DCIT, CENTRAL CIRCLE-3, NEW DELHI vs. SUMMIT PROMOTERS PVT. LTD., NEW DELHI

This Revenue’s appeal raises the following substantive grounds: 1. The Ld. CIT(A) is erred in deleting the addition of Rs.1,88,41,558/- u/s 69C on account of unexplained expenditure. 2. The Ld. CIT(A) is erred in holding that seized documents established that Solutrean Building Technologies Ltd. (SBTL) has paid brokerage in cash and has also received money in cash ignoring the fact that SBTL was working on behalf of assessee for commission. 3. The Ld. CIT(A) is erred in not considering the fact that amount of Rs.1,88,41,558/- is the unexplained expenditure done by SBTL for the construction of RST Horizon Project on behalf of the assessee.

We now come to the basic relevant facts. The assessee had filed its return of income on 30th October, 2017 declaring loss of Rs.2,45,692/- which stood processed under section 143(1) of the Act. The learned departmental authorities thereafter carried out the search and survey under section 132 r.w.s. 133A of the Act in Sh. Ravinder Singh Tongad group of cases on 18.11.2018 wherein the assessee was also covered under the latter exercise. They came across the alleged incriminating document “KKD” wherein the assessee’s authorized marketing agent to M/s. Solutrean Building Technologies Ltd. (“SBTL”) was found to have incurred an unexplained expenditure of Rs.2,48,41,558/- in its name which stood added under section 69C of the Act on account of its failure to explain and reconcile the same, by the Assessing Officer in his assessment framed on 13th October, 2021. 3 | P a g e

The assessee filed its lower appeal wherein the CIT(A) has reversed the above impugned addition as under: “Findings/Determination are as hereinafter- 6. I have considered the material on record including written submissions of the AR of the appellant filed in course of appellate proceedings. The issue in both the years is same as the addition made on the basis of same document found during the course of search.

I have perused the assessment order u/s 147 of the Act. There was search u/s 132 in the case of Ravinder Singh Tongad Group of cases. In the case of the appellant, there was survey u/s 133A of the act on 18.11.2018. During the course of search and survey, certain documents in the mobile phone and laptop of Shri H.N. Gupta was found. On the basis of these materials, the case of the appellant was reopened. Material relating to the appellant is as under:- 4 | P a g e

On the basis of such evidence reproduced in the assessment order, the Assessing Officer added an amount of Rs.60,00,000/- u/s 69C of the Act in the hands of the appellant for the A.Y 2016-17 and Rs.2,48,41,558/- u/s 69C in the A.Y 2017-18. For the A.Y 2017-18, on 26.10.2021, the Assessing Officer passed rectification order u/s 154 wherein it was stated that the assessed income actually Rs.1,88,41,558/- (Rs.24841558- 60,00,000) for the year under consideration.

For the A.Y 2017-18, the Assessing Officer in his order has stated that the SBTL has received Rs.5,01,70,538/- on behalf of the appellant company. Out of this amount Rs.2,53,28,980/- was returned to the appellant and there was balance remaining with SBTL was of Rs.2,48,41,558/-. In the assessment order (para 8) for the A.Y 2017-18, the Assessing Officer has stated as under:- 5 | P a g e

Thus, the Assessing Officer reached the conclusion that on behalf of the appellant, M/s SBTL had collected Rs.5,01,70,538/- and had returned back Rs.2,53,28,980/-. The money returned back by the SBTL to the investors has not been considered for addition. The money that was not returned back was considered as having been invested in the construction of the RST Horizon Project of the appellant company.

The Assessing Officer made addition u/s 69C on the basis that there was unexplained expenditure in the form of investment in the RST Horizon project by the appellant. However, there is no evidence to suggest that Rs.2,48,41,558/- was invested in the project and it was not reflected in the books of accounts of the appellant for the year under consideration (A.Y 2017-18). The documents in possession do not reveal in any manner that there was unaccounted investment/expenditure made by the appellant. Apparently, the Assessing Officer believed that the amount must have been invested in the project only and it must not have been reflected in the appellant's books leading him to make addition u/s 69C of the Act. It may be noted that the provisions of section 69C cannot be invoked on the basis of presumptions. For invoking the provisions of section 69C, it is necessary to establish that there was some expenditure made and that expenditure was not accounted in the books and that the source of money available to make investment is not explained by the appellant.

It is also a matter of record that the Assessing Officer has not conducted any enquiry with the third party in respect of the impugned transaction and has not brought any other corroborative evidence on record in support of his contentions. The document has not been examined by the Assessing Officer and the inferences drawn by the Assessing Officer is not logically flowing from the contents of the documents relied upon.

From the assessment order, it is seen that the Assessing Officer issued show cause notice to the appellant proposing addition of Rs.60,00,000/- for the A.Y 2016-17 and Rs.4,41,70,538/- for the A.Y 6 | P a g e

In para 4.4 of the assessment order, the Assessing Officer has reproduced the document based upon which addition has been made for the A.Y 2017-18. The same is once again reproduced below:-

From the above document, it is not evident and it is not established that the amount of Rs.2,48,41,558/- was invested in the construction of the project as has been claimed by the Assessing Officer in the assessment order. It is also not evident from the above that the appellant actually received Rs.2,48,41,558/- from SBTL. Further as per the Assessing Officer, in the A.Y 2016-17, the amount of Rs.60,00,000/- was held to be invested in the project and added u/s 69C of the Act because Rs.60,00,000/- was alleged to be received during the F.Y 2015-16. 7 | P a g e

Apparently, none of the additions were made in the hands of the M/s SBTL but was made in the case of the appellant company.

It was seen that the document reproduced in the assessment order was not the complete document but only part document. Therefore, the Assessing Officer was requested to furnish the evidences in his possession, based on which additions have been made.

In response to the letter, the Assessing Officer has furnished the details of the account contain in file KKD.pdf. From the account named KKD, it is seen that there are two ledger accounts. The first ledger account is as under:- 8 | P a g e 9 | P a g e 10 | P a g e 11 | P a g e

During the course of assessment and investigation proceeding, the appellant has stated that they do not know anything about the above said documents.

The Assessing Officer furnished above said document which mentioned the name of KKD and M/s Solutrean Building Technologies Ltd. (Ms/ SBTL). There was agreement between the appellant and SBTL for construction and selling of space. In this regard, the appellant furnished the agreement of the appellant company with SBTL.

The relevant portion of the agreement is as under:- 12 | P a g e 13 | P a g e 14 | P a g e 15 | P a g e

On the perusal of above agreements, it is clear that SBTL had a contract for development, marketing etc. of project named Karkardooma project (kkd) also called as RST Horizon with the appellant company. The agreement was for construction, marketing, power to appoint brokers and sale of the area. In the contract, M/s SBTL was to act as sole selling & marketing agent of the project. Thus, M/s SBTL was the entity entrusted with the responsibility of both construction and selling of the project. As per the agreement, the SBTL at their own cost and expenses employ adequate, skilled and efficient marketing personnel for the job. Further as per the agreement, SBTL shall be fully authorized and competent to appoint one or more than one sales/agents/brokers authorizing them to sell and market the project within the framework of the policy prepared by SBTL in consultation with RST Buildtech. Thus, even appointed brokers and dealing with them was the responsibility of SBTL.

The document found during the course of search has to be seen/examined in the light of the agreement of the appellant with M/s SBTL. The impugned document is document belonging to M/s SBTL in respect of the Karkardooma project (kkd). As the SBTL was the sole selling agent, therefore, he had interaction with the brokers. The impugned document states the transactions of receipts and payments by M/s SBTL in respect of brokerage payment. The document on page 16 | P a g e no.7 computes commission payable @9% in respect of KKD project by M/s SBTL. It is seen that M/s SBTL was supposed to receive commission at the rate of 9% of the gross revenue. Therefore, an amount of Rs.1,18,12,750/- credited and Rs.60,00,000/- paid during the year F.Y 2015-16 (i.e. A.Y 2016-17) and balance amount of Rs.58,12,752/- is carried forward to the next year i.e. F.Y 2016-17 (i.e. A.Y 2017-18). Apparently, the impugned document documents the receipt and payment by M/s SBTL.

During the investigation statement of Sandeep Sahani was recorded on 22.05.2019 and the impugned document was shown to him and the following question were asked:

Shri Sandeep Sahni was the key person of M/s SBTL. He evaded answering the question. Further, the appellant submitted that the total booking made by M/s SBTL in Karkardooma project is around 17 | P a g e

All the above said booking and cancellation thereof were duly recorded in the books of accounts of the appellant. Further, the appellant in support of cancellation of booking has submitted the cancellation agreement with the buyers. 25 | P a g e 26 | P a g e 27 | P a g e 28 | P a g e 29 | P a g e 30 | P a g e 31 | P a g e 32 | P a g e 33 | P a g e 34 | P a g e 35 | P a g e 36 | P a g e 37 | P a g e 38 | P a g e 39 | P a g e 40 | P a g e 41 | P a g e

The appellant has further submitted that the Karkardooma project was stalled and the customers (82 in numbers) approached the court, 42 | P a g e some of them even filed FIR against the appellant. Later on, except for nine clients, settlement was done with every person who booked their space in the Karkardooma project. The court case with nine client is in progress. In this regard, agreement of settlement was furnished, the sample of which has been reproduced above.

If the impugned document relates to the booking amount accepted by the appellant, then it is not possible that there will be no court case against the appellant for recovery of payment made in cash. If some customer of the appellant has paid any money by way of cash to the appellant, in that case those persons would have filed FIR/court case against the appellant for recovery of total amount paid by way of cash and cheque both. However, it is seen that the court cases are only in respect of amount paid by way of cheque/banking transactions and accounted in the books of accounts of the appellant. This indicates that the impugned documents are not in respect of payment received or made by the appellant to its customers. This establishes that the impugned document is in respect of payment of brokerage to various brokers by the SBTL because marketing and dealing with brokers was the obligation of the SBTL.

In support of the claim, appellant submitted the following documentary evidences for the FIR and court case with the concerned authorities/courts: 43 | P a g e 44 | P a g e

Upon examination of above documents, it is established that M/s Solutrean Building Technologies Ltd. PAN: AAMCS88350 has pald brokerage in cash and has also received money in cash from various persons. The details of such transactions are recorded in the impugned document reproduced in page 8 to 12 of this order. 45 | P a g e

In view of the above discussion, the action of the Assessing Officer in making addition in the hands of the appellant is unjustified. The addition of Rs.60,00,000/- and Rs.1,88,41,558/- for the A.Y 2016-17 and A.Y 2017-18 respectively u/s 69C of the Act is liable to be deleted.”