ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(3), AHMEDABAD vs. DHARNIDHAR DEVELOPERS, AHMEDABAD

PDF · subscribers
ITSSA 181/AHD/2024Status: DisposedITAT Ahmedabad28 February 2025AY 2014-155 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) rightly deleted the addition made under Section 68. The Tribunal noted that the transaction of Rs. 8 crores stood in the assessee's books as an unsecured loan, which was accepted by the Revenue for Assessment Years 2012-13 and 2013-14. The Tribunal observed that the amount was not received in Assessment Year 2014-15. It was an undisputed fact that the assessee had not received any amount over and above the entries in its regular books of account. The Tribunal found that the Revenue could not establish a case of forfeiture related to the land deal that was distinct from the unsecured loan already entered in the assessee's books. Therefore, the CIT(A)'s finding that the addition under Section 68 was wrongly made was upheld. The Tribunal found no need to interfere with the CIT(A)'s findings.

What were the facts?

The Revenue has appealed the order of the CIT(A)-12, Ahmedabad, for Assessment Year 2014-15. The appeal concerns an addition of Rs. 8,00,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, treating it as unexplained cash credits. This amount was initially received by the assessee, Dharnidhar Developers, as an advance against the sale of land. During search proceedings, digital evidence, including a draft banakhat, indicated that if the balance payment was not made, the advance would be forfeited. The AO treated the forfeited amount as taxable income from other sources, while the assessee had reflected it as an unsecured loan. The CIT(A) had deleted the addition.

What were the issues?

1. Whether, on the facts and in law, the CIT(A) erred in deleting the addition of Rs. 8,00,00,000/- made under Section 68, which was a forfeited amount from total sales consideration of Rs. 20,00,00,000/- for land at Survey No. 415/4, Makarba Village, when the assessee failed to offer it to taxation under 'Income from other Sources' in the year of forfeiture (A.Y. 2014-15)? (Question of law and fact, turns on Section 68). 2. Whether, on the facts and in law, the CIT(A) erred in ignoring the draft banakhat found in digital evidence, which stipulated forfeiture of Rs. 8 Cr advance if the buyer failed to pay the balance Rs. 12 Cr, and the assessee did not offer this forfeited amount to taxation under 'Income from other Sources' in A.Y. 2014-15? (Question of law and fact, turns on Section 68). 3. Whether, on the facts and in law, the CIT(A) erred in ignoring the change of accounting by the assessee, who reclassified Rs. 8 Cr from 'Advance against sale of Property' to 'Unsecured Loan' to avoid taxation of the forfeited amount under 'Income from other Sources' in A.Y. 2014-15? (Question of law and fact, turns on Section 68). Revenue's Contention: The CIT(A) erred in deleting the addition. The draft banakhat clearly indicated forfeiture. The assessee failed to offer the forfeited amount to taxation and improperly reclassified it as an unsecured loan to avoid tax. The AO's addition under Section 68 as unexplained cash credit was justified. Assessee's Contention: The grounds raised by the Revenue are not related to the AO's addition. The AO made the addition under Section 68 as unexplained cash credits, not as forfeited income. The Rs. 8 Cr was an unsecured loan received in A.Y. 2012-13 and 2013-14, which was accepted by the Revenue in those years. Therefore, the CIT(A) rightly deleted the addition.

Which sections of the Income-tax Act were involved?

Section 68,Section 132,Section 153A,Section 143(2),Section 142(1),Section 139(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD

Before: Ms. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Vijay Mehta, AR
For Respondent: Shri Ritesh Parmar, CIT-DR
Hearing: 17.02.2025Pronounced: 28.02.2025

PER SUCHITRA KAMBLE, JUDICIAL MEMBER:

The appeal filed by the Revenue against the order dated 07.10.2024 passed by the CIT(A)-12, Ahmedabad for the Assessment Years 2014-15

2.

The Revenue has raised the following grounds of appeal :-

1) “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 8,00,00,000/- made u/s. 68 of the Income Tax Act, being forfeited amount, out of total sales consideration of Rs.20,00,00,000/- with respect to land at Survey No. 415/4, Makarba Village, which the assessee has failed to bring forfeited amount to taxation under the head “Income from other Sources” in the year of forfeiture i.e., A.Y. 2014-15.”

IT(SS)A No.181/Ahd/2024 (Assessment Years: 2014-15) ACIT vs. Dharnidhar Developers Page 2 of 5

2) “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the draft banakhat found from the digital evidences (image / document No. 6ff84c7-e3be-49dd-801c-bfc53d8ba7b6, page No. 13 to 19, as per Annexure – A dated 17/10/2019) in the form of Mobile phone / Email Data, found and seized from the residence of Shri Dhiren Bharwad. In the said draft banakhat, it was categorically mentioned that, after the payment of Rs. 8Cr as advance towards purchase of property, if the buyer failed to pay the balance amount of Rs. 12 Cr, then the seller will forfeit the advance money of Rs. 8 Cr. Accordingly, on failure of payment of balance amount of Rs. 12 Cr, the seller i.e., the advance money of Rs 8 Cr but had not offered such forfeited amount to taxation under the head “Income from other Sources” in the year of forfeiture i.e., A.Y. 2014-15.”

3) “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the change of accounting undertaken by the assessee in their books of accounts, wherein, the assessee in order to avoid the payment of taxes had changed the nature of transaction of Rs 8 Cr from “Advance against sale of Property” to “Unsecured Loan” and thus, this change of accounting has been routed through Balance Sheet only and thus avoided to bring forfeited amount of Rs. 8 Cr for taxation under the head “Income from other Sources” in the year of forfeiture i.e., A.Y. 2014-15.”

4) “The Revenue craves leave to add / alter / amend and / or substitute any or all of the grounds of appeal.”

3.

During the year, the assessee has shown Profit and Gain from business and profession. Original return was filed on 30.09.2014 u/s 139(1) declaring total income at Rs. 87,22,060/-. A search action u/s 132 of the Income Tax Act was carried out in the case of “Land Broker and Financer” Group on 15.10.2019 and subsequent dates. The assessee i.e. Dharnidhar Developers is flagship entity of subgroup namely “Shri Dhiren R Bharwad”. During the course of search, the residence of the assessee was also covered u/s 132 of the Act. Consequent to search action, notice u/s 153A of the Act was issued on 19.10.2020 and served upon the assessee. In response to the same, the assessee filed the return of income on 18.11.2020 declaring total income

IT(SS)A No.181/Ahd/2024 (Assessment Years: 2014-15) ACIT vs. Dharnidhar Developers Page 3 of 5

at Rs. 87,22,060/-. Subsequently, a notice u/s 143(2) of the Act was issued on 07.12.2020 as well as notice u/s 142(1) was also issued along with questionnaire on 28.01.2021. in response, the Chartered Accountant of the assessee filed the details.

3.1 During the year, the assessee has shown Profit and Gain from business and profession. During the course of search proceedings u/s 132 of the Act at the residence of Shri Dhiren R Bharwad digital data found and seized as per Annexure A dated 17.10.2019, in the form of Mobile Phone(s)/Email data. From the said data, the Assessing Officer observed that the same are MOU for sale of land situated at Makarba Village by Shri Dhiren R Bharwad to M/s Vidhyutnagar Township, M/s Shiv Ugti Developers and M/s AB Technobuild. The total sales consideration was fixed at Rs. 20,00,00,000/- and as per the terms of Banakhat, the amount of Rs. 8,00,00,000/- which was received in the books of the assessee in past, was to be apportioned against the said consideration. The terms and conditions of MOU further stated that the balance amount has to be paid within 3 months otherwise the advance amount given will be forfeited by the receipient and the Bankhat agreement will stand cancelled.

3.2 During the post search proceedings, statement of Shri Dhiren Rambhai Bharwad was recorded on 06.02.2020 and in Ans. To Que. No. 5, he has stated that page no. 13 to 19 contain copy of MOU between him and M/s Vidhyutnagar Township & Others. The total sales consideration of the land is 20,00,00,000/- and he has already received total amount of Rs. 8,00,00,000/- towards the deal. However, no further payments have been received by him and documentation of the land is yet to be done. After going through the reply of the assessee which was filed in response to the Show Cause Notice dated 05.07.2021, the Assessing Officer observed that the assessee has received an amount of Rs. 8.00 crore from M/s Vidyutnagar Township, M/s Shiv Ugati Developers & M/s AB Technobuild. The Assessing Officer held that the claim of the assessee that the transaction is genuine and the same still stands in its books as unsecured loans, has not been established by assessee in respect of its genuineness. The assessee has not established the identity as well as the confirmation of the said transaction and not filed any bank details, therefore, the Assessing Officer made addition of Rs. 8.00 Crore u/s 68 of

IT(SS)A No.181/Ahd/2024 (Assessment Years: 2014-15) ACIT vs. Dharnidhar Developers Page 4 of 5

the Act treating the same as unexplained cash credits in the books os account of the assessee.

4.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. DR submitted that the assessee has made the said amount as loan entry in the previous year and reflected the same in the books of accounts. The Ld. DR submitted that the assessee has not given any evidence to the extent of repayment of loan and also not shown its intention to repay it. The Ld. DR further submitted that the CIT(A) was not correct in deleting the addition made u/s 68 of the Act as there is no evidence to the effect that there was forfeiture of amount and the assessee did not explain the same. The Ld. DR submitted that the assessee failed to bring forfeited amount to taxation under the head “Income from other sources” in the year of forfeiture i.e., A.Y. 2014-15. The Ld. DR submitted that the CIT(A) has not taken into consideration the draft banakhat found from the digital evidences in the form of Mobile phone / Email Data, found and seized from the residence of Shri Dhiren Bharwad wherein it was specifically mentioned that after the payment of Rs. 8 Cr as advance towards purchase of property, if the buyer fails to pay balance amount then the seller will forfeit the advance money.

6.

The Ld. AR submitted that the grounds taken in the Revenue’s appeal are not related to the addition made by the Assessing Officer. In fact, the Assessing Officer made addition of Rs. 8,00,00,000/- as unexplained cash credits u/s 68 which was not the amount of forfeiture but that of unsecured loan in respect of transaction of Rs. 8,00,00,000/- received by the assessee firm in A.Y. 2012-13 and 2013-14 which was accepted by the revenue in those assessment years. Thus, the CIT(A) has rightly deleted the addition.

7.

We have heard both the parties and perused all the relevant material available on record. It is matter of record that the assessee has the transaction of Rs. 8 crores stands in the books of account of the assessee as unsecured loan which was accepted by the Revenue for A.Y. 2012-13 and 2013-14. This fact was not denied by the Ld. DR. The CIT(A) in para 9.3 has explained that the parties to the said MOU were Shri Dhiren R. Bharwad and M/s Vidyutnagar Township, M/s

IT(SS)A No.181/Ahd/2024 (Assessment Years: 2014-15) ACIT vs. Dharnidhar Developers Page 5 of 5

Shiv Ugati Developers and M/s A.B. Technobuild. Shri Dhiren Bharwad is one of the partners in assessee firm. But facts remains that the assessee received Rs. 8,00,00,000/- in A.Y. 2012-13 and 2013-14. Thus, the said amount was not received in A.Y. 2014-15. It is an undisputed facts that there is no evidence nor it is the case of the Assessing Officer that the assessee has received any amount over and above the entries made in the regular books of account maintained by the assessee. Therefore, the CIT(A) has rightly deleted the addition made under Section 68 of the Act as the revenue cannot make out the case of the forfeiture in respect of the land deal is not related to the unsecured loan which is entered into the books of account of the assessee. There is no need to interfere with the findings of the CIT(A). Hence, the appeal of the revenue is dismissed.

8.

In the result, appeal filed by the Revenue is dismissed.

Order pronounced in the open Court on this 28th February, 2025.

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 28th February, 2025 PBN/*

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY

Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Latest GST High Court judgments

Search GST case law →