M/s Samrudhi Developers , Bangalore V. The Assistant Commissioner of Income Tax Circle-6(2)(1), Bangalore

ITA 2272/BANG/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0101 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 30-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASAN
• Section: 143(1); 143(2); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2272/BANG/2018 ASSESSMENT YEAR : 2013 14 M/S SAMRUDHI DEVELOPERS, #29, 2 ND FLOOR, 1 ST MAIN, 3 RD STAGE, 3 RD BLOCK, BASAVESWARANAGAR, BENGALURU-560 079. PAN ABUFS 5031 J VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-6(2)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI V SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI KANNAN NARAYANAN, JCIT DATE OF HEARING : 08-07-2021 DATE OF PRONOUNCEMENT : 23-07-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 20/06/2018 PASSED BY THE LD.CIT(A)-6, BANGALO RE FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING GROUNDS OF APP EAL: PAGE 2 OF 9 ITA NO.2272/BANG/2018 PAGE 3 OF 9 ITA NO.2272/BANG/2018 BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A FIRM HAVING INCOME FROM BUSINE SS. IT FILED ITS RETURN OF INCOME ON 28/09/2013 DECLARING TOTAL INCOME OF RS.3,47,10,000/-. THE RETURN WAS PROCESSED UNDER SE CTION 143(1) OF THE ACT AND THE CASE WAS SELECTED FOR SCRUTINY. NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO ASSESSEE, I N RESPONSE TO WHICH REPRESENTATIVE OF ASSESSEE APPEARED BEFORE TH E LD.AO AND CALLED REQUISITE DETAILS. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E LD.AO OBSERVED THAT ASSESSEE DEBITED SUM OF RS.4,38,21,78 4/- TO THE P&L ACCOUNT BY WAY OF PURCHASE OF LAND. THE LD.AO TREATED THE LAND PURCHASED AS STOCK IN TRADE AND THE CASH PURCH ASES INCURRED AMOUNTING TO RS.1,41,03,750/- AS NOT ALLOW ABLE UNDER SECTION 40(A)(3) OF THE ACT. THE LD.AO OBSERVED THA T, THE PAYMENTS WERE MADE IN THE NAME OF LAUGHTER YOGA ITE RNATIONAL FOUNDATION, AND NOT IN THE NAME OF THE VENDORS. 2.2 THE LD.AO CALLED UPON ASSESSEE TO EXPLAIN WHY T HE CASH PAYMENT AND CHECKED PAYMENT MADE IN THE NAME OF LAU GHTER YOGA FOUNDATION SHOULD NOT BE DISALLOWED. IN RESPON SE THE ASSESSEE SUBMITTED THAT, IT ACTED AS AGENTS OF SOCI ETY FOR ACQUISITION OF LAND AND THE AMOUNTS PAID BY THE SOC IETY WERE USED TO DEFRAY THE EXPENSES IN CONNECTION WITH THE PURCHASE OF LAND AND ULTIMATELY THE PROFIT THAT IS DERIVED BY A SSESSEE IS NOTHING BUT COMMISSION FOR AGENCY. THE ASSESSEE SUB MITTED THAT INSTEAD OF REFLECTING THE INCOME ALONE, THEY RESORT ED TO SHOW THE GROSS RECEIPTS AND EXPENSES RELATING TO THE PROJECT IN THE PROFIT AND LOSS ACCOUNT. PAGE 4 OF 9 ITA NO.2272/BANG/2018 2.3 THE LD.AO AFTER GOING THROUGH THE MOU ENTERED B ETWEEN THE ASSESSEE AND SOCIETY, CAME TO THE CONCLUSION TH AT ASSESSEE IS NOT ACTING AS AGENT OF ASSESSEE, PURCHASED THE LAND AND SOLD IT TO THE ASSESSEE. HE THUS MADE ADDITION IN THE HANDS OF ASSESSEE UNDER SECTION 40(A)(3) AMOUNTING TO RS.1,41,03,750/ -. 2.4 AGGRIEVED BY THE ORDER PASSED BY THE LD.AO ASSE SSEE PREFERRED APPEAL BEFORE THE LD.CIT(A). 3. THE LD.CIT(A) WAS OF THE OPINION THAT, ASSESSEE IS IN THE BUSINESS OF REAL ESTATE AND HAS AGREED TO SELL SITE S TO THE SOCIETY. THE LD.CIT(A) WAS OF THE OPINION THAT SINCE ASSESSE E AGREED TO SELL SITES TO THE SOCIETY, IT HAD TO ACQUIRE LANDS, DEVELOP IT INTO SITES, AND SELL THE SITES TO THE SOCIETY. THUS THE LD.CIT(A) ALSO CONCLUDED THAT ASSESSEE IS NOT AN AGENT OF THE SOCI ETY, AND IT IS A CONTRACT BETWEEN ONE PRINCIPAL AND ANOTHER PRINCIPL E. THE LD.CIT(A) UPHELD THE ADDITION MADE BY THE LD.AO. 3.1 AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE I S IN APPEAL BEFORE US NOW. 3.2 BEFORE US, THE LD.COUNSEL SUBMITTED THAT, ASSES SEE IS A DEVELOPER AND AGREED TO SELL RESIDENTIAL SITES TO SOCIETY FOR WHICH IT ACQUIRED LANDS. FOR PURPOSE OF ACQUISITION IT M ADE PAYMENT OF RS.1,41,03,750/- BY CASH TO THE PARTIES, WHICH IS D ISALLOWED BY THE LD. AO UNDER SECTION 40(A)(3) OF THE ACT. 3.3 THE LD.COUNSEL SUBMITTED THAT, ASSESSEE HAS ALS O MADE PAYMENT IN CHEQUE TO THE SAID PARTIES, WHICH HAS BE EN ENCAPSULATED IN THE ASSESSMENT ORDER AT PAGE 2. THE AGREEMENTS ENTERED INTO WITH PARTIES HAVE BEEN REGISTERED AND STAMP DUTY HAS BEEN PAID AS PER THE MARKET VALUE. PAGE 5 OF 9 ITA NO.2272/BANG/2018 3.4 HE SUBMITTED THAT IN THE PAPER BOOK AT PAGE 10- 81 THE AGREEMENTS PERTAINING TO PURCHASE OF THE LAND FROM THE RELEVANT PARTIES ARE PLACED ALONG WITH THE LEDGER ACCOUNT WH EREIN THE PAYMENT PAID TO VARIOUS VENDORS ARE MENTIONED AS PE R THE BOOKS OF ACCOUNT OF ASSESSEE. THE LD.COUNSEL SUBMITTED TH AT, FEW OWNERS ARE MINORS AND HAS BEEN REPRESENTED BY THE L EGAL GUARDIANS. IT IS SUBMITTED THAT AT THE INSTANCE OF THE VENDORS, WHO DID NOT HAVE ANY BANK ACCOUNTS, THE PAYMENT WER E MADE IN CASH. HE ALSO SUBMITTED THAT SUCH CASH PAYMENTS HA S NOT BEEN DENIED BY ASSESSEE AND HAS BEEN DULY RECORDED IN TH E BOOKS OF ACCOUNT. HE FURTHER SUBMITTED THAT IT IS NOT THE CA SE OF THE REVENUE THAT THESE ARE BOGUS TRANSACTIONS ENTERED I NTO BETWEEN ASSESSEE AND THE VENDORS. 4. ON THE CONTRARY, LD.SR.DR RELIED ON THE ORDERS P ASSED BY THE LD.CIT(A). HE ALSO PLACED RELIANCE ON THE DECIS ION OF HONBLE KARNATAKA HIGH COURT IN CASE OF NAM ESTATES PVT LTD VS ITU REPORTED IN (2020) 428 ITR 186 THAT UPHELD THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL REPORTED IN (2013) 141 ITD 659 . HE SUBMITTED THAT ASSESSEE HAS NOT ESTABLISHED THA T THE VENDORS TO WHOM CASH PAYMENTS WERE NOT MADE, DO NOT HAVE AN Y BANK ACCOUNTS. 5. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN LIGHT OF RECORDS PLACED BEFORE US. 5.1 THE ONLY ISSUE RAISED BY ASSESSEE IS IN RESPECT OF THE DISALLOWANCE OF CASH PAYMENT MADE BY ASSESSEE TO VA RIOUS VENDORS FOR PURCHASE OF LAND, UNDER SECTION 40 (A) (3) OF THE ACT. 5.2 WE NOTE THAT, THE AGREEMENTS ARE ENTERED WITH T HE ASSESSEE THROUGH THE POWER OF ATTORNEY HOLDERS. AMONGST THE VENDORS PAGE 6 OF 9 ITA NO.2272/BANG/2018 THERE ARE FEW WHO ARE MINORS, WHO ARE REPRESENTED B Y THEIR NATURAL GUARDIANS. FOLLOWING ARE THE REASONS CITED BY ASSESSEE FOR WHICH THE CASH PAYMENTS HAVE BEEN MADE: 5.3 THE NECESSITY SHOWN BY ASSESSEE TO MAKE THE PAY MENT IN CASH IS THAT, THE VENDORS INSISTED AT THE LAST MOM ENT IN CERTAIN PAGE 7 OF 9 ITA NO.2272/BANG/2018 CASES. IT IS ALSO NOTED THAT THE SAID MONIES PAID I N CASH TO VARIOUS VENDORS ARE OUT OF DRAWINGS MADE FROM BANK ACCOUNTS AND THEREFORE EXIGENCY IN MAKING THE SUCH PAYMENT I N CASH CANNOT BE SUSPECTED. 5.4 IN CASE OF AN CIT VS NAM ESTATES PVT. LTD ., RELIED BY THE LD.SR.DR, WE NOTE THAT THE REASON FOR WHICH THE CAS H PAYMENTS WERE MADE THEREIN BY THE ASSESSEE WAS FOUND TO BE I NCORRECT. IN THE PRESENT FACTS OF THE CASE THE REASON FOR MAKING THE PAYMENTS IN CASH TO CERTAIN VENDORS BY THE ASSESSEE HAS NOT BEEN FOUND TO BE INCORRECT BY ANY OF THE AUTHORITIES BELOW. THERE IS NO IOTA OF EVIDENCE THAT IS BROUGHT ON RECORD WHICH COULD CAST DOUBT ON THE REASON FOR WHICH THE PAYMENT HAS BEEN MADE IN CASH BY ASSESSEE. FURTHER IT IS ALSO NOT THE CASE OF LD. AO THAT, THE TRANSACTION ENTERED INTO BETWEEN ASSESSEE AND THE V ENDORS TOWARDS PURCHASE OF THE LAND IS BOGUS. ADMITTEDLY PAYMENTS MADE BY THE ASSESSEE BY CHEQUE HAS BEEN ACCEPTED BY THE LD. AO. 5.5 THE LD.COUNSEL RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF M.K.AGROTECH PVT.LTD., REPORTED IN 412 ITR 315. HONBLE COURT THEREIN OBSERVED THAT, ONCE THE PAYEE ADMITS THE ACCEPTANCE OF THE MONIES IN CASH AND HAS BEEN C REDITED INTO THEIR RESPECTIVE ACCOUNTS THE OBJECT WITH WHICH SEC TION 40(A)(3) WAS PROMULGATED STANDS SATISFIED. WE NOTE THAT IN T HE PRESENT FACTS OF THE CASE THE MONIES RECEIVED IN CASH HAS B EEN RECORDED IN THE AGREEMENTS ENTERED INTO BETWEEN THE ASSESSEE AND VARIOUS VENDORS. THERE IS NO DENIAL OF HAVING RECEIVED THE MONIES IN CASH BY THE VENDORS AND THEREFORE IN THE PRESENT FACTS O F THE CASE THE OBSERVATIONS OF HONBLE KARNATAKA HIGH COURT IN CASE OF MK PAGE 8 OF 9 ITA NO.2272/BANG/2018 AGROTECH (SUPRA) W OULD APPLY AS AGAINST THE DECISION RELIED BY THE LD.SR.DR. 5.6 THEREFORE WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN BY THE LD.CIT(A) AND THE SAME IS REVERSED. ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE STANDS A LLOWED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2021 SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 23 RD JULY, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 9 OF 9 ITA NO.2272/BANG/2018 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -07-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -07-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -07-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -07-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -07-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -07-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -07-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS