ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-25(1), NEW DELHI, INCOME TAX DEPARTMENT V. VSF REALTORS PVT. LTD., DELHI

ITA 2694/DEL/2023

AI Insights

The case involves contra appeals by VSF Realtor Pvt. Ltd. and the Assistant Commissioner of Income Tax concerning the assessment year 2015-16. The primary issues revolved around the taxability of share application money, deemed dividend, loans, and interest under various sections of the Income Tax Act, 1961. The AO had made several additions to the assessee's income, which were partially upheld by the CIT(A). Both parties appealed to the ITAT, which decided to remit certain issues back to the AO while upholding the CIT(A)'s decisions on others, referencing previous Tribunal decisions in similar cases involving the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312699 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2015-2016
• Other Referred Cases: ITA No.6470/Del/2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: TAPAS MISHRA
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Revenue expenditure; Deemed dividend
• Section: 143(3); 68; 2(22)(e)

Judgement Text

" ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.2057/Del/2023, A.Y.2015-16 VSF Realtor Private Limited, B-35, Lajpat Nagar-2, Lala Lajpat Marg, New Delhi PAN: AAACV2821R Vs. Assistant Commissioner of Income Tax, Circle-25(1), C. R. Building, I. P. Estate, New Delhi (Appellant) (Respondent) ITA No.2694/Del/2023, A.Y.2015-16 Assistant Commissioner of Income Tax, Circle - 25(1), C. R. Building, I. P. Estate, New Delhi Vs. VSF Realtor Private Limited, B-35, Lajpat Nagar-2, Lala Lajpat Marg, New Delhi PAN: AAACV2821R (Appellant) (Respondent) Assessee by Sh. Tapas Mishra, Advocate, Sh. Neeraj Kumar, CA Sh. Anuj Kumar, CA Revenue by Sh. Amit Katoch, Sr. DR Sh. Pramod Kumar, Sr. DR Date of Hearing 31/01/2025 Date of Pronouncement 29/04/2025 ORDER PER AVDHESH KUMAR MISHRA, AM These contra appeals of the assessee and the Revenue for the Assessment Year (hereinafter, the ‘AY’) 2015-16 are directed against the order dated 16.06.2023 of the Commissioner of Income Tax (Appeals), NFAC, New Delhi [hereinafter, the ‘CIT(A)’]. ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 2 2. These appeals contain common facts; therefore, these were heard together and are being disposed off by this common order. 3. Vide various grounds, issues raised in these appeals are summed up as under: Assessee’s appeal (ITA No.2057/Del/2023): The assessee; vide 3 grounds, has raised two issues: i. Taxability of share application money of Rs.6,86,95,538/- under section 68 of the Income Tax Act, 1961 (hereinafter, the ‘Act’), ii. Non-affording proper opportunity of being heard rejecting the request for video conferencing. Revenue’s appeal (ITA No.2694/Del/2023): The Revenue; vide 4 grounds, has raised three issues: i. Taxability of deemed dividend of Rs.1,06,00,000/- under section 2(22) of the Act, ii. Taxability of loan of Rs.2,20,000/- under section 68 of the Act, iii. Interest of Rs.1,37,12,880/- 4. The relevant facts giving rise to these appeals are that the assessee, engaged in the business of trading in real estate and renting of properties, filed its Income Tax Return (hereinafter, the ‘ITR’) on 13.09.2015 declaring NIL income. The case was picked up for scrutiny. Consequential assessment was completed under section 143(3) of the Act determining income at ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 3 Rs.9,32,28,418/-. The Assessing Officer (hereinafter, the ‘AO’) made following additions: a. Loan of Rs.1,06,00,000/- from M/s Samara India Pvt. Ltd. taxed under section 2(22)(e) of the Act, b. Loans aggregating to Rs.6,89,15,538/- received from Mr. Rajnish Wadhwan, Mr. Avnish Wadhawan, MR. S. K. Wadhawan and Mrs. Veena Wadhawan taxed under section 68 of the Act and c. Disallowance of interest of Rs.1,37,12,880/-. 4.1 Aggrieved, the assessee filed appeal before the CIT(A), who vide impugned order allowed part relief. The addition of Rs.6,86,95,538/- sustained by the Ld. CIT(A) was challenged by the assessee before the Tribunal; whereas the Revenue has challenged the relief allowed by the Ld. CIT(A). 5. We first proceed with the assessee's appeal. ITA No.2057/Del/2023, A.Y.2015-16: 6. The addition of Rs.6,86,95,538/- made under section 68 of the Act and sustained by the Ld. CIT(A) is challenged by the assessee. In support of the contention that the loans advanced by Mr. Rajnish Wadhwan, Mr. Avnish Wadhawan, MR. S. K. Wadhawan and Mrs. Veena Wadhawan were genuine and source thereof were also explained, the Ld. Counsel, as an application under Rule 29 of the ITAT Rules, submitted following ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 4 documents before us for admission of some of evidence as additional evidence:  Copy of Google search results of Mr. S. K. Wadhawan  Copy of the Article published by the \"India Front Liners\" on the journey of Mr. S. K. Wadhavwan  Copy of the Article published by \"Forbes\" showing the ranking of the top 100 Indian leaders making an impact in the Middle East 2019 (Mr. S. K. Wadhawan was at 57h Rank) (Refer page 18 of the PB).  Copy of the Article published by the \"Indians in Kuwait\" informing that Mr. S. K. Wadhawan featured in the Forbes Top Indian Business Leaders list  Copy of the tweet by Mr. Suresh Prabhu (Ex-Minister of Railways) informing about the felicitation ceremony of Mr. S. K. Wadhawan  Copy of the Article of Association of M/s Samara Auto Supplies Ltd., Kuwait (Arabic) Copy of Article of Association of M/s Samara Auto Supplies Ltd., Kuwait (Translated in English)  Copy of the Audited Financials of M/s Samara Auto Supplies Ltd for the Financial Year 2022  Copy of the relevant extract (in US $) of the Financials of M/s Samara Auto Supplies Ltd for the Financial Year 2022  Copy of NRE deposit confirmation from the Punjab & Sind Bank of Mr. S. K. Wadhawan and Mrs. Veena K. Wadhawan ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 5  Loan account ledgers of Sh. S K Wadhawan, Sh. Rajnish Wadhawan. Sh. Avnish Wadhawan and Mrs. Veena Wadhawan in the books of accounts of M/s Samara India Pvt. Ltd. and M/s Samara Automax Pvt. Ltd.  Copy of the ITR Acknowledgement for the AY 2015-16 of M/s Samara India Pvt. Ltd.  Copy of the ITR Acknowledgement for the AY 2015-16 of M/s Samara Automax Pvt. Ltd.  Copy of assessment orders of M/s Samara India Pvt. Ltd. passed under section 143(3) of the Act for AYs 20l1-12, 2012-13, 2013-14 and 2014-15  Copy of assessment orders of M/s Samara Automax Pvt. Ltd. passed under section 143(3) of the Act for AYs 20l1-12, 2012-13, 2013-14 and 2014-15 6.1 The categorical submission of the Ld. Counsel with respect to the addition under section 68 of the Act is as under: “In the Assessee's appeal, the single ground challenging the CIT(A) order is against the confirmation of addition under section 68 of the Income-tax Act, 1961 in respect of loans taken by the assessee from some individuals who are also shareholders of the Assessee. In the course of assessment and first appeal the Assessee had submitted details of these individuals including their PAN, copies of their Indian tax returns and sources of the funds from which the loans were advanced. Two of these individuals, Mr. S. K. Wadhawan and his wife, Mrs. Veena Wadhawan, are NRIs. The CIT(A), as also the AO, without carrying out any inquiry at all and without seeking any further details from the Assessee, held that the capacity of these individuals to advance the loans was not established. ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 6 The Assessee/Appellant respectfully submits that a simple Google search would have revealed that Mr. S.K. Wadhawan has been a businessman of significant standing and net worth in Quwait for over five decades. The Appellant respectfully seeks to submit relevant evidence to support its contention regarding the identity and net worth of these individuals. Since the authorities below neither raised specific queries regarding net worth nor carried out any independent inquiry, the Appellant did not have any occasion to submit the details being filed now as it believed that the details already filed adequately established their net worth, identity and genuineness of the loan transactions. it is therefore respectfully prayed that the documents now being filed as additional evidence may kindly accepted under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 and the issue be adjudicated with reference to these, along with other documents already filed.” 7. On the other hand, the Ld. Sr. DR submitted that the Ld. Counsel’s admittance that the issue of taxability under section 68 of the Act was not examined and the assessee had not submitted the requisite details and that was why the Ld. Counsel filed the application under Rule 29 of the ITAT Rules. He; therefore, prayed for remitting this matter back to the AO. 8. We have heard both parties and have perused the material available on the record. We find merit in the arguments of both parties. Since neither the AO nor the Ld. CIT(A) enquired about creditworthiness of the lenders and genuineness of transactions; therefore, the assessee has no occasion to respond in this regard. In view of the above and without offering any comment on merit of the case, we deem it fit to set aside the finding of the Ld. CIT(A) with respect to the addition of Rs.6,86,95,538/- made under section 68 of the Act and remit this issue back to the file of the AO for deciding the case afresh, in accordance with law, after providing adequate ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 7 opportunity of being heard to the assessee. Ordered accordingly. The assessee, no doubt, shall cooperate in remitted proceedings. 9. In the result, the appeal of the assessee is allowed for statistical purpose. ITA No.2694/Del/2023, A.Y.2015-16 10 With respect to other issues; i.e. deemed dividend and interest, the Ld. Sr DR, reiterating the finding of the AO argued the case vehemently. 11. On the other hand, the Ld. Counsel contended that these issues were squarely covered by the decision of the Tribunal in assessee’s own case in the ITA No.6470/Del/2018. Hence, he prayed for dismissal of appeal on these scores. 12. We have heard both parties and have perused the material available on the record. We find merit in the arguments of the Ld. Counsel. This year the loan has been received from the loan account of Mr. S. K. Wadhawan in the books of accounts of M/s Samara India Pvt. Ltd. to the assessee. In the preceding year, similar loan was received from the loan account of Mr. S. K. Wadhawan in the books of accounts of M/s Samara India Pvt. Ltd. to the assessee. The facts of this issue are quite similar to that of the AY 2014-15. The difference is in the name individual lender. We are of the considered view that this issue is squarely covered by the decision of the Tribunal in assessee’s own case in the ITA No.6470/Del/2018. The relevant part of the decision is as under: ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 8 “5.2. During the course of assessment proceedings and on perusal of the bank statement the A.O. noticed that the assessee has received funds from M/s. Samara India Private Limited and the total amount received during the year aggregated to Rs.80,45,000/- (the details of which are tabulated at Page-2 of the assessment order). The A.O. also noticed that Shri Rajnish Wadhawan and Shri Anish Wadhwan hold 33.50% shares of the company and on perusal of the audited Balance Sheet of M/s. Samara India Private Limited, he noted that Shri Rajnish Wadhwan held 33.33% of its shares and Mr Anish Wadhwan held 21.84% of its shares. He on examination of the audited Balance Sheet of M/s. Samara India Private Limited noticed that as on 31.03.2014 the surplus in the Profit and Loss account stood at Rs.3,00,77,593/- which according to the AO meant that it had sufficient accumulated and distributable profits as on 31.03.2014. The A.O. also noted that since M/s. Samara India Private Limited and assessee were both Private Limited companies, they cannot be treated as company in which public are substantially interested. In view of his aforesaid observations, the A.O. asked the assessee to show cause as to why the amount of Rs.80,45,000/- received by the assessee from Samara India Private Limited not be treated as deemed dividend under section 2(22)(e) of the Income Tax Act 1961. 5.3. The assessee inter alia, submitted that there was no transaction between M/s. Samara India Private Limited and the assessee company. It was submitted that Shri Rajnish Wadhwan, Director had given loan to M/s. Samara India Private Limited and Samara India Private Limited was directed to issue a cheque by debiting his loan account. The submissions of the assessee were not found acceptable to A.O. The A.O. held that the provisions of section 2(22)(e) were attracted in the present case. He accordingly made addition of Rs.85,45,000/- as deemed dividend under section 2(22)(e) of the Income Tax Act 1961. 5.4. Aggrieved by the order of the A.O. assessee carried the matter before the Ld. CIT(A). Before the Ld. CIT(A) it was inter alia submitted that the assessee had not paid but on the contrary it had received the sum from shareholder/director during the relevant year and, therefore, the provisions of section 2(22)(e) were not triggered. It was further submitted that Shri Rajnish Wadhwan also had an outstanding loan receivable from M/s. Samara India Private Limited, out of which the said sums were received by the assessee as loan from Shri Rajnish Wadhwan. ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 9 5.5. After considering the submissions of the assessee, the details and documents including the bank statement and ledger account of the loan balances in the books of the assessee as well as the related company, CIT(A) has given a finding that though the transfer of funds was between the companies, but the transaction was carried-out under the instructions of Director Shri Rajnish Wadhwan through his outstanding loan account maintained in both the companies. He has further given a finding that M/s. Samara India Private Limited had transferred the funds on behalf of and under the directions of Shri Rajnish Wadhwan debiting his loan account and the assessee had received the same as loan on account of Shri Rajnish Wadhwan which was credited in his name. He has, thereafter, given a finding that the transaction involved was not really in the nature of loan from M/s. Samara India Private Limited to the assessee, but, it was a loan transaction between Shri Rajnish Wadhwan and the assessee. He, thus, held that the provisions of Section 2(22)(e) of the Income Tax Act 1961 in the aforesaid circumstances does not apply and accordingly directed deletion of the addition. 6. Aggrieved by the order of the Ld. CIT(A), the Revenue is now before us. 7 Before us the Ld. D.R. took us through the findings of the A.O. and supported the order of A.O. 8. The Learned A.R, on the other hand reiterated the submissions made before the A.O. and the Ld. CIT(A) and supported the order of the Ld. CIT(A). He further pointed to the copy of the loan account in the name of Shri Rajnish Wadhwan appearing in the books of M/s. Samara India Private Limited and the loan account of Shri Rajnish Wadhwan appearing in the books of the assessee. He, thereafter pointed to the transfer of funds between the aforesaid accounts. He thereafter submitted that the transaction was between Shri Rajnish Wadhwan and the assessee and therefore the provisions of s. 2(22)(e) were not attracted. He, thus, supported the order of the Ld. CIT(A). 9. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the deletion of addition of the deemed dividend made by the A.O. under section 2(22)(e) of the Income Tax Act 1961. The A.O. had made addition under section 2(22)(e) of the I.T. Act, 1961 on account of the loan received by the assessee from M/s. Samara India Private Limited. ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 10 The Ld. CIT(A) after considering the submissions of the assessee, the bank account, the ledger account of the loan balances in the books of the assessee as well as the related company, has given a finding that the transaction involved was not in the nature of loan from M/s. Samara India Private Limited to assessee, but, rather it was a loan transaction between Shri Rajnish Wadhwan and the assessee wherein the funds were transferred on his direction from his loan account with M/s. Samara India Private Limited to the assessee company and, therefore, the provisions of section 2(22)(e) of the Income Tax Act, 1961 are not applicable. Before us no fallacy in the findings of the Ld. CIT(A) has been pointed out by the Revenue. In such circumstances, we find no reason to interfere with the order of the Ld. CIT(A) and thus, Ground No.1 of Revenue is dismissed. 13. We have given a thoughtful consideration to the entire facts of the case and submissions/contentions/arguments of both parties and are of the considered view that this issue is squarely covered by the decision of the coordinate bench of Tribunal in the assessee’s own cases in ITA No.6470/Del/2018. We therefore, following the reasoning given by the coordinate bench of Tribunal in the assessee’s own cases in ITA No.6470/Del/2018, decline to interfere with the finding of the Ld. CIT(A) on this score. 14. The next issue is in respect of the disallowance of interest of Rs.1,37,12,880/-. The Ld. Sr DR, reiterating the finding of the AO argued the case vehemently. 15. On the other hand, the Ld. Counsel contended that this issue was squarely covered by the decision of the Tribunal in assessee’s own case in the ITA No.6470/Del/2018. Hence, he prayed for dismissal of appeal on this score. ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 11 16. We have heard both parties and have perused the material available on the record. We find merit in the arguments of the Ld. Counsel. The facts of this issue are quite similar to that of the AY 2014-15. The difference is in the quantum of interest. We are of the considered view that this issue is squarely covered by the decision of the Tribunal in assessee’s own case in the ITA No.6470/Del/2018. The relevant part of the decision is as under: “20. Ground No.4 is with respect to deletion of addition of Rs.1,39,05,693/- being interest expenses. 20.1. During the course of assessment proceedings, the A.O. noticed that assessee had claimed interest of Rs.1,39,05,693/- as bank interest and Rs.98,87,190/- as other interest. He also noticed that assessee had advanced money to different parties for booking or purchases of properties and balances of these advances outstanding as on 31st March 2014 were Rs.7,41,53,685/-. The assessee was asked to prove the nexus between the borrowings for which financing charges were paid and the business activities carried out by it. 20.2. The assessee inter-alia, submitted that the assessee had paid interest amounting to Rs.93,74,077/- on loan taken from M/s. Samara Auto Max Private Limited and Rs.1,44,16,341/- on the overdraft loan taken from Punjab and Sind Bank. It was further submitted that the loan from M/s. Samara Auto Max Private Limited was taken for purchase of shop at Vasant Kunj Mahal and the overdraft facility from Punjab and Sind Bank was taken against the security on fixed deposit. It was further submitted that the loan was for the purpose of business. The submissions of the assessee were not found acceptable to A.O. The A.O. noted that the assessee had utilized the aggregate loan amounting to Rs.14.53 crores for giving advance for purchase of shops, for which, no possession has been received by assessee till date. He noted that since assessee was in the business of renting out of property and no rent has been generated out of these properties for which capital advance has been given, therefore, the interest payment amounting to Rs.1,39,05,693/- as revenue expenditure cannot be allowed as it was capital in nature. The A.O. accordingly disallowed the interest of Rs.1,39,05,693/-. 20.3. Aggrieved by the order of the A.O. the ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 12 assessee carried the matter in appeal before the Ld. CIT(A) who deleted the addition. 21. Aggrieved by the order of the Ld. CIT(A) the Revenue is now in appeal. 22. Before us the Ld. D.R. supported the order of the A.O. 23. On the other hand, the Learned A.R. reiterated the submissions made before the A.O. and the Ld. CIT(A) and supported the order of the Ld. CIT(A). 24. We have considered the rival submissions and perused the material on record. The issue in the present ground is with respect to the disallowance of interest expenses holding it to be capital in nature. We find that Ld. CIT(A) while deleting the addition has given a finding that the business of the assessee is in trading in real estate and renting the properties since 1996 and the funds obtained through overdraft as working capital or through unsecured loan was deployed for the purpose of business and extending the advances for booking of property's was in the line of its business activity and that mere non- recognition of rental income cannot be the basis for allowing expenditure when the utilisation of fund is established for business purposes. He further noted that on identical facts in assessee's own case for the A.Y. 2012-13, the Ld. CIT(A) had deleted the addition. He noted that since there are no change no change in the facts and circumstances of the case as compared to A.Y. 2012-13, he, following the order of his predecessor for the A.Y. 2012-13 deleted the addition made by the A.O. Before us no fallacy in the findings of CIT(A) has been pointed out by the Revenue. In such a situation we find no reason to interfere with the order of CIT(A). Thus, Ground No.4 of the Revenue is dismissed.” 17. We have given a thoughtful consideration to the entire facts of the case and submissions/contentions/arguments of both parties and are of the considered view that this issue is squarely covered by the decision of the coordinate bench of Tribunal in the assessee’s own cases in ITA No.6470/Del/2018. We therefore, following the reasoning given by the ITA No. 2057 & 2694/Del/2023 VSF Realtor Pvt. Ltd. 13 coordinate bench of Tribunal in the assessee’s own cases in ITA No.6470/Del/2018, decline to interfere with the finding of the Ld. CIT(A) on this score. 18. The issue of Loan of Rs.2,20,000/- from Mr. Avinash Wadhawan, in view of the finding of the Ld. CIT(A), does not require any interference particularly in the specific finding of the Ld. CIT(A) in the assessee’s case of the AY 2014-15. Hence, this ground of the Revenue also fails. 19. In the result, the appeal of the Revenue is dismissed as above. 20. To sum up, the assessee’s appeal is allowed for statistical purpose and the appeal of the Revenue is dismissed as above. Order pronounced in open Court on 29th April, 2025 Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29th/04/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(Appeals) 5. CIT-DR ASSISTANT REGISTRAR ITAT, NEW DELHI "