DCIT, CC-1, , JAIPUR vs. SHRI JUGAL KISHORE GARG(DEREWALA), JAIPUR

per the petition filed by MBDL before the Hon'ble Settlement Commission

the `peak deposit' of unaccounted Capital introduced, loans and advances

and interest paid and received was considered for computing the income.

Accordingly income of Rs.15.10 cr. was offered on the basis of cloud data

of N. Trading Company. The same is accepted by the Settlement

Commission at page 151 of the order dated 16.05.2019. The relevant

extract of the final order wherein this issue is discussed is reproduced as

under:-

‘’Para I of Page. 137-138 of the Hon'ble Settlement Commission order "UNACCOUNTED CASH LOANS - CHAPTER VII OF THE RULE 9 REPORT: (page no. 128-180 of the Report):-As offered by the Applicants: Cash Peak Of Cash Loans And Capital Transactions: Rs.15,10,77,500/- .As was the case with the capital introduction by the partners, in the Data found in tally P1 and P2 and also in the seized cash book, all seized pursuant to search, there were found recorded entries with regard to cash loans introduced in the business shown to have been received from various persons directly as well as through certain finance brokers. Repayment of the said loans along with interest on the same was also all found recorded in the Tally data. The line of business of the Applicant group, as has been discussed earlier, was such that required huge sums of cash. For purposes of the said, huge sums of unsecured loans in cash were thus taken from the market to meet the requirements and as cash was generated from booking of flats/units/plots, the said loans were periodically repaid. Interest on the loans all in cash, were also paid.In the search conducted, in the seized data, all such complete recordings of loan received, repaid and interest paid was all found. However, during the course of the search itself, since these entries could not be explained by filing confirmation of parties, these cash loans were accepted to be the undisclosed income of the Applicant group in order to buy peace.Thus based on the above, therefore, to determine the net funds generated in business, peak of the loan accounts (including the capital cash entries) 23

ITA No.34/JP/2020 DCIT, Central Circle-1, Jaipur vs Jugal Kishore Garg (Derewala) was worked out. It was the contention of the Applicant that the loan introductions/repayment and the capital introduction/withdrawals all represented inflow/ outflow of funds in the business and thus in the spirit of settlement, the peak of the same was offered as the undisclosed income of the Applicant group.In the working of such peak, the following cash entries relating to loans were considered: (the peak working is enclosed at pages 422-439 of the P/B). - Receipt of unsecured loans. - Repayment of unsecured loans. - Interest paid or received on cash loans. The same being settled in cash, the same is included in the peak calculations.

Thus based on the above, the peak of the cash transactions was arrived at Rs. 15,10,77,6001 and the same, being the business income of the Group was thus offered as the Additional income of the group.”

Para 2.5 Page No. 141 of the Hon'ble Settlement Commission order

"Thus, based on the above, the Applicant, in the event of loan confirmations being not readily available, in the spirit of settlement, has considered all these loan transaction as his own transaction. In the tally data both receipt of loan as well as repayment of loan is recorded. The loans raised from one party is utilised in the business activities of the group and out of such business receipts or further loan raised, repayment is made of the earlier loan."

Para 7.7 (Findings of the Commission) Page No. 151 of the Hon'ble Settlement Commission order

"The Commission has considered the submissions made by both parties. After going through the facts of the case the commission finds merit in the contention of the applicants that in computation of Peak the debit entries must also be considered. The contention of the Pr. CIT that the applicants are not entitled for any benefit of debit entries in calculation of peak values does not hold ground. The position of the Applicants get further force from the fact that the entries based on which applicants have computed the Peak value, are recorded in the data found in search and seizure.

ITA No.34/JP/2020 DCIT, Central Circle-1, Jaipur vs Jugal Kishore Garg (Derewala) Based on the above the contention of the applicants on the quantum of the peak as offered as undisclosed income of Rs. 15,10,77,600/- is hereby accepted." 3.11 In respect of surplus, the ld. CIT(A) observed that it may

point out that as per the petition filed by MBDL before the

Hon'ble Settlement Commission the 'on money' of received by

the Group on its various projects was considered for computing

the income. In its admissions made before the Hon'ble Settlement

Commission, MBDL has explained the nature of such 'surplus'

which was credited to the partner's accounts. .In fact the same

represent 'on money'. Accordingly income of Rs.80.07 cr.

(Rs.72.33 cr. + Rs.7.75 cr.) was offered on the basis of cloud

data of N. Trading Company. The same is accepted by the

Hon'ble Settlement Commission at page 57 of the order dated

16.05.2019. The relevant extract of the final order wherein this issue

is discussed is reproduced as under:-

Para 21.2 of Page. 11 of the Hon'ble Settlement Commission order

21.2 Amount of Settled Booking Advances in Tally Data The Applicant Group received booking advances from its various customers in various projects in cash, which got "settled" when the entire 'on-money' due from the customer was received. In the tally data, such receipts have been distributed in capital account directly with account description 'surplus'. The nature of these booking advances was identical to unsettled booking advances as explained above, however, in 25

ITA No.34/JP/2020 DCIT, Central Circle-1, Jaipur vs Jugal Kishore Garg (Derewala) such cases, no money remained further due from customers as far as 'cash component' was concerned, though, projects remains yet to be delivered to the customer. In the Tally Data, the said information is available with account head 'Surplus' for various schemes like "Surplus Ananda", 'Surplus Ajmer Road, 'SurplusVaishali Estate'. All such bookings are termed as Settled bookings for ready reference since in such cases, cash component has already been received/settled with customers. These advance bookings are also not revenue of the year of receipt, however, to determine overall profitability/cash profit, the said amount has been considered as 'revenue' in computation of additional income. The total of such Settled Booking received in cash as available in Tally data comes at Rs.382.89 Crores. Thus in total there has been receipt of booking advances in cash ('on money') of Rs. 684 Crore (301.11 cr. + 382.89 cr.), which is treated as revenue for the purpose of offer of additional income though the same is amount representing liability of the Applicant(s) is given in Enclosure1. Para 6.4 of page. 33 of the Hon’ble Settlement commissioner order o In the Tally Data, on the date on which the on money was all settled, the earlier cash receipts against "booking advances" were all deleted and on the said date of final settlement, a fresh consolidated cash entry was passed wherein cash was debited and the "Surplus - Project Name" Account was credited.

o After transfer of the settled receipts to the Surplus A/c, the said on money was transferred to the partners/directors of the Group by debiting the said Surplus Account and crediting the Partners Accounts with the description "being surplus after deletion credited to partners". Thus the Partners were given control of the funds for its proper utilisation for purposes of the Projects. The Term "Surplus" was a nomenclature used to identify the Settled on money which was put under the control of the Partners/Directors. o These entire receipts thus are booking receipts, which are revenue in nature and have already been considered and offered as revenue on-money income in our working. o Further regarding the utilization of the funds as pointed out the Ld. PCIT, it is submitted that above-mentioned surplus, being revenue in nature (earned by way of on money), was utilized was meeting various expenditures like utilization of land, for other construction cost and all other expenses related to business. Para 6.8 of Page. 57 of the Hon'ble Settlement Co mmission order 26

ITA No.34/JP/2020 DCIT, Central Circle-1, Jaipur vs Jugal Kishore Garg (Derewala) Based on the above the total undisclosed income of the applicants of the Group is settled at Rs.80,07,69„990/- on the issue of cash profit. The amount of undisclosed income settled in respect of the applicants in the respective assessment years are given in the following table.’’

In view of above, the ld. CIT(A) observed that it is evident that the

surplus being referred to by the Ld. AO is not profit from the projects but

the receipts of 'on money' credited to the capital accounts of the partners

which has been considered in the additional income offered by MBDL

and accepted by the Hon'ble Settlement Commission.

3.12 Thus on merits also since the amounts had already been added by

the AO and the same had already been subjected to tax in the hands of

MBDL and related entities, therefore, the ld. CIT(A) after considering all

those facts had correctly deleted the addition made in various assessment

years. The Bench also noted that no new facts have been brought by the

Revenue in controverting the order of the ld. CIT(A) to the issue in

question. In this view, of the matter, we find no reason to interfere with

the order of the ld. CIT(A). Thus the appeal of the Revenue for the

assessment year 2014-15 is dismissed.

4.1 As regards the appeals of the Revenue for the assessment year

2015-16 to 2017-18, the Bench noted that the grounds raised by the

Revenue are similar and the facts are also similar to the case of the

ITA No.34/JP/2020 DCIT, Central Circle-1, Jaipur vs Jugal Kishore Garg (Derewala) Revenue for the assessment year 2014-15 wherein the appeal of the Revenue for the assessment year 2014-15 is dismissed, hence taking into consideration the similar facts and circumstances of the case, the decision taken by the Bench for the assessment year 2014-15 shall be applicable

mutatis mutandis in the appeals of the Revenue for the assessment year 2015-16 to 2017-18. Thus the appeals of the Revenue are dismissed.

Sd/- Sd/- ¼ jes’k lh-'kekZ½ ¼lanhi xkslkbZ½ (Sandeep Gosain) (Ramesh C. Sharma) ys[kklnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 14/09/2020. *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1.vihykFkhZ@The Appellant- The DCIT, Central Circle-1 , Jaipur 2.izR;FkhZ@ The Respondent- Shri Jugal Kishre Garg (Derewala), Jaipur 3. vk;dj vk;qDr@ CIT vk;dj vk;qDr@ CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. xkMZ QkbZy@ Guard File {ITA No. 34 to 37JP/2020} 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत