ACIT 8(3)(1), MUMBAI, AAYAKAR BHAVAN, MUMBAI V. VIJAY DWELLERS PRIVATE LIMITED , MUMBAI

ITA 4976/MUM/2024

AI Insights

The case involves Vijay Dwellers Pvt. Ltd., a real estate developer, which was under scrutiny for a secured loan of Rs.30 crore reflected in its balance sheet. The loan was purportedly taken from Union Bank of India against mortgaged flats sold to M/s Balaji Universal Tradelink Pvt. Ltd. and M/s Balaji Lifestyle Realtors Pvt. Ltd. The Assessing Officer (AO) treated this loan as unexplained cash credit under section 68 of the Income Tax Act, adding it to the income of the assessee. However, the CIT(A) reversed this decision, leading to the revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, noting that the loan entry was not supported by actual cash transactions and remained only on paper.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34429 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEELKANTH KHANDELWAL
• Assessee Lawyers: AJAY MODI
• Keywords: Set aside; Unexplained cash credit; Revision of order
• Section: 143(3); 143(2); 250; 263; 68

Judgement Text

"P a g e | 1 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 4976/Mum/2024 (A.Y.2015-16) ACIT-8(3)(1) Room No. 665A, 6th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs. Vijay Dwellers Pvt. Ltd. 477, 1st Floor, Babylon, Adenwala Road, King Circle, Matunga East, Mumbai – 400019 \u0001थायी लेखा सं./जीआइआर सं./PAN/GIR No. AADCV9041N Appellant .. Respondent Appellant by : Shri Neelkanth Khandelwal Respondent by : Shri Ajay Modi, (CIT DR) Date of Hearing 10.12.2024 Date of Pronouncement 09.01.2025 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the revenue is directed against the order u/s 250 of the Act passed by the NFAC, Delhi, dated 29.04.2024 for A.Y. 2015-16. 2. The grounds of appeal filed by the Revenue are as under: “1. Ground No.1 Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.30,00,00,000/- made u/s. 68 of the I.T Act without appreciating the fact that the Hon'ble Supreme Court in Principal CIT v. NRA Iron & Steel Pvt. Ltd. has reiterated the settled position of law regarding Section 68 wherein the initial onus is on the assessee to establish by cogent P a g e | 2 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. evidence, the identity of the creditors, genuineness of the transaction and credit-worthiness of the investors under Section 68 of the Act? 2. Ground No.2 Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.30,00,00,000/- made u/s. 68 of the I.T Act without appreciating the fact the assessee has failed to prove the genuineness of transactions and creditworthiness of the parties from whom loans were taken? 3. Ground No.3 Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.30,00,00,000/- made u/s. 68 of the I.T Act without appreciating the fact that section 68 apply to all types of credits, including loans and not just cash credits, recorded in the books of account, and can such sums be treated as unexplained income if the assessee fails to satisfactorily explain their nature and source?” 3. Fact in brief is that return of income declaring total loss of Rs.11,86,94,754/- was filed on 30.09.2015. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 17.03.2016. The assessment u/s 143(3) of the Act was completed on 20.12.2017 and total income was assessed at Rs.18,13,05,246/-. During the course of assessment the AO noticed that assessee has shown secured loan of Rs.30 crore taken during the year under consideration from bank as reflected in its balance sheet as on 31.03.2015. The assessee was asked to furnish detail of loan with documentary evidences. The assessee explained that it had sold in 2007 four flats to M/s Balaji Universal Tradelink Pvt. Ltd. and six flats to M/s Balaji Lifestyle Realtors Pvt. Ltd. for Rs.8,76,90,000/-. Subsequently, M/s. Balaji Universal Trade Link Pvt. Ltd. and M/s. Balaji Lifestyle Realtors Pvt. Ltd. had taken loan of Rs.30 crore from Union Bank of India against mortgage of these flats. However, they were not able to repay the impugned l;oan to the bank. Since M/s Balaji Universal Tradelink Pvt. Ltd. and M/s Balaji Lifestyle Realtors Pvt. Ltd. had also huge P a g e | 3 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. outstanding dues of the Income Tax Department, Enforcement Directorate etc. against which the said ten flats were mortgaged, to release the same, the assessee company and M/s. Balaji Universal Trade Link and M/s. Balaji Lifestyle Realtors have made mutual understanding as per consent term that if M/s. Balaji Universal Trade Link Pvt. Ltd. and M/s. Balaji Realtors Pvt. Ltd. resolve the liabilities of statutory dues, government dues and property attachment case of Income Tax Department and Enforcement Directorate against the said ten flats and also made clear and marketable title within specified period then the assessee company will reacquire the said flats from them. The said offer was valid and under negotiations. If the said offer was materialized the assessee would repay the loan to the Union Bank of India and their liability alongwith interest and the said ten flats will be reacquired by the assessee company. Therefore, by journal entries the loan liability of Union Bank of India of Rs.30 crores was reflected in the financial statement in the balance sheet of the assessee under the short term borrowing from the bank. The assessee also explained that said mutual understanding was still not executed and the said offer was still at the negotiation stage. The assessee also explained that said loan of Rs.30 crores from Union Bank of India was taken by M/s Balaji Universal Tradelink Pvt. Ltd. and loan of Rs.28,28,83,039/- appeared in the audited financial statement at Note No. 5 as long time borrowing of secured loan of Rs.11,31,3,216/- and unsecured loan of Rs.16,97,29,823/- of M/s Balaji Universal Tradelink Pvt. Ltd. as on 31.03.2015. The assessee has also submitted the copies of balance sheet of M/s Balaji Universal Tradelink Pvt. Ltd. as on 31.03.2015. The P a g e | 4 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. assessee also submitted that once M/s Balaji Universal Tradelink Pvt. Ltd and M/s Balaji Lifestyle Realtors Pvt. Ltd. resolved their liability of outstanding statutory due of the government against the 10 flats with clear marketable title then the assessee company will reacquire the said 10 flats from them at Rs.30 crores. In view of the above circumstances the entry was made in the books of account of the assessee which remained only in papers without giving actual effect as the assessee company had neither reacquired those 10 flats from the said buyers nor taken any loan liability for payment of Union Bank of India. However, the AO has not agreed with the submission of the assessee on the ground that assessee has shown credit entries of Rs.30 crores in the form of bank loan in its books of account for the year under consideration as secured loan under the head short term borrowings, therefore, the amount of Rs.30 crores was treated as income of the assessee as cash credit u/s 68 of the Act and added to the total income of the assessee. 4. The assessee filed the appeal before the Ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant extract of the decision of Ld. CIT(A) is reproduced as under: “I have carefully considered the submission made by the Appellant. It is observed that scrutiny assessment for A.Y.2015-16 was completed on 22/12/2017. The order u/s 143(3) was set aside by the Ld. PCIT-8, Mumbai vide order u/s 263 dated 03-03-2021 and subsequently the AO passed order u/s 143(3) r.w.s. 263 on 29-03-2022. The AO observed that the Appellant had shown secured loan of Rs.30,00,00,000/- from bank in its balance sheet as on 31-03-2015. The Appellant submitted that it had soid 4 flats to M/S Balaji Universal Tradelink Pvt. Ltd. and 6 flats to M/S Balaji Lifestyle Realtors Pvt. Ltd. for Rs. 8,76,90,000/- in the year 2007. Subsequently, M/S Balaji Universal Tradelink Pvt. Ltd. and M/S Balaji Lifestyle Realtors Private Limited had taken a loan of Rs. P a g e | 5 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. 30,00,00,000/- from the Union Bank of India against the mortgage of these flats. However, they were not able to repay the same. Since, M/S Balaji Universal Tradelink Pvt. Ltd. and M/S Balaji Lifestyle Realtors Pvt. Ltd. had also huge liabilities of Income Tax Development, Enforcement Directorate etc., against which said ten flats were mortgaged, to release the same, the Appellant and M/S Balaji Universal Tradelink Pvt. Lid. and M/S Balaji Lifestyle Realtors Pvt. Ltd. made mutual understanding as per consent term that if the two companies resolve the liabilities of statutory dues, government dues and property attachment case of Income Tax Department and Enforcement Directorate against the said 10 flats and also made clear and marketable title within a specified period, then the Appellant will re-acquire the said flats from them. The said offer is still valid and negotiations in this regard is also going on and the said offer is valid till date. If the said offer is initiated, then the Appellant will repay to the Union Bank of India their liability along with interest and the said 10 flats would be re-acquired by it. Thus, loan liability of Union Bank of India of Rs.30,00,00,000/- is reflecting in the Financial statement under Short term borrowings from bank. The AO rejected the submission made by the Appellant by holding that the same loan cannot be reflected as liability of two different companies and that the Appellant also failed to bring on record any provisions of terms of consent that the same loan was required to be reflected as liability in the books of both the companies and added the amount of Rs. 30,00,00,000/-. It is observed that the Appellant had submitted during the course of assessment proceedings that the loan of Rs. 30,00,00,000/- (Approx) from the Union Bank of India was taken by M/s Balaji Universal Tradelink Pvt. Ltd. Further, a loan of Rs. 28,28,83,039/- appears in the audited financial statement in Note-5-Long-Term borrowing as a secured loan of Rs.11,31,53,216 and an unsecured loan of Rs. 16,97,29,823/- of M/s Balaji Universal Tradelink Pvt. Ltd. as on 31-03-2015. The Appellant had furnished copy of ITR, Audited Financial Statement, copy of confirmation of amount of loan taken by M/s Balaji Tradelink Pvt. Ltd. From UBI. The said loan of Rs. 28,28,83,039/- appears in the audited balance sheet of M/s Balaji Universal Tradelink Pvt. Ltd. as on 31-03-2015. In respect of the 10 flats sold to the two companies for a sale consideration of Rs. 8,76,90,000/- on 24/10/2007, the Appellant submitted that in the Journal entry, the advance received from Balaji against 10 flats has been shown at Rs. 9,78,88,580/- and the discrepancy is on account of maintenance charges and other sums P a g e | 6 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. collected from them included in advance received against the sale of 10 flats which was recoverable from the Balaji group. It is observed that the entries passed in the books of accounts by the Appellant were on the basis of the consent term with the Balaji Group, when the dispute was settled it was agreed that the Appellant will pay the loan of Rs.30,00,00,000/- against re-purchase of those 10 flats because these flats are mortgaged with UBI by Balaji Group against the said loan. The actual effect of these entries was not carried out as explained above and the loan taken from the UBI by Balaji group is still reflected in the balance sheet of M/s Balaji Universal Tradelink Pvt. Ltd. However, the entries are passed in the books of accounts of the Appellant with the hope that the arrangement will be carried out. Therefore, there is no actual or material effect of these entries in the Balance Sheet and Profit and Loss Account of the Appellant for the arrangement with these companies of Balaji Group as agreed in the consent term, which was not carried out. It is observed that the loan liability of Union Bank of India of Rs.30,00,00,000/- was reflected in the Financial statement of the Appellant under short term borrowings from bank, which is actually Journal entry taken into books of accounts and the cost of 10 flats taken as Rs.30,00,00,000/- and following entry passed in the books of accounts as under: Advance received from Balaji Against 10 flats Dr. 9,78,88,580 Reduced from advance against flat other current liabilities Balaji UBI Loan Capitalised Dr. 20,21,11,420/- Included in closing working in progress Balaji UBI Loan Cr. 30,00,00,000/- Included in Short term borrowings from Bank It is further observed that the Appellant has clearly mentioned in Para 26 of Notes to accounts of F.Y. 2021-22 (A.Y. 2022-23) of Balance Sheet that \"company has cleared all disputes in the financial year 2014-15 as per consent terms filed in the Hon' Supreme Court of India in December 2014 and as per Supreme Court Order. In the financial Year 2014-15, there was contingent liability as per consent clause no. 37-44 was wrongly accounted in books of accounts and the same has been rectified in the financial year 2021-22. Extract of clause no. 37-44 of the consent terms P a g e | 7 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. are hereunder reproduced for your perusal.\" Wherein for various reasons the said deal did not materialise and the said Journal entry is reversed and appropriate disclosure made in line with Accounting standards, which makes clear that Balaji UBI Loan of Rs. 30,00,00,000/- lying in the Balance sheet of F.Y. 2014-15 was contingent liability which was wrongly considered in Accounts instead of only notes of Accounts of the said Financial Year which has no relevance since there was a conditional offer by the Appellant to M/s Balaji Group of companies which was not materially realized into monetary transaction and hence there was no impact on income statement and therefore question of unexplained income does not arise. Even otherwise, had the Appellant actually availed the Bank Loan from Union Bank of India, there would have been no difficulty on the part of the Appellant to produce details about a Bank Loan shown as a Secured Loan from a Scheduled Bank. That the Appellant was unable to do so, itself supports the Appellant's contention that it was merely a Fictious and Paper entry erroneously and hastily made in its books of Accounts by the Appellant. Therefore, considering all the facts and circumstances as discussed above, it can be concluded that the entry was taken in the books of account of the Appellant and remained only on paper. There was no actual receipt of any cash by the Appellant and when the Appellant did not receive any receipt, there was no real credit or receipt by way of any mode in Cash/Bank Books and therefore, the question of inclusion of the amount of the entry as unexplained cash credit u/s 68 does not arise and the addition of Rs.30,00,00,000/- made by the AO is hereby deleted. These grounds are allowed. Ground No.4 is general in nature. In the result, the appeal is allowed.” 5. Heard both the sides and perused the material on record. The assessee company is a Real Estate Developer and took over a redevelopment project of two tenanted buildings in Matunga (E), Mumbai. Construction started in F.Y. 2003-04 and in the year F.Y. 2007-08 dispute arose amongst the said directors regarding tenancy rights, books of accounts and sale of flats and petitions P a g e | 8 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. were moved before the Company Law Board. Because of the order of the Company Law Board no activities were carried out till the deed of settlement cum consent term was signed by 74 parties on 06.12.2014. Further ten flats were agreed to be sold on 24.10.2007 to M/s Balaji Universal Tradelink Pvt. Ltd and M/s Balaji Lifestyle Realtors Pvt. Ltd. for consideration of Rs.876,90,000/- in the Assessment Year 2008-09 which was shows under the head advance against sale since possession of the flats were not given as occupation certificate of building from the MCGM was not received. M/s Balaji Universal Tradelink Pvt. Ltd and M/s Balaji Lifestyle Realtors Pvt. Ltd. had taken loan against the mortgaged of the aforesaid 10 flats from the Union Bank of India of Rs.30 crores. Subsequently, because of financial difficulties faced by the Balaji Universal Tradelink Pvt. Ltd. and Balaji Lifestyle Realtors Pvt. Ltd., there was mutual understanding made with the assessee company that the aforesaid buyers first clear the statutory dues and property attachment cases against the 10 flats to make them clear and marketable title thereafter the assessee will repay Union Bank of India their loan liability of Rs.30 crores and the assessee will reacquired the said 10 flats from M/s Balaji Universal Tradelink Pvt. Ltd and M/s Balaji Lifestyle Realtors Pvt. Ltd. Accordingly, the loan liability of Union Bank of India of Rs. 30 crores was reflected in financial statement under short term borrowing from bank which is actually journal entry taken into books of accounts and cost of ten flats taken as Rs. 30 crores in the books of accounts as under; P a g e | 9 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. Advance received from Balaji Against 10 flats Dr. 9,78,88,580 Reduced from advance against flat other current liabilities Balaji UBI Loan Capitalised Dr. 20,21,11,420/- Included in closing working in progress Balaji UBI Loan Cr. 30,00,00,000/- Included in Short term borrowings from Bank 6. The assessee at point No. 26 of notes to accounts of F.Y. 2021-22 (A.Y. 2022-23) of balance sheet stated that the company has cleared all disputes in the financial year 2014-15 as per consent terms filed in the Hon’ble Supreme Court of India in December 2014 and as per the Supreme Court order in the financial year 2014-15 there was contingent liability as per consent term clause no. 37-44 which was wrongly accounted in books of accounts and the same has been rectified in the financial year 2021-22. Since, the said understanding could not be materialized, therefore, the said entry was reversed and assessee had made disclosure in the accounting standard that loan amount of Rs.30,00,00,000/- relating to M/s Balaji Group shown in the balance sheet on financial year 2014-15 was contingent liability which was wrongly considered in the account instead of only notes to account of said financial year. It is evident that said entry remained only in papers and assessee company has neither reacquired those 10 flats from M/s Balaji Universal Tradelink Pvt. Ltd and M/s Balaji Lifestyle Realtors Pvt. Ltd. nor taken any loan liability for payment to Union Bank of India. It is undisputed fact that Union Bank of India has sanctioned loan vide letter dated 27.02.2009 in the name of M/s. Balaji Universal Tradelink Pvt. Ltd. and the AO has not brought any contrary material on record P a g e | 10 ITA No.4976/Mum/2024 Vijay Dwellers pvt.Ltd. to demonstrate that Union Bank of India has actually advanced any such loan amount to the assessee company. In view of the above facts and findings we do not find any infirmity in deleting the impugned addition of Rs. 30 crores of loan made by the AO. Therefore, the ground of appeal 1 to 3 filed by the revenue are dismissed. 7. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 09.01.2025 Sd/- Sd/- (Sunil Kumar Singh) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 09.01.2025 Rohit: PS आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0014 / The Appellant 2. \u0016\u0017थ\u0014 / The Respondent. 3. आयकर आयु\u001a / CIT 4. िवभागीय \u0016ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT, Mumbai 5. गाड$ फाईल / Guard file. स\u0017ािपत \u0016ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण/ ITAT, Bench, Mumbai. "