DEPUTY COMMISSIONER OF INCOME TAX - CENTRAL CIRCLE-1(2), CHENNAI, CHENNAI V. JACARANDA PROPERTIES PRIVATE LIMITED, CHENNAI

ITA 3337/CHNY/2024

AI Insights

The case involves an appeal by the Department of Income Tax against M/s Jacaranda Properties Private Limited concerning the Assessment Year 2014-15. The dispute arose from the assessment order under section 147 of the Income Tax Act, where the Assessing Officer reduced the WIP account of the assessee by the amounts paid to two entities acting as POA holders for land transactions, due to their non-existence and non-filing of income tax returns. The CIT(A) reversed this reduction, leading to the Department's appeal. The Tribunal upheld the CIT(A)'s decision, emphasizing the legality and proper documentation of the transactions in the sale deeds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314255 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM LD.
• Assessee Lawyers: SANJEEV ADITYA LD
• Keywords: Set aside
• Section: 147

Judgement Text

" आयकर अपीलीय अिधकरण “बी” ा यपीठ चे\u0012ई म\u0015। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI मा ननीय \u0018ी एबी टी. वक , ा ियक सद एवं मा ननीय \u0018ी मनोज क ुमा र अ$वा ल ,लेखा सद क े सम&। BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं ./ ITA No.3337/Chny/2024 (िनधा 'रण वष' / Assessment Year: 2014-15) DCIT Central Circle -1(2), Chennai. बना म/ Vs. M/s Jacaranda Properties Private Limited 12, South Mada Street, Srinagar Colony, Saidapet, Chennai-600 015. \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No. AADCJ-1448-H (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओर से/ Appellant by : Ms. Gouthami Manivasagam (JCIT) – Ld. Sr. DR थ की ओर से/Respondent by : Mr. Sanjeev Aditya (CA) – Ld. AR सुनवाई की तारीख/Date of Hearing : 05-05-2025 घोषणा की तारीख /Date of Pronouncement : 05-05-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by department for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 22-10-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 147 of the Act on 31-03-2023. The grounds taken by the revenue are as under: - 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld. CIT(A) erred in appreciating the fact that during the assessment proceedings, the Assessing officer made thorough verification about the existence of both M/s. Gayathri Infrastructure and Developers & M/s. 2 Venkateshwara Developers and ascertained that both the entities were found to be non-existing. 3. The Ld. CIT(A) erred in recognizing the fact that despite having huge receipts viz Rs.1,79,82,560/- paid to M/s. Gayathri Infrastructure and Developers & Rs.1,38,50,560/- paid to M/s. Venukateshwara Developers, both the entities did not file their return of income inter alia also the bank accounts to which the said payments had been made were closed after some time. 4. The Ld. CIT(A) erred in recognizing the fact that during appellate proceedings, the assessee could not provide any corroborative evidence in support of the existence of the both the said companies and also could not justify the reason behind closure of the bank accounts after receiving the sale transaction payments. 5. For these grounds and any other grounds including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld.CIT(A) may be set aside and that of the Assessing Officer be restored. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. 2. During assessment proceedings, it transpired that the assessee reflected work-in-progress (WIP) for Rs.50.53 Crores which represented various properties under development. The same include payment of Rs.179.82 Lacs to M/s Gayathri Infrastructure and Developers and another payment of Rs.138.50 Lacs to M/s Venkateshwara Developers. These two entities acted as Power of Attorney (POA) agents of sellers who sold their respective lands to the assessee. However, both the entities had not filed their return of income and Ld. AO held that these two entities were not existing. Accordingly, the WIP was reduced to the extent of aggregate payment of Rs.318.32 Lacs as paid to these entities. 3. During first appeal, the assessee, inter-alia, contended that the payments were made to these entities in the course of purchase of land as they were power of attorney holders of the land owners. Further, the payments were through banking channel and proper KYC documents were obtained before making these payments. Therefore, no such reduction could have been made by Ld. AO. 3 4. The Ld. CIT(A), after perusal of sale deeds, rendered factual findings that the payments to the two entities was made as Power of Attorney holders of the sellers. These payments were appearing in the respective sale deeds as tabulated in para 6.3.1 of the impugned order. The impugned payments to the sellers as well as to both these entities was duly documented in the sale deeds which clearly outline the sale consideration. The split in consideration between the landlords and the POA holders was transparent and legally recorded providing clear evidence of the transaction. There was no evidence that POA holders were paid more than what was specified in the sale deeds nor was there any evidence suggesting that the payments were made for purposes other than the land purchase. The absence of such evidences weakens the justification for any downward adjustment to the WIP account based on these payments. The Ld. AO made adjustment solely on the ground that the POA holders could not be traced and they had not filed their income tax returns. However, this reasoning would not invalidate the payments made for the land which were properly documented in the sale deeds. The fact that the POA holders were not traceable or non-filer would not change the legal validity of the transaction. Accordingly, aforesaid reduction was reversed against which the revenue is in further appeal before us. 5. From the facts, it clearly emerges that both the payee entities have acted as POA holders for landlords who have sold their land to the assessee. The transactions are well documented with various sale deeds and the impugned payments are in line with these sale deeds. The sale consideration has duly been split in the respective sale deeds between POA holders and the landlords and the payments have accordingly been 4 made by the assessee through banking channels. There is no evidence that POA holders were paid more than what was specified in the sale deeds nor was there any evidence suggesting that the payments were made for purposes other than the land purchase. The Ld. AO has made adjustment solely on the ground that the POA holders could not be traced and they had not filed their income tax returns. However, both these reasons do not invalidate the payments made for the land which were properly documented in the sale deeds. This fact would not change the legal validity of the transaction and assessee could not be denied its legitimate claim. Therefore, the impugned reduction of WIP has rightly been reversed by Ld. CIT(A). We order so. 6. The appeal stands dismissed. Order pronounced on 05th May, 2025. Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) ा ियक सद /JUDICIAL MEMBER लेखा सद / ACCOUNTANT MEMBER चे1ई Chennai; िदनांक Dated : 05-05-2025 DS आदेश की Eितिलिप अ$ेिषत / Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु:/CIT Madurai/Chennai/Coimbatore 4. िवभागीय ितिनिध/DR 5. गाड?फाईल/GF "