JOINT COMMISSIONER OF INCOME TAX(OSD), CHENNAI V. M/S SARWESWARA PROMOTERS PVT. LTD., CHENNAI

ITA 26/CHNY/2021

AI Insights

The case revolves around an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) which had deleted an addition of Rs.4 crores made by the Assessing Officer under section 68 of the Income Tax Act, 1961. The addition was initially made on the grounds that the transactions involved were suspicious and constituted unexplained cash credits. The Tribunal examined the transactions related to the purchase of property by Sarweswara Promoters Pvt. Ltd. from Ramaniyam Real Estates (P) Ltd., and found that the payments made were substantiated by receipts and were part of a legitimate business transaction, thus upholding the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135053 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-01-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 04-02-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G. DILIP KUMAR
• Keywords: Unexplained cash credit; Share purchase agreement
• Section: 68

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी जी. मंजुनाथ, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 26/CHNY/2021 िनधाᭅरण वषᭅ/Assessment Year: 2012-13 The JCIT (OSD), Corporate Circle 6(1), Chennai. vs. Sarweswara Promoters Pvt. Ltd., A-3, Lotus Lawns, No.4&5, Kilpauk Garden Road, Chennai – 600 010. PAN: AAJCS 5272N (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri P. Sajit Kumar, JCIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri G. Dilip Kumar Advocate सुनवाई कᳱ तारीख/Date of Hearing : 16.01.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 18.01.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-15, Chennai in ITA No.038/CIT(A)-15/2019-20 dated 21.09.2020. The assessment was framed by the ACIT, Corporate Circle 6(1), Chennai for the 2 ITA No. 26/Chny/2021 assessment year 2012-13 u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 30.12.2019. 2. At the outset, it is noticed that this appeal by Revenue is barred by limitation by 62 days. The Revenue received the impugned appellate order on 06.10.2020 and appeal was to be filed on or before 05.12.2020 but actually it was filed on 05.02.2021 thereby there was a delay of 62 days. The ld.Senior DR stated that this delay is due to pandemic period of Covid 19 and subsequent events and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal. 3. The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the addition made by AO of unexplained cash credit u/s.68 of the Act for an amount of Rs.4 crores admitting 3 ITA No. 26/Chny/2021 fresh claim in violation of Rule 46A of the Income Tax Rules, 1962 without providing opportunity to the AO. 4. We have heard rival contentions and gone through facts and circumstances of the case. Brief facts are that the AO noticed that the assessee company has purchased a property from Ramaniyam Real Estates (P) Ltd., for a sum of Rs.4 crores vide registered document No.2673/2011 dated 05.09.2011 with SRO, Alandur, Chennai, the UDS of land being 2700.62 sq.ft. and the saleable area of office space bearing 10,000 sq.ft. The AO noted that all the payment of Rs.4 crores were made after receipt of equal amount of money by assessee from Ramaniyam Real Estates (P) Ltd. The AO extracted the bank statement of savings bank account maintained with Axis Bank. He noted that the payments were received from the seller and the same was paid again to the seller of the property and hence, according to him, the assessee entered into scam transaction. According to him, the credit received by him is unexplained in term of provisions of section 68 of the Act. Accordingly, he made this addition of Rs.4 crores as unexplained cash credit. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) deleted the addition. Aggrieved, Revenue is in appeal before the Tribunal. 4 ITA No. 26/Chny/2021 5. We have gone through the documents produced before us and case records. We have heard submissions of both the sides. We noted that the CIT(A) has noted the chronology of events including the payments paid by assessee towards advance for purchase of property and amalgamation of Kannappa Realtors (P) Ltd., with Ramaniyam Real Estates (P) Ltd. The relevant chronology reads as under:- Sl. Date / Period Particulars 1 FY 2008-09 Appellant paid Rs. 2,94,00,000 to RREPL towards advance for purchase of property. This payment is duly reflected in the audited balance sheet for YE 31-03-2009. 2 FY 2009-10 RREPL was holding 90% of the shares in Sarweshwara Promoters till the financial year 2008-09. Subsequently in the FY 2009-10, the Appellant had taken over the company Sarweshwara promoters private limited from Ramaniyam Real Estates Private Limited and other Promoters as per share purchase agreement dated 20-04-2009. From FY 2009-10 onwards, S/Sh. Veena Bajaj, Aarti Bajaj, Jagdish Bajaj, Sunil Bajaj and Esha Bajaj are holding 20,000 shares each constituting each holding 20% shares. 2 Year 2010 KKPL filed a Company petition vide CP No. 338/2010 before the Hon'ble High Court of Madras seeking sanction of amalgamation of KRPL with RREPL. Similarly, RKPL also filed a Company petition vide CP No.339/2010 before the Hon'ble High Court of Madras seeking sanction of amalgamation of KKPL With RREPL. 3 21-02-2011 Hon'ble High Court of Madras sanctioned amalgamation of KKPL with RREPL. 5 ITA No. 26/Chny/2021 4 05-09-2011 Sale deed was Registered for transfer of the property "The Lords” from RREPL to the Appellant. 5 From Nov 2010 to Oct, 2011 Payments received from RREPL and paid to KRPL towards purchase of property at “The Lords” at Ekkaduthangal, Guindy, Chennai. Sl.No. Date Amount 1 19-11-2010 25,00,000 2 22-11-2010 25,00,000 3 24-11-2010 25,00,000 4 29-11-2010 25,00,000 5 02-12-2010 25,00,000 6 06/07-12-2010 25,00,000 7 10-12-2010 25,00,000 8 11-05-2011 25,00,000 / 40,00,000 9 17/18-10-2011 24,50,000 Total 2,49,50,000 6 From Nov,2010 to Aug,2011 Appellants received from Rs.3,34,50,000 from RREPL including the amounts mentioned at item no.5 above and rental arrears due to the Appellant from RREPL. RREPL filed a confirmation statement to this effect. 7 From Nov,2010 to Oct, 2011 Appellant paid Rs.4,00,00,000 to KRPL including the amounts mentioned at item no.5 above. We noted that the assessee made entire payment for the purchase of property to Kannappa Realtors (P) Ltd., i.e., the original owner of the property but it was not aware of the amalgamation of Kannappa Realtors (P) Ltd., with that of Ramaniyam Real Estates (P) Ltd. As explained before us by the ld.counsel that there is no cross holding of shares or holding of directorship in the assessee company either 6 ITA No. 26/Chny/2021 by the management of Kannappa Realtors (P) Ltd., or Ramaniyam Real Estates (P) Ltd. We noted that the assessee paid an amount of Rs.2.94 crores to Ramaniyam Real Estates (P) Ltd in financial years 2008-09 and 2009-10 on various dates. The assessee paid a sum of Rs.3,34,50,000/- to Ramaniyam Real Estates (P) Ltd in financial years 2010-11 & 2011-12 including the advance payment of Rs.2.94 crores in financial years 2008-09 & 2009-10. In this way, the assessee made total payment of Rs.4 crores to Kannappa Realtors (P) Ltd., towards purchase of the above property. The assessee made total payment of Rs.4 crores towards purchase of above said property and the source for making these payments includes the receipt of Rs.3,34,50,000/- from Ramaniyam Real Estates (P) Ltd. The sale was duly executed by a Registered Sale Deed on 02.09.2011. In the facts in entirety and the factual position brought out in the above paras based on the material available on record, we are of the view that the assessee has satisfied all the three ingredients such as identity, creditworthiness and genuineness of the creditor. The AO did not rebut the claim of assessee without appreciation of material and other attentive circumstances available on record. The AO made addition without understanding the nature of transaction between the assessee and Ramaniyam Real Estates (P) Ltd., and arrive at a conclusion that sum of Rs.4 crores is 7 ITA No. 26/Chny/2021 unexplained cash credit. After going through the documents and chronology of events and payments made by assessee to Kannappa Realtors (P) Ltd., we are of the view that the amount of Rs.4 crores is not unexplained as held by the AO. Hence, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed. 6. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 18 th January, 2023 at Chennai. Sd/- Sd/- (जी. मंजुनाथ) (G. MANJUNATHA) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 18 th January, 2023 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकरआयुᲦ (अपील)/CIT(A) 4. आयकरआयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.