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

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.

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.

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 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)”

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.

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 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 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, 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 location of the plots, to be totally unjustified. Accordingly, he deleted the addition.

Order pronounced in the open court on 25/11/2025