in the order passed under section 143(3) of the Act relating to assessment year 2006-07, was denied by the assessing officer as the appeals were pending against the order of Tribunal is not correct approach. Further, the Commissioner (Appeals) has relied on the CBDT Circular dt. 23-4-2014, wherein the CBDT has laid down that instead of depreciation on the cost incurred by the assessee, the said cost should be amortized over a specified period and allowed in the hands of assessee. However, the expenditure incurred by the assessee is not revenue in nature and the same cannot be amortized over the period for which the assessee can collect the toll; the right to collect toll is capital expenditure incurred by the assessee and consequently, the assessee is entitled to claim depreciation on such intangible asset as provided under section 32(1)(ii) of the Act. Accordingly, we hold so. The assessee is thus, entitled to its claim. Thus, the second part of the order of assessing officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The assessing officer is directed to allow the claim of assessee of depreciation on such intangible asset under section 32(1)(ii)of the Act.
23. In the totality of the above-said facts and circumstances before us, where the claim of assessee was depreciation on the right to collect toll being infrastructure and not on the toll road, where the cost incurred for development and construction of infrastructure facility was a right in the nature of intangible asset falling within purview of section 32(1)(ii) of the Act, the assessee was entitled to depreciation on such intangible asset. The assessee undoubtedly, had expended on development, construction and maintenance of infrastructure facility for a specified period out of its own funds and after the end of specified period, the assessee was to transfer the said infrastructure facility to the Government of Maharashtra free of charge. In consideration of developing, constructing and maintaining the facility for specified period and thereafter, transferring it to the State Government, the assessee was granted the right to collect toll from motorists whoever use the said infrastructure facility during the specified period. The said right to collect toll was on account of assessee incurring the cost towards development, construction and maintenance of infrastructure facility, which was treated by the assessee as its intangible asset and on which, it claimed the depreciation under section 32(1)(ii) of the Act. Following the precedent referred to above, the assessee is entitled to claim the said deduction on intangible asset, in view of section 32(1) (ii) of the Act. The reason for which the said depreciation which was earlier allowed by the Tribunal in the case of assessee itself for assessment year 2007-08 and was allowed by the assessing officer in the order passed under section 143(3) of the Act relating to assessment year 2006-07, was denied by the assessing officer as the appeals were pending against the order of Tribunal is not correct approach. Further, the Commissioner (Appeals) has relied on the CBDT Circular date 23-4-2014, wherein the CBDT has laid down that instead of depreciation on the cost incurred by the assessee, the said cost should be amortized over a specified period and allowed in the hands of assessee. However, the expenditure incurred by the assessee is not revenue in nature and the same cannot be amortized over the period for which the assessee can collect the toll; the right to collect toll is capital expenditure incurred by the assessee and consequently, the assessee is entitled to claim depreciation on such intangible asset as provided under section 32(1)(ii) of the Act. Accordingly, we hold so. The assessee is thus, entitled to its claim. Thus, the second part of the order of assessing officer in amortizing the expenditure over the period of facility and allowing the same stands reversed. The assessing officer is directed to allow the claim of assessee of depreciation on such intangible asset under section 32(1)(ii)of the Act.
24. Now, coming to the second issue raised in the present appeal i.e., estimation of toll receipts in the hands of assessee. During the course of search proceedings carried out in the Ashoka Group of cases, a diary was found from the possession of assessee, wherein admittedly, unaccounted receipts were noted for the period 25-12-2009 to 19-4-2010. In this regard, statement of one employee Ms. Dipti Lokam was recorded, who was maintaining the said diary in the office premises. She admitted that the said diary was being written by her and was rough cash book for period 25-12-2009 to 19-4-2010. She also confirmed that the cash entries were not fully recorded in regular books of account of group. She further reiterated that the cash reflected in the said rough cash book was not part of official cash book. As regards toll collection, she stated that some portion of cash collected from Toll Nakas was not deposited in the bank which lead to generation of unaccounted cash. Further, on the date of search also, search team furnished SMSes relating to Toll Nakas from the mobile of Shri Jayesh Dungarwal to the mobile of the director of the company Shri Sunil B. Raisoni. In the statement recorded on 20-4-2010 at the assessee’s Pune office, Shri Jayesh Dungarwal had confirmed that he was working with the assessee and he further stated that he was supervising work of collection of toll from Toll Nakas situated at various places and also confirmed that Ms. Dipti Lokam was receiving cash from various Toll Nakas. In the SMS Nos. 43 and 44 received on the mobile of Shri Sunil B. Raisoni, which was dt. 19-4-2010, the amount of toll collected was mentioned and Shri Jayesh Dungarwal stated that the said contents represent the toll collection from various places and were reported to Shri Sunil B. Raisoni by him. He was confronted with the cash receipt of Rs. 8.64 lakhs shown as toll collection from Shirur Toll Naka on 19-4-2010 as against cash receipt of Rs. 10.35 lakhs found from Ms. Dipti Lokam. On physical verification with regard to difference of Rs. 1.71 lakh, Shri Jayesh Dungarwal replied that the Director, Shri Sunil B. Raisoni used to give instructions as to how much amount was to be accounted for in the books of account, the balance amount of cash remained with the cashier. He reconfirmed about the instructions of the director to report less cash vis-a-vis actual cash received from Toll Nakas. The assessee during the course of assessment proceedings furnished the statement showing the difference in toll collection as per seized note and books and as per regular books of account for the period 25-12-2009 to 19-4-2010. As per the assessee’s own statement, total amount reflected in the seized annexure was Rs. 10.98 crores as against Rs. 10.48 crores recorded in the regular books of account. The assessing officer noted that the ratio of unrecorded to recorded toll collection was about 4.79 per cent. The assessee before the authorities below claimed that out of unrecorded toll collection, certain amount was utilized for unrecorded expenses and according to the assessee, about 3.39 per cent of the total unrecorded collection of 4.79 per cent was spent on the toll collection activities, thereby, excess unrecorded toll collection was 1.40 per cent. The claim of assessee was rejected in the absence of any documentary evidence to establish the incurring of unrecorded cash for any expenditure. The Commissioner (Appeals) further took note of expenditure variations in the seized documents which were incurred on illegal payments and he held that the same were in any case not allowable under the Income Tax Act.
25. Another related contention of assessee before the authorities below was that the seized documents related to limited period pertaining to assessment years 2010-11 and 2011-12 and hence, no addition was required to be made on this account for earlier years. The said contention of assessee was rejected since the assessee was collecting the toll from 6-7-2005 on wards and it was held that the assessee was adopting this practice of under-reporting of toll collection since the beginning. The assessing officer and the Commissioner (Appeals) had estimated the income @ 5 per cent of total collection as unrecorded for assessment years 2006-07 to 2011-12. The assessing officer has included the said additional income as income from other sources. However, the Commissioner (Appeals) allowed the claim of assessee that since the amounts were admittedly collected, was on account of toll collection and where the assessee has no other business activity, then the same is to be assessed under the head ‘Income from business’. Further, directions were given by the Commissioner (Appeals) to give set off of current/unabsorbed losses/unabsorbed depreciation.
26. The first contention of the assessee before us is that in the absence of any evidence found during the course of search in respect of receipts in the earlier years, no addition can be made in the hands of assessee. In this regard, he had placed reliance on series of decisions of Pune Bench of Tribunal. He further placed reliance on the ratio laid down by the Honorable Bombay High Court in the case of CIT v. Thakkar Popattal Velji Sales Ltd. in IT Appeal No. 2266 of 2013, judgment date 29-3-2016, which has confirmed the ratio laid down by the Pune Bench of Tribunal. The claim of Revenue in the said decision was that where the register evidencing the sales were found for certain period, the Revenue was entitled to extrapolate the sales recorded therein for the entire assessment year. The Honorable High Court vide para 9 held as under :
“9. So far as the next submission on behalf of the Revenue viz., of extrapolation of evidence found during search is concerned, this Court in All Cargo Global Logistics Ltd. (supra) had negatived the Revenue’s submission before it that the assessment under section 153A of the Act is not to be restricted only to the incriminating material found during the course of search but would extend to other material also. Therefore, in the facts of present case this issue is covered by the decision of this Court in All Cargo Global Logistics Ltd. (supra) in favour of the respondent- assessee inasmuch as it restricts the assessment to be made only to the incriminating material found during the course of search. The reliance upon the decision of the Supreme Court in H.M. Esufali H.M. Abdulali (supra) is inappropriate. This is so as it was passed under the sales-tax law and it proceeded the basis of best judgment assessment i.e. disregarding the assessee’s books of account. It is not so in this case.”
27. On the other hand, the learned Departmental Representative for the Revenue has placed reliance on the ratio laid down by the Hon’ble High Court of Delhi in CIT v. Chetan Das Lachman Das (supra), wherein it has been held that seized material was found to show that the assessee had been indulging in off records transactions. In the facts of the case, before the Honorable High Court certain documents were found and the partners of assessee firm had admitted to the practice of suppressing the profits. The seized papers also reflected different rates when compared with the sale bills issued and these findings were not denied by the assessee. The Honorable High Court observed that where on comparison of sale bills with the seized papers, corroborated the suppression of income and it was held that the inference could be drawn that similar transactions were throughout the period of six years covered by section 153A of the Act.
28. In the facts of the present case also, admittedly, the director of the assessee company has admitted to the unaccounted toll receipts recorded in the diary seized from the premises of assessee. The case of assessee before us is that the addition, if any, is to be limited to the period for which the diary is found. The learned Authorized Representative for the assessee was confronted with the extrapolation application for financial year 2009-10, wherein it was admitted before the Commissioner (Appeals) that such practice of recording cash receipts and suppressing part of it was from May, 2009. The learned Authorized Representative for the assessee further contended that no extrapolation for earlier years could be made and even for the year of search, except for financial year 2009-10 and for the next year upto 19-4-2010. The learned Authorized Representative for the assessee further pointed out that Pune Bench of Tribunal in ITO v. Vikrant Happy Homes (P) Ltd. (supra) had referred to the ratio laid down by the Hon’ble High Court of Delhi in CIT v. Chetan Das Lachman Das (supra) and pointed out that in the said case, the issue that evidence of one year cannot be utilized for another year, was not raised and consequently, the estimation of income was made for search period. The Tribunal considering the said facts and arguments of the assessee before it, held that the said decision was not applicable to the facts of the said case observing as under :
“4.6 We find in the case of CIT v. Chetan Das Lachman Das (2012) 211 Taxman 61 (Del), wherein there was a search on the assessee and certain evidences were found which indicated that the assessee was suppressing its income. On the basis of the evidences found, the assessing officer estimated sales for the 6 years. The said addition was deleted by the Tribunal on the ground that no evidence was found in the course of search. Hon’ble Delhi High Court held that the decision of Tribunal that no seized material was found was not correct since evidences were clearly found indicating suppression of income. Accordingly, Hon’ble Delhi High Court held that the Commissioner (Appeals) had noted in his order that one of the partners of the assessee firm had admitted the practice of suppressing income. Further, in the said case, the issue that evidence of one year cannot be utilised for another year was not raised. Accordingly, considering the above facts, the estimation of income made by the assessing officer was accepted. Considering the above facts, the said decision is not applicable to the facts of the present case. In the said case also, the assessee had accepted carrying out such practice and accordingly, Hon’ble High Court confirmed the action of the assessing officer. It is important to be noted that Tribunal had deleted the addition on the ground that no seized material was found which was totally contrary to the evidence on record. Accordingly, the above ratio is not applicable to the facts of the present case. Regarding the learned Departmental Representative’s reliance on the ratio in the case of CIT v. Hotel Meriya (2011) 332 ITR 537 (Ker), we find that the assessee was running a restaurant. There was a search conducted on the assessee firm and in the course of search, statement of one of the partners was recorded. In the statement recorded, the partner of the assessee firm accepted that certain sales were suppressed and such suppression of sales was carried out from inception. Considering the said statement, Hon’ble High Court held that as the assessee had agreed of suppression of turnover, the estimation of income made by the assessing officer was justified. In the said case, there was a clear admission of the partner of the assessee that the sales were suppressed and considering the said admission, the extrapolation of sales for all the years was accepted by the Hon’ble High Court. In the case before us, there is no acceptance that the on-money is collected by the assessee firm for all the years and accordingly, the decision in the case of Hotel Meriya (supra) is not applicable to the facts of the present case. Regarding the learned Departmental Representative’s reliance on the ratio in the case of Rqjnik & Co. v. Asstt. CIT (2001) 251 ITR 561 (AP), we find that the assessee firm was engaged in the business of dealing in cycle spare parts. There was a search conducted on the assessee on 13-11-1996. In the course of search, incriminating material was seized for indicating suppression of sales for a period of 24 days in assessment year 1996-97 and for a period of 15 days in assessment year 1997-98. However, the partner of the assessee in the course of search admitted that such practice was adopted for all the years including the years for which no evidence was found. On the basis of the above facts, assessing officer estimated undisclosed income for the block period. The matter went upto High Court and the Hon’ble High Court held that as the evidence was found for certain years and considering the acceptance of the partner that similar practice was followed in the earlier years, the estimation of income made by the assessing officer was correct. In the case before us, the facts are not identical as there was no acceptance by the assessee or its directors that such practice was followed in the earlier years as well. Accordingly, the ratio of Rajnik & Co. is not applicable to the facts of the present case. We further find in the case of Khopade Kisanrao Manikrao v. Asstt. CIT (2000) 69 TTJ (Pune)(TM) 135, wherein the learned Departmental Representative has relied upon the said decision of Tribunal, Third Member of Pune Bench. In the said case, the evidence was found that the assessee had taken on-money on sale of plots. The evidence was found for all the years falling within the block period. Thus the issue arose that on the basis of evidence found for sale of certain plots, can the assessing officer estimate the income in respect of other plots for which no evidence was found. The Third Member held that the evidence was found that the assessee was taking the on-money for sale of plots for the various years of the block period and hence, the assessing officer could estimate the on-money in respect of sale of other plots even though the evidence was not found. Hence against the distinguishing factor, the evidence was found for all the years and not some of the years and therefore, the assessing officer was not justified in estimating the unaccounted income for the other years in this case. In the case of Khopade Kisanrao Manikrao (supra), the issue that whether evidence of one year could be used for making an addition in the other year was not raised simply because certain evidence was found for each of the years. Hence, the ratio of Khopade Kisanrao Manikrao (supra) is not applicable to the facts of the present case.
4.7 We further find in the case of Dr. Gurvinder Singh Randhawa v. CIT (2013) 352 ITR 616 (P&H) relied upon by the Revenue, the assessee was a medical practitioner. In the course of search, evidence was found that the assessee had suppressed his professional receipts. The assessing officer applied the rate of Rs. 10,147 for each surgery as against Rs. 6,000 offered by the assessee. The dispute in that case was regarding the rate to be adopted for each surgery and the issue that whether evidence of one year can be used for jestimating income of another year was not involved before Hon’ble High Court. Accordingly, the ratio of Dr. Gurvinder Singh Randhawa v. CIT is not applicable to the facts of the present case and the reliance placed by the learned Departmental Representative is misplaced. We find in the case of CIT v. Dr. M.K.E. Memon (2001) 248 ITR 310 (Bom), the learned Departmental Representative placed reliance on the decision of Hon’ble Bombay High Court in the case of Dr. M.K.E. Memon (supra). However, the facts of the said case are not identical and not applicable to the present case. In the said case, the assessee was a general physician. Search was conducted on the assessee on 11-12-1996. In the course of search, evidences were found that the assessee had generated unaccounted income for the period-11-1993 onwards. On the basis of the said evidence, the assessee offered to tax income for pre-November, 1993 period and post-November, 1993 period. The assessing officer estimated higher income for the pre-November, 1993 period. Tribunal deleted the addition made by the assessing officer and sustained the income declared by the assessee for the pre-11-1993 period. The issue before Hon’ble Bombay High Court was whether such deletion of addition made by the assessing officer was justified. Hon’ble High Court held that the Tribunal was justified in deleting the addition made because the income does not remain constant over the years. Moreover, evidence of one year cannot be used for other year as held by the Tribunal, Pune ‘A Bench in the case of Dy. CIT v. Venkateshwara Hatcheries (P) Ltd. in ITA Nos. 746 and 747/Pn/2012 & Anr.. Accordingly, the facts of the said case are not identical and not applicable to the facts of the present case.”
29. The Tribunal thus, held that the evidence of one year could not be used for other years as held by the Pune Bench of Tribunal in Dy. CIT v. Venkateshwara Hatcheries (P) Ltd. (supra).
30. The issue arising in the present appeal before us is identical to the issue before the Pune Bench of Tribunal in ITO v. Vikrant Happy Homes (P) Ltd. (supra), which had considered the ratio laid down by the Hon’ble High Court of Delhi in CIT v. Chetan Das Lachman Das (supra), wherein no issue was raised of extrapolation of income on the basis of evidence of one year to be utilized for other years of search and in the absence of raising of such issue by the assessee therein before the Hon’ble High Court, there is no merit in the plea of learned Departmental Representative for the Revenue before us and consequently, reliance placed upon by the learned Departmental Representative for the Revenue is dismissed. Following the ratio laid down by the Pune Bench of Tribunal in ITO v. Vikront Happy Homes (P) Ltd. (supra) and other decisions, we hold that the evidence found during the course of search toll receipts which were not recorded in the books of account for certain period could be utilized for extrapolation of income for the relevant financial year(s). However, the said material cannot be made the basis for working out the income in the hands of assessee for other years for which no incriminating documents or entries in any cash book or note books were found during the course of search. We hold so.
31. Now, coming to another aspect raised by the assessee that in case of completing proceedings under section 153A of the Act, where the assessment proceedings have been completed and no incriminating documents have been found for the said completed assessment years, then no proceedings can be initiated under section 153A of the Act and consequently, the assessment order passed under section 143(3) read with section 153A of the Act is to be annulled. The learned Authorized Representative for the assessee before us has referred to the assessments completed in assessment years 2006-07 and 2007-08 in this regard. He further placed reliance laid down by the Hon’ble Bombay High Court in CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd./All Cargo Global Logistics Ltd. (supra). We find merit in the plea of assessee in this regard, where the assessments have already been completed for a particular year, then the same could not be disturbed in the absence of any incriminating material found during the course of search. Accordingly, the orders passed under section 143(3) read with section 153A of the Act relating to assessment years 2006-07 and 2007-08 are annulled and the same are set aside. In respect of other years i.e., assessment years 2008-09 to 2010-11, we have already decided the issue in the paras herein above. For the sake of clarification, we point out that as regards the claim of depreciation on the right to collect toll being intangible asset, we have decided the issue in favor of the assessee and the same is to be allowed in the hands of assessee as deduction under section 32(1)(ii) of the Act in all the years for which the assessee is in appeal before us.
32. In respect of second addition made on account of estimation of toll receipts, where no evidence was found for particular year’s, we hold that no addition on this account is to be made in the hands of assessee in assessment years 2008-09 and 2009-10. However, in assessment year 2010-11, evidence was found and the said receipts were to be extrapolated for determining the toll receipts in the hands of assessee and in this regard, we uphold the order of assessing officer in estimating the same @ 5 per cent of accounted toll receipts. Similarly, in the year of search i.e., assessment year 2010-11, evidence has been found for part of the month and the addition is to be restricted to the said evidence found. The evidence cannot be used for extrapolating the receipts for balance period, which is after the date of search; since, no evidence has been brought on record to establish that the same practice has been followed by the assessee in the period pursuant to the date of search. Accordingly, the assessing officer is directed to compute the income in the respective years in the hands of assessee.
33. In the result, appeals of assessee in assessment years 2006-07 and 2007-08 are allowed and appeals in assessment years 2008-09 to 2011-12 are partly allowed.
