No further addition on issues covered by settlement commission order in other proceedings

Brief of the case:

AO made additions on account of unexplained sources of expenses on the basis of some documents found during search proceedings u/s 132 on Gopal Zarda Group. On seized documents some details of expenses and payment of share premium is mentioned. Additions made by AO were deleted by CIT (A). After examining the facts and arguments tribunal observed that CIT(A) perused the order of settlement commission and held that CIT (A) was right in deleting addition.

Facts of the case:

• A search and seizure action u/s. 132 of the I.T. Act was carried out in the Gopal Zarda group of cases on 15.1.2009 and during the course of search at the residential premises, Director Gopal Corporation Ltd. certain documents belonging to the assessee were seized (Annexure-A 1) on which details of expenses and payment of share premium is mentioned.
• On the basis of documents so found notice u/s 153C was issued on 21.06.2010 after recording the satisfaction note u/s. 153C of the Act and duly served upon the assessee requiring it to furnish the true and correct return of income for the AY 2007-08 within 21 days from the date of receipt of the notice.
• The assessee did not file its return of income within the time stipulated in the notice u/s. 153C. The return of income was filed on 13.9.2010 declaring total income at Rs. 15,280/- Delay in filing of return of income was more than two months.
• Earlier assessee had filed his original return of income declaring same income.
• Subsequently notice u/s. 143(2) of the Act dated 14.9.2010 was issued and served upon the assessee. Previously, notice u/s. 142(1) of the Act dated 28.7.2010 along with the questionnaire were issued and served upon the assessee.
• During the course of assessment proceedings, the assessee has been requested to furnish the details as requested vide notice u/.s 142(1) of the Act.
• In response to these notices, authorized representative attended the assessment proceedings from time to time and furnished various details. AO noted that the onus is on the assessee to prove which remains unexplained. After considering the facts and circumstances of the case, AO made an addition of Rs. 47,02,750/- on account of unexplained source of expenses u/s. 69C r.w.s. 37 of the Act and completed the assessment vide order dated 29.12.2010 passed u/s. 153C r.w.s. 143(3) of the I.T. Act, 1961.

Contention of the revenue:

• Since the Directors of the assessee company has accepted the payment and receipt of Premium mentioned in Annexure A-1 of the seized documents therefore the amount of expenses mentioned on Page NO. 47 of Annexure A-I is also correct.
• During the period under consideration construction of two properties i.e. Hotel Motia Khan property of the assessee company and Hotel project in Mehrauli in the name of M/s Penguine Farms Pvt. Ltd. was in progress. These lands were purchased in assessment year 2006-07 and assessment year 2008-09.
• These two project lands were acquired and hotel projects were launched by the owners of both the companies, therefore, these expenses were related to both these companies and thus made addition of Rs. 47,02,750/- (50% of total expenditure of Rs. 94,05,500/-) each in the hands of the assessee company and M/s Penguine Farms Pvt. Ltd.

Contention of the assessee:

• The additions made in case of the assessee with regard to unexplained and undisclosed expenses related to property at Motia Khan by the AO are covered by the order U/S 245D(4) passed by the Settlement Commission dated 31.12.2010 therefore in terms of the Section 245-I of the IT Act the matters which are covered by the Order of Settlement Commission could neither be reopened nor eligible for any further addition under any proceedings under this Act.

 Held by CIT (A):

• CIT (A) after examining the order passed by settlement commission deleted the addition made by AO.

Held by the tribunal:

• After perusing the order passed by settlement commission u/s 245D (4) there is no case for addition made by the AO on account of unexplained and unaccounted expenses with respect to property at Motia Khan, as made in the assessment order.
• The assessment order has been passed on 29.12.10 and therefore the AO was not having the benefit of having the Settlement Commission Order and finding given therein but then now as the Order of the Settlement Commission has already been passed upon consideration of the entire issues and having considered the addition to income with respect to the concerned properties in respect of the assessee group, therefore in terms of Section 245-I of the Act the additions made in the assessment order are rightly been deleted by the Ld. CIT(A).