ACIT, NEW DELHI vs. M/S. SHALIMAR TOWN PLANERS PVT. LTD., NEW DELHI

ORDER PER O.P. KANT, AM:

This appeal by the Revenue has been filed against order dated 27/07/2013 passed by the Learned Commissioner of Income-tax (Appeals)-XXXIII, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2007-08. The grounds raised in the appeal are reproduced as under:

1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 3,41,08,967/-and Rs,2,96,91,956/- made by the Assessing Officer in A.Ys.2007- 08 and2008-09 respectively on account of interest on PDCs Paid out Side the books of account. 2 On the facts and in the circumstances of the case, the CIT(A) has erred in law in deleting the addition of Rs 6,80,15,748/-,and Rs2,96,91,956/-made by the Assessing Officer in A.Ys2007-08 and 2008-09 respectively, in view of the Provisions of Section 37(1) Of the income tax act, 1961 on account of additional payment in violation of stamp DutyAct,1899, 3 The order of the CIT(A) is erroneous and is not tenable on facts and in law.

2. Briefly stated facts of the case are that consequent to search action at the premises of BPTP Group, assessment under section 153C read with section 153A of the Income-tax Act, 1961 (in short ‘the Act’) was completed on 31/12/2009 in the case of assessee. Aggrieved with additions made, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee. Aggrieved with the finding of the Ld. CIT(A), the Revenue is in appeal before the Income-Tax Appellate Tribunal (in short ‘the Tribunal’) raising the grounds as reproduced above.

3. Before us, the parties appeared through Videoconferencing facility. 4. At the outset, the learned Counsel of the assessee submitted that both grounds are covered in favour of the assessee by the order of the Tribunal in the case of the assessee itself. The Learned DR could not controvert this factual submission of the learned Counsel of the assessee. 5. We have heard rival submission of the parties and perused the relevant material on record.

6. In ground No. 1, the Revenue has challenged deletion of addition of ₹ 3,41,08,967/-, which was made on account of interest on post dated cheques (PDCs) paid outside the books of account. 6.1 Briefly stated facts qua the issue-in-dispute are that the assessee company belongs to BPTP Group of Companies, which are owned and controlled by Sh. Kabul Chawla. The group companies are engaged in the business of real estate development and operating mainly in the National Capital Region (NCR) Area, including Faridabad, Gurgaon and Noida. During the course of search operation at the premises of the BPTP Group companies, certain incriminating documents were seized. From the seized documents and post search inquiries conducted, it was observed by the Department that BPTP Group companies, including the assessee, had purchased huge tract of land in different villages of Faridabad such as Kherikhurd, Kheriklan, Budena, Bhatola etc. The Assessing Officer also observed that the Group was following a business model under which only a part payment of the sale consideration for the purchase of land was used to be made at the time of the execution of sale deed and balance sale consideration was invariably made through post dated cheques (PDC). For the period between the date of the sale deed and date of the encashment of PDC i.e. intervening period, the assessee used to pay interest in cash to the vendors of the land, on monthly basis at the rate of 1.25% per month on the amount of the PDC. This cash payment, however, has not been accounted for in the books of account of the assessee company. The Assessing Officer in the impugned order has mentioned various seized documents on pages 2 to 7 of the assessment order, which according to the Assessing Officer indicate interest payment in cash on PDC. The Assessing Officer also observed huge cash deposits in the accounts of five sellers of the land to ‘BPTP’ Group. The Assessing Officer asked the assessee to produce the sellers of the lands, but the assessee did not comply with the said direction. The assessee has simply denied payment of any interest on cash on PDC and relied only on the written sale agreements/deeds. The Assessing Officer rejected the contention of the assessee and made addition of ₹ 3,30,81,969/- for interest on PDC observing as under: “2.6 So keeping in view the business model/modus operandi of the BPTP Group as is clear from the seized material as discussed above, it is proved beyond any iota of doubt that the assessee has paid cash interest to the vendor(s) on the amount of PDCs @ 1.25% per month (15% per annum) outside-the books of account. Thus, by applying the rate of 1.25% per month on the amount of PDCs for the intervening period i.e. from date of sale deed to date of encashment of PDCs, the total amount of unaccounted interest paid by the assessee company to the vendors as per Annexure-PDC-Intt. is worked out to Rs.33,081,969/-. [The above payment of interest is computed only in respect of period under consideration i.e. if in a case where the sale deed was executed during the year but the date of encashment falls in the next financial year than interest only up to last day of relevant, previous year is computed because it is seen from the seized document that invariably the interest was being paid in advance on monthly basis. For the period falling in next financial year, the amount of interest for that period will be added to income for that year.] 2.7 As per Annexure-PDC-Intt., a sum of Rs.33,081,969/- has been paid by the assessee tc the vendors as interest on PDC’s issued to them. Since this interest has been paid by the assessee company outside its books of accounts, the same is added to the income of the assessee company- being paid out of its undisclosed income. Hence, an addition of Rs.33,081,969/- is made in the income of the assessee company. In view of the above discussion, the undersigned is satisfied that the assessee company by - paying interest to the vendors of the land out

of its undisclosed income has concealed its income and for that penalty proceedings u/s 271_(l )(c) have been initiated separately. (addition of Rs.33,081,969/-)”

6.2 The said addition was further increased to ₹ 4,13,41,937/- as per rectification order under section 154 of the Act dated 29/04/2010. The Ld. CIT(A) also analyzed the seized documents in para 6.3 of the impugned order. Though the Ld. CIT(A) held that seized documents proved that interest was paid on PDCs, however, he directed the Assessing Officer to compute the interest after six months from the date of the sale and accordingly, he partly allowed the appeal. Pursuant to the direction of the Ld. ₹ CIT(A), the Assessing Officer deleted the addition of 3,34,75,648/-whereas the addition of ₹ 78,66,289/- was confirmed. 6.3 Aggrieved with the above relief of ₹ 3,34,75,648/- , the Revenue is in appeal before the Tribunal. 6.4 Before us, both the parties appeared through Video Conferencing facility. The assessee filed a synopsis through email. 6.5 At the outset, the learned Counsel of the assessee submitted that issue in dispute is covered by the order of the Tribunal in the case of the assessee for assessment year 2010-11 and also from the order of the Tribunal in the case of Impower Infrastructure Private Limited (another group company) in for assessment year 2010-11. He also mentioned that in respect of the amount of ₹ 78,66,289 confirmed by the Ld. CIT(A), the assessee filed appeal before the Tribunal, but later on the said appeal was withdrawn as the assessee opted for settlement of the dispute under “ Vivad se Viswas Scheme.”

6.6 The Learned DR though relied on the order of the Assessing Officer, however, could not controvert the decisions relied upon by the Learned Counsel of the assessee. 6.7 We have heard rival submission of the parties on the issue- in-dispute. In the present case, the Ld. CIT(A) has upheld the addition of cash payment of interest on PDC, however, he directed to charge interest for six month after the sale deed. This identical issue was before the Tribunal in the case of M/s. Impower Infrastructure Private Limited (supra). The Tribunal upheld the finding of the Learned First Appellate Authority in said case, observing as under: “10. We have carefully considered the rival contention and perused the orders of the lower authorities. On the issue of interest the issue is squarely covered in favour of the assessee in one of the group cases in case of M/s IAG promoters and developers private limited in and 1765/del/2013 for assessment year 2008 - 09 wherein the coordinate bench in order dated 31/10/2014 has held as under:-

"5. We have heard the arguments of both the sides and perused relevant materials placed before us. At the outset, the ground raised by the revenue is misconceived because Ld. CIT (A) is not deleted the addition of Rs. 5, 06, 625 but has only directed to recalculate the interest. We have carefully gone through the order of the Ld. CIT (A) and the submissions of both the parties and we do not find any infirmity in the order of the Ld. CIT (A). After examining the loose papers seized at the time of search and the assessee's premises, it was noted that the interest is paid on the post dated cheques only during the period of extension of post dated cheques and therefore he directed the assessing officer to recompute the interest on post dated cheques at the time of extension of the post dated cheques. He further observed that if it is not possible to extension of post-dated cheques in each case, then assessing officer is directed to recompute interest on post dated cheques of 6 months from the date of the issuei of post-dated cheques. Therefore the ground of appeal of the revenue that the CIT (A) deleted the addition of peace 506625/- macie by the assessing officer on account of interest on post dated cheques respectively incorrect and contrary to the order of the Ld. CIT

(A). The CIT (A) directed to recalculate the interest on post dated cheques and was a sound logic for such direction. His direction is based on material found and seized at the time of search. In view of the above we do not find any justification to interfere with the order of the Ld. CIT(A) in this regard accordingly, we reject ground No. 1 of the revenue's appeal"

6.8 Before us also, the Learned Departmental Representative failed to support as why the period of the interest upheld by the Ld. CIT(A) was not correct. In the case of the assessee for assessment year 2010-11 also, the Tribunal in vide order dated 30/05/2018 has deleted the addition observing as under: " The issue in present case also is identical and Ground No. 1 is in favour of the assessee by this Tribunal. It was very well proved that the assessee was used to pay part payments of the sale consideration in respect of the land purchased at the time of execution of the sale-deed and the payments of balance sale consideration were invariably made through post dated cheques (PDCs) and for the intervening period) i.e. period between the date of sale deed and the date of encashment of PDCs), interest was paid in cash to the vendors of the land by the vendee company on monthly basis @ 1.25% p.m. on the amount of PDCs and this cash payment of interest by the vendee company, was not accounted for by it, in its books of account. The addition on the ground has been made in the several group companies of the BPTP group during the course of earlier assessment proceedings u/s 143(3)/148/153A in consequence to search carried out on 15/11/2007. Thus, the Ground No. 1 of the Revenue’s appeal is dismissed.”

6.9 Respectfully following the finding of the Tribunal on the issue-in-dispute, we uphold the finding of the Learned CIT(A) on the issue-in-dispute. The ground of the appeal of the Revenue is accordingly dismissed.

7.3 The Learned DR though relied on the order of the Assessing Officer, however, could not controvert the fact that the Tribunal has decided the identical issue in favour of the assessee. 7.4 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The identical issue has been decided by the Tribunal in favour of the assessee in the case of Impower Infrastructure Private Limited (supra) observing as under: “12. Second ground of appeal is withrespect to the disallowance of Expenditure of Rs.

27. Lacs being amount paid to the various landowners over and above the actual price of the land. This issue is squarely covered in favour of the assessee by the decision of M/s westland developers private limited in dated 22/8/2014 for the assessment year 2006 - 07 is in that case such addition was deleted. The Ld. departmental representative could not controvert the above fact and further more that decision of the coordinate bench is further followed in involved in the case of the group concerns. In view of this the above judicial precedent binds us and therefore respectfully following the decision of the coordinate bench we also direct the Ld. assessing officer to delete the addition of Rs.

27. Lacs made in the hands of the assessee. Consequently, we confirm the order of the Ld. CIT (A) and dismiss ground No. 2 of the appeal of the revenue.”

7.5 The Tribunal in the case of the assessee in for assessment year 2010-11 has also dismissed the appeal of the Revenue on this ground, observing as under:

"In the present case, the CIT(A) has given categorical finding that the payment for acquiring land cannot be said disbursement of expense or not claimed as expense. In case of owner i.e. assessee effectively the owner of the land is purchasing the same and selling all the rights in said land at a cost of land In the present case, the CIT(A) has given categorical finding that the payment for acquiring land cannot be said disbursement of expense or not claimed as expense. In case of owner i.e. assessee effectively the owner of the land is purchasing the same and selling all the rights in said land at a cost of land plus Rs. 35,000 per acre. Therefore, the cost of land plus Rs.

35,000 per acre is the sale cost which effectively claimed but due to accounting entries, such transaction gets squared up to the extent of cost of land, as such owner including the assessee is directly crediting Rs. 35,000 per acre in its P&L account. Thus, the case is squarely covered by the decision of the Vasundra Promoters (P) Ltd (Supra) Ground No. 2 of the Revenue’s appeal is dismissed."

7.6 Respectfully following the finding of the Tribunal (supra), the issue-in-dispute is decided in favour of the assessee and finding of the Ld. CIT(A) is upheld. The ground of the appeal of the Revenue is accordingly dismissed.