AI Insights
The case involves cross appeals by M/s. Saptarshi Realtors Pvt. Ltd. and the Income Tax Officer against the order of the National Faceless Appeal Centre (NFAC), which pertained to the assessment year 2013-14. The primary issues revolved around the additions made under section 68 of the Income Tax Act, 1961, concerning unexplained cash deposits and unsecured loans. The AO had made substantial additions citing lack of evidence and explanations from the assessee, which were partly overturned by the CIT(A) but contested by both parties in their respective appeals to the Tribunal. The Tribunal's decision focused on the adequacy of evidence provided by the assessee to substantiate the transactions in question.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 301242 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-03-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
28-02-2023
Assessment Year
2013-2014
Appeal Filed On
29-12-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “G”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER ITA No.3291/M/2022 Assessment Year: 2013-14 M/s. Saptarshi Realtors Pvt. Ltd., 5, Kamar Mansion, 40-45A, Nanabhai Paralkar Marg, Parel Village, Mumbai – 400 012 PAN: AAQCS1735B Vs. Income Tax Officer, Ward 8(1)(3), Mumbai (Now assessed with Income Tax Officer, Ward 8(1)(1), Mumbai] Room No.662, 6 th Floor, Aaykar Bhavan, M.K. Road, Mumbai – 400 020 (Appellant) (Respondent) ITA No.3293/M/2022 Assessment Year: 2013-14 Income Tax Officer- 8(1)(1), Room No.651, 6 th Floor, Aayakar Bhawan, M.K. Road, Mumbai – 400 020 Vs. M/s. Saptarshi Realtors Pvt. Ltd., 5, Kamar Mansion, 40-45A, Nanabhai Paralkar Marg, Parel Village, Mumbai – 400 012 PAN: AAQCS1735B (Appellant) (Respondent) Present for: Assessee by : None Revenue by : Shri Dharmvir D. Yadav, D.R. Date of Hearing : 01 . 03 . 2023 Date of Pronouncement : 31 . 03 . 2023 ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 2 O R D E R Per : Kuldip Singh, Judicial Member: Aforesaid cross appeals filed by the appellants M/s. Saptarshi Realtors Pvt. Ltd. (hereinafter referred to as ‘the assessee’) and the Income Tax Officer, Ward 8(1)(1), Mumbai (hereinafter referred to as ‘the Revenue’) emanated from impugned order dated 04.11.2022 passed by National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)]. 2. The assessee and the Revenue by filing aforesaid cross appeals sought to set aside the impugned order dated 04.11.2022 on the grounds inter-alia that: “Grounds of assessee (ITA No.3291/M/2022) “1. On the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in confirming the addition of Rs.1,25,01,969/- made by the Ld. AO on account of alleged unexplained cash deposits. Your appellant, therefore, prays that the aforesaid addition of Rs.1,25,01,969/- be deleted.” Grounds of Revenue (ITA No.3293/M/2022) “1) Whether on the facts and in circumstances of case and in the law the Ld. CIT (A) erred in deleting the unsecured loans. 2) Whether on the facts and in circumstances of case and in the law the Ld. CIT(A) erred in deleting the unsecured loans specially so when the AO clearly mentioned in the Remand report that the identity genuineness and creditworthiness were not established by the Ld. CIT(A) erred in entirely deleting the unsecured loans in so far as not restricting the loans of 9 related parties in view of the fact that in Remand proceedings the AO stated that many of the lenders have not furnished the Return of Income and have immediate cash deposit immediately preceding the loan transaction. 3) Whether on the facts and in circumstances of case and in the law the Ld. CIT(A) erred in deleting the unsecured loans and not restricting the same to the lenders who were not having sufficient creditworthiness ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 3 and not appreciating facts in remand report in so far as not appreciating the fact that the lenders of highly any means will not deposit cash to give loan to the builder and such transactions are beyond the scope of preponderance of probability. 4. Whether facts and the circumstances the Ld. CIT(A) erred in deleting the addition of Rs.74,39,883/- on account of being 25% of total advances of Rs. 2,97,59,530/- received by the assessee. 5) On the basis of facts and in circumstances of case the Ld. CIT(A) erred in deleting the advance taken by the assessee specially so when the assessee failed to prove the nature and genuineness of the transaction during the assessment proceedings and no remand report was called for in respect of this issue and in absence of any contrary findings regarding genuineness and nature of advances taken by the assessee, the Ld. CIT(A) erred in entirely deleting the addition.” 3. Briefly stated facts necessary for consideration and adjudication of the issues for A.Y. 2013-14 at hand are : the assessee company is into the business of builders and developers. Assessee’s return of income filed for the year under consideration declaring total income of (-) Rs.7,07,929/- was subjected to scrutiny. During the scrutiny proceedings it was noticed that the assessee has taken unsecured loan of Rs.1,97,62,025/-, cash deposit of Rs.1,25,01,969/- and received advance booking of flats at Rs.2,97,59,530/-, qua which the assessee was called upon to furnish the details and supporting evidences. However, the assessee has not furnished details/confirmation/supporting evidence of the same. Since the assessee has not furnished any details, evidences and explanation the Assessing Officer (AO) proceeded to make addition of Rs.1,97,62,025/- claimed by the assessee as unsecured loan, under section 68 of the Income Tax Act, 1961 (for short ‘the Act’). 4. The AO also made addition of Rs.1,25,01,969/- under section 68 being the time deposit and cash deposit in the cooperative credit society. The AO also made addition of Rs.1,01,21,400/- being ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 4 unexplained cash credit deposited by the assessee into the IDBI Bank on failure of the asessee to file the details/evidences and thereby framed the assessment under section 143(3) of the Act. The AO also made addition of Rs.74,39,883/- under section 68 of the Act being the credit made in the books of account in the name of advance booking on failure of the assessee to file the necessary details and explanation for depositing of such amount in the books of account and thereby framed the assessment. 5. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the appeal filed by the assessee. Feeling aggrieved with the impugned orders passed by the Ld. CIT(A) the assessee and the Revenue have come up before the Tribunal by way of filing present cross appeals. 6. The assessee has not preferred to put in appearance to contest the present cross appeals despite the fact that notices issued were through Registered Post with Acknowledge Due (RPAD) at the given address but not received back served/unserved. Since a period of 30 days has already elapsed assessee is presumed to have been served but not preferred to come present. So the Bench has decided to dispose of these cross appeals on the basis of material available on record with the assistance of the Ld. D.R. for the Revenue. 7. We have heard the Ld. D.R. for the Revenue, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and case law relied upon. ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 5 Ground No.1 of assessee’s appeal bearing ITA No.3291/M/2011 for A.Y. 2013-14 7. The AO has made addition to the tune of Rs.1,25,01,969/- (Rs.23,77,500 + Rs.1,01,21,400) in respect of cash deposit/time deposit by the assessee in its cooperative credit society and IDBI Bank account during the year under consideration under section 68 of the Act. The addition made by the AO has been confirmed by the Ld. CIT(A) by returning following findings: “ 8.2 Finding on Ground of Appeal No.3 a) AO has made addition of Rs.1,25,01,969/- in respect of Cash Deposits/Time Deposits made by Appellant of Rs.23,77,500/- in Cooperative Credit Societies and Rs.1,01,21,400/- in IDBI Bank u/s 68 of Act. b) Onus is on the Appellant to prove the three ingredients i.e. • Identity of Depositor • Creditworthiness • Genuineness of Transaction c) Appellant has made a general statement that these Cash Deposits were received from 122 people who had advanced these sums towards booking of Flats/shops. Source of same was explained to be from their past savings. Such a general statement does not discharge the onus cast on Appellant to prove the above three ingredients in respect of Cash deposits. d) Appellant had to give the name, address, PAN, amount received from the persons from whom this cash was received alongwith a confirmation of the same from the said depositors. The question of the source of cash in their hands comes much later. e) These facts show that the Identity of Depositors, Creditworthiness of Depositors and genuineness of transactions is not proved in respect of this transaction so the AO was right in adding the same u/s 68 of the Act. The Appellant was unable to discharge the onus cast on Appellant. The explanation offered by the Appellant in this regard is not found to be satisfactory. f) In para 6.6 of the assessment order, the AO has clearly stated that Appellant was specifically asked to furnish the confirmation for the said Cash deposits but Appellant failed to furnish the confirmation. ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 6 g) The judgment relied upon by Appellant is not acceptable in the present case as in that case the withdrawal of cash from Bank account in 2013 was held to be available with the assessee to be redeposited/utilized at a later date. h) In case the amount was received in Cash against booking of flat/shop there should have been an execution of an agreement for sale of flat/shop but no such agreement was filed by the Appellant either before AO or the undersigned. Reliance is placed on judgment of Hon'ble P&H High Court reported in 179 taxmann.141. i) In view of the above facts the addition made by the AO of Rs.1,25,01,969/- u/s 68 in respect of Cash deposits is sustainable and is hereby upheld and confirmed. Ground of Appeal No. 3 is dismissed.” 8. When the assessee has not given the detail viz. name, address and PAN of the person from whom the cash in question was received along with confirmation neither before the AO nor before the Ld. CIT(A) nor the assessee has come up before the Tribunal to furnish any such detail, the identity and creditworthiness of the depositor has not been proved nor the genuineness of the transaction is proved as required under section 68 of the Act, we find no illegality or perversity in the impugned findings returned by the Ld. CIT(A). So ground No.1 raised by the assessee in its appeal is hereby dismissed. Ground No.1, 2 & 3 of Revenue’s appeal bearing ITA No.3293/M/2022 for A.Y. 2013-14 9. On failure of the assessee to furnish any detail qua unsecured loan of Rs.19,762,025/- despite issuing numerous notices, the AO made addition thereof under section 68 of the Act being the unexplained credit. However, the Ld. CIT(A) after entertaining additional evidence deleted the addition made by the AO under section 68 of the Act. ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 7 10. Undisputedly during the year under consideration the assessee has claimed to have taken unsecured loan to the tune of Rs.19,762,025/- (Ld. CIT(A) stated that loan amount is wrongly calculated and the exact amount comes to Rs.92,86,843/-) detailed as under: Sr. No. Names Amount 1. Deepak Rajaram Mhatre 20,74,120 2. Gurunath Sahdev Natekar 4,01,068 3. Jayashree Shinde 5,16,799 4. Priyanka Sarjerao 2,50,835 5. Sachin Ramrao Pawar 10,13,747 6. Sarjerao Gaikwad 18,41,747 7. ShailaVardekar 16,24,825 8. Smita Sachin Pawar 10,18,349 9. Vivek Thorat 5,45,575 1,97,62,025 11. It is also not in dispute that before the Ld. CIT(A) the assessee has brought additional evidence to which remand report was called from the AO who has objected to in entertaining the additional evidence as the assessee has not filed complete details before the AO during remand proceedings. In all the cases the AO raised the common objections that except for transactions of providing unsecured loans to the assessee there is no transaction in the account of the assessee nor they have any source of income. Even they have not filed return of income and as such genuineness of the transaction has not been proved. In case of all the 9 creditors the AO has duly thrashed the facts by observing that except the transactions in question with the assessee no other transaction is there nor any source of income of the assessee has come on record nor any bank statement has been filed and that when the assessee has failed to prove the regular source of income of the lenders so as to prove their creditworthiness, genuineness of the transaction has ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 8 also not been proved. It is categorically mentioned by the AO in case of Sarlerao Gaikwad who claimed to have lent an amount of Rs.18,41,525/- and has given confirmation, ledger and xerox copy of the PAN, all the transactions are made in cash and no other source of income of the lender has been proved, thus failed to prove the genuineness of the transaction. 12. In case of Shalla Vardekar who stated to have lent an amount of Rs.16,24,825/- to the assessee has also failed to prove any source of income. The AO noticed from the bank statement that an amount of Rs.4,00,000/- was paid to the assessee on 22.08.2012 and there was a corresponding cash deposit of Rs.4,00,000/- in financial year 2011-12 and opening balance for the year under consideration was merely Rs.4,36,898/-. So ultimately the AO drawn the conclusion that since the assessee has failed to bring on record any documentary evidence to support the creditworthiness of the lenders which is evident from the bank statement which does not reflect all the loans and lenders have not been filing any regular income tax return nor it is case of the assessee that the lenders are into the business of money lending, the genuineness of the transactions and creditworthiness of the lenders remained unproved on the file. 13. Undisputedly, the assessee has availed of the unsecured loan of Rs.1,97,62,025/- (however, the AO has wrongly written the total as Rs.1,97,62,025/- which actually is Rs.92,86,843/-) from the nine individuals detailed as under: Sr. No. Names Amount 1. Deepak Rajaram Mhatre 20,74,120 ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 9 2. GurunathSahdevNatekar 4,01,068 3. Jayashree Shinde 5, 16,799 4. Priyanka Sarjerao 2,50,835 5. SachinRamrao Pawar 10,13,747 6. Sarjerao Gaikwad 18,41,747 7. ShailaVardekar 16,24,825 8. SmitaSachin Pawar 10,18,349 9 Vivek. Thorat 5,45,575 1,97,62,025 14. However, without discussing the remand reports the Ld. CIT(A) deleted the addition by returning following findings: “7.8 In view of the facts and respectfully following the judgments as outlined in the preceding paras, it is hereby held that Appellant has discharged the onus cast on it in proving the identity, creditworthiness and genuineness of transaction in respect of loans taken from the above mentioned 9 lenders. Therefore, the addition made u/s 68 of Rs.92,86,843/- for Unsecured loans taken from these nine lenders is not sustainable and is hereby deleted. In para 6.1(d) of this order, it has been held that AO has made wrong addition of Rs.1,04,75,182/- on basis of wrong calculation/addition u/s 68 of Act and same deserves to be deleted.” 15. We have perused the impugned findings returned by the Ld. CIT(A) deleting the addition of Rs.92,86,843/- made by the AO under section 68 of the Act but the same are not sustainable in the eyes of law for the reason inter-alia that the assessee has failed to prove the creditworthiness and genuineness of the transactions of the creditors as they have found to be not having any source of income nor they are found to be money lenders nor they were filing any regular return of income. It is settled principle of law that when apparent was not real then the taxing authorities are entitled to look into the surrounding circumstances to find out the reality of such transactions by invoking the principle of “preponderance of ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 10 probabilities” as held by Honorable Apex Court in the case of CIT versus Durgaprasad More 82 ITR 540. 16. No doubt the assessee has brought on record PAN, bank statement, ledger account of the lender etc. but in the given circumstances their creditworthiness has not been proved by the assessee when specifically called upon by the AO to prove as required under section 68 of the Act. Merely because of the fact that transaction is through banking channel does not absolve the assessee to prove the creditworthiness of the lenders. Financials of any of the creditors have not been brought on record. 17. We are of the further considered view that when such transactions are surrounded by unexplainable facts and suspicious circumstances the onus is on the assessee to explain and to dispel all the suspicious circumstances which the assessee has miserably failed to prove. 18. No doubt income of the lending entities is not the requirement of the law or they should have sufficient balance in their account to lend the loan. But we are of the considered view that when transactions themselves are surrounded by unexplainable and suspicious circumstances, income of the lending parties and their business profile do become a requirement to be explained by the assessee. 19. Moreover, no income or meager income of the lender itself speaks volume of the creditworthiness of the lenders which is the requirement of section 68 to prove. So in these circumstances, we are of the considered view that when the assessee has failed to ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 11 discharge the onus by proving genuineness of the transactions and creditworthiness of the creditors as required under section 68 of the Act, the impugned deletion made by the Ld. CIT(A) is not sustainable, hence deletion made by the Ld. CIT(A) of Rs.92,86,843/- is set aside and addition made by the AO is restored. So grounds No.1, 2 & 3 of Revenue’s appeal are allowed. Grounds No.4 & 5 of Revenue’s appeal 20. The Ld. CIT(A) deleted the addition of Rs.74,39,883/- being estimated addition @ 25% of the advance booking receipt on shops/flats by the AO under section 68 of the Act by returning following findings: “ 9.2 Finding on Ground of Appeal No.4 a) AO has made addition u/s 68 of Rs.74,39,883/- being 25% of Advance Booking amount received of Rs.2,97,59,530/- received from various people as Advances for booking flat/shop in the project of Appellant in a Village near Panvel, Distt. Raigad. b) Addition u/s 68 can be made only if the following three ingredients are not satisfied. • Identity • Creditworthiness • Genuineness of Transaction. The AO has not called for these details from Appellant. AO asked the Appellant to furnish certificate of completion of project as on 31.03.2013. Appellant was asked to show cause as to why 25% of Advance booking amount be not taxed in his hands. No submission was filed by Appellant. As a result the AO made addition on estimate @25% of Advance Booking to tune of Rs.74,39,883/- u/s 68 of Act. AO has to call for the confirmation of the persons who had made advance booking in such flats/shops and in absence of documentary evidences can make addition u/s 68 in those cases only where the above three ingredients are not satisfied. Addition u/s 68 cannot be made on estimate basis. It can only be made in respect of specific transactions where these three ingredients are not satisfied. However, firstly, an opportunity has to be given to Appellant to discharge the onus to prove the genuineness of these Advances. In the present case the AO called for the certificate of completion of project as on 31.03.2013 and in case ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 12 of non compliance of Appellant to produce the same the AO made the said estimated addition u/s 68 of Act. These facts show that the addition made by the AO u/s 68 on estimate basis is not sustainable in the eyes of law. OME TAX DEPART c) These advances were received in Cash/cheque. As per note No. 4 attached to Balance Sheet under the head 'Trade Payable' it is clear that 122 persons and Employees/ Members of Coop. Credit Societies advanced a sum of Rs. 2,97,59,530/- towards Advance booking of flats/shops in the Low Cost Housing project of Appellant. The list showing name and amount received as Advance towards booking of flats is mentioned in Note No. 4 under 'Trade Payable and is listed in Balance Sheet. Out of these an amount of Rs.1,01,21,400/- was received in Cash from a group of 122 persons. As discussed earlier the AO has added this cash amount of Rs.1,01,21,400/- deposited by Appellant in his bank account u/s 68 of Act from these Advances received on booking of flats. AO has again made an estimated addition @25% of these Advances received of Rs.2,97,59,530/- totaling of Rs.74,39,883/-. The above facts clearly show that the AO has made double addition from the Advances received for booking of Flats/shops as under: • Addition of Rs.1,25,01,969/- u/s 68 on account of cash received as Advance for booking of flats/shops and deposited in its bank account u/s 68 of Act. • Estimated addition @25% out of Total Advances received on booking of flats/shops to tune of Rs.74,39,883/-. This double addition made by AO u/s 68 in respect of the same amount i.e. Advances received on booking of flats/shops is not sustainable in the eyes of law. d) The Appellant had started a Low Cost Housing flats to be constructed on a plot of land purchased by Appellant in a village near Panvel, Distt. Raigad. Appellant received this amount of Rs.2,97,59,530/- from various persons as Advance booking of low cost housing flats. At the time of applying for conversion of this land from Agricultural to Residential the Appellant was informed that this plot is reserved for a Project called Virar Alibag Corridor Project The Sub Divisional Officer acquired this plot of land with other lands through Direct Acquisition vide private negotiation channel. No construction activity can be done in the said plot of land as it is affected by 'Virar Alibag Multipurpose Corridor. The compensation for acquisition of said plot of land by Govt. is pending ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 13 since 2012 till date. Appellant could not start the project and total purchase price paid for this plot of land is blocked and held up. Appellant states that after the receipt of compensation from Govt. the money received as Advances shall be refunded back to these Investors who paid this Advance booking for flats/shops. The above facts show that the said project cannot see the light of day in future and no income can be generated by Appellant from the said plot which has been acquired by Govt. under the 'Virar Alibag Multipurpose Corridor'. The only option available to Appellant is to refund the amounts back to these Investors after the receipt of Compensation from Govt. In view of these facts, the action of AO in making an estimated addition @25% u/s 68 of Act of such Advances received is not sustainable in the eyes of law. 9.3 In view of the facts and discussion as outlined in para 9.2 above, the estimated addition @25% of Advance booking received on shops/flats u/s 68 of Act is not sustainable in the eyes of law and same is hereby deleted. Addition made by AO u/s 68 of Act of Rs.74,39,883/- is hereby deleted. Ground of Appeal No. 4 is allowed.” 21. The assessee being a builder & developer received an amount of Rs.2,97,59,530/- as advance booking of low cost housing flats. It is also not in dispute that at the time of applying for conversion of use of the land in question from agriculture to residential the assessee was informed that sole plot reserved for a project called “Virar Alibag Corridor Project” on which no construction activity can be carried out. In these circumstances the assessee was to refund the advance to the investors. Since the project could not be further carried out due to legal bar the assessee was under legal obligation to refund the amount to the investors after receiving compensation from the government. In these circumstances estimated addition @ 25% of the advance booking received by the assessee by the AO is not sustainable, hence rightly deleted by the Ld. CIT(A). Consequently grounds No.4 & 5 raised by the Revenue are hereby dismissed. ITA No.3291/M/2022 & ITA No.3293/M/2022 M/s. Saptarshi Realtors Pvt. Ltd. 14 22. Resultantly assessee’s appeal is dismissed and Revenue’s appeal is partly allowed. Order pronounced in the open court on 31.03.2023. Sd/- Sd/- (OM PRAKASH KANT) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 31.03.2023. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.
