M/S WADHWA CONSTRUCTION AND INFRASTRUCTION PVT LTD , MUMBAI V. DCIT, CENTRAL CIRCLE 5(4), MUMBAI

ITA 584/MUM/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4854 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 29-03-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Earning of tax free income; Additional evidence; TDS; Rule 8D
• Section: 68; 132; 69C; 143(3); 2(14); 153A; 14A; 40(a)(ia); 133(6); 37(1); 250; 40a(ia); 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM ITA No. 584 & 585/Mum/2022 (Assessment Year 2015-16 & 2016-17) M/s Wadhawa Constructions & Infrastructure Ltd. 301, Platina, Plot C-50, G-Block Bandra Kurla Complex, Bandra (E), Mumbai-400 051 Vs. ACIT Centra l C i rcle 5(4 ) Room No. 1927, 1 st Floo r, Air Ind ia B ldg. Nar im an Point, Mum bai-400 021 ITA No. 631/Mum/2022 (Assessment Year 2015-16) ITA No. 227/Mum/2022 (Assessment Year 2016-17) ITA No. 851/Mum/2022(Assessment Year 2014-15) ACIT Centra l C i rcle 5(4 ) Room No. 1927, 1 st Floo r, Air Ind ia B ldg. Nar im an Point, Mum bai-400 021 Vs. M/s Wadhawa Constructions & Infrastructure Ltd. 301, Platina, Plot C-50, G-Block Bandra Kurla Complex, Bandra (E), Mumbai-400 051 (Appellant) (Respondent) PAN No. AAACW5097J Assessee by : Shri Jitendra Jain, AR Revenue by : Shri Ajay Singh, DR Date of hearing: 05.09.22 Date of pronouncement : 21.09.2022 O R D E R PER PRASHANT MAHARISHI, AM: A.Y. 2015-16 01. ITA No. 584/Mum/2022 is filed by the assessee against Appellate order passed by the Commissioner of Income- tax (Appeals)-53, Mumbai [the learned CIT (A)] dated Page | 2 Wadhwa Construction & Infrastructure Pvt. Ltd 30 th November, 2021 raising following grounds of appeal:- “a) The Commissioner of Income Tax (Appeals) - 53, Mumbai [hereinafter referred to as "CIT(A)"] erred in confirming the addition of Rs.3,68,000/- towards undisclosed income. The Appellant submits that the income has been offered on a percentage of receipt basis under the real income theory and thus the addition made is unjust and deserves to be deleted. b) The CIT (A) erred in not allowing the deduction of selling and administrative expenses as the same as "Period Cost" and such allowable in the year of its incurrence.” 02. ITA No. 631/Mum/2022 is filed by the Asst. Commissioner of Income-tax, 5(4), Mumbai (the learned Assessing Officer) against the same order raising following grounds of appeal:- “(1) Whether the Ld. CITIA) erred in admitting additional evidence under rule 46A despite the fact Whether the repeated opportunities were given to the assessee by the AO and he was not prevented by sufficient cause from producing the evidence as the land is an agricultural land. (2) Whether the Ld. CITA) erred in admitting additional evidences in contravention of the judgment of Hon'ble Delhi high Court in the case of CIT V. Manish Build Well Pvt. Ltd.(2012) 204 TAXMAN 106 that additional evidence can be produced at first Page | 3 Wadhwa Construction & Infrastructure Pvt. Ltd appellate stage only when conditions stipulated in rule 46A are satisfied. (3) Whether the Ld. CIT(A) erred in deleting the addition of Rs. 7,03,96,000/ u/s. 40(a)(ia) on account of Agricultural land on the basis of additional evidence submitted by the assessee without providing opportunity to the Assessing Officer of rebuttal under rule 46A. (4) Whether the Ld. CIT(A) erred in deleting the addition of Rs. 7,03,96,000/ u/s. 40(a)(ia) on account of Agricultural land on the basis of Additional evidence submitted by the assessee without providing opportunity to the Assessing Officer of rebuttal under rule 46A thereby ignoring the reasons mentioned in the assessment order. (5) Whether the Ld. CIT(A) erred in deleting the addition of 7,03,96,000/- u/s. 40(a)(ia) on account of Agricultural land on the basis additional evidence submitted by the assessee without appreciating the finding of Survey of India (Govt. of India) that such parcel of land lying at Vadoli/Bherele Taluka falls within 8 Km of Panvel Municipal Limits and hence not an agricultural land within the meaning of Section 2(1A) of the Income tax Act, 1961. (6) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the assessing officer of Rs. 1,78,55,000/- as unaccounted cash expenditure based on seized digital evidence, on the ground that Page | 4 Wadhwa Construction & Infrastructure Pvt. Ltd the same has been considered by the settlement commission on the case of another entity against the law that the orders of the Settlement Commission are assessee specific and does not give protects to any other entity.” 03. The brief facts of the case show that assessee is engaged in the business of real estate. Assessee filed return of income on 20 th November, 2015 at Rs Nil after setting off brought forward losses of ₹13,89,166/-. Search under Section 132 of the Act was conducted on 16 December 2015. Notice under Section 153A of the Act was issued to the assessee, wherein original return filed was reiterated. 04. During the course of assessment proceedings, the learned Assessing Officer noted that i. Assessee has not deducted tax at source on purchase of land under Section 194IA of the Income-tax Act, 1961 (the Act) amounting to ₹7,03,96,000/- and therefore, it was disallowed under Section 40(a)(ia) of the Act. ii. as per data assessee has incurred expenditure of ₹1,79,55,000/- during the year and therefore, the addition was made under Section 69C of the Act on account of unexplained expenditure. iii. Addition of ₹3,68,000/- was made on account of undisclosed income. Page | 5 Wadhwa Construction & Infrastructure Pvt. Ltd iv. Disallowance under Section 40a(ia) of the Act resulted into lower work in progress for the year but did not have any impact on the returned income of this year. 05. Accordingly, total income was assessed at ₹1,96,44,165/- vide Assessment order dated 29 December 2017 passed under Section 143(3) read with section 153A of the Act. 06. Assessee preferred appeal before learned CIT (A), who i. Deleted the disallowance under Section 40(a)(ia) of the Act for the reasons that there was no tax deductible under Section 194-IA of the Act as the impugned land purchased by assessee is an agricultural land. ii. With respect to the addition of ₹1,78,55,000/- under Section 69C of the Act, he deleted the addition holding that in case of group concerns settlement commission passed an order wherein the on-money as well as expenditure is already included and therefore, no separate addition in the hands of the assessee can be made. Accordingly, he deleted the addition. iii. With respect to the addition of ₹3,68,000/- on account of undisclosed income, he confirmed the addition, he held that the order of settlement commission did not include above sum. Page | 6 Wadhwa Construction & Infrastructure Pvt. Ltd 07. The Revenue is in appeal before us. As per ground no.1- 5 of the appeal, the learned Assessing Officer is aggrieved wherein it has been held by the learned CIT (A) that payment made by the assessee for purchase of land amounting to ₹7,03,96,000/- is not subject to tax deduction at source under Section 194IA and accordingly, the disallowance under Section 40(a)(ia) of the Act was deleted allowing the assessee to increase the work-in- progress during the year. 08. The brief facts in the issue shows that the assessee is constructing residential township at Panvel and acquired agricultural land in the surrounding villages from farmers for its township project at village Bhelre and Bardoli. Admittedly, assessee did not deduct tax at source on purchase of land stating that it is an ‘agricultural land’. Assessee submitted details before learned Assessing Officer stating that the agricultural land purchased is situated in villages which satisfy the criteria of an agricultural land as per provision of Section 2(14) of the Act and therefore, provisions of Section 194-IA of the Act is not applicable. The learned Assessing Officer referred to the data available from the survey of India which provided that the impugned land is situated within 8 K.M. from the local limits of Panvel municipality and therefore, it is not an agricultural land and tax should have been deducted at source on purchase under Section 194-IA of the Act. As the impugned cost of the purchase of land is included in Page | 7 Wadhwa Construction & Infrastructure Pvt. Ltd the work-in progress, the learned Assessing Officer reduced the cost of work-in-progress to be carried forward in the subsequent year by the above amount. Assessee on appeal before the learned CIT (A) was granted the relief. The reason for granting relief is that the learned CIT (A) found that as per Census of 2011, the population of Panvel municipal corporation was only 1,80,020 and therefore, the impugned property is an ‘agricultural land’. Assessee also furnished the letter from sub engineer dated 9 August 2019, stating that the impugned land is situated at a distance of 10 kilometers from the limits of municipal council. The Google Map also shows the distance of more than 12 kilometers. 09. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer, where the learned Authorized Representative supported the order of the learned CIT (A). The learned Authorized Representative referred to the provision of Section 2(14) (iii) for definition of agricultural land stated that even if the area is measured aerially; the impugned land is an agricultural land. He referred to the provision of Section 194-IA of the Act, where agricultural land is excluded from the rigors of TDS. He referred to the explanation (a) to section 194IA , where the agricultural land is defined. Therefore, according to him, the learned CIT (A) has correctly deleted the addition. Page | 8 Wadhwa Construction & Infrastructure Pvt. Ltd 010. We have carefully considered the rival contention and perused the orders of the lower authorities. The learned CIT (A) dealt with the above issue as under:- “5.3 The findings of the AO in the assessment order and the submission made by the appellant have been considered. During the year under consideration, the Appellant has made payment of Rs. 7,03,96,000/- towards purchase of land at Bherle, Vardoli and Bhinegrwadi in Panvel Taluka. The appellant has not deducted TDS considering the land being an agricultural land. On the other hand, the AO has relied upon a letter from Survey of India in which it was stated that the land at Bherle, Vardoli and Bhngerwadi falls within 8 kms of Panvel Municipal limits. Therefore, the AO has held the land as Non agricultural land within the meaning of section 2(1A) of the IT Act. Accordingly, the AO has made disallowance of Rs.7,03,96,000/- u/s 40(a)(ia) of the Act. During the appellate proceedings, the appellant has submitted that as per the last census of 2011, the population of Panvel Municipal Council was 1,80,020, therefore, situated within 6 kms from the limits of Panvel Municipal Council is Non-agricultural land. It is also submitted that the letter of Surveyor of India referred by the AO is a general letter and does not give precise distance of the land in question situated villages at Bherle, Vardoli and Bhingerwadi. Further during the appellant proceeding, the Appellant has filed a letter from Sub-Engineer Raigarh Zilla Parishad Page | 9 Wadhwa Construction & Infrastructure Pvt. Ltd dated 9.08.2019 certifying that Vardoli, Bhingerwadi and Bherle villages are at a distance of 11.90, 10 and 10 kms respectively from the limits of Panvel Municipal Council. The Google Map filed by the Appellant before the assessing officer also shows aerial distance closer to 8 kms whereas the road distance as per Google map is more than 12 kms. Thus, the appellant has finally submitted that the land purchased by it would not fall under definition of capital asset u/s 2(14)(iii)(b)(1) of the IT Act. The appellant has also brought to my notice that out of total land of Rs. 7,03,96,000/-, the land aggregating to Rs. 1,34,00,000/- was purchased by the Appellant from Mr. Navin Makhija, Managing Director of the Group Companies of the Appellant. In the case of Shri Navin Makhija, the AO in the assessment order u/s 153A r.w.s. 143(3) had made addition of capital gain on sale of such as against exempt agricultural land claimed by the assessee. On appeal by the assessee, my predecessor CIT(A) has treated the land as agricultural land and allowed the appeal in case of Shri Navin Makhija by his order dated 04.11.2019 in Appeal No. CIT(A)-53/1T- 484/DCCC 5(4)/2017-18 for A.Y.2015-16. The relevant part of the appellate order is as under:- “5.5. I have considered the submission of the appellant carefully. It is noted that as per the last Census of 2011, the population of Panvel Municipal Council was 1,80,020. Later in 2016 the Municipal Council was upgraded to Panvel Page | 10 Wadhwa Construction & Infrastructure Pvt. Ltd City Municipal Corporation and its population then was 5,09,000. The letter of Survey of India referred to by the assessing officer is general letter and does not give precise distance of the villages Bherle, Vardoli etc. It only states that the same are within 8 kms of the Panvel Municipal limits. In contrast, when asked to, the Appellant has filed a letter from Sub Engineer Raigarh Zilla Parishad dated 9.8 2019 certifying that Vardoli, Bhingerwadi and Bherle of Panvel Taluka are at a distances of 11,90. 10.00, and 10.00 km from the limits of Panvel City Municipal Corporation. A map of Panvel City Municipal Corporation was also issued which has been filed along with Panvel Taluka Map. Google Maps shows the distance by road as about 12 km. The aerial distance of the Google map is closer to 8 kms. By whatever method is adopted, the land in question is more than 6 km from the limits of Panvel City Municipal Corporation. The land in question here is at Bherle. Thus the land at Bherle, Vardoli would not fall under definition of capital asset u/s 2(14) (iii) (b) (ll). Hence ground of appeal no 2 and 3 are allowed." Similar order was passed by My Predecessor in the case of Mr. Navin Makhija for A.Y.2014-15 in appeal no.CIT(A)-53/IT-490/DCC-5(4)/2017-18 order dt. 4.11.2019 and in the case of Mr. Sanjay Chabbaria for A.Y.2014-15 order dt.30.10.2019 in appeal no. CIT(A)-53/IT-572/DCCC-5(4)/2017-18. Page | 11 Wadhwa Construction & Infrastructure Pvt. Ltd All the argument, which have been made by the appellant in the present appeal, were also made before the CIT(A) in the case of Shri Navin Makhija (supra). After considering all those argument, the then CIT(A) has decided the case of Shri Navin Makhija in his favour after considering the land under question as the agricultural land. Thus respectfully following the order of my precedent CIT(A) in the case of Shri Navin Makhija (supra) for A.Y. 2014-15 and AY 2015-16, the land purchased by the appellant situated at village Bherle, Vardoli and Bhingerwadi is held as the agricultural and TDS provision u/s 194IA of the Act is not applicable in the case of the Appellant. Therefore, the disallowance of Rs. 7,03,96,000/- u/s 40(a)(ia) of the Act made by the AO is deleted. Accordingly, grounds of appeal no.2 and 3 are allowed.” 011. According to the provisions of Section 194IA any transferee person responsible for paying to a transferor resident any sum by way of a consideration for transfer of any immovable property, other than an agricultural land, shall at the time of credit of such sum to the account of the transferor or at the time of payment, whichever is earlier shall deduct an amount equal to 1% of such sum as income tax thereon. According to this provision, there is no requirement of withholding tax if the impugned transferred property is an agricultural land. According to explanation (a) agricultural land is defined as agricultural Page | 12 Wadhwa Construction & Infrastructure Pvt. Ltd land in India not being a land situated in any area referred to in items (a) and (b) of sub clause (iii) of clause (14) of Section 2. Therefore, to decide which agricultural land is exempted, one has to look at the provisions of Section 2 (14) of the act. According to Section 2 (14) (iii) agricultural land in India does not include land situated in any area within the distance measured a really not been more than 6 km from the local limits of any municipality and which has a population of more than 1 lakh but not exceeding 10 lakh. In the present case, such land is situated beyond 6 km from the local limits of Panvel municipality, which has a population of more than 1 lakh but not exceeding 10 lakhs. Assessee has submitted the aerial distance of the land purchased showing that it is situated at a distance of more than 6 km aerially from limits of Panvel Municipality. A communication was also submitted from Panvel Nagar Parishad. Revenue failed to bring on record any evidence, which proves that the impugned land is not an agricultural land. Therefore, We find that the impugned land is an agricultural land and no tax is required to be deducted on purchase of land under Section 194-IA of the Act. Accordingly, we confirm the order of the learned CIT (A) on this count and dismissed grounds no.1 to 5 of the appeal of the Revenue. 012. Ground no. 6 to 10 of Revenue’s appeal is with respect to the deletion of addition under Section 69C of the Act. 013. The brief facts of the case show that certain data was perused by the learned Assessing Officer, which was Page | 13 Wadhwa Construction & Infrastructure Pvt. Ltd recorded in cloud. There were details of unexplained expenditure with respect to ‘Panvel’ project. It was found that the total expenses of ₹ 1,78,65,000/- and ₹1,79,51,000/- were incurred in F.Ys. 2014-15 and 2015- 16. Therefore, assessee was asked that why the above amount should not be added under Section 69C of the Act. Assessee explained that income of ₹69.112 crores was offered as an additional income pertaining to various project of Wadhwa Group. The details were maintained group as a whole and there were separate data entity wise. On money income offered in case of all group covers above expenditure and therefore, the addition under Section 69C of the Act cannot be made. The learned AO rejected the contention of the assessee and made the above addition. 014. On appeal before ld CIT [A] above addition was deleted based on the order of the settlement commission wherein the expenditure incurred by the assessee considered against the total disclosure made by the group for capitalization. Therefore, the learned CIT (A) deleted the same. 015. The ground no.6-10 of the appeal was argued by the learned Departmental Representative, submits that this expenditure was found to be incurred for the Panvel project and therefore, the same is required to be added in the hands of the assessee. The learned CIT (A) has wrongly granted the relief to the assessee. Page | 14 Wadhwa Construction & Infrastructure Pvt. Ltd 016. The learned Authorized Representative supported the order of the learned Commissioner of Income tax (Appeals). He also referred to the order of settlement commission, wherein the name of the assessee and the impugned expenditure has been considered for capitalization. 017. We have considered the rival contentions and perused the orders of the lower authorities. The learned CIT (A) noted that in the order of settlement commission at Para no.3, the total expenditure of ₹7,36,85,450/- was considered as an application of income against the disclosure made by the group before the settlement commission. The total income offered by the group before settlement commission is ₹61.15 crores on account of on money and therefore, the application of such income was allowed by settlement commission. The above sum was also considered with respect to this assessee. The learned CIT (A) relying upon the order of the settlement commission deleted the addition. In the order of the settlement commission at paragraph number 13 the capitalization was granted to the assessee about the only earned which has been utilized by incurring the expenditure of this company. The fact shows that Wadhwa group Holdings private limited has admitted to certain receipts in the nature of loans as belonging to it. Having so admitted the receipts, that applicant also owns up outgoing in the seized material is being spent by the applicant Wadhwa Group Holdings Pvt Ltd on various projects of different entities of the group which also included the assessee and Page | 15 Wadhwa Construction & Infrastructure Pvt. Ltd same are not in the nature of any tangible asset. In the settlement commission the expenditure incurred with respect to the projects of the assessee of 3,58,06,000 was also considered for capitalization. The settlement commission allowed the same. Therefore, We do not find any infirmity in the order of the learned CIT (A) in deleting the above addition and therefore, ground no.6 to 10 of the appeal is dismissed. 018. In the result, the appeal of the learned Assessing Officer for A.Y. 2015-16 is dismissed. 019. Coming to the appeal of the assessee in ITA No. 584/Mum/2022 wherein the addition of ₹3,68,000/- on account of undisclosed income was confirmed. 020. The fact shows that unaccounted cash receipt of ₹4 lacs found out of which only ₹32,000/- was offered in the return of income. Assessing Officer made the addition to the extent of ₹3,68,000/-. On appeal before the learned CIT (A), the same was confirmed. The learned Authorized Representative submitted that the addition has wrongly made. 021. The learned Departmental Representative supported the order of the lower authorities. 022. We have considered the rival contentions and perused the orders of the lower authorities. The fact shows that during the course of search it was found that Group was maintaining the record of unaccounted cash receipts and payments on a cloud based software i.e. HR Points. The Page | 16 Wadhwa Construction & Infrastructure Pvt. Ltd entries were made in coded language. The data was analyzed and it was found that sum of ₹4 lacs is belonging to the appellant. The assessee has not undertaken sales of any of the project. The learned Assessing Officer found that out of that only 8% of such income has been offered as income, the balance ₹3,68,000/- were added in the hands of the assessee. As in the case of the assessee any expenditure incurred by the assessee were considered before settlement commission and there was no income offered on account of assessee, the learned CIT (A) confirmed the same. We find that as there is no evidence given by the assessee with respect to any income, we do not find any infirmity in the orders of lower authorities in confirming the addition of ₹3,68,000/-. Accordingly, the solitary ground of appeal of the assessee is dismissed. 023. Accordingly, both the appeals of the assessee and learned Assessing Officer for A.Y. 2015-16 are dismissed. A.Y. 2016-17 024. ITA No. 585/Mum/2022 is filed by the assessee for A.Y. 2016-17 against the order of learned CIT (A)-53, Mumbai dated 30 th November 2021. Assessee has raised the solitary ground against confirmation of disallowance of ₹37,02,693/- under Section 37(1) of the Act being interest on late payment of tax deduction at source. 025. The learned Assessing Officer has filed appeal in ITA No.227/Mum/2022 wherein the expenditure of Page | 17 Wadhwa Construction & Infrastructure Pvt. Ltd ₹1,7951,000/- added under Section 69C of the Act is deleted. 026. The fact shows that assessee filed return of income on 30 th November, 2016, declaring loss of ₹30,97,955/-. The return of income culminated in the assessment order under Section 143(3) of the Act dated 29 th December 2017. In the assessment order, additions of ₹1,79,51,000/- was made on account of unexplained expenditure under Section 69C of the Act. This is identical to the expenditure added in A.Y. 2015-16. The learned Assessing Officer further made disallowance of ₹37,02,693/- on account of interest paid on late deposit of tax deducted at source. On appeal before the learned CIT (A), the addition under Section 69C of the Act of ₹1,79,51,000/- was deleted on the identical reasoning given by him for A.Y. 2015-16. The disallowance of interest on late payment of TDS was confirmed. 027. At the time of hearing, the learned authorised representative submitted that assessee does not want to pursue the same. Accordingly, ITA No.585/Mum/2022 is dismissed. 028. Coming to the appeal of the learned Assessing Officer, both the parties confirmed that all the grounds raised therein are identical to ground nos. 6 to 10 in appeal of the learned Assessing Officer for A.Y. 2015-16. 029. On careful consideration, we find that while deciding the appeal of the learned Assessing Officer for A.Y. 2015-16, Page | 18 Wadhwa Construction & Infrastructure Pvt. Ltd we have directed the learned Assessing Officer to delete the addition. As there is no change in the facts and circumstances of the case following our order for A.Y. 2015-16, we confirm the order of the learned CIT (A) and dismissed the appeal of the learned Assessing Officer. 030. Accordingly, both the appeals, of the learned Assessing Officer as well as assessee for A.Y. 2016-17, are dismissed. A.Y. 2014-15 031. ITA No. 851/Mum/2022 is filed by the Asst. Commissioner of Income Tax, Mumbai against the order passed the CIT (A)-53, Mumbai dated 23 rd January, 2022, wherein the assessee has raised following grounds of appeal:- “(1) That the Ld.CIT (A) erred in admitting additional evidences under rule 46A despite the fact that the repeated opportunities were given to the assessee by the AO and he was not prevented by sufficient cause from producing the evidence as the land is an agricultural land. (2) That the Ld. CIT (A) erred in admitting additional evidences in contravention of the judgment of Hon'ble Delhi high Court in the case of CIT v. Manish Build Well Pvt. Ltd. (2012) 204 TAXMAN 106 that additional evidence can be produced at first appellate stage only when conditions stipulated in rule 46 A are satisfied. (3) That the Ld. CIT(A) erred in deleting the addition of Rs. 29,28,23,500/- under Section 40(a)(ia) on Page | 19 Wadhwa Construction & Infrastructure Pvt. Ltd account of Agricultural land on the basis of additional evidence submitted by the assessee without providing opportunity to the Assessing Officer of rebuttal under rule 46A. (4) That the Ld. CIT(A) erred in deleting the addition of Rs. 29,28,23,500/-u/s 40(a)(ia) on account of Agricultural land on the basis of additional evidence submitted by the assessee without providing opportunity to the Assessing Officer of rebuttal under rule 46A thereby ignoring the reasons mentioned in the assessment order. (5) That the Ld. CIT(A) erred in deleting the addition of Rs. 29,28,23,500/- u/s 40(a)(ia) on account of Agricultural land on the basis of additional evidence submitted by the assessee without appreciating the finding of Survey of India (Govt. of India) that such parcel of land lying at Vadoli/Bherele Taluka falls within 8 Km of Panvel Municipal Limits and hence not an agricultural land within the meaning of Section 2(1A) of the Income tax Act, 1961. (6) On the facts and in the circumstances of the case and in law, the Id CIT(A) erred in restricting the disallowance of Rs. 21,08,798/- u/s. 14A to the tune of Rs.65,197/-even when the AO rightly worked out the disallowance u/s 14A as per the rule 8D(ii) of Income tax Rule, 1962. (7) On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in restricting the disallowance u/s. 14A r.w.r 8D to the extent of the Page | 20 Wadhwa Construction & Infrastructure Pvt. Ltd exempt income earned by the assessee during the year under consideration without appreciating the CBDT Circular No. 05/2014 dated 11.02.2014 wherein, it has been clarified that Rule 8D r.w.s. 14A provides for disallowance of expenditure even where the assessee in particular has not earned exempt income. (8) Whether the Ld CIT(A) is justified in deleting the addition of Rs. 21,08,798/- made by the assessing officer u/s 14A r.w. Rule 80D on the basis that the same is not to be applied if no exempt income is earned during the year and neither can it exceed the quantum of exempt income earned during the year, ignoring the clear provisions of the Act and as clarified by the CBDT Circular No. 05/2014 dated 11.02.2014. (9) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition u/s. 68 of Rs.4,00,00,000/- ignoring the fact that the debenture holders- M/s. Silfix Tradelink Private Ltd (STPL) and M/s. Sitram Investment Limited were dummy companies as per finding of Investigation Wing, Kolkata and assessee has also failed to prove the genuineness of transaction in respect of debenture issued amounts to Rs. 4,00,00,000/- to above dummy parties. 10) The Applicant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be.” Page | 21 Wadhwa Construction & Infrastructure Pvt. Ltd 032. The brief fact of the case shows that assessee filed its return of income on 17 th December 2016 declaring nil income. Due to search on 16 th December 2015, notice under Section 153A of the Act was issued on 30 th September 2016. It was found that assessee has purchased land which is not an agricultural land of ₹29,28,23,500/- on which tax was required to be deducted under Section 194-IA of the Act which is not deducted and therefore, the cost of land was not allowed to be capitalized in work-in-progress (WIP). The learned Assessing Officer also found that Assessee Company has made investment in partnership firm and earning exempt income. Therefore, 0.5% of such investment amounting to ₹21,08,798/- which was included in WIP was also reduced. During the year, the assessee has debenture subscription from two companies namely Sitaram Investment Ltd of ₹1.5 crores and from Silfix Trade Link Pvt. Ltd. of ₹2.5 crores. The investigation of Director of Investigation, Kolkata informed that these are merely paper companies and therefore, the addition of ₹4 crores was made under Section 68 of the Act. Accordingly, the total income of the assessee is assessed at ₹ 4 crores as per order passed under Section 143(3) read with section 153A of the Act on 28 th December 2018. 033. Assessee aggrieved with the order of the learned Assessing Officer preferred the appeal before the learned CIT (A). The learned CIT – A decided the issues as Under:- Page | 22 Wadhwa Construction & Infrastructure Pvt. Ltd a. With respect to the non-deduction of tax at source on agricultural land of ₹29,28,23,500/-, it was held that tax was not required to be deducted thereon and therefore, same was allowed to be carried forward in work-in-progress. b. With respect to the disallowance under Section 14A of the Act, it was found that assessee has only earned exempt income of ₹65,197/- whereas the disallowance of expenditure is ₹21,08,798/-, he restricted the disallowance to the exempt income. c. With respect to the debenture investment by the two companies, he obtained the remand report on information submitted by the assessee. The learned Assessing Officer issued notice under Section 133(6) of the Act and the reply was received from both the parties. The learned CIT (A) noted that M/s. Silfix Trade link Private Ltd (STPL) was allotted 250 debentures of ₹1 lac each on 8 th March, 2014 amounting to ₹2.5 crores for the above debentures upfront fees was paid to IIFL Wealth Management Services Ltd. the above debentures were redeemed and interest was paid to F.Y. 2015-16. The interest paid was also subjected to tax deduction at source. The finding of the learned Assessing Officer shows that the return on income filed by the above party has shown the above investments. With respect to M/s. Silfix Tradelink Private Ltd (STPL) 150 debentures of ₹1 lac each were allotted on 25 th Page | 23 Wadhwa Construction & Infrastructure Pvt. Ltd February, 2014 for ₹1.5 crores similarly same were redeemed and interest on debentures was paid after tax deducted at source. From no.26AS of both the parties were also produced which also reflected receipt of interest. In the remand proceedings, the assessee produced all the evidences, which proved the identity and creditworthiness and genuineness of the transaction, and therefore, the addition was deleted. 034. Accordingly, the appeal of the assessee was allowed and hence, the learned Assessing Officer is in appeal before us. 035. Ground nos. 1 to 5 of the appeal is with respect to disallowance under Section 40a(ia) of the Act of ₹29,28,23,500/- and land purchased by the assessee, identical issue arose in the case of the assessee for A.Y. 2016-17 and 2015-16, wherein it has been held that same is an agricultural land and tax is not required to be deducted under Section 194-IA of the Act. There is no change in the facts and circumstances of the case. Therefore, we confirmed the order of the learned CIT (A). Accordingly, these ground nos. 1 to 5, are dismissed. 036. Ground no. 6 to 8 with respect to the disallowance under Section 14A of the Act. The Assessing Officer disallowed ₹21,08,798/- however the learned CIT (A) restricted it to the extent of exempt income earned of ₹65,197/-. No infirmity is pointed out in the order of the learned CIT (A). Based on several judicial precedents, The learned CIT (A) has held that disallowance cannot exceed the exempt Page | 24 Wadhwa Construction & Infrastructure Pvt. Ltd income. Accordingly, we confirm the order of the learned CIT (A) and dismiss the ground no. 6 to 8 of the appeal. 037. Ground no. 9 of the appeal is with respect to the deletion of the addition under Section 68 of the Act of ₹4 crores. We find that two companies have been allotted, the debentures of ₹ 4 crores. The report of the Director of Investigation, Kolkata stated that these are table space companies with no real business and therefore, addition under Section 68 of the Act was made. The assessee submitted that there was a funding arrangement with IIFL Realty Ltd. and India Infoline Finance Ltd. (IIFL) for funding of financial assistance for housing project at Panvel. The trustee to the debentures trust deed was IDBI trusteeship Services Limited. The funding was made by IIFL realty Limited. Based on this, the debentures of ₹4 crores were issued to Sitaram Investment Ltd of ₹1.5 crores and Selfix Trade link Pvt. Ltd. of ₹ 2.5 crores. The debenture was at the coupon rate of 20% per annum payable quarterly. The tenure of the debenture was for 36 months. The debentures were held in Demat account. These debentures were redeemed in 2015. During the course of assessment proceedings, the assessee submitted the requisite bank account, Permanent Account Number, annual accounts and confirmation etc. Sources of fund were stated to be redemption of mutual fund units from income opportunities fund real estate fund. In case of Sitaram Investment Ltd and Silfix Tradelink Private Ltd made investment from Sunlife, the balance sheet of Silfix Tradelink pvt ltd. shown the investment in mutual funds of Page | 25 Wadhwa Construction & Infrastructure Pvt. Ltd 45 crores. Similarly, in case of Sitaram Investment Ltd. had investment in alternative investment fund [ AIF] of ₹ 3 crores. It has investment in tax free bonds of ₹4.64 crores as well as investment in quoted mutual fund of ₹57,10,000/-. The investment in quoted equity such as NTPC, CIPLA is also to the tune of ₹65 lacs. The income of this company is ₹1.53 lac for 31 st March 2014 and ₹1,61,00,000/- for 31 st March 2015. 038. It is further shown that both these companies are registered with RBI as non-banking financial companies in the category of non-deposit taking systemically important companies. Further, the remand report dated 25 th November 2011 are clearly shown that these companies were enquired by the learned Assessing Officer and complete replies are submitted by them. The learned Assessing Officer on receipt of the reply did not have anything adverse to comment. It is also apparent that assessee has proved identity and creditworthiness of the depositor as well as the genuineness of the deposit of money in the form of debentures. In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the addition under Section 68 of the Act of ₹ 4 crores. We confirm the order of the learned CIT (A) and dismissed ground no.9. 039. Accordingly, appeal of the learned Assessing Officer is dismissed. 040. In the result, all the appeals of the assessee as well as learned Assessing Officer are dismissed. Page | 26 Wadhwa Construction & Infrastructure Pvt. Ltd Order pronounced in the open court on 21.09.2022. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 21. 09.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai