DCIT CC 7(3), Mumbai V. M/S GREEN VALLEY RALTORS , Mumbai

ITA 2158/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8400 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 07-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Search and seizure; Accommodation entries
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘G‘ BENCH MUMBAI BEFORE: SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.2158/Mum/2019 (Asse ssment Year :2013-14) DCIT-CC-7(3) Room No.655, 6 th Floor Aayakar Bhavan M.K.Road, Mumbai – 400 020 Vs. M/s. Green Valley Realtors Shop No.6,7 & 8, Royal Palace, Plot No.11 Sector-2, Kharghar Navi Mumbai - 410210 PAN/GIR No.AAJFG9206E (Appellant) .. (Respondent) Assessee by Shri Rushabh Mehta Revenue by Shri Hoshang B. Irani Date of Hearing 02/08/2022 Date of Pronouncement 11/08/2022 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.2158/Mum/2019 for A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-437/2016-17 dated 01/01/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/03/2016 by the ld. Dy. Commissioner of Income Tax, Central Circle7(3), Mumbai (hereinafter referred to as ld. AO). ITA No.2158/Mum/2019 M/s. Green Valley Realtors 2 2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition of Rs 2,77,74,485/- made u/s 68 of the Act in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of construction and development of real estate projects in residential and commercial premises since February 2010. The assessee during the year under consideration has developed 2 projects namely Feather and Metropolis both in Navi Mumbai. In order to meet the immediate financial requirements for the purpose of the completion of the projects within the particular time frame, the assessee approached many investors / lenders and the following parties agreed to invest funds in the projects of the assessee after due negotiations:- a) M/s Sumukh Commercial Pvt Ltd b) M/s Casper Enterprises Pvt Ltd c) M/s Vanguard Jewels Ltd d) M/s Ansh Merchandise Pvt Ltd 3.1. An understanding was entered into with the investors by the assessee wherein the investors provided authority to the assessee to sell the flats / area secured by them to the outsiders and it was agreed to allocate the profits (sale price minus fixed booking price of the investor) arrived on sale to the account of the investors. During the year under consideration, various flats were sold to the outside customers and accordingly, the assessee had credited the account of the respective investors by Rs 2,77,74,485/- for receiving money from the sale of various flats in excess of fixed booking price as under:- a) M/s Sumukh Commercial Pvt Ltd Rs.31,63,923 b) M/s Casper Enterprises Pvt Ltd Rs.69,45,145 ITA No.2158/Mum/2019 M/s. Green Valley Realtors 3 c) M/s Vanguard Jewels Ltd Rs.57,21,751 d) M/s Ansh Merchandise Pvt Ltd Rs.1,19,43,666 TOTAL Rs.2,77,74,485 3.2. A search and seizure action was carried out u/s 132(1) of the Act in the premises of Shri Pravin Kumar Jain on 1.10.2013, wherein it transpired that he was engaged in providing accommodation entries in the form of share capital/share premium , unsecured loans etc through various entities controlled by him. The ld. AO observed that the aforesaid investor companies were controlled by Shri Pravin Kumar Jain and accordingly the ld. AO sought to examine the veracity of amounts lying to the credit of the aforesaid investors in the books of the assessee. The ld. AO concluded that the amounts lying in the liability in the names of aforesaid investors are fictitious and the same cease to exist and made an addition of Rs 2,77,74,485/- as suppressed profit of the assessee. The ld. AO while making this addition had heavily relied on the original statement recorded from Shri Pravin Kumar Jain during his search proceedings, though the said statement has been retracted subsequently by him. The ld. AO had also observed that the assessee had failed to discharge its onus to establish the genuineness and creditworthiness of the aforesaid investors and that the same is not in the form of accommodation entries. The addition made by the ld. AO was deleted by the ld. CIT(A). Aggrieved, the revenue is in appeal before us. 3.3. It is not in dispute that the assessee had booked the portion of fixed booking price as its income for the year under consideration. The assessee has entered into Memorandum of Understanding (MOU) on 15.9.2010 with the aforesaid investors to record the terms and conditions defining the rights/liabilities/obligations/payment tenure etc of the deal, wherein the investors agreed to finance the projects by appropriating, securing specified area in the aforesaid project at a specified booking ITA No.2158/Mum/2019 M/s. Green Valley Realtors 4 price prevailing at the time of investment. As per the terms of MOU, the assessee received funds from the above investors during earlier assessment years which were utilized to meet the cost of construction of the projects. Hence it could be safely concluded that the monies credited to the accounts of the aforesaid investors in excess of agreed booking price, cannot be construed as a simple loan so as to invoke the provisions of section 68 of the Act in the instant case. Merely because the assessee could sell the flats at a price in excess of the fixed booking price of investors, it does not mean that the said excess money need not be paid to the investors by the assessee. The assessee is duty bound to pay back the said monies to the investors. In our considered opinion, they are completely a commercial transaction purely with business understanding to pass over the profits of the investors and hence the investors account is credited in the books of the assessee. The genuineness of the entire transactions have been proved beyond doubt in the instant case and how the profits had even flown to the investors and assessee are even established. The assessee had provided satisfactory explanation for the entire transactions with regard to the amounts credited in its books in the name of investors together with supporting documentary evidences. Apart from this, the assessee had provided confirmation from the investors, copy of their PAN, copy of ITR acknowledgements of investors, their audited financial results for the year ended 31.3.2013 and copy of MOU entered with the parties, before the ld. AO. We find that the ld. AO in page 5 of his order states that investors did not have right to sell the flats. This is factually incorrect as the investors had given authority to the assessee to sell the flats to the outside customers which is evident from the terms and conditions provided in MOU, which fact has been taken due cognizance by the ld. CIT(A). ITA No.2158/Mum/2019 M/s. Green Valley Realtors 5 3.4. We find that the ld. CIT(A) had duly appreciated the entire contentions of the assessee and the commercial understanding entered into by the assessee with the investors. The ld. CIT(A) had also duly appreciated the manner in which the excess profits figure attributable to the investors have been arrived at. The same could be understood better from the following table:- Sr No Name of the Investor Fixed Booking Price (A) Profit Amount (Opening Balance) Profit Amount (During the Year) Total Profit Amount (B) Amount received against the sales consideration (A+B) 1 M/s. Vanguard Jewels Ltd. 1,68,04,146 56,21,199 57,21,751 1,13,42,950 2,81,47,096 2 M/s. Sumukh Commercial Pvt. Ltd 78,94,849 12,97,957 31,63,923 44,61,880 1,23,56,728 3 M/s. Casper Enterprises Pvt. Ltd. 3,82,01,888 19,59,255 69,45,145 89,04,400 4,71,06,288 4 M/s. Ansh Merchandise Pvt. Ltd. 4,20,26,644 46,07,630 1,19,43,666 1,65,51,296 5,85,77,940 Total 10,49,27,527 1,34,86,041 2,77,74,485 4,12,60,526 14,61,88,052 3.5. We find that the profits figure credited to the account of the investors is sought to be added by the ld. AO as unexplained cash credit u/s 68 of the Act. We have already held hereinabove that the assessee had duly proved all the three necessary ingredients of section 68 of the Act in the instant case by proving the identity of investors, creditworthiness of investors and genuineness of transactions. Infact we also hold that the provisions of section 68 of the Act per se could not be made applicable to the instant case as the ld. AO had approached the entire issue treating ITA No.2158/Mum/2019 M/s. Green Valley Realtors 6 the transactions as simplicitor loan transaction. Actually it is a commercial business transaction carried out by the assessee with the investors on profit sharing basis pursuant to MOU. Infact the genuineness of MOU dated 15.9.2010 is not at all doubted by the revenue. However, the assessee, having credited the accounts of the investors towards their profit share, has to prove the fact as to whether the said profits were passed on to the investors in subsequent years. This aspect requires factual verification by the ld. AO. The assessee is directed to produce necessary evidences in this regard before the ld. AO. Accordingly, the issue in dispute before us is set aside to the file of ld. AO to make verification of the payment of profits back to the investors in subsequent years. This would be crucial as it testifies the sanctity of the actual understanding of the parties in the MOU. Accordingly, the ground raised by the revenue is allowed for statistical purposes. 4. In the result, the appeal of the revenue is allowed for statistical purposes. Order pronounced on 11/08/2022 by way of proper mentioning in the notice board. Sd/- (VIKAS AWASTHY) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 11/08/2022 KARUNA, sr.ps ITA No.2158/Mum/2019 M/s. Green Valley Realtors 7 Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary / Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//