DEMAS DEVELOPERS PRIVATE LIMITED,NEW DELHI vs. INCOME TAX OFFICER, WARD 7(1), NEW DELHI

PER ANUBHAV SHARMA, JM:

These cross appeals are preferred by the assessee and revenue against

the order dated 31.03.2024 of the Ld. National Faceless Appeal Centre

(NFAC) Delhi (hereinafter referred as Ld. First Appellate Authority or in

short Ld. ‘FAA’) in DIN & Order No.: ITBA/NFAC/S/250/2023-

24/[1063796665(1) arising out of the order dated 29.12.2019 u/s 147 r.w.s

143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’)

passed by the ITO, Ward 7(1) for AY: 2012-13.

our attention to revised ground of appeal at revised Form 36 filed wherein

assessee has raised following additional ground:

“2.(a) That having regard to the facts and circumstances of the case, reassessment proceedings based on borrowed opinion of the Investigation Wing without any independent verification done by the Ld. AO is in bad in law, thus, making the entire reassessment proceedings void.”

Assessee") is a company engaged in the business of real estate development

P a g e | 3 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) including owning, development and maintenance of real estate. The company

was incorporated on 06.07.2010. Accordingly, the subject assessment year

i.e. AY 2012-13 (FY 2011-12) is the second year of the company operating in

its gestation or incubation period. A real estate business generally has a

longer gestational period for purchasing lands, making negotiations with the

prospective buyers, obtaining necessary statutory approvals before starting

with the project of real estate development.

information about one, M/s Janardhan Infrastructure Pt Ltd, that it has

received debits as well as credits from various companies including the

Assessee company. Since the Assessee company had negligible turnover and

profit it was alleged to be a paper company engaged in the business of

providing accommodation entries. Further, it also alleged that many times

cash was withdrawn as per the bank statement. The investigation report also

alleged that the statement was obtained from one of the directors i.e. Mr.

Tulsi Dass Arora who denied any knowledge or involvement in this

company. The investigation report concluded that since the Assessee

company has been used for layering of funds, information is passed to the

P a g e | 4 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) jurisdictional AO for assessing commission income @ 2% of the total credits

i.e. Rs.73.38 Cr.

Assessee has minimum profits for AY 2011-12 and AY 2012-13 and has

reported unsecured loans, it is established that no business activities were

carried out and the Assessee is a shell company. Accordingly, it was

observed that total credits of Rs.73.38 Cr is sham and bogus and Rs.73.38 Cr

is income escaping assessment.

the last day of the limitation period. Vide order dated 28.12.2019 passed u/s

147 r.w.s 143(3) of the Act, it was held that Assessee has failed to prove the

creditworthiness of the unsecured loan received from related parties u/s 68 of

the Act. Thus, addition of Rs.108 Cr was made in respect of 10 out of 11

related parties on the basis that they had shown meagre income.

before the Ld.CIT(A) wherein the additions were partially deleted. Regarding

the Assessee company being a shell company or an accommodation entry

P a g e | 5 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13)

provider, the CIT(A) clearly held in favour of the Assessee. Relevant extract

as follows:

7.6...."I am of the considered opinion that the appellant company is not a dummy/paper/shell concern merely created for the purpose of layering of unaccounted money in any accommodation entry network unlike as indicated in the report of the Investigation Wing, New Delhi which has been relied upon by the AO in the impugned assessment order. The appellant is rather found to be a genuine entity holding considerable tangible assets in the form of land as reflected in its Balance Sheet and purchased for real estate development activities of the 'ERA Group'. The factum of acquisition of the land is also satisfactorily evidenced from the concerned land registry documents produced by the appellant and the MCA master data reflecting loans given by the banks against security of the land mortgage.

7.7 The main reason given by the investigation wing authorities and the AO in labelling the appellant company as a shell company was absence of any significant business receipts or any operational profits in its P& L A/c for the AY 2011-12 & 2012-13. In this regard, the explanation of the appellant that it was incorporated during the FY 2010-11 only, as a subsidiary of the flagship company of the Era group, Era Infra Engineering Ltd., along with many other companies of the Era group, mainly for the purpose of acquiring land for further development in the course of real estate business of the Era group in view of the ceiling limits imposed upto which agricultural land can be acquired by one entity and that being the initial year of business operation, it started by purchasing the lands during the FYs 10-11 & 11-12 under consideration as the first step in the real estate development business

P a g e | 6 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) and hence there were no 'business turnover' or operational profits yet, is found to be convincing given the fact that the appellant did actually purchase substantial land at total cost of 66.91 crores as on 31.03.2012. In the real estate development business there is considerable gestational period involved for acquisition & development of land and further construction thereon after completing several legal & procedural formalities and statutory & administrative approvals before operational revenues in the form of sale of the developed properties can start pouring in. Thus, the appellant company having tangible assets in the form of land worth 66.91 crores duly registered in its name cannot be termed as a paper/shell company merely due to absence of operational revenues or net profits and receipt of substantial loans/advances, Hence, the AO's findings to the contrary arrived at in the impugned assessment order are found to be unsustainable"

reopening assessment were unsustainable, went to analyse the case on merits

for the addition made of unsecured loans and allowed partial relief to the

Assessee. Accordingly, both the sides are in appeal before this Tribunal.

view that additional ground raised in regard to validity of reassessment

proceedings u/s 147 of the Act being challenged on the basis that

reassessment was based on borrowed opinion of the investigation wing and

P a g e | 7 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13)

without any independent verification done by the assessing officer being a

pure question of law which can be decided on the basis of admitted facts the

ground is admitted.

to be recorded cannot be encyclopedic and reasons should prima facie

discloses material facts which have been duly narrated in the reasons and

assessing officer specifically mentions of the analysis of the return of the

assessee and the information received from Investigation wing to conclude

that the impugned receipts were outcome of sham and bogus transaction

which were used for only layering/routing funds.

the reasons itself:

Recording of reasons for re-opening the case of M/s Demas Developers Pvt. Ltd. for A.. 2012-13, PAN: AADCD53600.

P a g e | 8 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13)

The DDIT(Inv.), Unit-7(2), New Delhi, vide his letter F. No. DDIT(Inv.) /U- 7(2)/2018-19/S/Jan./581 dated 25.03.2019 has passed on an information, the relevant portion related to the assessee company namely M/s Demas Developers Pvt. Ltd. is as under:-

“...2. Credible information was received in this office related to m/s Jardhan Infrastructure Pvt. Ltd. regarding high value RTS credits are followed by immediate debits to various accounts during AY 2012-13.

3.1 The bank account statement of the subject company was obtained and it was noticed that there are high value credits from the following entities:

• Rajat Steels • Rajat Alloys • Dore Realtors • Demas Developers • Nuray Realtech

3.2 The debits from this account included transfer to the following entities among others:

• Dore Realtors • Demas Developers • Ampulla Developers • Nuray Realtech • Febrrus • Rajat Steels

AY PUC SP Unsecured Turnover PBT Loan 2011-12 1,00,000 0 0 13,680 1,451 2012-13 1,00,000 0 0 6,500 574

P a g e | 9 ITA Nos. 2314 & 2962/Del/2024 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) Demas Developers Pvt. Ltd. (AY: 2012

Thus, for the years mentioned above, Thus, for the years mentioned above, the company had no significant business and the company had no significant business and it was beyond any logic to receive such huge amounts in its bank account. beyond any logic to receive such huge amounts in its bank account. beyond any logic to receive such huge amounts in its bank account.

4.1 To understand the nature of transactions of the subject company with the entities 4.1 To understand the nature of transactions of the subject company with the entities 4.1 To understand the nature of transactions of the subject company with the entities mentioned in para 2 and 2.1, bank statements and/or mentioned in para 2 and 2.1, bank statements and/or KYC of these entities were obtained KYC of these entities were obtained and duly analyzed. Dore Realtors, Demas Developers and Nuray Realtech have the same and duly analyzed. Dore Realtors, Demas Developers and Nuray Realtech have the same and duly analyzed. Dore Realtors, Demas Developers and Nuray Realtech have the same address and the same directors. On physical verification of the address given on the KYC address and the same directors. On physical verification of the address given on the KYC address and the same directors. On physical verification of the address given on the KYC form, none of the companies was found operatio form, none of the companies was found operational from there. Subsequently, summonses nal from there. Subsequently, summonses were issued and statement of Sh. Tulsi Dass Arora, who was a Director in these three were issued and statement of Sh. Tulsi Dass Arora, who was a Director in these three were issued and statement of Sh. Tulsi Dass Arora, who was a Director in these three companies, was recorded on oath w/s 131(1 A). In his sta companies, was recorded on oath w/s 131(1 A). In his statement, Sh. Tulsi Dass Arora tement, Sh. Tulsi Dass Arora stated that he acted as director in many compa ted that he acted as director in many companies on-the directions of chairman of Era the directions of chairman of Era Group Sh. Hem Singh Bharana. He further stated that he never knew anything about Group Sh. Hem Singh Bharana. He further stated that he never knew anything about Group Sh. Hem Singh Bharana. He further stated that he never knew anything about these companies including their business, if any. Further, these companies including their business, if any. Further, the ITR profiles of these the ITR profiles of these companies were analyzed which is as follows: companies were analyzed which is as follows:

Thus, it is clear that these companies have negligible turnover and PBT. Thus, it is clear that these companies have negligible turnover and PBT.

4.2 Analysis of bank statement of these companies reveled that many times cash was 4.2 Analysis of bank statement of these companies reveled that many times cash was 4.2 Analysis of bank statement of these companies reveled that many times cash was withdrawn or amount was transferred in the form of Demand Drafts etc. As withdrawn or amount was transferred in the form of Demand Drafts etc. As- these withdrawn or amount was transferred in the form of Demand Drafts etc. As companies are not involved in any business, as can be seen from their ITR profiles also, involved in any business, as can be seen from their ITR profiles also, involved in any business, as can be seen from their ITR profiles also, and with their director denying any knowledge and involvement in them, it is clear that and with their director denying any knowledge and involvement in them, it is clear that and with their director denying any knowledge and involvement in them, it is clear that these

5.1 Rajat Alloys Pvt Ltd.: In its reply dated 31.07.2014, Rajat Alloys Pvt. Ltd. stated t Ltd.: In its reply dated 31.07.2014, Rajat Alloys Pvt. Ltd. stated t Ltd.: In its reply dated 31.07.2014, Rajat Alloys Pvt. Ltd. stated that during the year, it has paid R that during the year, it has paid Rs. 20.75 Crore as Advance towards purchases but due s. 20.75 Crore as Advance towards purchases but due

P a g e | 10 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13)

to certain disputes the amount was received back. It further submitted a ledger account of Janardhan Infrastructure Pvt. Ltd. in its books for the period 01.94.2011 to 31.03.2012 in which it showed to have received Rs. 20.75 Crores from 20.03.2012 to 28.03.2012 in its Axis Bank account no. 912020009968547. However, on perusal of the Bank statement for this account for the mentioned period, it was noticed that the corresponding transactions were missing. Subsequently, summons were issued for personal deposition of Sh. Ramesh Chand Goel. No one appeared in compliance to the summons but an email dated 18.03.2019 was received in which it was stated that Sh. Ramesh Chand Goel is confined to judicial custody since 12.10.2015. The LTR profile of Rajat Alloys Pvt. Ltd. is as follows:

AY PUC SP Unsecured Turnover PUT Loan 2011-12 2,00,000 0 68,62,997 46,68,70 5,20,942 2012-13 2,00,000 0 73,57,133 3,49,66,48 23,18,550

5.2 Rajat Steels: Rajai Steels is the proprietary concern of M/s Ramesh Chand Goel (HUF). In its reply to the summons dated 31.07.2014, it gave no explanation with respect to the transactions with M's Janardhan Infrastructure Pvt: Ltd. Subsequently, summons were issued for personal deposition of Sh. Ramesh Chand Goel, Director. No one appeared in compliance to the summons but an email dated 18.03.2039 was received in which it was stated that Sh. Ramesh Chand Goel is confined to judicial custody since 12.10.2015. The IR profile of Rajat Steel is as follows:

AY: Proprietor’s Capital Unsecured Turnover PBT 2011-12 1,72,88,450 3,56,76,159 2,19,83,18,183 31,90,513 2012-13 1,91,52,639 5,17,26,218 6,34,59,30,169 49,98,676

Table 6.1 (in Rs. Crores)

S. No. Name Total credits from Janardhan Total Debits to Infrastructure Janardhan Infrastructure 1 Rajat Allows Pvt. ltd. Nil 20.75 2 Rajat Steel 14.5 5.05

6.1 Further, since the accounts of following entities have been used for layering the movement of funds, information may be passed on to the jurisdictional As of the following

P a g e | 11 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13)

companies with respect to the commission income earned @2% of the total credits for providing accommodation entries: • Janardhan Infrastructure Pvt. Ltd. (total credits Rs. 91.9 crores) • Dore Realtors (total credits Rs. 120.16 crores) • Demas Developers (total credits Rs. 73.38 crores) • NurayRealtech (total credits Rs. 136.77 crores) • Ampulla Developers (total credits Rs. 23.24 crores) • Frebruus (total credits Rs. 45.9 crores) 3. Analysis of ITR, information received from Investigation Wing As stated above, the assessee company filed its return of income for A.Y. 2012-13 on 28.09.2012 declaring total income of Rs.1562/-. As per information available on ITR the Directors of the Company are Bharat Bhushan Yadav And Tulsi Dass Arora. On going through the financial the previous year 2011-12 relevant to A.Y. 2012-13, following observations were found:-

Description A.Y. 2011-12 A.Y. 2012-13 Authorized Share Capital 1,00,000 1,00,000 Issued Subscribed & paid up 1,00,000 1,00,000 Loans (Unsecured) 249700000 1051798801 Sales Turn Over 265500 10623

It is observed that meager sales/gross turnover at Rs.2,65,500/- & 10,623/- for the assessment year 2011-12 & 2012-13 respectively have been declared by the assessee company and huge unsecured loans in both the years have been reported. It clearly established that no business activities were actually done by the assessee company except routing/creating layers for claiming bogus expenditure and providing accommodation entries. 4. Reasons for formation of belief In the light of above discussion, it is apparent that the assessee company M/s Demas Developers Pvt. Ltd. is an entry providing company as it opt the same modus operandi like the other shell/paper companies used for providing accommodation entries of various nature. Hence, the total credit receipts during the year under consideration amounting to Rs. 73.38 crores are sham/bogus transactions, which were used for only layering/routing the funds. Therefore, I have reasons to believe that the income to the tune of Rs.73.38 cores under the garb of bogus/sham transactions have escaped assessment as defined by Section 147 of the Act for Assessment Year 2012-13. The income chargeable to tax has escaped assessment for this year by the reasons of the failure on the part of the assessee to disclose fully and truly all material facts. Therefore, it is a fit case for the issuance of notice u/s 148 of the Act for the financial year 2011-12 relevant to A.Y. 2012-13.

P a g e | 12 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) Approval may please be granted to issue notice u/s 148 rw. provisions of section 149(1)(b) of the Income Tax Act, 1961 for assessment year 2012-13. In this case, A.Y. 2012-13 pertains to period beyond four years but before the expiry of six years from the date of issue of notice. As the case pertains to period beyond four years from the end of relevant assessment year at the time of issue of notice, necessary sanction has to be obtained from Pr. Chief Commissioner of Income Tax or Pr. Commissioner of Income Tax, in view of the amended provisions of section 151 w.e.f. 01.06.2015. It is, therefore, requested to accord approval for issuance of notice u/s 148 of the I.T. Act as per sub- section (I) of section 151 of the I.T. Act, 1961.” 12. Now as we go through the reasons the content of which have been

reproduced by above we find that the investigation wing report given some

sort of conclusive findings that assessee company has been used for layering

the movement of funds and therefore commission income on the total credits

should be considered. However, if assessing officer had actually examined

the facts of the case of the assessee then assessing officer would have

examined the issue that assessee is a real estate development company and

had purchased substantial land during the year under consideration and it

deposited money with director Town and Country Planning, Haryana which

was reflected in the financial statement. It was the second year of inception of

the assessee company. The assessing officer picked up this amount of

Rs.73.38 crores from the Investigation wing report and ended up making

addition of Rs.108 crores. Assessing Officer had mentioned of assessee

claiming bogus expenditure but no such fact was examined or adjudicated

against the assessee during the assessment proceedings. The non application

P a g e | 13 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) of mind and arriving at satisfaction only on the basis of investigation wing

report had led assessing officer to conclude that assessee is a paper/shell

company but ld. CIT(A) has also appreciated on the basis of the facts and

circumstances of the real estate development business of assessee that there

may be absence of operational expenses or net profit yet the assessee cannot

be termed as paper/shell company. Once the whole foundation of the

assessing officer to doubt the existence of assessee company as a mere

accommodation entry provider is not found sustainable, the so called reasons

to form belief are left to be merely drawing inferences from the investigation

wing report.

the assumption of jurisdiction gets vitiated. Accordingly, the appeal is

allowed and the impugned assessment order is quashed.

Order pronounced in the open court on 20.05.2026

Sd/- Sd/- (Manish Agarwal) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 20.05.2026 Rohit, Sr. PS

P a g e | 14 ITA Nos. 2314 & 2962/Del/2024 Demas Developers Pvt. Ltd. (AY: 2012-13) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI