The Deputy Commissioner of Income Tax, Central Circle, Panaji., Panaji V. M/s Elegance Properties Pvt. Ltd., Panaji

ITSSA 39/PAN/2016

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2428 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRINIVAS NAYAK
• Keywords: Business income; Business expenditure; Search and seizure; Share purchase agreement; Opportunity of cross examination
• Section: 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER IT (SS) A NO. 3 9/P A N/201 6 (ASST. YEAR : 200 9 - 1 0 ) DCIT, CENTRAL CIRCLE, PANAJI GOA. VS. M/S. ELEGANCE PROPERTIES PVT. LTD., A - 2, FIRST FLOOR, DIVYA ENCLAVE, MIRAMAR, PANAJI GOA. PAN NO. AABCE 6183 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHRINIVAS NAYAK C A. DEPARTMENT BY : SHRI PRASHANT GADEKAR - D R DATE OF HEARING : 0 8 / 0 8 /201 6 . DATE OF PRONOUNCEMENT : 0 8 / 0 8 /201 6 . O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , PANAJI , DATED 26 /0 2 /201 6 . 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING 7 ,00 ,25,000/ - FOR TRANSFER OF SHARES BY SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI TO M/S. INDUJA TRADERS PVT. LTD. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY PAID MR. TAHIR ISHAN & MR. MANSOOR ALI ISANI 3.50 CRORES EACH FOR PURCHASE OF 250 SHARES OF M/S. ELEGANCE PROPERTIES PVT. LTD. BY M/S. INDUJA TRADERS PVT. LTD. WHICH WAS CLAIMED 2 IT(SS)A NO. 39/PAN/2016 AS EXPENDITURE. THERE WAS A M EMORANDUM OF UNDERSTANDING (MOU) DATED 17/11/2007 BETWEEN M/S. ELEGANCE PROPERTIES PVT. LTD . , M/S. UNICORN DEVELOPERS, M/S. INDUJA TRADERS PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. ACCORDING TO WHICH, 10 0 % SHARE HOLDING OF M M/S. ELEGANCE PROPERTIES PVT. LTD. WAS AGREED TO BE SOLD TO M/S. INDUJA TRADERS PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. SH RI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI ALSO ENTERED INTO SHARE PURCHASES AGREEMENT DATED 21/05/2008 WHEREIN THEY AGREED TO S ELL THEIR 250 SHARES EACH OF M/S. ELEGANCE PROPERTIES PVT. LTD. TO M/S.INDUJA TRADERS PVT. LTD. FOR A CONSIDERATION OF 3.50 CR ORES EACH . A S PER THIS AGREEMENT, SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI HAD TO TRANSFER THEIR SHARE IMMEDIATELY ON EXECUTION OF TH IS AGREEMENT AND M/S. INDUJA TRADERS PVT. LTD. HAD TO PAY AGREE D AMOUNT OF 3.50 CRORES EACH ON OR BEFORE 03/12/2008. INFORMATION RECEIVED FROM TH E REGISTRAR OF COMPANIES REVEAL ED THAT SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI TRANSFERRED 250 SHARES EACH OF M/S. ELEGANCE PROPERTIES PVT. LTD. ON 03/05/2008 TO M/S. CONVENTION HOTELS INDIA PVT. LTD. SUBSEQ UENTLY, ON 17/05/2008 M/S. CONVENTION HOTELS INDIA PVT. LTD. SOLD THE ABOVE 500 SHARES TO M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI RECEIVED THE AMOUNT OF 3,50,12,500/ - EACH TOWARDS THE TRANSFER OF SHARES FROM M/S. ELEGANCE PROPERTIES PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. AS UNDER: - NAME OF THE SHAREHOLDER DATE OF PAYMENT AMOUNT PAID BANK/PAID BY MANSOOR V ISANI 10/03/2008 1,00,00,000 VANQUISH ILPL MANSOOR V ISANI 23/04/2008 2,50,12,500 SBI/ELEGANCE TAHIR ISHANI 10/03/2008 1,00,00,000 VANQUISH ILPL TAHIR ISHANI 09/04/2008 2,00,00,000 CBPL/ELEGANCE TAHIR ISHANI 23/04/2008 50,12,500 SBI/ELEGANCE 3 IT(SS)A NO. 39/PAN/2016 MR. PRAKASH KITTUR CONFIRMED THAT SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI WERE PAID THE ABOVE AMOUNTS TOWARDS TRANSFER OF SHARES OF M/S. ELEGANCE PROPERTIES PVT. LTD. WHEN CONFRONTED WITH SHRI TAHIR ISHANI DEPOSED ON 20/05/2010 STATING THAT CONSIDERATION OF 7 CRORES RECEIVED WAS FOR THE TRANSFER OF SHARES OF M/S. ELEGANCE PR OPERTIES PVT. LTD. FURTHER, THE ASSESSING OFF ICER OBSERVED THAT IT IS EVIDENT THAT CONSIDERATION OF 3,50,1 2 ,500/ - EACH WAS PAID TO SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI TOWARDS THE TRANSFER OF SHARES OF M/S. ELEGANCE PROPERTIES PVT. LTD. IT IS NOTICED THAT M/S. ELEGANCE PROPERTIES PVT. LTD. CLAIMED THESE PAYMENTS OF 7,00,25,000/ - AS EXPENDITURE AND ADJUSTED THE SAME IN THE ACCOUNTS OF M/S. INDUJA TRADERS PVT. LTD. MR.PRIYAKANT AMIN WHILE DEPOSING ON 31/05/2010 CLAIMED THAT THE ABOVE PAYMENTS WERE MADE BY M/S. ELEGANCE PROPERTIES PVT. LTD. AT THE INSTANCE OF M/S. INDUJA TRADERS PVT. LTD. ACCORDING TO THE ASSESSING OFFICER , ACTUALLY THE PAYMENTS OF 7,00,25,000/ - WERE MADE BY M/S.EL EGANCE PROPERTIES PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. DURING MARCH TO APRIL 2008. M/S. ELEGANCE PROPERTIES PVT. LTD. INCLUDED THIS AMOUNT OF 7 CRORES IN THE ALLEGED COMPENSATION OF 24,53,50,000/ - . FURTHER, ASSESSING OFFICER OBS ERVED THAT THE AMOUNT OF 3.50 CRORES PAID TO SHRI TAHIR ISHANI , IS SHOWN AS J OURNAL E NTRY IN THE BOOKS OF M/S. INDUJA TRADERS PVT. LTD. THIS ENTRY WAS NECESSITATED BECAUSE THE PAYMENT OF 3.50 CRORES WAS MADE EARLIER DURING MARCH - APRIL 2008 AND M/S. ELEGANCE PROPERTIES PVT. LTD. SOUGHT TO INCLUDE THE SAME IN THE ALLEGED COMPENSATION TO CAMOUFLAGE THAT REAL NATURE OF THE PAYMENT. FURTHER , AS NOTED ABOVE, SHRI MANSOOR ALI ISANI ACTUALLY RECEIVED THE CONSIDERATION OF 3.50 CRORES D URING MARCH - APRIL 2008. BUT AN ATTEMPT WAS MADE TO SHOW AS IF THE PAYMENTS WERE MADE IN NOVEMBER 2008 BY M/S. INDUJA TRADERS PVT. LTD. IN ORDER TO CAMOUFLAGE THE REAL NATURE OF THE PAYMENTS MADE TO SHRI MANSOOR ALI ISANI AND TO MAKE IT BELIEVE THAT M/S. INDUJA TRADERS PVT. LTD. PAID THE SUM OF 3.50 CRORES TO SHRI MANSOOR ALI ISANI IN NOVEMBER, 2008 THE PAYMENTS WERE ROUTED THROUGH BANK ACCOUNTS OF SHRI MANSOOR ALI ISANI, 4 IT(SS)A NO. 39/PAN/2016 M/S. ELEGANCE PROPERTIES PVT. LTD. AND M/S. INDUJA TRADERS PVT. LTD. THE PAYMENTS MADE IN NOVERMBER 2008 CONSTITUTE RING TRANSACTIONS WHEREIN THE SOURCE AND THE FINAL DESTINATION OF THE PAYMENTS OF 3.50 CRORES IS THE SAME AND THERE IS NO ACTUAL PAYMENT MADE TO SHRI MANSOOR ALI ISANI IN NOVEMBER 2008. DATE RECEIPT BY M/S. ELEGANCE PRO PERTIES PVT. LTD. FROM SHRI MANSOOR ALI ISANI PAYMENT BY M/S. ELEGANCE PROPERTIES PVT. LTD. TO M/S. INDUJA TRADERS PVT. LTD PAYMENT BY M/S. INDUJA TRADERS PVT. LTD. TO SHRI MANSOOR ALI ISANI 08/11/2008 5,000,000 5,000,000 5,000,000 08/11/2008 5,000,000 5,000,000 5,000,000 08/11/2008 5,000,000 5,000,000 5,000,000 08/11/2008 5,000,000 5,000,000 5,000,000 08/11/2008 5,000,000 5,000,000 5,000,000 12/11/2008 5,000,000 5,000,000 5,000,000 12/11/2008 5,000,000 5,000,000 5,000,000 TOTAL 35,000,000 35,000,000 35,000,000 IN VIEW OF THE ABOVE, THE ASSESSING OFFICER OBSERVED TH A T IT IS EVIDENT THAT THE PAYMENTS OF 7,00,25,000/ - WERE MADE BY M/S. ELEGANCE PROPERTIES PVT. LTD. TO SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI TOWARDS THE PURCHASE OF SHA RES . M/S. ELEGANCE PROPERTIES PVT. LTD. CANNOT CLAIM THE EXPENDITURE OF 7,00,25,000/ - PAID TO ITS SHAREHOLDERS AS A CONSIDERATION FOR THE TRANSFER OF SHARES TO THIRD PARTIES. THE EXPENDITURE INCURRED FOR THE TRANSFER OF SHARES OF A COMPANY CANNOT BE THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE COMPANY. HE, THEREFORE, DISALLOWED 7,00,25,000/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OBSERVING AS UNDER: - 5.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE WRITTEN AS WELL AS ORAL SUBMISSIONS MADE BY THE AR OF THE APPELLANT. IT IS A FACT THAT M/S INDUJA TRADERS PVT. LTD. ENTERED INTO A SHARE PURCHASE AGREEMENT WITH MR. TAHIR ISANI AND MR. MANSOORALI ISANI SEPARATELY VIDE THE DEEDS EXECUTED ON 03.05.2008. THUS, THE 5 IT(SS)A NO. 39/PAN/2016 SHARES WERE PURCHASED BY M/S INDUJA TRADERS PVT. LTD. FROM THE ISANIS VIDE THE SHARE PURCHASE AGREEMENT WHICH WAS AUTHORIZED BY THE BOARD RESOLUTION OF INDUJA TRADERS PVT. LTD. DATED 25.04.2008. THE PAYMENT FOR PURCHASE OF SHARES HELD BY MR. TAHIR ISANI AND MR. MANSOORALI ISANI WAS MADE BY M/S INDUJA TRADERS PVT. LTD.. THE PAYMENTS MADE TO MR. TAHIR ISANI AND MR.MANSOORALI ISANI HAVE NOT BEEN DEBITED TO THE P & L ACCOUNT OF THE APPELLANT COMPANY. THEREFORE, THE QUESTION OF DISALLOWING THE EXPENDITURE IN THE HANDS OF THE APPELLANT COMPANY IN NORMAL CIRCUMSTANCES DOES NOT ARISE. 5.4. THE BASIC DOUBT, THE AO HAD ON THIS TRANSACTION IS THAT EARLIER PAYMENT WAS MADE BY THE APPELLANT COMPANY TO MR. TAHIR ISANI AND MR. MANSOORALI ISANI AND THEREFORE, THIS EXPENDITURE WAS INCLUDED IN THE COMPENSATION PAID TO M/S INDUJA TRADERS PVT. LTD. WHEN IT IS ESTABLISHED THAT THE PURCHASE OF SHARES FROM ISANIS WAS BY M/S INDUJA TRAD ERS PVT. LTD., WHICH WAS BY MEANS OF SHARE PURCHASE AGREEMENT WHICH IS IN BLACK AND WHITE, IT IS IMMATERIAL HOW THE PAYMENT IS MADE. ASSUMING FOR A MOMENT, THE PAYMENT WAS MADE BY THE APPELLANT COMPANY, SUCH PAYMENT WAS NEVER DEBITED TO THE P & L ACCOUNT. APPELLANT COMPANY COULD HAVE MADE THE PAYMENT TO THE ISANIS AT THE INSTANCE OF M/S INDUJA TRADERS PVT. LTD., WHO HAD INVESTED LOT OF FUNDS IN THE SOLE PROJECT OF THE APPELLANT COMPANY. AS LONG AS THE PAYMENT MADE TO THE ISANIS IS NOT DE B ITED TO P & L ACCOU NT, THE SAME CANNOT BE DISALLOWED AND ADDED AS INCOME OF THE APPELLANT COMPANY. 5.5. AS REGARDS, THE COMPENSATION PAID TO M/S INDUJA TRADERS PVT. LTD. IT IS AS PER THE CANCELLATION AGREEMENT DATED 10.12.2008 WHICH WAS NOTARIZED ON 10.12.2008 AT BANGALORE. IN THE SAID CANCELLATION AGREEMENT, THE AMOUNT OF COMPENSATION OF RS.24,53,50,000/ - HAS BEEN SPECIFIED. THEREFORE, AOS PRESUMPTION THAT HIGHER COMPENSATION WAS PAID TO M/S LNDUJA TRADERS PVT. LTD. TO IN TURN PAY MR. TAHIR ISANI AND MR. MANSOORALI ISANI IS INCORRECT. 5.6. THEREFORE, IN VIEW OF THE FACT THAT THE APPE L LANT COMPANY HAS NOT CLAIMED ANY EXPENDITURE TOWARDS PURCHASE OF SHARES FROM MR.TAHIR LSANI AND MR. MANSOORALI ISANI IN ITS P & L ACCOUNT AND AS THE SHARE PURCHASE BY M/S INDUJA TRADERS PVT. LTD. IS AS PER THE AGREEMENTS WITH THE ISANIS AND AS THE COMPENSATION PAID TO M/S . LNDUJA TRADER PVT. LTD. BY THE APPELLANT COMPANY WAS THROUGH A CANCELLATION AGREEMENT, THE PRESUMPTION MADE BY THE A O IS NOT PROVED AND THEREFORE, THE ADDITION MADE OF RS.7,00,25,000 / - IS HEREBY DELETED. 5. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE AUTHORIZED REPRESENTATIVE OF THE 6 IT(SS)A NO. 39/PAN/2016 ASSESSEE WHILE SUPPORTING THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS) SUBMITTED THAT AS THE SHARES OF THE ASSESSEE COMPANY WERE SOLD BY THE SHAREHOLDERS AND PURCHASED BY SOME THIRD PARTY, THE SAME CANNOT BE CONSIDERED AS THE TRANSACTION OF THE ASSESSEE COMPANY AND DISALLOWANCE CANNOT B E MADE IN THE HANDS OF THE ASSESSEE AS THE ASSESSEE IS UNCONCERN AND UNCONNECTED WITH THE SAID TRANSACTION. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ACQUIRED TWO PLOTS OF LAND SITUATED AT (I) BEARING CHALTA NOS. 2,3 & 4 OF P.T. SHEET NO. 121, SITUATED IN THE WARD OF ST. INEZ WITHIN THE LIMITS OF CORPORATION OF THE CITY OF PANAJI, TALUKA TIS WADI, STATE OF GOA ADMEASURING AS AREA OF 5754 SQ.MTS. , AND ; (II) BEING CHALTA NO. 33 OF P.T. SHEET NO. 130 OF THE CITY SURVEY PANAJI, SITUATED AT ST. INEZ WITHIN THE LIMITS OF CORPORATION OF THE CITY OF PANAJI, TALUKA TISWADI, DISTRICT OF NORTH GOA, ST ATE OF GOA, ADMEASURING 2139 SQ.MTS. KNOWN AS AGOR . THE ASSESSEE COMPANY FOR DEVELOPING THE ABOVE PLOTS OF LAND, ENTERED INTO A MOU WITH M/S. INDUJA TRADERS PVT. LTD. AND M/S. UNICORN DEVELOPERS ON 12/12/2007. HOWEVER, LATER ON , THE ABOVE MOU WAS CANCELLED VIDE AGREEMENT DATED 10/12/2008 . IN PURSUANCE TO THE ABOVE AGREEMENT, THE ASSESSEE WAS REQUIRED TO PAY 24,53,50,000/ - TO M/S. INDUJA TRADERS PVT. LTD. AS COMPENSATION. THE ABOVE COMPENSATION PAYABLE BY THE ASSESSEE WAS ADJU STED WITH 7 CRORES WHICH WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID DURING THE PERIOD 10/03/2008 TO 23/04/2008. THE ASSESSING OFFICER FOUND THAT THE ABOVE PAYMENT OF 7 CRORE S WAS, IN FACT, PAID BY THE ASSESSEE TO ITS SHAREHOLDERS NAMELY SHRI TAHIR ISHANI 3.50 CRORES AND SHRI MANSOOR ALI ISANI 3.50 CRORES. THE ASSESSING OFFICER, THEREFORE, TREATED THE 7 IT(SS)A NO. 39/PAN/2016 ABOVE PAYMENT OF 7 CRORES WAS FOR ACQUISITION OF SHARES AND NOT A PART OF COMPENSATION PAID BY THE ASSESSEE TO M/S. INDUJA TRADERS PVT. LTD. IN THIS VIEW OF THE MATTER, THE DEDUCTION CLAIMED OF 7 CRORES , OUT OF THE TOTAL DEDUCTION CLAIMED OF 24,53,50,000/ - AS COMPENSATION TO M/S. INDUJA TRADERS PVT. LTD. WAS DISALLOWED BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT AMOUNT OF 7 CRORE S WAS PAID TO SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI WAS FOR AND ON BEHALF OF M/S. INDUJA TRADERS PVT. LTD. BY THE ASSESSEE AND THIS PAYMENT WAS ALSO ADJUSTED WITH THE COMPENSATION PAYABLE TO M/S.INDUJA TRADERS PVT. LTD. IN T HIS VIEW OF THE MATTER , THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ABOVE DISALLOWANCE OF 7 CRORES. 7. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT TAKEN INTO CONSIDERATION THE STATEMENT OF MR.PRIYAKANT AMIN WHICH WAS RECORDED BY THE ASSESSING OFFICER UNDER SECTION 131 OF THE ACT ON 31/05/2010. THE DEPARTMENTAL REPRESENTATIVE HAS NOT FILED ANY COPY OF THE STATEMENT OF MR.PRIYAKANT AMIN, BUT SUBMITTED THAT THE RELEVANT PART OF THE STATEMENT S ARE STATED BY THE ASSESSING OFFICER AT PAGE NOS. 6 & 7 OF THE ASSESSMENT ORDER . AFTER GOING THROUGH THE QUESTIONS AND ANSWERS QUOTED BY THE ASSESSING OFFICER IN THE ORD ER OF THE ASSESSMENT, A QUERY WAS PUT TO THE DEPARTMENTAL REPRESENTATIVE THAT HOW THE SAID QUESTIONS AND ANSWERS ARE RELATED TO THE AMOUNT OF 7 CRORES IN QUESTION . THE DEPARTMENTAL REPRESENTATIVE COULD NOT GIVE ANY REPLY. WE FIND NO MATERIAL HAS BEEN B ROUGHT BEFORE US TO SHOW THAT THE ASSESSEE COMPANY A C Q U I R E D ANY SHARES FROM SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI. FURTHER, NO MATERIAL HAS BEEN BROUGHT BEFORE US TO SHOW THAT THE ABOVE AMOUNT PAID BY THE ASSESSEE WAS NOT TREATED BY M/S. INDUJA TRADERS PVT. LTD. AS PART OF THE COMPENSATION PAYABLE BY THE ASSESSEE TO M/S. INDUJA TRADERS PVT. LTD. IN PURSUANCE TO THE CANCELLATION OF THE JOINT DEVELOPMENT AGREEMENT. IN THE ABOVE 8 IT(SS)A NO. 39/PAN/2016 CIRCUMSTANCES , WE DO NOT FIND ANY ERROR IN THE FINDING OF THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED 8 . IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF 17,53,50,000/ - ON ACCOUNT OF DISALLOWANCE OF PAYMENTS MADE TO M/S. INDUJA TRADERS PVT. LTD. 9 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED THAT IT HAS MADE PAYMENT OF 24,53,50,000/ - TO M/S. INDUJA TRADERS PVT. LTD. THE PAYMENTS ARE SPREAD OVER TWO FINANCIAL YEARS FROM 19/03/2008 TO 12/11/2008. THE ASSESSEE PAID 21,03,50,000/ - TO M/S. INDUJA TRADERS PVT. LTD. AND THE PAYMENT OF 3.50 CRORES TO SHRI TAHIR ISHANI WAS ADJUSTED TO GENERAL ENTRY. FU RTHER 3.50 CRORES WAS CLAIMED TO BE PAID TO SHRI MANSOOR ALI ISANI ON 08/11/2008 TO 12/11/2008 IS ONLY ACCOMMODATION ENTRY AND A RING TRANSACTION WHERE SOURCE AND DESTINATION OF THE AMOUNT OF 3.50 CRORES IS THE SAME. HENCE, PAYMENTS OF 7 CRORES MADE TO SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI FOR THE PURPOSE OF SHARE ARE EXCLUDED FROM THE ALLEGED COMPENSATION OF 24,53,50,000/ - . HENCE, IT IS HELD THAT NET PAYMENTS OF 17,53,50,000/ - WERE MADE TO M/S. INDUJA TRADERS PVT. LTD. THE DETAILS OF THE PAYMENTS MADE THROUGH CENTURION BANK OF PUNJAB ACCOUNT OF THE ASSESSEE ARE AS UNDER: - DATE RECEIPT PAYMENT 19/03/2008 30,000,000 24/03/2008 30,000,000 24/03/2008 2,000,000 22/05/2008 24,500,000 04/05/2008 15,000,000 25/06/2008 6,250,000 30/06/2008 1,000,000 28/07/2008 15,000,000 30/07/2008 25,000,000 04/08/2008 23,600,000 9 IT(SS)A NO. 39/PAN/2016 12/08/2008 10,000,000 20/08/2008 9,500,000 07/10/2008 2,500,000 TOTAL NET TOTAL 9,500,000 18,48,50,000 17,53,50,000 THE ASSESSING OFFICER OBSERVED THAT THE ISSUE OF THE BALANCE PAYMENT OF 17,53,50,000/ - IS THAT AN AGREEMENT DATED 12/12/2007 WAS BETWEEN M/S. UNICORN DEVELOPERS, M/S. INDUJA TRADERS PVT. LTD. AND M/S.ELEGANCE PROPERTIES PVT. LTD. ACCORDING TO WHICH, M/S. INDUJA TRADERS PVT. LTD. AGREED TO UNDERTAKE TO COORDINATE WITH THE REQUIRED AGENCIES AND PLANNING AUTHORITIES FOR UNDERTAKING THE C - 1 ZONING OF THE SAID PROPERTY. FURTHER, M/S. INDUJA TRADERS PVT. LTD. AGREED TO ENHANCE THE SALEABLE AREA OF THE PROPERTY AS WELL AS DEVELOP COMMERCIAL HOTEL PROJECT, MAKE AND PROVIDE NECESSARY FINANCES / INVESTMENTS AS REQUIRED. THE HOTEL PROJECT WOULD BE CONSTRUCTED JOINTLY BY ALL THE PARTIES AS APPROVED BY THE CONCERNED AUTHORITIES WITH SUCH MODIFICATIONS THERETO THAT BE MADE AND WHICH WOULD BE SUBJECT TO THE APPROVAL OF THE CONCERNED AUTHORITIES . FURTHER, M/S. INDUJA TRADERS PVT. LTD. SHALL JOINTLY REPRESENT UNDERTAKE TO MAKE AVAILABLE THE NECESSARY PERMISSIONS, APPROVALS, SANCTIONS REQUIRED FOR THE DEVELOPMENT OF THE SAID PROPERTY FROM ALL THE CONCERNED AUTHORITIES AND SHALL ALSO BE REQUIRED TO PAY THE NECESSARY CHAR GES, PREMIUMS, HARDSHIPS, LEVIES, ASSESSMENT CHARGED, FINES, PENALTIES ETC. WHICH ARE REQUIRED TO BE PAID . FURTHER, M/S. INDUJA TRADERS PVT. LTD. WAS TO CONTRIBUTE ALL THE FUNDS REQUIRED FOR THE PURPOSE OF DEVELOPING THE COMMERCIAL BUILDING PROJECT ON TH E SAID PROPERTY FROM TIME TO TIME FOR COMPLETION THEREOF AND WOULD BE SOLELY RESPONSIBLE FOR ARRANGEMENT OF SUCH FUNDS. AGREEMENT DATED 12/12/2007 WAS NAMED AS THE JOINT DEVELOPMENT AGREEMENT, CAREFUL READING OF THE OBLIGATIONS OF M/S. INDUJA TRADERS PVT. LTD. REVEALS THAT THE AGREEMENT IN SUBSTANCE IS THE AGREEMENT FOR OBTAINING THE APPROVALS FOR THE PROPERTY. M/S. INDUJA TRADERS PVT. LTD. HAS NOT CONTRIBUTED ANY FUNDS FOR THE DEVELOPMENT OF THE SAID PROJECT. CANCELLATION AGREEMENT DATED 10/12/2008 WAS BETWEEN M/S. UNICORN 10 IT(SS)A NO. 39/PAN/2016 DEVELOPERS, M/S. INDUJA TRADERS PVT. LTD. AND M/S. ELEGANCE PROPERTIES PVT. LTD. ACCORDING TO WHICH THE JOINT DEVELOPMENT WAS CANCELLED AND TOWARDS CANCELLATION 24,53,50,000/ - WAS PAID TO M/S. INDUJA TRADERS PVT. LTD. THE ASSESSIN G OFFICER OBSERVED THAT 7 CRORES WAS PAID FOR THE PURCHASE OF SHARES IN PURSUANCE OF EARLIER AGREEMENTS AND THE ALLEGED COMPENSATION OF 17,53,50,000/ - WAS PAID FOR THE PURPOSE OF APPROVAL FOR ENHANCEMENT OF THE FLOOR SPACE INDEX OF THE PROJECT UNDER C - 1 ZONING. M/S. ELEGANCE PROPERTIES PVT. LTD. FAILED TO EXPLAIN WHY THE PAYMENTS WERE MADE TO M/S. INDUJA TRADERS PVT. LTD. FOR THE PURPOSE OF OBTAINING THE APPROVALS WHEREAS THE REQUISITE APPROVALS FOR C - 1 ZONING AND THE INCREASE IN FLOOR SPACE INDEX AR E GRANTED BY THE GOVERNMENT AUTHORITIES LIKE THE MINISTRY OF TOWN AND COUNTRY PLANNING . THE ASSESSING OFFICER ALSO OBSERVED THAT AS PER CLAUSE 2 OF MOU DATED 17/11/2007 , IT WAS THE RESPONSIBILITY OF M/S. UNICORN DEVELOPERS TO OBTAIN APPROVALS UNDER C - 1 ZO NING. THIS MOU IS NOT CANCELLED. M/S.ELEGANCE PROPERTIES PVT. LTD. FAILED TO PRODUCE THE DETAILS OF ACTUAL AMOUNTS PAID TO THE GOVERNMENT AUTHORITIES FOR OBTAINING THE APPROVALS. THE ASSESSING OFFICER NOTED THAT THOUGH THE ALLEGED CANCELLATION AGREEMENT IS DATED 10/12/2008, THE PAYMENTS WERE ACTUALLY MADE EVEN BEFORE THE ABOVE DATE AND WERE SPREAD OVER THE PERIOD 19/03/2008 TO 07/10/2008 . NO PAYMENTS WERE MADE ON OR AFTER THE DATE OF THE CANCELLATION AGREEMENT. IN ACCORDANCE WITH THE TERMS OF THE JOINT DEVELOPMENT AGREEMENT M/S. INDUJA TRADERS PVT. LTD. WAS SUPPOSED TO CONTRIBUTE FUNDS. ON THE CONTRARY, M/S. INDUJA TRADERS PVT. LTD. RE CEIVED 17,53,50,000/ - FROM M/S.ELEGANCE PROPERTIES PVT. LTD. THERE IS NO BASIS FOR THE DETERMINATION OF THE ALLEGED COMPENSATION AS PER THE CANCELLATION AGREEMENT. MOU DATED 17/1 1 /2007 , THE AGREEMENT DATED 12/12/2007 AND THE CANCELLATION AGREEMENT DATED 10/12/2008 ARE ALL UNREGISTERED AGREEMENTS. THESE ARE COLOURABLE DEVICES EMPLOYED TO EVADE PAYMENT OF TAXES. THESE FACTS PROVE THAT THE ABOVE AGREEMENTS WERE FABRICATED TO SHOW THAT THE PAYMENTS MADE TO M/S. INDUJA TRADERS PVT. LTD. CONSTITUTE GENUINE 11 IT(SS)A NO. 39/PAN/2016 B USINESS EXPENDITURE. FURTHER, M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. AND M/S. INDUJA TRADERS PVT. LTD. HAD NO INTEREST IN THE ABOVE LAND AT PANAJI . THEY HAVE NOT MADE ANY PAYMENTS TO THE ORIGINAL LAND OWNERS OR TENANTS. DURING THE COURSE OF POST SEARCH, ENQUIRIES MR. PRAKASH KITTUR WAS ASKED TO JUSTIFY THE CLAIM OF ABOVE EXPENSES. HE SUBMITTED COPIES OF TITLE REPORTS GIVEN BY M/S. DUA ASSOCIATES IN RESPECT OF THE ABOVE PROPERTY . THIS TITLE REPORT WAS SUBMITTED IN TWO VOLUMES ONE FOR THE PROPERTY ADMEASURING 5754 SQ.MTS. AND THE OTHER FOR THE PROPERTY ADMEASURING 2,127 SQ.MTS AT ST.INEZ, PANAJI, GOA . IT IS NOTICED FROM THE ABOVE REPORT THAT DOCUMENTS PERTAINING TO THE FOLLOWING PERIODS WERE SUBMITTED TO THEM AND THE SAME WERE EXAMINED: - PROPERTY PROPERTY OF 5754 SQ.MTS. PROPERTY OF 2127 SQ.MTS PERIOD FOR WHICH DOCUMENTS WERE AVAILABLE 25/06/1954 TO 02/02/2009 22/10/1979 TO 17/02/2009 THE ASSESSING OFFICER OBSERVED THAT THE ALLEGED MOU DATED 17/11/2007 , THE AGREEMENT DATED 12/12/2007 AND CANCELLATION AGREEMENT DATED 10/10/2008 ARE NOT FOUND IN THE LIST OF DOCUMENTS SUBMITTED AND EXAMINED FOR THE ABOVE TITLE VERIFICATION. IT IS EVIDENT FROM THE ABOVE THAT M/S. INDUJA TRADERS PVT. LTD. NEVER HAD ANY INTEREST IN THE ABOVE PROPERTIES AT ST. INEZ, PANAJI . IT IS EVIDENT FROM THE ABOVE THAT THE ALLEGED THREE AGREEMENTS WERE AN AFTERTHOUGHT. MR. PRIYAKANT AMIN AND MR. PRAKASH KITTUR PLAYED KEY ROLE IN APPROPRIATION OF THE SALE CONSIDERATION OF 50.70 CROES AND FABRICATED THE ABOVE UNREGISTERED AGREEMENTS TO SHOW THAT THE PAYMENTS OF 17,53,50,000/ - MADE TO M/S. INDUJA TRADERS PVT. LTD. CONSTITUTE GENUINE BUSINESS EXPENDITURE OF THE ASSESSEE . M/S. INDUJA TRADERS PVT. LTD. DOES NOT HAVE ANY INTEREST IN THE ABOVE LAND NOR HAS IT MADE ANY INVESTMENTS IN THE ABOVE LAND. HENCE, ENQUIRIES WERE CAUSED TO VERIFY THE GENUINENESS AND THE BUSINESS PURPOSE OF THE PAYMENT OF 17.53 CRORES TO M/S. INDUJA 12 IT(SS)A NO. 39/PAN/2016 TRADERS PVT. LTD. A SURVEY U NDER SECTION 133A WAS CARRIED OUT AT THE PREMISES OF M/S. INDUJA TRADERS PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. THE DIRECTOR OF THE ABOVE COMPANIES SHRI JITENDRA SALECHA ADMITTED THAT THE PAYMENTS WERE CIRCULAR TRANSACTION AND WERE ON LY CARRIED OUT FOR THE PURPOSE OF ACCOMMODATION. SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THE CASE OF SHRI MR. PRIYAKANT AMIN DIRECTOR OF THE ASSESSEE AND M/S. MARVEL RESORTS PVT. LTD. DURING THE PERIOD OF THE ABOVE TRANSACTION ON 19/07/2011. SHRI JITENDRA SALECHA REITERATED ON 19/07/2011 THAT THE ABOVE TRANSACTIONS WERE FOR THE PURPOSE OF ACCOMMODATION . HENCE, THE PAYMENT OF 17,53,50,000/ - BY M/S. ELEGANCE PROPERTIES PVT. LTD. TO M/S. INDUJA TRADERS PVT. LTD. IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF M/S.ELEGANCE PROPERTIES PVT. LTD. THEREFORE, HE HELD THAT EXPENDITURE OF 17,53,50,000/ - PAID TO M/S. INDUJA TRADERS PVT. LTD. IS DISALLOWED AND BROUGHT TO TAX AS UNDISCLOSED INCOME OF THE M/S. ELEGANCE PROPERTIES PVT. LTD . FOR THE ASSESSMENT YEAR 2009 - 10. 1 0 . O N A P P E A L , COMMISSIONER OF INCOME TAX (APPEALS) V A C A T E D T H E D I S A L L O W A N C E . 1 1 . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THE PAYMENT WAS MADE TO M/S. INDUJA TRADERS PVT. LTD. EXPENSES INCURRED BY THEM ON THE HOUSING PROJECT ON THE CANCELLATION OF THE AGREEMENT WITH THEM AS THEY DID NOT HAVE REQUIRED FUNDS. 1 2 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE FACTS PERT A INING TO THIS GROUND OF APPEAL ARE THE SAME AS STATED WHILE DECIDING THE G R OUND NO.1 OF THE APPEAL ABOVE . OUT OF THE TOTAL COMPENSATION OF 24,53,50,000/ - CLAIMED BY THE ASSE SSEE TO HAVE 13 IT(SS)A NO. 39/PAN/2016 BEEN PAID TO M/S. INDUJA TRADERS PVT. LTD. IN GROUND NO.1 OF THE APPEAL ABOVE, RELATES TO A PART OF THE COMPENSATION OF 7 CRORES AND THIS GROUND RELATES TO THE BALANCE COMPENSATION OF 17,53,50,000/ - . THE ASSESSING OFFICER DISALLOWED THE D EDUCTION CLAIMED BY THE ASSESSEE OF 17,53,50,000/ - ON ACCOUNT OF THE ABOVE PAYMENT TO M/S. INDUJA TRADERS PVT. LTD. ON THE GROUND THAT NO WORK WAS DONE BY THE SAID M/S.INDUJA TRADERS PVT. LTD. IN PURSUANCE TO THE JOINT DEVELOPMENT AGREEMENT. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) VACATED THE DISALLOWANCE BY OBSERVING AS UNDER: - 6.2. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE AR OF THE APPELLANT. IT IS A FACT THAT THE LAND PURCHASED BY THE APPELLANT COMPANY WAS AN ABANDONED LAND WITH A BIG GUTTER ADJACENT TO IT. THE LAND WAS UNEVEN WITH THE WATER POND AND AS SUCH UNSUITABLE FOR ANY PROJECT. ON TOP OF IT, IT WAS ILLEGALLY OCCUPIED BY SLUM DWELLERS. PERHAPS, THAT IS THE REASON AS TO WHY THE LAND IN THE HEART OF PANAJI CITY COULD BE BOUGHT BY THE APPELLANT COMPANY AT SUCH A MEAGRE PRICE. NOW THE CONTENTION OF THE APPELLANT COMPANY IS THAT ALL THE PARTIES WHO WERE ROPED IN CONTRIBUTED IN THE DEVELOPMENT OF THE PLOT IN THEIR OWN WAY, WHICH INCREASED THE VAL UE OF THE LAND. IT WAS SUBMITTED THAT THE LAND COSTING RS.2.1O CRORES WAS ULTIMATELY SOLD FOR RS.50.7 CRORES ITSELF GOES TO SHOW THAT THERE WAS VALUE ADDITION TO THE LAND. THE AR OF THE APPELLANT IS RIGHT IN HIS SUBMISSION THAT IF THE VARIOUS PARTIES WHO H AD CONTRIBUTED IN THE VALUE ADDITION OF THE LAND, WERE NOT GIVEN THEIR DUE SHARES, THEY WOULD HAVE CREATED LEGAL OBSTACLES IN SALE OF LAND. 6.3. AO IN THE ASSESSMENT ORDER HAS STATED THAT M/S INDUJA TRADERS PVT. LTD. HAVE NOT INVESTED ANY AMOUNT IN THE PR OPERTY OF THE APPELLANT COMPANY. ON THE OTHER HAND, THE AR OF THE APPELLANT SUBMITS THAT M/S INDUJA TRADERS PVT. LTD. HAVE DONE SETTLEMENT WITH THE TENANTS ON THE PROPERTY AND ALSO HAVE INVESTED IN GETTING APPROVAL FOR ENHANCEMENT OF THE FLOOR SPACED INDEX OF THE LAND UNDER C - 1 ZONING. BY VIRTUE OF THIS APPROVAL, THE CONSTRUCTION ON THE LAND WAS TO BE DOUBLE OF THE ORIGINAL PERMITTED AMOUNT OF CONSTRUCTION. THIS INCREASED THE VALUE OF THE LAND TREMENDOUSLY. IT IS A FACT THAT THE SETTLEMENT OF THE TENANTS IS A DIFFICULT TASK AND MOST OF THE TIME THE BUILDERS NEED TO SPEND MONEY IN CASH TO SETTLE THE TENANTS AND TO PAY THE COMMISSIONS TO THE MIDDLEMEN ETC. SIMILARLY, GETTING VARIOUS APPROVAL FROM VARIOUS GOVERNMENT AUTHORITIES, ESPECIALLY CHANGING ZONES TO INC REASE FSI REQUIRES SPENDING ON VARIOUS BROKERS AND 14 IT(SS)A NO. 39/PAN/2016 MIDDLEMEN. THE FACT THAT APPELLANT COMPANY HAS PAID THE AMOUNT TO M/S INDUJA TRADERS PVT. LTD. (HENCEFORTH REFERRED TO AS M/S INDUJA) GOES TO SHOW THAT M/S INDUJA HAVE REALLY DONE VALUE ADDITION TO THE LAN D AS SUBMITTED BY THE APPELLANT COMPANY. AO IS NOT DENYING THE PAYMENT MADE BY THE APPELLANT COMPANY TO M/S.INDUJA. AO HAS NOT EVEN STATED THAT THE PAYMENT MADE TO M/S.INDUJA WAS RECEIVED BACK BY THE APPELLANT COMPANY OR ITS DIRECTORS. THE CONTENTION OF TH E AO IS THAT M/S INDUJA HAS NOT DONE ANY SUBSTANTIAL WORK TO GET PAID TO THE TUNE OF RS.24,53,50,000/ - . HOWEVER, THE QUANTUM OF WORK DONE BY M/S INDUJA CAN BE EVALUATED ONLY BY THE APPELLANT COMPANY AND THE FACT THAT THE APPELLANT COMPANY HAS DECIDED TO SE TTLE M/S INDUJA FOR RS.24,53,50,000/ - PROVES THAT M/S INDUJA HAS DONE COMMENSURATE WORK IN THE DEVELOPMENT OF THE LAND OF THE APPELLANT COMPANY. FURTHER, M/S INDUJA HAS ADMITTED THE SAID RECEIPT AS ITS INCOME AND HAS FILED RETURNS OFFERING THE SAME AS INCO ME AFTER REDUCING THE EXPENSES INCURRED. M/S INDUJA IS NOT A RELATED PARTY AS DEFINED IN SECTION 40A OF THE LT. ACT OF THE APPELLANT AND THEREFORE, AO COULD NOT HAVE STATED THAT THE PAYMENT WAS EXCESS OR WAS MADE WITHOUT M/S INDUJA DOING ANY WORTHWHILE WOR K. 6.4. IN VIEW OF THE ABOVE, AS THE APPELLANT HAS ACCEPTED THAT M/S INDUJA HAS DONE THE WORK RELATING TO SETTLEMENT OF TENANTS AND ALSO TAKEN EFFORTS FOR CHANGING THE ZONE OF THE LAND AND THEREBY INCREASING THE FSI TO DOUBLE THAN ALLOWED ORIGINALLY, THE AO HAS NOT BROUGHT ANY TANGIBLE EVIDENCES TO DISPROVE THE SAME. FURTHER, THE PAYMENT TO M/S INDUJA HAS BEEN DONE AS PER THE CANCELLATION AGREEMENT WHICH IS NOTARIZED. AO HAS NOT BEEN ABLE TO PROVE THAT PAYMENT MADE TO M/S INDUJA WAS RECEIVED BACK BY THE AP PELLANT COMPANY OR ITS DIRECTORS IN ANY FORM. CONSIDERING ALL THESE ASPECTS AND ON THE FACTS OF THE CASE, THAT AN ABANDONED LAND WAS MADE MARKETABLE BY THE APPELLANT COMPANY WITH THE HELP OF ENTITIES LIKE M/S INDUJA, THE PAYMENT MADE TO M/S INDUJA IS QUITE JUSTIFIED AND HENCE, THE ADDITION OF 17,53,50,000/ - MADE BY THE AO IS DELETED. 1 3 . WE FIND THAT NO MATERIAL COULD BE BROUGHT BEFORE US BY THE DEPARTMENTAL REPRESENTATIVE TO CONTROVERT THE ABOVE FINDING S OF THE COMMISSIONER OF INCOME TAX (APPEALS). NO SPECIFIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) COULD ALSO BE POINTED OUT BY THE DEPARTMENTAL REPRESENTATIVE. THE ONLY CONTENTION OF THE DEPARTMENTAL REPRESENTATIVE BEFORE US WAS T H A T THE STATEMENT OF SHRI JITENDRA SALECHA DATED 19/07/2011 RECORDED BY THE ASSESSING OFFICER 15 IT(SS)A NO. 39/PAN/2016 WAS NOT CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) BEFORE DELETING THE AMOUNT IN QUESTION. IN REPLY, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTE D THAT THE ASSESSEE WAS NEVER PROVIDED WITH A COPY OF THE STATEMENT OF SHRI JITENDRA SALECHA AND THE ASSESSEE WAS NEVER CONFRONTED WITH THAT STATEMENT BY THE ASSESSING OFFICER. IN ABSENCE OF THE SAME , THE SAID STATEMENT COULD NOT BE READ AGAINST THE ASSESSEE. THE DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE ABOVE SUBMISSIONS OF THE ASSESSEE. FURTHER, EVEN BEFORE US, THE DEPARTMENTAL REPRESENTATIVE HAS NOT PRODUCED THE COPY OF THE SAID ALLEGED STATEMENT. IN THE ABOVE CIRCUMSTA N CES, IN OUR CO NSIDERED VIEW, THE SAID STATEMENT CANNOT BE USED AGAINST THE ASSESSEE BY THE REVENUE. IN THESE CIRCUMSTANCES , IN OUR CONSIDERED OPINION, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION AFTER PROPER APPRECIATION OF THE FACTS OF THE CASE. 1 4 . IT IS NOT IN DISPUTE THAT M/S. INDUJA TRADERS PVT. LTD. HAS SHOWN THE COMPENSATION OF 24,53,50,000/ - UNDER CONSIDERATION AS ITS INCOME IN THE YEAR UNDER CONSIDERATION . NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT NO RIGHT OF M/S. INDUJA TRADERS P VT. LTD. WAS CREATED IN PURSUANCE TO THE JOINT DEVELOPMENT AGREEMENT ENTERED INTO ON 12/12/2007 WHICH CAME TO AN END BECAUSE OF CANCELLATION OF THE SAME ON 10/12/2008. WE THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 1 5 . IN GROUND NO.3 THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E R RED IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF PAYMENTS OF 14,62,12,500/ - TO M/S. UNICORN DEVELOPERS. 16 IT(SS)A NO. 39/PAN/2016 1 6 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS MADE A PAYMENT OF 14,62,12,500/ - TO M/S.UNICORN DEVELOPERS AND CLAIMED THE SAME AS AN EXPENDITURE. M/S.UNICORN DEVELOPERS IS THE PROPRIETARY CONCERN OF MR. PRAKASH KITTUR, WHO IS THE DIRECTOR OF THE ASSESSEE COMPANY . DURING THE COURSE OF SEARCH, MR. PRAKASH KITTUR HAD ADMITTED THAT HE HAD RECEIVED 14.62 CRORES FROM THE ASSESSEE COMPANY , OUT OF WHICH HE HAD INCURRED EXPENSES IN DEVELOPMENT OF LAND OF THE ASSESSEE COMPANY TO THE TUNE OF 9.62 CRORES AND 5 CRORES WOULD BE HIS PROFIT WHICH WAS OFFERED FOR TAXATION IN ASSESSMENT YEAR 2009 - 10. THE ASSESSING OFFICER BIFURCATED THE AMOUNT PAID TO M/S. UNICORN DEVELOPERS AS 7 CRORES PAID TOWARDS PURCHASE OF SHARES OF MR. PRAKASH KITTUR AND 7,62,12,500/ - AS PAYMENT FOR HAVING INCURRED EXPENDITURE ON VARIOUS ITEMS FO R DEVELOPMENT OF THE LAND OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER OBSERVED THAT FROM THE DETAILS OF TRANSFER OF SHARES CALLED FROM THE REGISTRAR OF COMPANIES, GOA, IT IS OBSERVED THAT MR. PRAKASH KITTUR SOLD HIS 500 SHARES IN M/S.ELEGANCE PROPERTIE S PVT. LTD. ON 23/03/2008 TO M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. WHEN CONFRONTED MR. PRAKASH KITTUR ADMITTED THAT HIS 500 SHARES IN M/S.ELEGANCE PROPERTIES PVT. LTD. WERE SOLD TO M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. HOWEVER , HE DID NOT GIVE DETAILS OF THE CONSIDERATION RECEIVED ON SALE OF SHARES OUT OF THE TOTAL RECEIPT OF 14.62 CRORES. THE ASSESSING OFFICER NOTED THAT MR. PRAKASH KITTUR PROPRIETOR M/S. UNICORN DEVELOPERS ENTERED INTO AN MOU ON 17/11/2007 WITH M/S. INDUJA TRADERS PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. ACCORDING TO WHICH, 100% SHAREHOLDING OF M/S. ELEGANCE PROPERTIES PVT. LTD. WAS AGREED TO BE SOLD TO M/S. INDUJA TRADERS PVT. LTD. AND M/S. VANQUISH INVESTMENTS & LEASING PVT. LTD. IN A CCORDANCE WITH THE ABOVE MOU, MR. PRAKASH KITTUR SOLD HIS 500 SHARES IN M/S.ELEGANCE PROPERTIES PVT. LTD. TO M/S.VANQUISH INVESTMENTS & LEASING PVT. LTD. THE ASSESSING OFFICER FURTHER NOTED THAT IN THE CASE OF SHRI TAHIR ISHANI AND SHRI MANSOOR ALI ISANI, THE 250 SHARES WERE SOLD FOR A CONSIDERATION 17 IT(SS)A NO. 39/PAN/2016 OF 3.50 CRORES . HENCE, CONSIDERATION OF 500 SHARES SHALL BE ADOPTED AS 7 CRORES, OUT OF THE TOTAL RECEIPT OF 14,62,12,500/ - , WHICH CANNOT BE SAID TO BE THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURCHASE OF BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE BALANCE AMOUNT OF 7,62,12,500/ - PAID TO M/S. UNICORN DEVELOPERS, IT IS EVIDENT FROM THE MOU DATED 27/11/2007 AND THE DEBIT NOTE DATED 26/03/2009 THAT IT IS THE RE SPONSIBILITY OF M/S. UNICORN DEVELOPERS TO OBTAIN THE APPROVALS UNDER C - 1 ZONING. M/S.ELEGANCE PROPERTIES PVT. LTD. FAILED TO PRODUCE THE DETAILS OF EXPENSES INCURRED BY M/S. UNICORN DEVELOPERS TOWARDS I) APPROVALS, CONSENTS, LICENSING EXPENSES II) VACATI ON RESETTLEMENT AND COMPENSATION EXPENSES III) LAND DEVELOPMENT IV) LEGAL AND PROFESSIONAL EXPENSES V) OFFICE EXPENSES AND VARIOUS RELATED OVERHEADS . THE ASSESSING OFFICER NOTED THAT M/S. INDUJA TRADERS PVT. LTD. CLAIMED TO HAVE OBTAINED APPROVALS UNDER C - 1 ZONING. M/S.ELEGANCE PROPERTIES PVT. LTD. FAILED TO PRODUCE DETAILS OF THE BASIS OF WHICH THE COMPENSATION OF 7,62,12,500/ - WAS PAID TO M/S. UNICORN DEVELOPERS. HENCE, HE DISALLOWED THE EXPENDITURE. 1 7 . O N A P P E A L , COMMISSIONER OF INCOME TAX (APPEALS) D E L E T E D T H E ADDITION . 1 8 . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE O RDER OF THE ASSESSING OFFICER WHEREAS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THE PAYMENT WAS MADE TO M/S. INDUJA TRADERS PVT. LTD. EXPENSES INCURRED BY THEM ON THE HOUSING PR OJECT ON THE CANCELLATION OF THE AGREEMENT WITH THEM AS THEY DID NOT HAVE REQUIRED FUNDS. 1 9 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE RELEVANT 18 IT(SS)A NO. 39/PAN/2016 FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ACQUIRED TWO PLOTS OF LAND SITUATED AT (I) BEARING CHALTA NOS. 2,3 & 4 OF P.T. SHEET NO. 121, SITUATED IN THE WARD OF ST. INEZ WITHIN THE LIMITS OF CORPORATION OF THE CITY OF PANAJI, TALUKA TISWADI, STATE OF GOA ADMEASURING AS AREA OF 5754 SQ.MTS., AND; (II) BEING CHALTA NO. 33 OF P.T. SHEET NO. 130 OF THE CITY SURVEY PANAJI, SITUATED AT ST. INEZ WITHIN THE LIMITS OF CORPORATION OF THE CITY OF PANAJI, TALUKA TISWADI, DISTRICT OF NORTH GOA, STATE OF GOA, ADMEASURING 2139 SQ.MTS. KNOWN AS AGOR. THE ASSESSEE COMPANY FOR D EVELOPING THE ABOVE PLOTS OF LAND, ENTERED INTO A MOU WITH M/S. INDUJA TRADERS PVT. LTD. AND M/S.UNICORN DEVELOPERS ON 12/12/2007. HOWEVER, LATER ON THE ABOVE MOU WAS CANCELLED VIDE AGREEMENT DATED 10/12/2008. IN PURSUANCE TO THE ABOVE AGREEMENT , THE ASS ESSEE WAS REQUIRED TO PAY 1 4,62,12,500/ - TO M/S.UNICORN DEVELOPERS AS COMPENSATION. THE ASSESSING OFFICER DISALLOWED DEDUCTION TO THE ASSESSEE ON THE GROUND THAT OUT OF 14,62,12,500/ , THE ASSESSEE HAD PAID 7 CRORES TOWARDS PURCHASE OF SHARES OF SHRI PRAKASH KITTUR. THE ASSESSING OFFICER DISALLOWED THE BALANCE AMOUNT OF 7,62,12,500/ - ON THE GROUND THAT ACCORDING TO THE MOU DATED 27/11/2007 AND DEBIT NOTE DATED 26/03/2009, IT WAS THE RESPONSIBILITY OF M/S. UNICORN DEVELOPERS TO OBTAIN THE APPROVALS UNDER C - 1 ZONING. HE NOTED THAT M/S. INDUJA TRADERS PVT. LTD. HAVE CLAIMED TO HAVE OBTAIN ED APPROVAL UNDER C - 1 ZONING AND THAT THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF THE BASIS OF WHICH COMPENSATION OF 7,6 2,12,500/ - WAS PAID TO M/S. UNICORN DEVELOPERS, HENCE, HE DISALLOWED THE EXPENDITURE. ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER: - 7 .2. FIRSTLY, I SHALL DEAL WITH THE ISSUE OF ADDITION OF RS.7 CRORES MADE BY THE AC TOWARDS EXPENDITURE INCURRED ON TRANSFER OF SHARES HELD BY MR PRAKASH KITTUR. THE AO HAS CALLED FOR SOME 19 IT(SS)A NO. 39/PAN/2016 RECORDS FROM THE REGISTRAR OF COMPANIES AND ON THE BASIS OF THE SAME HAS HELD THAT MR. PRAKASH KITTUR SOLD 500 SHARES OF THE APPELLANT COMPANY TO M/S VANQUISH INVESTMENT & LEASING PVT. LTD. AC APPLIED THE RATE AT WHICH MR. TAHIR ISANI AND MR.MANSOORALI ISANI HAD SOLD THEIR SHARES AND HELD THAT RS.7 CRORES RECEIVED BY M/S UNICORN OUT OF RS.14,62,21,500 / - WAS TOWARDS THE SALE OF SHARES AND HE DISALLOWED THE SAID AMOUNT OF RS.7 CRORES AND ADDED AS THE UNDISCLOSED INCOME OF THE APPELLANT COMPANY. 7.3. THE AR OF THE APPELLANT HAS PRODUCED THE SHARE REGISTER OF THE APPELLANT COMPANY AND THE SHARE CERTIFICATE OF MR. PRAKASH KITTUR. ON VERIFICATION OF BOTH THESE DOCUMENTS, IT IS FOUND THAT THE SHARES HELD BY MR. PRAKASH KITTUR WERE NEVER TRANSFERRED TO M/S VANQUISH INVESTMENTS & LEASING PVT. LTD. EVEN AS ON THE DATE OF SUBMISSION, MR. PRAKASH KITTUR OWNED THE SHARES. FROM THE DOCUMENT PRODUCED BEFORE ME, IT IS PROVED BEYOND DOUBT THAT THE SHARES HELD BY MR PRAKASH KITTUR WERE IN THE APPELLANT COMPANY WERE NEVER TRANSFERRED. AS SHARES WERE NEVER TRANSFERRED AND THIS AMOUNT WAS NEVER DEBITED TO P & L ACCOUNT SEPARATELY, THE ADDITION MADE BY THE AO OF RS .7 CRORES UNDER THE PRESUMPTION THAT SHARES WERE TRANSFERRED BY MR. PRAKASH KITTUR IS DELETED. GROUND NO.7 IS ALLOWED. 7.4. NOW, I COME TO THE OTHER ADDITION OF RS.7,62,12,5001 - PAID TO M/S UNICORN. IT IS A FACT THAT M/S UNICORN WAS ASSOCIATED WITH THE P ROJECT OF THE APPELLANT COMPANY RIGHT SINCE BEGINNING. IT IS ONLY DUE TO THE SHORTAGE OF FUNDS WITH M/S UNICORN, THE OTHER PARTIES HAD TO BE ROPED IN TO COMPLETE THE PROJECT. IN THE STATEMENT DURING THE COURSE OF SEARCH, MR. PRAKASH KITTUR, THE PROPRIETOR OF M/S UNICORN HAS ADMITTED THAT HE RECEIVED TOTAL AMOUNT OF RS.14,62,12,500/ - . IT WAS SUBMITTED BY HIM THAT THIS AMOUNT WAS RECEIVED FOR HAVING RENDERED VARIOUS SERVICES TO THE APPELLANT FIRM FOR IMPROVING THE TITLE OF THE LAND AND ALSO FOR TAKING VARIOUS MEASURES TO MAKE THE LAND FIT FOR A PROJECT. FURTHER, IT WAS ALSO SUBMITTED THAT MR. PRAKASH KITTUR HAS OFFERED THE ENTIRE AMOUNT RS.14,62,12,500/ - FOR TAXATION IN HIS RETURN FILED FOR AY. 2009 - 10. 7.5. THE BASIC CONTENTION OF THE AO IN DISALLOWING THE E XPENDITURE INCURRED BY THE APPELLANT FOR PAYMENT TO M/S UNICORN IS THAT THE APPELLANT HAS NOT GIVEN THE DETAILS OF EXPENDITURE INCURRED. HOWEVER, THE APPELLANT COMPANY HAS GIVEN A LIST OF WORKS CARRIED OUT BY M/S UNICORN WHICH ARE GIVEN AS UNDER: ANNEXURE - A 20 IT(SS)A NO. 39/PAN/2016 SR.NO. PARTICULARS OF DELIVERABLE 1 UPDATED CI CONSTRUCTION LICENSE OF THE EARLIER LICENSES BEARING NO. 4/45/T5/06 - CCP/06 - 0 7/70 DATED 16.01.2007 ISSUED BY THE CORPORATION OF CITY OF PANAJI 2 LETTER OF MAMLATDAR OF TISWADI TALUKA, PANAJI, GOA TO THE ADDL . COLLECTOR, NORTH GOA DIST. REGARDING CONVERSION OF USE OF LAND OF AGRICULTURE LAND TO NON - AGRICULTURE PURPOSE 3 REPORT OF THE TOWN PLANNER, TOWN AND COUNTRY PLANNING DEVELOPMENT, PANAJI GOA IN 4 PROPERTY CARD OF PANAJI CITY IN FORM D IN RESPECT OF PROPERTY. 5 CONVERSION TO CL CLEARANCE FROM THE PDA. 6 REMOVAL OF TENANT OCCUPANTS. 7 LAND FILLING AS REQUIRED BY HEALTH DEPARTMENT 8 COMPOUND WALL AND BARRICADING SEGREGATING THE LAND. 9 ROAD DEVELOPMENT WORKS. 10 SETTLEMENT OF DISPUTES RAISED BY NEIGHBORS AND MUNDAKAR. 11 RESETTLEMENT STRUCTURES THAT MAY BE REQUIRED. 12 PROJECT PLANNING AND ALL REQUISITE DRAWINGS FOR SUBMISSION TO AUTHORITIES. 13 SECURITY AND LEGAL COSTS IF ANY TO SECURE THE RIGHTS AND OCCUPANCY OF THE PROPERTY. 14 BANK DEBT SYNDICATION IF PARTIES WANT TO PURSUE A PROJECT FOR RESIDENTIAL OR COMMERCIAL. 15 ARRANGEMENT OF ANY PROJECT FINANCE REQUIRED TO CARRY OUT THE ABOVE WORKS. 7.6. FROM THE ABOVE CHART, IT IS QUITE CLEAR THAT M/S UNICORN HAS RENDERED VARIOUS SERVICES FOR DEVELOPMENT OF LAND OF THE APPELLANT COMPANY. THE SCOPE OF THE SAID WORK IS PRESENT IN THE AGREEMENT ENTERED BY THE APPELLANT WITH M/S UNICORN AND THE DEBIT NOTE RAISED BY M/S UNICORN ON THE APPELLANT DATED 26.03.2009. THUS, IT IS PROVED THAT THE APPELLANT HAS RECEIVED THE SERVICES FROM M/S . UNICORN FOR WHICH THE PAYMENT OF RS.14,62,12,500/ - WAS MADE. THIS AMOUNT RECEIVED HAS BEEN OFFERED TO TAX BY MR. PRAKASH KITTUR IN HIS INDIVIDUAL RETURN. THUS, THERE IS A EVIDENCE BROUGHT O N RECORD TO PROVE THAT WORK HAS BEEN EXECUTED BY M/S . UNICORN FOR THE APPELLANT COMPANY. APPELLANT COMPANY ALSO HAS PROVED THAT PAYMENT HAS BEEN MADE TO M/S UNICORN AND M/S . UNICORN, PROPRIETOR MR. PRAKASH KITTUR HAS OFFERED THE RECEIPT IN HIS RETURN. HONBL E ITAT IN THE CASE OF MR. PRAKASH KITTUR IN ITA.NO.187/PNJ/2015 DATED 13.08.2015 HAS HELD THAT THE RECEIPT FROM THE APPELLANT COMPANY WAS THE BUSINESS RECEIPT AND MR.PRAKASH KITTUR HAD OFFERED THE SAID RECEIPT AFTER REDUCTION OF THE EXPENDITURE AS INCOME, WHICH WAS DIRECTED TO BE ACCEPTED AS INCOME OF MR. PRAKASH KITTUR. FURTHER, HONBLE ITAT IN THE SAME ORDER REFERRED ABOVE HAS HELD THAT AO WAS NOT JUSTIFIED IN TREATING THE AMOUNT OF RS.7 CRORES AS CONSIDERATION TOWARDS THE SALE OF 500 SHARES OF THE APPELL ANT COMPANY AND TAXING THE SAME AS 21 IT(SS)A NO. 39/PAN/2016 SHORT TERM CAPITAL GAINS. AL! THESE EVIDENCES GO TO PROVE THAT PAYMENT TO M/S UNICORN WAS MADE FOR THE PURPOSES OF BUSINESS OF THE APPELLANT FIRM AND THE SAME NEEDS TO BE ALLOWED. THUS, THE ADDITION MADE BY THE AO OF RS.7 ,62,12,5001 - IS HEREBY DELETED. 2 0 . WE FIND THAT NO MATERIAL COULD BE BROUGHT BEFORE US BY THE DEPARTMENTAL REPRESENTATIVE TO CONTROVERT THE ABOVE FINDIN G S OF THE COMMISSIONER OF INCOME TAX (APPEALS) . NO SPECIFIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) COULD ALSO BE POINTED OUT BY THE DEPARTMENTAL REPRESENTATIVE. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITIO N AFTER PROPER APPRECIATION OF THE FACTS. IT IS NOT IN DISPUTE THAT M/S. UNICORN DEVELOPERS HAS SHOWN COMPENSATION OF 14,62,12,500/ - UNDER CONSIDERATION AS ITS INCOME IN THE RETURN OF INCOME FILED. FURTHER, NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT NO RIGHT OF M/S. UNICORN DEVELOPERS WAS CREATED IN PURSUANCE TO THE JOINT DEVELOPMENT AGREEMENT ENTERED INTO ON 12/12/2007 WHICH CAME TO AN END BECAUSE OF CANCELLATION OF THE SAME ON 10/12/2008 . WE , THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 2 1 . IN GROUND NO.4 , THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE OF 11.20 CRORES TO M/S.NEERAJKUMAR ASSOCIATES PVT. LTD. 2 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE CLAIMED THAT IT ENTERED INTO REGISTERED AGREEMENT FOR JOINT DEVELOPMENT DATED 29/06/2007 WITH M/S. NEERAJKUMAR ASSOCIATES PVT. LTD., PUNE FOR THE DEVELOPMENT OF PROPERTY AT CHALTA 2, 3 & 4 OF P.T. SHEET NO. 121 MEASURING 5754 SQ.MTS AT ST. INEZ, PANAJI, GOA AND UNDIVIDED 5/12 TH SHARE IN PROPERTY KNOWN AS AGOR UNDER CHALTA NO .2 22 IT(SS)A NO. 39/PAN/2016 OF PT SHEET NO. 130 ADMEASURING 3647 SQ.MTS AT ST. INEZ, GOA. AS PER THE AGREEMENT WITH M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. WAS TO INTRODUCE A CAPITAL OF 4 CRORES IN THE SAID JOINT VENTURE AS PER WHICH 51 LAC WAS PAID VIDE CHEQUE NO. 132508 DATED 2 9/06/2007 AND 1 CRORE VIDE CHEQUE NO. 132509 DATED 29/06/2007 AND 2.49 CRORES WAS AGREED TO BE PAID ON OR BEFORE 30/07/2007 AND THE PROFIT SHARING RATIO WAS 40% TO M/S.ELEGANCE PROPERTIES PVT. LTD. AND 60% TO WITH M/S. NEERAJKUMAR ASSOCIATES PV T. LTD. IN THE M/S. MONT VERT ELEGANCE JOINT VENTURE. THE JOINT VENTURE AGREEMENT WAS CANCELLED VIDE REGISTERED CANCELLATION AGREEMENT DATED 24/04/2008 . ACCORDING TO WHICH, 11.20 CRORES WAS TO BE PAID BY M/S.ELEGANCE PROPERTIES PVT. LTD. TO M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. AND 7.20 CRORES WAS PAID VIDE DD NO. 078217 DATED 23/04/2008, 1 CRORE PAID VIDE CHEQUE NO. 006035 DATED 10/03/2008 AND 3 CRORE WAS PAID THROUGH RTGS TRANSFER ON 15/04/2008. THEREFORE, BY INVESTING 1.51 CRORES WITH M /S. NEERAJKUMAR ASSOCIATES PVT. LTD. RECEIVED 11.20 CRORES . THIS PAYMENT OF 11.20 CRORES HAS BEEN CLAIMED AS EXPENDITURE BY M/S.ELEGANCE PROPERTIES PVT. LTD. FOR THE FINANCIAL YEAR 2008 - 09. THE PAYMENT MADE TO M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND, THEREFORE, HE DISALLOWED THE SAME. 2 3 . O N A P P E A L , COMMISSIONER OF INCOME TAX (APPEALS) D E L E T E D T H E ADDITION . 2 4 . DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THE PAYMENT WAS MADE TO M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. EXPENSES INCURRED BY THEM ON THE HOUSING PROJECT ON THE CANCELLATION OF THE AGREEMENT WITH THEM AS THEY DID NOT HAVE REQUIRED F UNDS. 23 IT(SS)A NO. 39/PAN/2016 2 5 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . THE ASSESSING OFFICER DISALLOWED DEDUCTION CLAIMED BY THE ASSESSEE OF 11.20 CRORES ON ACCOUNT OF PAYMENT TO M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. ON THE GROUND THAT IT WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER: - 8.6. I HAVE GONE THROUGH THE P & L ACCOUNT FOR THE YEAR ENDED 31.03.2009 AND BALANCE SHEET AS ON 31.03.2009 OF NAPL. IN THE BOOKS OF THE NAPL, THE CAPITAL CONTRIBUTION MADE AND THE OTHER EXPENDITURE INCURRED WITH REFERENCE TO THE JOINT DEVELOPMENT AGREEMENT WITH THE APPELLANT COMPANY HAS BEEN CLAIMED AS EXPENDIT URE AGAINST THE RECEIPT OF RS.1 1.2 CRORES FROM THE APPELLANT COMPANY. THUS, NAPL INSTEAD OF CREDITING OUT OF PROCEEDS OF RS.11.2 CRORES TOWARDS THE CAPITAL CONTRIBUTED, THEY HAVE TREATED THE ENTIRE SU M AS EXPENDITURE AGAINST TH E RECEIPT OF RS. 11.2 CRORES FROM APPELLANT COMPANY. HOWEVER, THIS TREATMENT GIVEN BY NAPL IN THEIR BOOKS DOES NOT CHANGE THE NOMENCLATURE OF THE PAYMENT MADE BY THE APPELLANT COMPANY TO NAPL. 8.7. AS NAPL HAS CLAIMED REPAYMENT OF RS.4 CRORES OUT OF TOTAL PAYMENT OF RS.11.2 CRORES TOWARDS CAPITAL INTRODUCED BY NAPL, WHICH IS THE CORRECT POSITION AS PER THE JOINT DEVELOPMENT AGREEMENT BETWEEN THE APPELLANT COMPANY AND NAPL, THE RECEIPT OF RS.4 CRORES INTRODUCED BY NAPL IN THE BOOKS OF THE APPELLANT COMPANY CANNOT BE TAXED IN THE FACTS AND CIRCUMSTANCES OF THE CASE DISCUSSED ABOVE. THUS, THE ADDITION OF RS.4 CRORES MADE BY THE AO ONLY ON THE BASIS OF STATEMENT BY NAPL BEFORE DIT ( IN V.), PUNE, WITHOUT GIVING ANY OPPORTUNITY OF CROSS EXAMINATION TO THE APPELLAN T IS HEREBY DELETED. 8.8. ON THE SAME LINES, AS DECIDED BY ME IN PARA NO.8.7 ABOVE THAT THE RECEIPT OF RS.4 CRORES WAS THE CAPITAL INTRODUCED BY NAPL IN APPELLANT COMPANY, WHICH WAS REFUNDABLE AS PER THE JOINT DEVELOPMENT AGREEMENT, THE REPAYMENT MADE BY THE APPELLANT COMPANY AS PER THE CANCELLATION DEED, RS.4 CRORES OUT OF TOTAL PAYMENT OF RS.1 1.2 CRORES IS THE AMOUNT REPAID BY THE APPELLANT TO NAPL. THUS, THE ADDITION MADE BY THE AO TOWARDS RS.4 CRORES REPAID OUT OF TOTAL AMOUNT OF RS.11.2 CRORES IS ALS O DELETED. 8.9. NOW, I COME TO THE COMPENSATION OF RS.7.2 CRORES PAID BY THE APPELLANT COMPANY TO NAPL. THIS RS.7.2 CRORES IS THE AMOUNT OF COMPENSATION CLAIMED BY THE APPELLANT COMPANY IN ITS P & L ACCOUNT FOR THE YEAR ENDED 31.03.2009. THIS AMOUNT OF RS .7.2 24 IT(SS)A NO. 39/PAN/2016 CRORES IS ARRIVED BY REDUCING RS.4 CRORES BEING REFUND OF CAPITAL CONTRIBUTED BY THE APPELLANT COMPANY. AS SEEN FROM THE CANCELLATION AGREEMENT, IT IS A FACT TH AT APPELLANT COMPANY PAID RS.11 .2 CRORES TO NAPL. THE PAYMENT IS ACKNOWLEDGED BY NAPL AND T HE SAME HAS BEEN OFFERED TO TAX BY THEM IN THEIR RETURN OF INCOME. AO ALSO DOES NOT DISPUTE THE PAYMENT OF RS.11.2 CRORES TO NAPL BY THE APPELLANT COMPANY. NOW THE REAL QUESTION TO BE ANSWERED IS WHETHER, THE SAID PAYMENT OF RS.7.2 CRORES WHICH IS CLAIMED AS EXPENDITURE IN THE P & L ACCOUNT OF THE APPELLANT COMPANY, WHETHER SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE APPELLANT COMPANY. 8.10. I HAVE GONE THROUGH THE JOINT DEVELOPMENT AGREEMENT BETWEEN THE APPELLANT COMPANY AND NAPL. BY VIRTUE OF THE SAID JOINT DEVELOPMENT AGREEMENT AND ALSO BY VIRTUE OF CONTRIBUTION OF CAPITAL BY THE NAPL IN THE BOOKS OF THE APPELLANT COMPANY FOR TAKING UP THE WORK RELATING TO THE LAND BELONGING TO THE APPELLANT COMPANY, NAPL CREATED OWNERSHIP RIGHT IN T HE LAND. THE APPELLANT COMPANY COULD NOT HAVE SOLD THE LAND IN QUESTION TO ANY THIRD PARTY AS NAPL HAD EQUAL RIGHT AND INTEREST IN THE PROPERTY. THE WAY OUT FOR THE APPELLANT COMPANY, WHO HAD INTENTION TO DISPOSE OFF THE LAND WAS TO SETTLE NAPL SO THAT THE TITLE OF THE LAND BECOMES CLEAR. THUS, PAYING OF COMPENSATION TO NAPL WAS MANDATORY FOR THE APPELLANT COMPANY WHICH THE APPELLANT COMPANY DECIDED TO BE RS.7.2 CRORES. 8.11. AS THE SAID COMPENSATION OF RS.7.2 CRORES WAS PAID AS PER THE CANCELLATION AGREEM ENT REFERRED SUPRA AND AS THIS AMOUNT OF RS.7.2 CRORES HAS BEEN ACKNOWLEDGED AS RECEIVED BY NAPL AND AS NAPL HAS OFFERED THIS AMOUNT IN THEIR P & L ACCOUNT AS ON 31/03/2008, THE SAID COMPENSATION IS ALLOWABLE AS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT COMPANY. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAID COMPENSATION PAID TO NAPL AMOUNTING TO 7.2 CRORES AS EXPENDITURE OF THE APPELLANT COMPANY. 2 6 . WE FIND NO MATERIAL COULD BE BROUGHT BEFORE US BY THE DEPARTMENTAL REPRESENTATIVE TO CONTROVERT THE ABOVE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). NO SPECIFIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) COULD ALSO BE POINTED OUT BY THE DEPARTMENTAL REPRESENTAT IVE. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION AFTER PROPER APPRECIATION OF THE FACTS OF THE CASE. 25 IT(SS)A NO. 39/PAN/2016 FURTHER, IT IS NOT IN DISPUTE THAT M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. HAS SHOWN THE COMPENSATION OF 11.20 CRORES UNDER CONSIDERATION AS ITS INCOME DURING THE YEAR UNDER CONSIDERATION . FURTHER, NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT NO RIGHT OF M/S. NEERAJKUMAR ASSOCIATES PVT. LTD. WAS CREATED IN PURSUANCE TO THE JOINT DEVELOPMENT AGREEMENT ENTERED INTO ON 29/06/2007, WHICH WAS CAME TO AN END BECAUSE OF CANCELLATION OF THE SAME ON 24/04/2008 . THEREFORE, WE DO NOT FIND ANY GOOD REASON WITH INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS HER EBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 2 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT IN THE PRESENT OF THE PARTIES, AT THE CLOSE OF THE HEARING ON MONDAY , THE 0 8 TH DAY OF AUGUST , 201 6 AT GOA. S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 0 8 TH AUGUST , 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE M/S. ELEGANCE PROPERTIES PVT. LTD., A - 2, FIRST FLOOR, DIVYA ENCLAVE, MIRAMAR, PANAJI GOA. 2 . THE REVENUE. DCIT, CENTRAL CIRCLE, PANAJI GOA. 3 . THE PR. CIT (CENTRAL), BANGALORE. 4 . THE CIT(A) - 2, PANAJI, GOA. 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI