REALPRO ASSETS LIMITED,CHANDIGARH vs. DEPUTY COMMISSIONER OF INCOME TAX, CHANDIGARH

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2011-12 arises out of an order of learned Commissioner of Income Tax (Appeals)-27, Delhi [CIT(A)] dated 15.01.2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) on 07.03.2014 making certain addition in the hands of the assessee. 2. The registry has noted delay of 1860 days in the appeal, the condonation of which has been sought by Ld. AR. It has been

explained that pursuant to search action, the case of the assessee was centralized at Delhi and another assessment was framed u/s 153A r.w.s. 143A on 30.12.2016 repeating additions which were already made in regular assessment as already framed u/s 143(3) on 07.03.2014. The assessee challenged both these assessment orders before Delhi Tribunal vide ITA Nos.2652 & 2653/Del/2019 order dated 19.02.2024 wherein appeal qua assessment framed u/s 143(3) was held to be not maintainable on account of the fact that the jurisdiction of the same lie with Chandigarh Benches of Tribunal. Accordingly, a liberty was granted to the assessee to file fresh appeal against this assessment before Chandigarh bench within 60 days which has been done by the assessee. The assessment framed u/s 153A r.w.s. 143A was restored back to Ld. AO for re-adjudication in the light of adjudication of appeal against assessment framed u/s 143(3). In this background, we find that there is no actual delay in the appeal and the delay is well explained. Accordingly, we proceed for adjudication of the appeal on merits. 3. As per assessee’s various grounds of appeal, two issues fall for our consideration i.e., (i) Disallowance of business expenses for Rs.300.02 Lacs; (ii) Confirmation of addition u/s 68 for Rs.739.49 Lacs. The Ld. AR advanced arguments supporting the case of the assessee and referred to various documents as placed on record. The Pr. CIT- DR also advanced arguments supporting the impugned additions. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.

I want to state that in total I offer a voluntary disclosure of Rs.3,00,02,600/- (Rupees Three Crores Two Thousand and Six Hundred only) in total in the hands of M/s Real Pro Assets Ltd. for the current financial year i.e., 2010-11 relevant to AY 2011-12 as mentioned above subject to no penalty provisions of I.T.Act, 1961. I have offered the said surrender voluntarily and as Managing Director I am fully competent to do so. The surrender is without any fear or coercion and survey has been carried out in a peaceful manner. The statement has been recorded in from of Sh. Atul Sundra, Director and has been explained to me in my mother tongue.

4.2 Out of above surrender of Rs.300.02 Lacs, an amount of Rs.294.17 Lacs was shown as part of gross receipts in the Profit & Loss Account whereas the remaining amount of Rs.5.85 Lacs was offered separately in the computation of income. However, Ld. AO opined that the said surrender would be assessable separately u/s 69, & 69C. Further, no business expenditure would be allowable to the assessee against such income. Finally, the surrender of Rs.300.02 Lacs was brought to tax as deemed income as ‘income from other sources’ and all the business expenses so claimed by the assessee were disallowed. The business income was finally assessed at Rs.14.54 Lacs. 5. Confirmation of Addition u/s 68 The assessee reflected advance received for sale of properties for Rs.10.63 Crores from 18 parties which are tabulated in the assessment order. The assessee was accordingly, required to file requisite supporting documents. In the absence of requisite confirmation by the lenders, the genuineness of the transactions was held to be not established and the same was added as unexplained cash credit u/s 68 while framing the assessment on the assessee.

Appellate Proceedings 6.1 The Ld. CIT(A), at para 8.2.1, noted that the assessee surrendered undisclosed income of Rs.300.02 Lacs from business activities on the basis of huge cash deposits made in the bank account and certain undisclosed assets found including cash. In the absence of books of accounts during survey, the assessee surrendered the amount of profit earned out of unaccounted transactions which was deposited in assessee’s bank account. The Ld. AO held that the said profit was net of expenses as the final amount of gross profit would only be deposited in the bank account. The nature of expenses incurred through cheque by the assessee up-to the date of survey was also not on record. Even if the plea of the assessee was accepted then the assessee would have been showing huge losses without the undisclosed income which again makes the account of the assessee suspicious. Therefore, Ld. AO was justified in disallowing the expenses. Finally, the action of Ld. AO in treating the surrendered amount as deemed income net of expenses and assessment of ‘business income’ was upheld. 6.2 On the issue of addition u/s 68, the assessee furnished additional evidences during first appeal which stood admitted and subjected to remand proceedings. After due consideration, the advances for Rs.324.50 Lacs pertaining to 4 parties (Smt. Sharda Bajaj, M/s Garg Rice Mills, Shri Tarsem Chand Jindal & Smt. Tripta Rani) stood accepted by Ld. AO in the remand proceedings. Considering the same,

Ld. CIT(A) deleted addition to that extent but confirmed the remaining addition. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 7. First, we take up the issue of assessment of ‘business income’ and assessment of surrendered income. From assessee’s computation of income as placed before us, it could be seen that assessee’s business receipts include profit on resale, commission received and income surrendered for Rs.294.17 Lacs. Against the same, the assessee has claimed personnel expenses, administrative & operations expenses & depreciation. These expenses are genuine business expenses for the assessee and are incurred mostly through banking channels prior to survey on the assessee. The survey on the assessee has happened at fag-end of this financial year (on 11.02.2011) whereas most of this expenditure has been incurred much before that date through banking channels and are incurred in normal course of assessee’s business operations. The complete details thereof have been provided by the assessee in his audited books of accounts. The substantial expenditure is in the nature of administrative and operations expenditure which include advertisement expenses, pre-design & printing expenses, professional charges, rent and other numerous items of administrative / operational expenditure in nature. Most of the expenditure has happened through normal banking channels before the date of survey on the assessee and are duly supported by various documentary evidences as placed on record. In particular, the assessee has furnished evidence of insertion of

numerous advertisements in print media inviting business from prospective customers. The copies of newspaper cuttings to substantiate advertisement expenses have been placed in the paper book on Page Nos.761 to 862. The ledger extracts of all major expenses have been placed on Page Nos.540 to 760. The copy of rent agreement and ledger of commission paid has been placed on Page Nos.863 to 869 of the paper book. The cursory glance of bank statements, as placed on record, would establish that majority of the expenses have been incurred through banking channels only and are genuine business expenditure incurred during normal course of assessee’s business. Pertinently, no specific doubt has been expressed on such expenditure. Since the expenditure is incurred in normal course of business, the same has to be allowed to the assessee while computing its ‘business income’. In our considered opinion, the rejection of books merely to disallow such expenditure is not justified. Such expenditure as incurred by the assessee have been incurred wholly and exclusively for the purpose of assessee’s business and accordingly, constitute allowable expenditure to the assessee while computing ‘business income’. We order so. 8. Coming to the issue of assessment of surrendered income, it could be seen that the assessee’s only source of income is business income. From the recorded statement as extracted above, it is quite clear that the profit earned by the assessee out of its business activities has been deposited in its bank account. The assessee has admitted that the cash deposit was nothing but profit earned to the extent of

Rs.225 Lacs which was not recorded in the regular books of accounts. This profit is in the nature of cash profit earned on account of sales made but not recorded in the books of accounts. The surrender of Rs.5.85 Lacs is to cover up misc. discrepancies which also bear the character of business income for the assessee. The surrender of Rs.9.55 Lacs are on account of excess cash found which do not tally with the books of accounts. Since the assessee does not have any other source of income and apparently has made surrender for cash profit, this surrender is also to be accepted as business income only. The total disclosure as voluntarily made by the assessee thus bears the character of business income only and is to be assessed as such. Accordingly, we would hold that the surrender has to be assessed as ‘business income’ only and not as ‘income from other sources’. In our considered opinion, the statement has to be accepted as a whole and not in a piecemeal manner. When the assessee has honored the surrender so made and also stated that the same was cash profit, the surrender has to be regarded as arising out of business activities only. Therefore, we would hold that such surrender has to be accepted as ‘business income’ only. Alternatively, even if this income is to be regarded as ‘income from other sources’, the set-off of the same against business losses of this year has to be allowed to the assessee since there is no statutory bar to claim such set-off in this year. Therefore, the head of income of this surrender would ultimately be tax neutral only and would not affect overall tax liability of the assessee.

The balance of Col. Jasmohan Singh for Rs.40 Lacs is stated to be still outstanding but it has been stated that the assessee is in possession of sufficient documentary evidence to substantiate the same. 11. In our considered opinion, when these advances have duly been refunded to the lenders in subsequent years which has been accepted by revenue, the same could not be considered to be unexplained cash credit in the hands of the assessee. Similarly, when the advances have been fructified into sales in subsequent years, the same could not be considered to be unexplained cash credit u/s 68. This view is duly fortified by the decision of Hon’ble Delhi High Court in the case of New Video Pvt. Ltd. (ITA No.576/2017 dated 05.09.2017) confirming deletion of similar addition on the ground that explanation offered by the assessee regarding repayment to the creditors in subsequent years was accepted by the revenue. The revenue’s Special Leave Petition (SLP) against this decision has subsequently been dismissed by Hon’ble Apex Court in SLP No.18325/2018 dated 20.07.2018). Similar is the view of Hon’ble Gujarat High Court in the case of CIT vs. Ayachi Chandrashekhar Narsangji (ITA No.992 of 2013 dated 02.12.2013). 12. We also find that the assessee has placed on record (Page Nos.245 to 441 of the paper-book) confirmation, Id proofs, bank statements and ledger extracts of four lenders viz. Shri Ishwar Chand, M/s S.B. Township India Ltd., M/s Hanumant Builders & Land Developers and M/s Sweet Hospitality Pvt. Ltd. It could be seen that the loan of Shri Ishwar Chand has fully been liquidated in subsequent years. The loan of M/s S.B. Township India Ltd. is duly supported by

confirmation of the lender, ledger extracts & audited financial statements of the lender. The loan has fully been liquidated in subsequent year which is evidenced by relevant bank statements. Similarly, for M/s Hanumant Builders & Land Developers, the assessee has placed on record PAN & Income Tax Return of the lender, financial statements, ledger extracts & confirmation of the lender. The loan has fully been liquidated in subsequent years which are supported by relevant bank statements. Similar documents have been placed for M/s Sweet Hospitality Pvt. Ltd. Upon perusal of all these documents, it could be well said that the assessee has duly established the identity of the lender along with their respective creditworthiness and genuineness of the transaction and considering the ratio of enumerated judicial decisions, there remain no reason to treat these credits as unexplained cash credit u/s 68. Therefore, the impugned addition, with respect to these four lender parties stand deleted. 13. For remaining lenders, it has been contended that these loans stood liquidated in subsequent years which could be well established by the assessee. Considering the same, Ld. AO is directed to verify the same. If the loans have been so liquidated, the impugned addition, to that extent, would stand deleted. 14. With respect to credit of Col. Jasmohan Singh, the assessee is apparently in possession of sufficient documentary evidences to satisfy the ingredients of Sec. 68. The Ld. AO is directed to verify these documents and delete the addition, if the documents are found in order.

We order so. The corresponding grounds of assessee’s appeal stand partly allowed. No other ground has been urged in the appeal. 15. The appeal stand partly allowed. Order pronounced on 02nd September, 2026.

-Sd- -Sd- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AS Dated: 02-09-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

ASSISTANT REGISTRAR

ITAT CHANDIGARH