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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
Commissioner of Income Income-tax(Appeals)-3, Mumbai [in short 3, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011 ] for assessment year 2011-12 and 2012-13 13 respectively. As common issue in dispute is involved in both these appeals, common issue in dispute is involved in both these appeals, common issue in dispute is involved in both these appeals, therefore, same were heard together and dispose therefore, same were heard together and disposed off by way of this off by way of this consolidated order for convenience and avoid consolidated order for convenience and avoid repetition of repetition of facts.
First we take up, the appeal for assessment year 2011-12. The First we take up, the appeal for assessment year 2011 First we take up, the appeal for assessment year 2011 grounds raised by the assessee grounds raised by the assessee are reproduced as under: reproduced as under:
That the Id. C.I.T. (Appeals) has erred in confirming the That the Id. C.I.T. (Appeals) has erred in confirming the That the Id. C.I.T. (Appeals) has erred in confirming the disallowance (reduction) made & denial of carry disallowance (reduction) made & denial of carry disallowance (reduction) made & denial of carry forwarding claim of Closing Work forwarding claim of Closing Work in Progress (WIP) of Rs. in Progress (WIP) of Rs. 2,99,40,000/ 2,99,40,000/- by the Id. A.O. without properly appreciating by the Id. A.O. without properly appreciating the facts of the case & law. The Appellant prays that the facts of the case & law. The Appellant prays that the facts of the case & law. The Appellant prays that disallowance of closing WIP & denial of carry forward disallowance of closing WIP & denial of carry forward disallowance of closing WIP & denial of carry forward claim of the same being wrong on facts & bad in law claim of the same being wrong on facts & bad in law claim of the same being wrong on facts & bad in law therefore therefore same may kindly be deleted. 3. Briefly stated facts of the case are that stated facts of the case are that the assessee company the assessee company was incorporated on 03/02/2011 with two shareholders i.e was incorporated on 03/02/2011 with two shareholders i.e was incorporated on 03/02/2011 with two shareholders i.e. Sh Ashwin L. Shah and Smt Kalpana Shah, with the main purpose of Shah and Smt Kalpana Shah, with the main purpose of Shah and Smt Kalpana Shah, with the main purpose of redevelopment of a Property namely “Kir redevelopment of a Property namely “Kirti Chambers”, located at ti Chambers”, located at Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 3 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 Fort, Mumbai. The assessee failed to file his regular return of income Fort, Mumbai. The assessee failed to file his regular return of income Fort, Mumbai. The assessee failed to file his regular return of income for the assessment year under consideration i.e. AY 2011 for the assessment year under consideration i.e. AY 2011 for the assessment year under consideration i.e. AY 2011-12, therefore the Assessing Officer issued a notice under section 148 of therefore the Assessing Officer issued a notice under section 148 of therefore the Assessing Officer issued a notice under section 148 of the Income-tax Act, 1961 ( tax Act, 1961 (in short ‘the Act’) on 29/10/2013, which ) on 29/10/2013, which was duly served upon the assessee. In response, the assessee filed was duly served upon the assessee. In response, the assessee filed was duly served upon the assessee. In response, the assessee filed return of income income income on on on 18/02/2014 18/02/2014 18/02/2014 declaring declaring declaring Nil income. Subsequently, statutory notices under the Subsequently, statutory notices under the Act were issued and were issued and complied with. In the assessment comp complied with. In the assessment completed on 31/03/2015 under leted on 31/03/2015 under section 147 read with section 143(3) of Act, the Assessing Officer section 147 read with section 143(3) of Act, the Assessing Officer section 147 read with section 143(3) of Act, the Assessing Officer though assessed the total income at NIL, however though assessed the total income at NIL, however dis disallowed work- in-progress in respect of progress in respect of “Kirti Chambers Property Kirti Chambers Property” amounting to ₹2,99,40,000/- and denied carry and denied carry forward of the same for forward of the same for subsequent years. On further appeal, the Ld. CIT(A) also upheld the On further appeal, the Ld. CIT(A) also upheld the On further appeal, the Ld. CIT(A) also upheld the disallowance. Aggrieved, the assessee disallowance. Aggrieved, the assessee is in appeal before the in appeal before the Tribunal, raising the grounds as reproduced above. , raising the grounds as reproduced above.
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 4 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 3.1 The sole ground raised by the assessee relate The sole ground raised by the assessee relates to disallowance of work in progress in respect of Kirti Chambers. of work in progress in respect of Kirti Chambers.
3.2 The facts qua the issue in dispute raised in ground are that t The facts qua the issue in dispute raised in ground are that the The facts qua the issue in dispute raised in ground are that t property “Kirti Chambers Kirti Chambers” was originally standing in the name of was originally standing in the name of M/s Sahib Enterprises, from it was purchased by Sh M/s Sahib Enterprises, from it was purchased by Sh Ashwan L Shah and Smt. Kalpana Shah ( and Smt. Kalpana Shah (i.e. promoters of the assessee company) i.e. promoters of the assessee company) through a registered deed of conveyance dated through a registered deed of conveyance dated 04.12. 04.12.2006, which was held by them as an individual investment and after having the was held by them as an individual investment and after having the was held by them as an individual investment and after having the decision to exploit the property commercially, it was decision to exploit the property commercially, it was decision to exploit the property commercially, it was transferred to the assessee company by way of a registered deed of conveyance the assessee company by way of a registered deed of conveyance the assessee company by way of a registered deed of conveyance dated 21/06/2011. The property acquired by the company was fully dated 21/06/2011. The property acquired by the company was fully dated 21/06/2011. The property acquired by the company was fully tenanted tenanted tenanted by by by recorded recorded recorded as as as well well well as as as unrecorded unrecorded unrecorded occupiers occupiers occupiers (unauthorized person ed persons to whom the tenements occupied by the the tenements occupied by the recorded tenants were illegally sublet). Even pending to the recorded tenants were illegally sublet). Even pending to the recorded tenants were illegally sublet). Even pending to the formation of the assessee company and ultimate transfer of the formation of the assessee company and ultimate transfer of the formation of the assessee company and ultimate transfer of the building in reference, the abovenamed promoters holding the title, building in reference, the abovenamed promoters holding the title, building in reference, the abovenamed promoters holding the title,
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 5 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 had filed the suit against the unl had filed the suit against the unlawful occupiers of the tenant awful occupiers of the tenants in the Court of small causes at Court of small causes at Mumbai for their eviction and negotiated Mumbai for their eviction and negotiated with some of the recorded and unrecorded tenants for surrender of with some of the recorded and unrecorded tenants for surrender of with some of the recorded and unrecorded tenants for surrender of their their their tenancy/occupation tenancy/occupation tenancy/occupation claim claim claim by by by payments payments payments of of of suitable suitable suitable consideration till 31/03/2011. consideration till 31/03/2011. The original promoters inducted M/s The original promoters inducted M/s Vedang Builders LLP and others to provide finance an LLP and others to provide finance an LLP and others to provide finance and expertise towards development of the property under redevelopment scheme. towards development of the property under redevelopment scheme. towards development of the property under redevelopment scheme.
The Assessing Assessing Officer Officer observed observed work work-in in-progress of ₹3,05,33,250/- in the balance sheet u in the balance sheet under the head “inventories”. It nder the head “inventories”. It was claimed by the assessee that said entry was in respect of the was claimed by the assessee that said entry was in respect of the was claimed by the assessee that said entry was in respect of the stamp duty paid and and registration cost in respect of the purchase registration cost in respect of the purchase including cost paid towards acquisition of tenanted premises. The including cost paid towards acquisition of tenanted premises. The including cost paid towards acquisition of tenanted premises. The breakup of said work in pro breakup of said work in progress submitted by the assessee has gress submitted by the assessee has been reproduced by the Ld. CIT(A) in been reproduced by the Ld. CIT(A) in para 7.3 of the impugned 7.3 of the impugned order as under:
Particulars Amount (in ₹) Amount (in Payments for tenancy purchase Payments for tenancy purchase
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 6 & 3419/M/2017 ITA No. 3418 & 3419/M/2017
M/s Asian Machinery M/s Asian Machinery 95,40,000/ 95,40,000/- M/s Zuber Investmest Ltd. M/s Zuber Investmest Ltd. 1,70,00,000/- 1,70,00,000/ Shirish Modi 9,00,000/- 9,00,000/ Phoolchand N. Patel & O Phoolchand N. Patel & Others 25,00,000/ 25,00,000/- 2,99,40,000/- 2,99,40,000/ Stamp Duty/Regn. Charges etc. Stamp Duty/Regn. Charges etc. 5,93,250/- 5,93,250/ Grant Total 3,05,33,250/- 3,05,33,250/ 4.1 It was claimed by the assessee that M/s Vedang It was claimed by the assessee that M/s Vedang Builders LLP It was claimed by the assessee that M/s Vedang made payments of made payments of ₹2,99,40,000/- on behalf of the assessee on behalf of the assessee company for purchase of tenancy rights of shop/offices in Kirti company for purchase of tenancy rights of shop/offices in Kirti company for purchase of tenancy rights of shop/offices in Kirti Chambers from above mentioned persons, though owner of the said Chambers from above mentioned persons, though owner of the said Chambers from above mentioned persons, though owner of the said property were still Mr Ashwin L Shah and Smt Kalpana Shah property were still Mr Ashwin L Shah and Smt Kalpana Shah property were still Mr Ashwin L Shah and Smt Kalpana Shah (i.e. prior to incorporation of the assesse prior to incorporation of the assessee company).
4.2 The Assessing Officer observed that M/s Vedang The Assessing Officer observed that M/s Vedang Builders LLP The Assessing Officer observed that M/s Vedang had purchased tenancy had purchased tenancy rights of shop (Old No. 1 and New No. 3) Old No. 1 and New No. 3) admeasuring 304 ft² in Kirti Chambers from M/s Asian machinery at measuring 304 ft² in Kirti Chambers from M/s Asian machinery at measuring 304 ft² in Kirti Chambers from M/s Asian machinery at nil cost vide registered agreement dated 30/12/2010. Similarly, registered agreement dated 30/12/2010. Similarly, registered agreement dated 30/12/2010. Similarly, vide registered agreement dated 12/01/2011, M/s Vedang registered agreement dated 12/01/2011, M/s Vedang registered agreement dated 12/01/2011, M/s Vedang Builders LLP had purchased rights of the office admeasuring 405 square fit in rights of the office admeasuring 405 square fit in rights of the office admeasuring 405 square fit in “Kirty Chambers” from m/s Zuber Investments at from m/s Zuber Investments at Nil Nil cost.
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 7 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 4.3 Whereas, the assessee company also submitted a he assessee company also submitted a he assessee company also submitted a non- registered (document document) dated 27/03/2013 relating to relating to surrender of tenement, wherein it was mentioned that M/s erein it was mentioned that M/s Vedang builders LLP Vedang builders LLP had paid ₹95,40,000/ 95,40,000/- and ₹1,70,00,000/- to M/s Asian Machinary to M/s Asian Machinary and M/s Zuber investmen and M/s Zuber investments Ltd respectively for acquisition of ts Ltd respectively for acquisition of tenancy rights.
4.4 The claim of the assessee claim of the assessee is that payment has been made for that payment has been made for acquisition of tenancy rights as noted in the unregistered acquisition of tenancy rights as noted in the unregistered acquisition of tenancy rights as noted in the unregistered agreements, whereas the claim of the Assessing Officer agreements, whereas the claim of the Assessing Officer agreements, whereas the claim of the Assessing Officer is that as per registered agreements, no payment has been made for acquisition of registered agreements, no payment has been made for acquisition of registered agreements, no payment has been made for acquisition of the tenancy rights and therefore the tenancy rights and therefore, he disallowed the work he disallowed the work-in- progress to the extent of progress to the extent of ₹2,99,40,000/-. The Ld. CIT(A) upheld the The Ld. CIT(A) upheld the disallowance observing as under: disallowance observing as under:
“7.7 I have perused the fact 7.7 I have perused the facts of the case & appellant's submissions s of the case & appellant's submissions carefully. First of all, I find it prudent to understand the accounting carefully. First of all, I find it prudent to understand the accounting carefully. First of all, I find it prudent to understand the accounting entries made in appellant's books. The ledger statement of Vedaang entries made in appellant's books. The ledger statement of Vedaang entries made in appellant's books. The ledger statement of Vedaang Builders LLP in appellant's books from 01.04.2010 to 31.03.2011 Builders LLP in appellant's books from 01.04.2010 to 31.03.2011 Builders LLP in appellant's books from 01.04.2010 to 31.03.2011 [Page 85 of Paper book] shows following entries: aper book] shows following entries:
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 8 & 3419/M/2017 ITA No. 3418 & 3419/M/2017
Date Particulars Type Debit Debit Credit 30.12.2010 By Kirit Chambers Property A/c By Kirit Chambers Property A/c Journal 1,97,210/- By Kirit Chambers Property A/c By Kirit Chambers Property A/c Journal 110/- 31.12.2010 Tenant Purchase A/c Tenant Purchase A/c Journal 95,40,000/- (Being paid to Asian Machinery on (Being paid to Asian Machinery on behalf of Green Twig received from behalf of Green Twig received from Vedaang) By Kirit Chambers Property A/c By Kirit Chambers Property A/c Journal 3,0400/- 12.01.2011 Tenant Purchase A/c Tenant Purchase A/c Journal 1,70,00,000/- (Being paid to Zuber Investment on (Being paid to Zuber Investment on behalf of Green Twig received from behalf of Green Twig received from Vedaang) By Kirit Chambers Property A/c By Kirit Chambers Property A/c Journal 30,420/- By Kirit Chambers Property A/c By Kirit Chambers Property A/c Journal 3,35,000/- 15.01.2011 Tenant Purchase A/c Tenant Purchase A/c Journal 9,00,000/- (Being paid to Shirish Modi on behalf (Being paid to Shirish Modi on behalf of Green Twig received from Vedaang) of Green Twig received from Vedaang) 18.02.2011 Tenant Purchase A/c Tenant Purchase A/c Journal 25,00,000/- (Being paid to Fulchand N. Patel & (Being paid to Fulchand N. Patel & Others on behalf of Green Twig Others on behalf of Green Twig received from Vedaang) received from Vedaang) Total 3,05,33,140/- I find that the appellant company was incorporated on 02.03.2011, I find that the appellant company was incorporated on 02.03.2011, I find that the appellant company was incorporated on 02.03.2011, hence technically it did not exist before that date. Therefore, the technically it did not exist before that date. Therefore, the technically it did not exist before that date. Therefore, the entries passes in appellant's accounts before that date is nothing but entries passes in appellant's accounts before that date is nothing but entries passes in appellant's accounts before that date is nothing but a back dating of entries, which is not acceptable. a back dating of entries, which is not acceptable. 7.8 I find that the corresponding debit entries are not passed in books 7.8 I find that the corresponding debit entries are not passed in books 7.8 I find that the corresponding debit entries are not passed in books of counter party M/s Vedaang Builders LLP on given dates. The of counter party M/s Vedaang Builders LLP on given dates. The of counter party M/s Vedaang Builders LLP on given dates. The appellant has submitted confirmation of its account in books of Ms appellant has submitted confirmation of its account in books of Ms appellant has submitted confirmation of its account in books of Ms Vedaang Builders LLP for the period from 01.04.2010 to 31.03.2015 Vedaang Builders LLP for the period from 01.04.2010 to 31.03.2015 Vedaang Builders LLP for the period from 01.04.2010 to 31.03.2015 [Page 89 of Paper Book). The said account does not show any [Page 89 of Paper Book). The said account does not show any [Page 89 of Paper Book). The said account does not show any transaction during FY 2010 ransaction during FY 2010-11. The alleged payments on behalf of 11. The alleged payments on behalf of the appellant of Rs. 95,40,000/ the appellant of Rs. 95,40,000/-, Rs. 1,70,00,000/-, Rs. 9,00,000/ , Rs. 9,00,000/-, & Rs. 25,00,000/ Rs. 25,00,000/-are debited to appellant's account by journal entry are debited to appellant's account by journal entry only on 01.04.2014, i.e. after a long period of more t only on 01.04.2014, i.e. after a long period of more than 3 years since han 3 years since
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 9 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 close of FY 2010 close of FY 2010-11 in which entries are passed in appellant's books. 11 in which entries are passed in appellant's books. Also, it is observed that the date of corresponding entry passed in Also, it is observed that the date of corresponding entry passed in Also, it is observed that the date of corresponding entry passed in books of Vedaang Builders LLP, i.e. 01.04.2014, falls soon after the books of Vedaang Builders LLP, i.e. 01.04.2014, falls soon after the books of Vedaang Builders LLP, i.e. 01.04.2014, falls soon after the date of filing return by the ap date of filing return by the appellant in response to notice us 148, i.e. pellant in response to notice us 148, i.e. 28.03.2014. It cannot be ruled out that the fear of reconciliation issue 28.03.2014. It cannot be ruled out that the fear of reconciliation issue 28.03.2014. It cannot be ruled out that the fear of reconciliation issue arising in said assessment proceedings would have prompted the arising in said assessment proceedings would have prompted the arising in said assessment proceedings would have prompted the appellant to get passed said entry in books of Vedaang Builders LLP. appellant to get passed said entry in books of Vedaang Builders LLP. appellant to get passed said entry in books of Vedaang Builders LLP. 7.9 It is clear that the appellant had not made any direct payment to s clear that the appellant had not made any direct payment to s clear that the appellant had not made any direct payment to parties for vacating the tenancy rights of land owned by Shri Ashwin parties for vacating the tenancy rights of land owned by Shri Ashwin parties for vacating the tenancy rights of land owned by Shri Ashwin Shah/ Smt. Kalpana Shah, the two shareholders of the appellant Shah/ Smt. Kalpana Shah, the two shareholders of the appellant Shah/ Smt. Kalpana Shah, the two shareholders of the appellant company. Neither, the said shareholders had made payment on company. Neither, the said shareholders had made payment on company. Neither, the said shareholders had made payment on behalf of the appellant company pending formation of the appellant half of the appellant company pending formation of the appellant half of the appellant company pending formation of the appellant company. The payments are allegedly made by a third party M/s company. The payments are allegedly made by a third party M/s company. The payments are allegedly made by a third party M/s Vedaang Builders LLP, and that too are not debited to appellant Vedaang Builders LLP, and that too are not debited to appellant Vedaang Builders LLP, and that too are not debited to appellant company's account during FY company's account during FY 2010-11 in books of said party. In su 11 in books of said party. In such case, the appellant's claim of Rs.2,99,40,000/ case, the appellant's claim of Rs.2,99,40,000/- towards cost of WIP towards cost of WIP remains unilateral, and hence unsubstantiated. remains unilateral, and hence unsubstantiated. 7.10 The AO has contended that the unregistered document dated 10 The AO has contended that the unregistered document dated 10 The AO has contended that the unregistered document dated 27.03.2013 submitted as proof of tenancy purchase for Rs. submitted as proof of tenancy purchase for Rs. submitted as proof of tenancy purchase for Rs. 2,99,40,000/- has no evidentiary value. The AO has stated that the no evidentiary value. The AO has stated that the said document does not bear any signature/ confirmation of the said document does not bear any signature/ confirmation of the said document does not bear any signature/ confirmation of the alleged recipient of the proceeds for transfer of rights. I find that alleged recipient of the proceeds for transfer of rights. I find that alleged recipient of the proceeds for transfer of rights. I find that while submitting various other agreements/ documents in Paper while submitting various other agreements/ documents in Paper while submitting various other agreements/ documents in Paper Book, the appellant has not submitted a copy of this agreement ppellant has not submitted a copy of this agreement ppellant has not submitted a copy of this agreement during present appellate proceedings. If at all the appellant wanted during present appellate proceedings. If at all the appellant wanted during present appellate proceedings. If at all the appellant wanted to rely upon said document, it should have at least submitted a copy to rely upon said document, it should have at least submitted a copy to rely upon said document, it should have at least submitted a copy of the same.
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 10 & 3419/M/2017 ITA No. 3418 & 3419/M/2017
7.11 The appellant has relied upon the judgment of Ho 7.11 The appellant has relied upon the judgment of Hon'ble Gauhati n'ble Gauhati High Court in the case of Narsingdas Surajmal Properties (P) Ltd. v. High Court in the case of Narsingdas Surajmal Properties (P) Ltd. v. High Court in the case of Narsingdas Surajmal Properties (P) Ltd. v. CIT [1981] 127 ITR CIT [1981] 127 ITR 0221. The Hon'ble High Court has held that non 0221. The Hon'ble High Court has held that non- registration of a compulsory registrable document relating to registration of a compulsory registrable document relating to registration of a compulsory registrable document relating to immovable property renders the document inadm immovable property renders the document inadmissible as evidence issible as evidence of a transaction affecting immovable property, but it may be of a transaction affecting immovable property, but it may be of a transaction affecting immovable property, but it may be admitted and made use of as evidence of collateral facts or for any admitted and made use of as evidence of collateral facts or for any admitted and made use of as evidence of collateral facts or for any collateral purposes or to prove a lessee's possession of tenancy. I find collateral purposes or to prove a lessee's possession of tenancy. I find collateral purposes or to prove a lessee's possession of tenancy. I find that the facts of said case are di that the facts of said case are distinguishable. In present case, the stinguishable. In present case, the appellant has not even bothered to produce a copy of the appellant has not even bothered to produce a copy of the appellant has not even bothered to produce a copy of the unregistered agreement dated 27.03.2013 which it wanted to use as unregistered agreement dated 27.03.2013 which it wanted to use as unregistered agreement dated 27.03.2013 which it wanted to use as an evidence. Moreover, the AO has observed that such agreement did an evidence. Moreover, the AO has observed that such agreement did an evidence. Moreover, the AO has observed that such agreement did not bear any signature/ confir not bear any signature/ confirmation of the alleged recipients of the mation of the alleged recipients of the proceeds for transfer of rights. Also, the said agreement would not be proceeds for transfer of rights. Also, the said agreement would not be proceeds for transfer of rights. Also, the said agreement would not be backed by entries in books of counter party M/s Vadaang Builders backed by entries in books of counter party M/s Vadaang Builders backed by entries in books of counter party M/s Vadaang Builders LLP, as discussed in preceding paras. Looking at these circumstances, LLP, as discussed in preceding paras. Looking at these circumstances, LLP, as discussed in preceding paras. Looking at these circumstances, any such agreement even if produced would not find any evidentiary greement even if produced would not find any evidentiary greement even if produced would not find any evidentiary value. 7.12 The appellant has heavily relied upon two "Declaration", i.e. (i) 7.12 The appellant has heavily relied upon two "Declaration", i.e. (i) 7.12 The appellant has heavily relied upon two "Declaration", i.e. (i) Declaration dated 30.12.2010 showing payments of Rs. 95,40,000/ Declaration dated 30.12.2010 showing payments of Rs. 95,40,000/ Declaration dated 30.12.2010 showing payments of Rs. 95,40,000/- by Vedaang Builders LLP to partners of Asian Machinery [ by Vedaang Builders LLP to partners of Asian Machinery [ by Vedaang Builders LLP to partners of Asian Machinery [Page 11-14 of Paper Book], & (ii) Declaration dated 12.01.2011 showing of Paper Book], & (ii) Declaration dated 12.01.2011 showing of Paper Book], & (ii) Declaration dated 12.01.2011 showing payment of Rs. 1,70,00,000/ payment of Rs. 1,70,00,000/- by Vedaang Builders LLP to Zuber by Vedaang Builders LLP to Zuber Investments [Page 37 to 40 of Paper Book]. I find that the said Investments [Page 37 to 40 of Paper Book]. I find that the said Investments [Page 37 to 40 of Paper Book]. I find that the said documents are executed on stamp paper of Rs. 100/ documents are executed on stamp paper of Rs. 100/- each, on each, on same date on which respective date on which respective "registered" agreements were executed by "registered" agreements were executed by these parties showing Nil consideration for transfer of tenancy rights. these parties showing Nil consideration for transfer of tenancy rights. these parties showing Nil consideration for transfer of tenancy rights. The reason given by the AR in written submissions for not disclosing The reason given by the AR in written submissions for not disclosing The reason given by the AR in written submissions for not disclosing respective consideration in registered agre respective consideration in registered agreements is that the said ements is that the said
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 11 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 consideration exceeded stamp duty value. Therefore "to save the consideration exceeded stamp duty value. Therefore "to save the consideration exceeded stamp duty value. Therefore "to save the stamp duty as Prudent businessman" actual consideration agreed stamp duty as Prudent businessman" actual consideration agreed stamp duty as Prudent businessman" actual consideration agreed and paid at the time registration of the purchase documents of and paid at the time registration of the purchase documents of and paid at the time registration of the purchase documents of tenancy rights transferred from the above hts transferred from the above referred parties were not referred parties were not incorporated in the said transfer documents which was not required incorporated in the said transfer documents which was not required incorporated in the said transfer documents which was not required to be disclosed mandatorily. to be disclosed mandatorily. I find such practice not only to be highly I find such practice not only to be highly unethical, but also having used as a tool to evade stamp duty unethical, but also having used as a tool to evade stamp duty unethical, but also having used as a tool to evade stamp duty payment. If such practice is payment. If such practice is permitted. then there would be no permitted. then there would be no sanctity of law and everyone would resort to such dubious practices. sanctity of law and everyone would resort to such dubious practices. sanctity of law and everyone would resort to such dubious practices. Also, in my opinion, an unregistered agreement cannot supersede the Also, in my opinion, an unregistered agreement cannot supersede the Also, in my opinion, an unregistered agreement cannot supersede the terms of a registered agreement on very same subject matter. terms of a registered agreement on very same subject matter. terms of a registered agreement on very same subject matter. Therefore, any payment b Therefore, any payment by Vedaang Builders LLP to these parties y Vedaang Builders LLP to these parties towards purchase towards purchase cost of tenancy riehts is unsubstantiated cost of tenancy riehts is unsubstantiated. 7.13 As regards the other two payments of Rs. 9,00,000/- to Shirish 7.13 As regards the other two payments of Rs. 9,00,000/ 7.13 As regards the other two payments of Rs. 9,00,000/ Modi & Rs.25,00,000/ Modi & Rs.25,00,000/- to Phoolchand N. Patel & Others claimed as to Phoolchand N. Patel & Others claimed as made by Vedaang made by Vedaang Builders LLP on behalf of the appellant, the LLP on behalf of the appellant, the appellant has submitted on Page 65 to 82 of Paper Book, an appellant has submitted on Page 65 to 82 of Paper Book, an appellant has submitted on Page 65 to 82 of Paper Book, an agreement dated 10.12.2013 for surrender of tenements executed by agreement dated 10.12.2013 for surrender of tenements executed by agreement dated 10.12.2013 for surrender of tenements executed by (i) Mr. Kishor Mittal, (ii Kishor Mittal, (ii) Mr. Ashwin Shah/ Mrs. Kalpana Shah, (iii in Shah/ Mrs. Kalpana Shah, (iii) Green Twin Estat Green Twin Estate Management Pvt. Ltd. (the appellant herein). e Management Pvt. Ltd. (the appellant herein). Following observations are made from said agreement: Following observations are made from said agreement: (i) The said agreement states that the third declarant (the appellant) The said agreement states that the third declarant (the appellant) The said agreement states that the third declarant (the appellant) has paid to the Occupant a sum of Rs. 9,00,000/ has paid to the Occupant a sum of Rs. 9,00,000/- by pay order by pay order bearing No. 016550 issu bearing No. 016550 issued by the National Co-op. Bank Ltd., Nariman op. Bank Ltd., Nariman Point Branch. The copy of payorder however shows instrument no. as Point Branch. The copy of payorder however shows instrument no. as Point Branch. The copy of payorder however shows instrument no. as 197275 and name of bank as Dhanlaxmi Bank, which is drawn in 197275 and name of bank as Dhanlaxmi Bank, which is drawn in 197275 and name of bank as Dhanlaxmi Bank, which is drawn in favour of Kamal Funchand Patel. favour of Kamal Funchand Patel.
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 12 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 (ii) The said agreement further states that in a se The said agreement further states that in a second acquisition of cond acquisition of tenancy, the Third Declarant (appellant) has paid to the Occupant a tenancy, the Third Declarant (appellant) has paid to the Occupant a tenancy, the Third Declarant (appellant) has paid to the Occupant a sum of Rs. 25,00,000/ sum of Rs. 25,00,000/- by three pay orders bearing Nos. 197273, by three pay orders bearing Nos. 197273, 197274 & 197275 all issued by Dhanlaxmi Bank Ltd. The said 197274 & 197275 all issued by Dhanlaxmi Bank Ltd. The said 197274 & 197275 all issued by Dhanlaxmi Bank Ltd. The said payorders are drawn by said bank in favour of payorders are drawn by said bank in favour of Shefali Kamal Patel Shefali Kamal Patel (Rs. 8,00,000/ (Rs. 8,00,000/-), Deepika Kamal Patel (Rs. 8,00,000), & Kamal ), Deepika Kamal Patel (Rs. 8,00,000), & Kamal Funchand Patel (Rs.9,00,000/ Funchand Patel (Rs.9,00,000/-). The said agreement refers to some ). The said agreement refers to some Consent Terms executed with said parties in the Court of Small Consent Terms executed with said parties in the Court of Small Consent Terms executed with said parties in the Court of Small Causes at Mumbai, copies of which are given Causes at Mumbai, copies of which are given by the appellant. I find by the appellant. I find that in said consent terms, nowhere the payment of any sum towards that in said consent terms, nowhere the payment of any sum towards that in said consent terms, nowhere the payment of any sum towards surrender of tenancy rights are mentioned. Also, as discussed in surrender of tenancy rights are mentioned. Also, as discussed in surrender of tenancy rights are mentioned. Also, as discussed in preceding paras, the appellant's books show such payment allegedly paras, the appellant's books show such payment allegedly paras, the appellant's books show such payment allegedly made by Vedaang Builders LLP, wh made by Vedaang Builders LLP, which is not appearing as a party to ich is not appearing as a party to this agreement. For these reasons, it appears that this agreement this agreement. For these reasons, it appears that this agreement this agreement. For these reasons, it appears that this agreement showing payment of Rs. 9,00,000/ showing payment of Rs. 9,00,000/- & Rs. 25,00,000/-seems to be self seems to be self contradictory, and hence cannot be accepted as evidence towards contradictory, and hence cannot be accepted as evidence towards contradictory, and hence cannot be accepted as evidence towards any such payment having any such payment having made by the appellant company towards made by the appellant company towards cost of WIP. 7.14 The aforesaid facts of the case make it clear that the appellant 7.14 The aforesaid facts of the case make it clear that the appellant 7.14 The aforesaid facts of the case make it clear that the appellant has grossly filed to substantiate the payments aggregating to has grossly filed to substantiate the payments aggregating to has grossly filed to substantiate the payments aggregating to Rs.2,99,40,000/ Rs.2,99,40,000/- towards cost of WIP. Hence, I confirm the WIP. Hence, I confirm the disallowance made of said amount as reduction in WIP cost in hands made of said amount as reduction in WIP cost in hands made of said amount as reduction in WIP cost in hands of the appellant. In view of the same, Ground No. 2 is dismissed.” of the appellant. In view of the same, Ground No. 2 is dismissed. of the appellant. In view of the same, Ground No. 2 is dismissed.
5. The main reasons cited by the lower authorities for The main reasons cited by the lower authorities for The main reasons cited by the lower authorities for disallowance are as under: as under:
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 13 & 3419/M/2017 ITA No. 3418 & 3419/M/2017
(i) The unregistered document submitted by the assessee unregistered document submitted by the assessee unregistered document submitted by the assessee did not bear any signature/confirmation of the alleged id not bear any signature/confirmation of the alleged id not bear any signature/confirmation of the alleged recipient of the proceeds of transfer of tenancy rights. It recipient of the proceeds of transfer of tenancy rights. recipient of the proceeds of transfer of tenancy rights. was not having any legal or evidentiary value and was was not having any legal or evidentiary value and was was not having any legal or evidentiary value and was merely self merely self-serving document, prepared to inflate the serving document, prepared to inflate the amount of work in progress. amount of work in progress. (ii) The cost of acquisition of tenancy right which had been st of acquisition of tenancy right which had been st of acquisition of tenancy right which had been mentioned as nil in the registered document for transfer mentioned as nil in the registered document for transfer mentioned as nil in the registered document for transfer of tenancy rights of tenancy rights, had been duly confirmed by the owner , had been duly confirmed by the owner of said premises. of said premises. (iii) The entries in books of accounts of the The entries in books of accounts of the assessee assessee company in respect of work in respect of work in progress are for the period when the in progress are for the period when the company was not in existence itself. Corresponding company was not in existence itself. Corresponding company was not in existence itself. Corresponding entries in the books of accounts of M/s Vedang Builders entries in the books of accounts of M/s Vedang entries in the books of accounts of M/s Vedang LLP were not passed on given dates a were not passed on given dates as evident from the s evident from the confirmation of accounts of the assessee in the books of confirmation of accounts of the assessee in the books of confirmation of accounts of the assessee in the books of Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 14 & 3419/M/2017 ITA No. 3418 & 3419/M/2017
M/s Vedang M/s Vedang Builders LLP and entries have been passed LLP and entries have been passed on 01/04/2014 by way of a journal entry which is after on 01/04/2014 by way of a journal entry which is after on 01/04/2014 by way of a journal entry which is after the issue of notice under section 148 to the assessee on the issue of notice under section 148 to the assessee on the issue of notice under section 148 to the assessee on 28/03/2014. 28/03/2014. (iv) Copy of the unregistered document was not submitted of the unregistered document was not submitted of the unregistered document was not submitted before the Ld. CIT(A) before the Ld. CIT(A) (v) The assessee place assessee placed reliance on the declarations reliance on the declarations executed on the stamp paper of on the stamp paper of ₹100/- on same date on which on same date on which respective registered agreements were respective registered agreements were executed executed by these parties showing nil parties showing nil consideration, but in declarations consideration, but in declarations payment of payment of ₹95,40,000/- was shown as received by M/s was shown as received by M/s Asian Machnary and Asian Machnary and ₹1,70,00,000/- was shown as was shown as received by M/s Zuber Investment Ltd. regarding not received by M/s Zuber Investment Ltd. received by M/s Zuber Investment Ltd. disclosing the respective consideration in the registered disclosing the respective consideration in the registered disclosing the respective consideration in the registered agreement, agreement, it was explained by assessee that to save the it was explained by assessee that to save the stamp duty as prudent businessmen actual consideration stamp duty as prudent businessmen actual consideration stamp duty as prudent businessmen actual consideration
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 15 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 agreed and paid at the time of registration of the agreed and paid at the time of registration of the agreed and paid at the time of registration of the purchase of tenancy rights was not disclosed. The Ld. purchase of tenancy rights was not disclosed purchase of tenancy rights was not disclosed CIT(A) held this claim of the assessee is highly unethical CIT(A) held this claim of the assessee is highly u CIT(A) held this claim of the assessee is highly u and without sanctity of law. and without sanctity of law. (vi) Regarding the payment of Regarding the payment of ₹9,00,000/- to Shirish Modi to Shirish Modi claimed by M/s Vedang claimed by M/s Vedang Builders LLP on behalf of the LLP on behalf of the assessee was was disallowed by the Ld. CIT(A) disallowed by the Ld. CIT(A) after noting discrepancy of instrument No. i.e. Payorder , through discrepancy of instrument No. i.e. Payorder , through discrepancy of instrument No. i.e. Payorder , through which payment was claim to be made. hich payment was claim to be made. (vii) Regarding payment of Regarding payment of ₹25,00,000/- to Phoolahand N to Phoolahand N Patel and others by M/s Vedang Patel and others by M/s Vedang Builders LLP on behalf of LLP on behalf of the assessee the assessee was also disallowed by the Ld. CIT(A) after also disallowed by the Ld. CIT(A) after noting that the consent terms agreed between the parties noting that the consent terms agreed between the parties noting that the consent terms agreed between the parties before the Court of small causes a fore the Court of small causes at Mumbai, nowhere the t Mumbai, nowhere the payment of any payment of any sum towards purchase of the tenancy right was mentioned. right was mentioned.
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 16 & 3419/M/2017 ITA No. 3418 & 3419/M/2017
Before us, the Before us, the Ld. counsel of the assessee has filed an of the assessee has filed an application for admission of additional evidence under application for admission of additional evidence under application for admission of additional evidence under Rule 29 of ITAT Rules, 1963. In the said application the assessee has . In the said application the assessee has . In the said application the assessee has filed a certified copy of duly executed and notarized certified copy of duly executed and notarized memorandum of memorandum of understanding dated 14/09/2010 en dated 14/09/2010 entered into by Shri Ashwin L tered into by Shri Ashwin L Shah and Smt. Kalpana Shah Kalpana Shah, the landlords with M/s Vedang with M/s Vedang Builders LLP containing the terms and condition including payment LLP containing the terms and condition including payment LLP containing the terms and condition including payment to be made up to ₹12 12 crores to the tenants/occupants by Vedang to the tenants/occupants by Vedang Builder LLP. The Ld. counsel Ld. counsel requested that said additional evidence at said additional evidence is important for adjudicating the issue in dispute and accordingly is important for adjudicating the issue in dispute and accordingly is important for adjudicating the issue in dispute and accordingly submitted to restore the issue in dispute submitted to restore the issue in dispute to the file of the Assessing the file of the Assessing Officer.
The Ld. DR on the other hand relied on the order of the lower on the other hand relied on the order of the lower on the other hand relied on the order of the lower authorities.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. We find that issue in dispute here is in relevant material on record. We find that issue in dispute here is in relevant material on record. We find that issue in dispute here is in Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 17 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 relation to the genuineness of the amount of work in progress, relation to the genuineness of the amount of work in progress, relation to the genuineness of the amount of work in progress, which has been claimed by the assessee which has been claimed by the assessee. The lower authorities The lower authorities has mainly rejected the genuineness of the expenditure incurred against mainly rejected the genuineness of the expenditure incurred against mainly rejected the genuineness of the expenditure incurred against payment to tenanted authorized/unauthorized tenanted authorized/unauthorized dwellers ( dwellers (i.e. which has been acclaimed as work has been acclaimed as work-in-progress) mainly on the ground that progress) mainly on the ground that in the registered deed of transfer, purchase value in the registered deed of transfer, purchase value was recorded at was recorded at nil as compared to the value recorded in unregistered agreements nil as compared to the value recorded in unregistered agreements nil as compared to the value recorded in unregistered agreements and declaration of seller parties. In our opinion, the registered or and declaration of seller parties. In our opinion, the registered or and declaration of seller parties. In our opinion, the registered or unregistered sale agreement are in the nature of the agreement unregistered sale agreement are in the nature of the agreement unregistered sale agreement are in the nature of the agreement between the parties and in law those agreem between the parties and in law those agreements can we challenged ents can we challenged by the parties and it is it is not within the powers or authority of within the powers or authority of the Income-tax Authority Authority to challenge or dispute the terms and the terms and condition mentioned in those agreements. The condition mentioned in those agreements. The condition mentioned in those agreements. The Income-tax authorities are authori are authorized to examine the expenditu ed to examine the expenditure incurred from the angle of section 37(1) of the from the angle of section 37(1) of the Act so as to verify whether the so as to verify whether the expenditure has been incurred wholly and exclusively for the expenditure has been incurred wholly and exclusively for the expenditure has been incurred wholly and exclusively for the Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 18 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 purpose of the business of the assessee. purpose of the business of the assessee. The onus was on the The onus was on the assessee to establish that expenditure was incurred assessee to establish that expenditure was incurred assessee to establish that expenditure was incurred wholly and exclusively for the purpose of the business of the assessee. for the purpose of the business of the assessee. for the purpose of the business of the assessee. In the case, the Assessing Officer wa case, the Assessing Officer was required to verify two things. Firstly s required to verify two things. Firstly, whether the payments has been made by the assessee or on behalf the payments has been made by the assessee or on behalf the payments has been made by the assessee or on behalf of the assessee to the seller parties. S of the assessee to the seller parties. Secondly, the payment has been econdly, the payment has been made for the purpose of the business of the assessee. Since in the made for the purpose of the business of the assessee. Since in the made for the purpose of the business of the assessee. Since in the case it is claimed by the assessee that payments have been made for case it is claimed by the assessee that payments have been made for case it is claimed by the assessee that payments have been made for purchase of legal or illegal purchase of legal or illegal tenanted premises, therefore the therefore the assessee was required to subs was required to substantiate with documentary evidence tantiate with documentary evidence to the effect that the payment have effect that the payment have made to the seller parties and that too made to the seller parties and that too for the purpose of purchase of relevant properties of purchase of relevant properties. The assessee of purchase of relevant properties attempted to substantiate with the help of non attempted to substantiate with the help of non attempted to substantiate with the help of non-registered agreement and declaration of the seller parties. But in the facts of agreement and declaration of the seller parties. But in the facts of agreement and declaration of the seller parties. But in the facts of the case, the assessee was required to produce those parties before the case, the assessee was required to produce those parties before the case, the assessee was required to produce those parties before the Assessing Officer for confirmation of the facts the Assessing Officer for confirmation of the facts the Assessing Officer for confirmation of the facts stated in their
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 19 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 affidavits and to show deposit of said payment in the bank accounts. and to show deposit of said payment in the bank accounts. and to show deposit of said payment in the bank accounts. The seller parties were also required to show from The seller parties were also required to show from The seller parties were also required to show from Income-tax Returns filed that payment filed that payments have been shown as income from been shown as income from sale/transfer/vocation sale/transfer/vocation of tenanted premises.
7.1 In view of additional evidence filed before us, which goes to the In view of additional evidence filed before us, which goes to the In view of additional evidence filed before us, which goes to the root of matter, we feel appropriate to restore the issue in dispute to root of matter, we feel appropriate to restore the issue in dispute to root of matter, we feel appropriate to restore the issue in dispute to the file of the Assessing Officer Assessing Officer for adjudicating afresh after taking afresh after taking into consideration the evidences nto consideration the evidences, which would be , which would be filed by the assessee. It will the responsibility of the assessee to assessee. It will the responsibility of the assessee to assessee. It will the responsibility of the assessee to produce the seller parties before the AO and cooperate in disposal of the matter. seller parties before the AO and cooperate in disposal of the matter. seller parties before the AO and cooperate in disposal of the matter. The AO is at liberty to carry out The AO is at liberty to carry out enquiries as deemed fit for disposal deemed fit for disposal of the issue in dispute. The grou dispute. The ground of appeal is accordingly allowed accordingly allowed for statistical purposes. for statistical purposes.
In for AY 2012 In ITA No. 3419/Mum/2017 for AY 2012-13 also identical 13 also identical issue of genuineness genuineness of work-in-progress is involved, is involved, therefore,
Green Twig Estate Management Pvt. Ltd. Green Twig Estate Management Pvt. Ltd. 20 & 3419/M/2017 ITA No. 3418 & 3419/M/2017 following our finding in AY following our finding in AY 2011-12, the grounds raised in AY 2012 12, the grounds raised in AY 2012- 13 are allowed for statistical purposes. 13 are allowed for statistical purposes.
In the result, both the appeals are allowed for statistical , both the appeals are allowed for statistical , both the appeals are allowed for statistical purposes.