QUANTUM REAL ESTATE & PROPERTY DEVELOPMENT INDIA PVT LTD,MUMBAI V. INCOME TAX OFFICER, WD-11(1)(1), MUMBAI, MUMBAI

ITA 4591/MUM/2025

AI Insights

The case involves Quantum Real Estate & Property Development India Pvt Ltd, which appealed against the order of the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2009-10. The primary issue was the addition made under section 68 of the Income Tax Act, 1961, concerning an advance received from M/s Seaview Trading Co. Pvt Ltd for the sale of a property. The Tribunal examined whether the addition was justified, considering the nature of the transaction, the documentation provided, and the banking details of the parties involved. The Tribunal concluded that the addition was not justified and allowed the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788736 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 18-07-2025
• Other Referred Cases: ITO Vs. Raj Maitry & Escon Developer, Focus Heights P. Ltd Vs. ACIT, CIT-III Vs M/s. Sapna Land Developers
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANNAVAN KOSURI
• Assessee Lawyers: PRAKASH JHUNJHUNWALA
• Keywords: Additional evidence; Unexplained cash credit; Gross profit estimation
• Section: 68; 133(6)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER& SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.4591/Mum/2025 A.Ys: 2009-10 Quantum Real Estate & Property Development India Pvt Ltd 101, Kapandia Apartment, S. V. Road, Vile Parle (W), Mumbai PAN – AAACQ1375R Vs ITO, Ward – 11(1)(1) Aayakar Bhavan, MK Road, Mumbai (Appellant) (Respondent) Assessee by Shri Prakash Jhunjhunwala Revenue by Shri Annavan Kosuri, Sr. DR Date of Hearing 24.09.2025 Date of Pronouncement 25.11.2025 ORDER PERSANDEEP GOSAIN, JM: This appeal has been filed by the assessee challenging the impugned order dated 22.05.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2009- 10. 2. Ground No.1, raised by the assessee is not being pressed therefore the same stands dismissed as not pressed. 3. Ground No. 2 & 3 raised by the assessee are interrelated and interconnected and relates to challenging the order of Ld. Printed from counselvise.com 2 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. CIT(A) in sustaining the addition u/s 68 of the Act, therefore we have decided to adjudicate these grounds through the present consolidated order. 4. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities. From the records we noticed that as per the facts of the present case the assessee is engaged in the business of purchase and sale of stressed assets/properties, under litigation, mortgage and encumbrances. The assessee, vide Sale Agreement dated 24/02/2006 had acquired a land admeasuring 36.28 Gunthas situated at Velachery Road, Guindy, Chennai 600032 from M/s Bay Orient Realty Pvt Ltd at a total consideration of Rs.24,77,00,000/-. Out of the total consideration, the assessee had paid advance payments to the seller of Rs.7,11,00,000/-. The said Sale Agreement discloses various litigations in the property in the nature of mortgage of property with Indbank Housing Ltd, disputes with Madras Race Club, Encroachments, tax arrears, etc. 5. In order to resolve the above disputes, the Hon'ble High Court of Madras vide order dated 24/12/2014 had appointed retired Judge Mr. Justice K. Venkantaraman as a sole arbitrator to adjudicate upon the disputes arising between assessee and other parties. Although, the other parties filed SLP before Hon'ble Supreme Court Printed from counselvise.com 3 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. thereby challenging the order of High Court of Madras however the Hon'ble Supreme Court vide order dated 05/10/2015 dismissed the SLP and confirmed the appointment of the Arbitrator to adjudicate the disputes between the parties. 6. We also noticed that during the year under consideration, the assessee had sold a part of such land admeasuring 2.28 Gunthas to M/s Seaview Trading Co. Pvt Ltd vide Agreement for Sale dated 05/10/2008 on 'As is where is basis’ at a consideration of Rs.5,70,00,000/- and received the advance consideration of Rs.1,55,00,000/- in two installments i.e Rs.1,25,00,000/- + Rs.30,00,000/- respectively. As per the terms of the said agreement for Sale, the balance sale consideration of Rs.4,15,00,000/- shall be paid by the purchaser M/s Seaview Trading Co. Pvt Ltd in three installments and in case of non-payment of balance consideration, the advance paid by such purchaser shall be liable for forfeiture. 7. After perusal of the records we also noticed that due to existence of litigations, the purchaser M/s Seaview Trading Co. Pvt Ltd did not make the balance payments of Rs.4,15,00,000/- and accordingly, the assessee issued the reminder letters/ notices on 10/05/2009 and 11/06/2009 requesting to make the payment of balance installments. However, the said purchaser did not make Printed from counselvise.com 4 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. the payment of overdue installments and accordingly, the appellant had issued the final notice on 30/09/2009 for cancellation/termination of the agreement and forfeiture of advance. However, the revenue authorities considered the soaid advance of Rs. 1,55,00,000/- as accommodation entry and made addition u/s 68 of the Act. 8. During course of assessment and first appeal, the assessee had furnished the copies of Ledger account, Confirmation of account, PAN details, Certificate of incorporation and I.T. acknowledgement receipt of the purchaser of (M/s Seaview Trading Co. Pvt Ltd), bank statements, purchase agreement, Agreement for Sale, notices and correspondences issued by the assessee and submitted that the trade advance received by the assessee from the purchaser M/s Seaview Trading Co. Pvt Ltd, in the normal course of business, is not liable to taxed under deeming provision of Sec. 68 of I.T. Act, 1961. The AO, in response to notice u/s.133(6), had obtained the KYC details and bank statements of the purchaser M/s Seaview Trading Co. Pvt Ltd, which discloses the advance paid by such purchaser to the assessee of Rs.1,55,00,000/- (Rs.1,25,00,000 + Rs.30,00,000) and source of payer's funds is not out of cash deposits or intermingling of assessee's funds. Printed from counselvise.com 5 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. 9. But still the AO made the addition u/s.68 of the entire sum received by the assessee from M/s Seaview Trading Co. Pvt Ltd by holding that such entity is managed and controlled by an entry provider named Dilip S. Mehta, Chartered Accountant and group and the notice issued u/s 133(6) and ward inspector had reported that such entity is not found at its registered place of business. 10. In this regard Ld. DR submitted that the purchase and sale of property is a sham transaction and since the assessee is not an absolute owner of the property, thus is not entitled to sell such land and accordingly, the sum received as advance from M/s Seaview Trading Co. Pvt Ltd of Rs.1,55,00,000/- is taxable u/s.68 of I.T. Act, 1961. 11. Whereas on this context, the assessee reiterated that the addition sustained by Ld.CIT(A) u/s.68 of Rs. 1,55,00,000/- is erroneous and unjustified. 12. After having gone through the arguments of both the parties and considering the documents placed on record, we noticed that the trade advance received by the assessee in the normal course of business of buying and selling of stressed assets could not attract the deeming provision of Sec. 68 of Act. The entire advances of Rs.1,55,00,000/- (Rs.1,25,00,000 + Rs.30,00,000) had been received through banking channel by A/c Payee Printed from counselvise.com 6 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. cheques and copies of bank statements of the assessee are already on the record. The AO in response to notice u/s.133(6), had obtained the KYC details and bank statements of the purchaser M/s Seaview Trading Co. Pvt Ltd, which discloses that advance paid by such purchaser to the assessee of- Rs.1,55,00,000/- (Rs.1,25,00,000 + Rs.30,00,000) and source of payer's funds arenot out of cash deposits or intermingling of assessee's funds; 13. Further, the Sale Agreement dated 24/02/2006 and advance paid by the assessee of Rs.7.11 crores evidences the acquisition and creation of right in the land at Chennai admeasuring- 36.28 Gunthas at a consideration of Rs.24.77 crores. Thus the assessee was competent to enter into further Agreement for Sale dated 05/10/2008 with the purchaser M/s Seaview Trading Co. Pvt Ltd against which the advance had been received in two installments amounting to Rs. 1,55,00,000/-. 14. The assessee had also filed the copies of ledger account, confirmation of account, PAN details, certificate of incorporation, I.T. acknowledgement receipt of the purchaser M/s Seaview Trading Co. Pvt Ltd including purchase agreement, Agreement for Sale, notices and correspondences to justify the identity, credit- worthiness and genuineness of transactions. Even the AO on issuing the notice u/s.133(6) had obtained the Printed from counselvise.com 7 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. bank statement and KYC documents of such purchaser, which also discloses the payments made to the assessee of Rs.1,55,00,000/-. 15. Therefore now the question arises that when it is established on record that the assessee had received advances during the course of its regular business, which has already been reflected in the schedules to the balance sheet at schedule ‘F’ at paper book page No. 44then such advances cannot be considered as income for the purpose of Sec. 68 of the Act. In this regard reliance is being placed upon the decision of the Coordinate bench of ITAT in the case of ITO Vs. Raj Maitry & Escon Developer in ITA No. 2117/Mum/2023the operative portion is reproduced herein below: 5. We have observed order of Ld. CIT (A) and find that information furnished by the assessee before the Ld. CIT (A) is mostly available on record before the AO also, it is also observed that addition u/s. 68 of the Act on account of Unsecured Loan may be treated as such but as far as advance received from customers is concerned it's a settled position of law, same can't be considered as income for the purposes of section 68 of the Act. So, addition made u/s. 68 on account of customer's advance treatment by AO was void- ab initio and Ld. CIT (A) rightly handled the issue by analysing the same in the light of the fact that same has been duly reflected in the books of account as per the accounting system followed by the assessee under the head sales, advance and booking amount returned. 16. In the case of ITO Vs. Raj Maitry & Eskon Developers Pvt Ltd, 100 Taxmann.com 100(SC) and 100 taxmann.com 99(Delhi-HC), wherein in has been Printed from counselvise.com 8 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. held that “In course of assessment, Assessing Officer made additions to assessee's income under section 68 in respect of trade advances Commissioner (Appeals) and Tribunal deleted said addition finding that trade advances received by assessee were adjusted against sales made in subsequent years High Court upheld order passed by Tribunal Whether, on facts, SLP filed against decision of High Court was to be dismissed Held, yes [Para 2][in favour of assessee)” 17. In the case of Focus Heights P. Ltd Vs. ACIT, 174 Taxmann.com 1127 (Delhi-ITAT), wherein it has been held that “where assessee received advance of Rs. 3 crores from a party against sale of property and said amount was received through banking channels, no addition could made on account of said advance received”. 43. Ground No.1(v) raised by the Revenue is that the addition of INR 3 crores of the amount of advance received from one Shri R.C.Puri was deleted by Ld.CIT(A). The AO had made this addition by holding that the assessee has failed to justify the capacity of creditors as neither address nor PAN nor bank statement of Shri R.C.Puri was filed. During the course of appellate proceedings, the assessee filed additional evidences which includes Agreement to Sell with Shri R.C.Puri, the cancellation agreement and it was submitted that the amount was received as advance for sale of property at A-8, Westend for which the AO has already made an addition by treating the said sale consideration of INR 12 crores. Accordingly, the CIT(A) has deleted the addition. 46. Before us, the Ld.CIT DR has failed to controvert the findings given by the Ld.CIT(A) and further looking to the Printed from counselvise.com 9 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. facts that advance of INR 3 crores is duly mentioned in the Agreement to Sell and amount was received through banking channels and it was advance against the property and therefore, we do not find any infirmity in the order of the Ld.CIT(A) deleting the addition, thus the same is hereby upheld. Ground No.1(v) of the Revenue is thus dismissed. 18. In the case of CIT-III Vs M/s. Sapna Land Developers, ITA No. 651 of 2010 (Guj-HC), wherein it has been held as under: 8. The Assessing Officer found that the said amount has been credited towards advance installments from the customers. For verifying genuineness of the credit, he called for the details from the assessee. Since no explanation according to the Assessing Officer came forth with regard to the credit entries of the members and the details of the members, he considered the said amount as unexplained cash credit and added the same to the total income of the assessee. 9. The CIT (Appeals) was of the opinion that the Assessing Officer did not carry out requisite inquiry and therefore, it did not approve the act of the Assessing Officer. 10. When challenged before the Tribunal by the Revenue Appellate Tribunal was of the opinion that the assessee accepted the monthly advances from the members as booking amount from them and income arose from the sale of the plots once the total amount of consideration was paid, the land was transferred and when the plots were registered in the name of the members and possession given to them, at that point of time, the amount shown as advances or installments from the members stood transferred to the sales account. And therefore, the Tribunal concluded that credit accounts of the members are nothing but advances towards plot booking in the particular scheme. 11. The Tribunal was of the opinion that all the requisite and relevant details in the nature of source of the amount credited in the advance installments accounts were revealed but the documents produced by the assessing-respondent Printed from counselvise.com 10 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. were not aptly scrutinized by the Assessing Officer which had led him to arrive at a wrong conclusion but in view of the fact that the CIT (Appeals) whose powers are co- terminus with those of Assessing Officer had examined all the papers and it had dismissed the say of the department with regard to this issue and therefore, the Tribunal had upheld the filing of CIT (Appeals). 12. This Court finds no infirmity in the conclusion arrived at by the Appellate Tribunal which has essentially based its findings on the factual details substantiated by way of the documentary evidences before the Adjudicating Authorities. 19. In the case of ITO Vs. M/s. Sapna Land Developers, which is held as under: 8. The learned counsel for the assessee on the other hand submitted that all the evidence was adduced at the assessment stage itself and no fresh evidence was led before the CIT(A). He drew our attention to the paper book filed by the assessee and in particular to the reply of the assessee to the questionnaire issued by the AO. The copy of the reply is at pages 1 to 4 of the paper book. The letter dated 26-12- 2007 referred to by the learned CIT-DR, it was pointed out, contains several enclosures and in particular our attention was drawn to the copies of the ledger accounts of the membership booking which were enclosed to the said letter. These copies are at pages 40 to 48 of the paper book. On 26- 12-2007 another letter was written by the assessee to the AO, a copy of which is at page 49 of the paper book. The assessee had enclosed to this letter, the copies of the ledger accounts of collection of advance instalments from the customers. These accounts occupy almost 200 pages of the paper book, from page 50 to 244. They show the names and addresses of the members, the number of the instalment received, the amount received and discount if any given. It was submitted that even under cover of letter dated 26-10- 2007 (page 5 of the paper book), the assessee had furnished statements showing month wise details of advance instalments received from the beginning of the scheme till the year under consideration. It is pointed out that this Printed from counselvise.com 11 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. information was given at a time when sufficient time was left for completing the assessment. It is also pointed out that it was only on 24-12-2007, barely seven days before the assessment was getting barred by time that the AO asked for all the details of the cash credits in response to which the assessee submitted the relevant details by letter dated 26- 12-2007 which included copies of the ledger accounts of member booking receipts. Our attention was also drawn to para-7 of the statement of facts filed before the CIT(A) in which it was stated by the assessee that the AO was not correct in saying that the assessee did not submit the details of the members from whom advances and booking amounts were received. It was further pointed out therein that by two letters dated 26-12- 2007 complete details of the members and their addresses were furnished to the AO. It is contended by the learned counsel for the assessee that when the ledger extracts from the books of accounts were furnished to the AO, it amounts to producing the members register itself and if the AO had doubted the ledger accounts he could have got it verified with the members register. It is contended that when complete details about the members and the advances given by them and the booking amounts paid by them were furnished to the AO he was not justified in saying that the cash credits were not proved. The learned counsel further relied on the finding of the CIT(A) that having regard to the nature of the assessee's business the AO was not justified in treating the instalments and members booking amount as cash credit and assessing them under Section 68. It was therefore pleaded that the findings of the CIT(A) should be upheld. 9. In his reply, the learned CIT-DR pointed out that in the letter dated 26- 10-2007 (page 5 of the paper book) the assessee filed only the bare minimum information from which nothing can be gathered and that is why the AO was compelled to ask for further information by letter dated 24- 12-2007. It was submitted that the CIT(A) has ignored the findings of the AO and has \"rushed to dispose of the appeal\". 10. We have carefully considered the rival contentions. The facts narrated in the preceding paragraphs would show that the assessee did file the relevant details regarding the Printed from counselvise.com 12 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. members who paid the advance instalments and the booking amounts before the AO. Copious details including ledger account extracts have been filed by the assessee. They were all filed before 24-12- 2007. In fact most of the details were filed under cover of letter dated 26-10- 2007. The details called for by letter dated 24-12-2007 were filed on 26-12- 2007. The assessee is in the business of buying and selling lands and its modus operandi is to buy plots of land in villages which had scope for development, take members who are willing to buy the plots, collect monthly instalments from them as also an initial booking amount and transfer the land to them once the instalments are fully paid. When the land is transferred, the advances are treated as sales and taken to the trading account. The AO, as pointed out by the CIT(A), has not disputed the modus operandi of the business and has even proceeded to estimate the profits of the Ilahi Park scheme. The CIT(A) has held that the AO has failed to keep in mind the nature of the assessee's business while examining the contribution made by the members in monthly instalments, even though he was fully aware of the business of the assessee. We are inclined to agree with the decision of the CIT(A) and also with his observation that the AO has taken contradictory stands. If he accepts that the business of the assessee involved taking of monthly advances from the members and booking amounts from them and that the income arose from the sale of the plots in the year in which the plots were registered in the names of the members and possession given, then it follows that the amounts shown as advances or instalments from the members stood proved. The AO has not disputed the fact that the advance instalments stood transferred to the sales account when the plot was transferred in the name of the member. Thus, the credits in the accounts of the members are nothing but advance payments or instalments in anticipation of the sale pursuant to the booking of the plot in the particular scheme. During the relevant accounting year, there were 57 sales and the assessee has contended before the AO in its letter dated 26- 12-2007 that the instalment and booking amounts standing to the credit of these members were transferred to the sale of plots account which was taken to the trading account. If this claim is not disputed, as it has not been disputed by the AO, Printed from counselvise.com 13 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. then it follows that the amounts shown in the accounts of the members cannot be assessed as cash credits under Section 68 of the Act. This aspect of the matter has also been highlighted by the CIT(A) and we are in agreementwith his view on this aspect. The papers compiled in the paper book also show that all the details which are relevant and which show the nature and source of the amounts credited in the advance instalments account and the members booking account have been filed before the AO. In these circumstances, we are unable to differ from the view taken by the CIT(A). We are also not inclined to accept the submission of the learned CIT-DR that the CIT(A) erred in not following the procedure prescribed by Rule 46A. It has not been pointed out by him as to what was the additional evidence adduced before the CIT(A) by the assessee. Since complete details were filed before the AO himself, there is also no need to send back the matter for fresh consideration. Even if the AO did not have the time to examine those papers, the CIT(A) whose powers are co-terminus with those of the AO has examined them and has taken the decision. It is therefore unnecessary to restore the matter for fresh Thus, the first two grounds taken by the department are examination. dismissed. 11. The only other ground which remains is ground no.3 which is against the relief of Rs.49,555/- given by the CIT(A) by deleting the addition for low gross profit. The AO noted that the rate of gross profit from Ilahi Park Scheme was only 13.75% as against the gross profit of 66.60% in respect of the other transactions in the plots. He accordingly estimated the gross profit of Ilahi Park also at 66.60% which resulted in the addition of Rs.49,555/-. Before the CIT(A) it was submitted that the details of the purchases and sales of plots in Ilahi Park were available in the members registers produced before the AO. It was also contended that the AO cannot make a sweeping comparison between plots located at different places and seek to enhance the rate of gross profit of Ilahi Park plots. The CIT(A) agreed with the assessee's submissions and also held that the AO did not dispute the purchase price or sale price of the plots in Ilahi Park. He found the comparison made by the AO, irrespective of the Printed from counselvise.com 14 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. location of the plots, to be totally unjustified. Accordingly, he deleted the addition. 20. Thus considering the overall circumstances of the present case and the decision cited above, we are also of the view that assessee had received advance and forfeited the same during the course of his business and has discharge his onus of proving identity, creditworthiness of the purchaser and genuineness of the transactions with M/s Seaview trading Pvt Ltd., therefore no addition could have been made u/s 68 of the Act. Hence AO is directed to delete the same it is ordered accordingly. These grounds raised by the assessee are allowed. 16. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 25/11/2025 Sd/- Sd/- (PRABHASH SHANKAR) (ACCOUNTANT MEMBER) (SANDEEP GOSAIN) (JUDICIAL MEMBER) Mumbai: Dated: 25/11/2025 KRK, Sr. PS. Printed from counselvise.com 15 ITA No.4591//Mum/2025 Quantum Real Estate & Property Development Ind Pvt Ltd., Mumbai. Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "