SH.SIMARJIT SINGH BAINS,LUDHIANA vs. INCOME TAX OFFICER, LUDHIANA

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 27.02.2017 of the Commissioner of Income Tax (Appeals)-2, Ludhiana [hereinafter referred to as CIT(A)].

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 2 Officer by invoking provisions of section 68 of the Income Tax Act thereby, by treating the same as income of the assessee from undisclosed sources as per para 3.18 of his order. 2. That the Ld. CIT(A) has failed to appreciate the fact that during the course of hearing onus which was cast upon the assessee, had duly been discharged and the identity, genuineness and credit worthiness of the company namely Bhumipatra (India) Ltd., had been proved before the Assessing Officer and, thus, the addition was not justified.. 3. That the Ld. CIT(A) has failed to appreciate the fact that in the balance sheet of the Pvt. Ltd. Company, the amount as given as advance against the agreement has duly been reflected in the return of income filed by the said company and which have been ignored by the Worthy CIT(A). 4. That the Ld. CIT(A) has also erred in not considering that during the course of hearing before the Assessing Officer, the sanctity of the Biana/Legal notice and also the Compromise deed, had been filed and ignored by the Authorities below. 5. That the addition as above has been wrongly confirmed by the Ld. CIT(A) and submissions filed during the course of hearing before assessment proceedings and also before the Ld. CIT(A) has not been considered properly. 6. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 3 Income Tax Act, 1961 (in short 'the Act') on account of ‘income from

undisclosed sources’.

proceedings, the Assessing Officer observed that there were huge

deposits of Rs. 3 crores in the bank account of the assessee through

three different RTGS transactions of Rs. 1 Crore each. On being asked

to explain in this respect, the assessee explained that the aforesaid

amount of Rs. 3 crores was received through banking channel (RTGS)

from M/s Bhumiputra (India ) Pvt. Ltd. That the said amount was

received as ‘earnest money’ as per the agreement to sell of the land

dated 10.8.2011 entered by the assessee along with his brothers (co-

owners) with the said M/s Bhumiputra (India) Pvt. Ltd. Copy of the

said agreement to sell was also produced before the Assessing Officer.

However, the Assessing Officer observed that the said agreement though

executed on a stamp paper but was not registered. Though the land in question was owned by three brothers / co-owners with 1/3rd share each,

however, the agreement was signed only by the assessee. Though, as per

the agreement, the total earnest money up to 30.8.2011 to be received

was Rs. 12 crores, but only an amount of Rs. 7 crores was received till

date, out of which Rs. 3 crores was deposited in the account of the

assessee and remaining Rs. 4 crores was deposited in the account of his

brother Shri Paramjit Singh Bains. Though, the entire amount of the

agreed sale consideration was to be received by 31.12.2012, but no

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 4 further payment was received by the assessee except the aforesaid

amount of Rs. 7 crores. The Assessing Officer further asked the assessee

to prove the identity and creditworthiness of the payer as well as

genuineness of the transactions. In reply, the assessee stated that,

though, as per the agreement to sell, the earnest money to be received

was Rs. 12 crores, however, the proposed purchaser M/s Bhumiputra

(India) Pvt. Ltd. did not pay the remaining amount except the aforesaid

amount of Rs. 7 crores. The assessee produced confirmation from M/s

Bhumiputra (India) Pvt. Ltd. of the aforesaid transactions and the

balance sheet of the said company. However, the Assessing Officer held

that the assessee had failed to produce the directors of the company in

person and further held that the said M/s Bhumiputra (India) Pvt. Ltd.

was a paper company and was indulged in providing bogus business

accommodation entries, whose creditworthiness was not verifiable. He,

accordingly held the amount of Rs. 3 crores received by the assessee as

‘unexplained income’ of the assessee.

assessee preferred appeal before the Ld. CIT(A). It was explained to the

CIT(A) that there was no legal requirement of getting the said

agreement registered. The agreement was executed duly on stamp paper,

which was also even not disputed by the other party i.e. M/s Bhumiputra

(India) Pvt. Ltd. That the assessee had duly filed before the Assessing

Officer the copies of the Income tax returns, copy of PAN, copy of the

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 5 balance sheet and profit & loss account, certificate of incorporation of

M/s Bhumiputra (India) Pvt. Ltd. Even the assessee duly provided

copies of the bank account of the said company along with balance sheet

which clearly depicted sufficiency of resources of the company. Further,

to prove the genuineness of the transactions, copy of the agreement to

sell and copy of the deed for the cancellation of agreement duly signed

by the directors of the company were provided. It was also submitted

that the finding of the Assessing Officer that the buyer company was a

paper company was wrong. That at the time when the inquiries were

made by the Assessing Officer through Investigation Wing, the name of

the company was changed to M/s Future Corporation Ltd. and the

address was also changed. However, the inquiries were made by the

Income tax authorities at the old address and in respect of old name of

the company. It was also submitted that the PAN and ITR of the said

company were provided to the Assessing Officer. Even, the case of the

buyer company had been selected for scrutiny assessment proceedings

for the assessment year 2009-10 and the assessment order was passed

by the Income Tax Officer accepting the returned income. A copy of the

order passed u/s 143(3) of the Act in the case of the buyer company for

assessment year 2009-10 was also placed on file. It was, therefore,

submitted that the assessee had proved the identity, creditworthiness of

the buyer as well as genuineness of the transactions. It was further

explained that the said agreement to sell was cancelled on 28.3.2015 due

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 6 to non-cooperation on the part of the buyer. That as per the cancelled

deed, the aforesaid amount of Rs. 7 crores was repaid / remitted by the

assessee at the instructions of the buyer company to M/s Uchit

Construction Pvt. Ltd. The assessee also produced on the file the

copy of the bank statement of M/s Bhumiputra (India) Pvt. Ltd. to prove

the creditworthiness of the said party. Further, the amount was repaid /

remitted at the instructions of the M/s Bhumiputra (India) Pvt. Ltd. to

M/s Uchit Construction Pvt. Ltd., through banking channel. The Ld.

CIT(A), however, did not get satisfied by the above explanation of the

assessee and held that the assessee had failed to discharge the onus to

prove the genuineness of the transactions and creditworthiness of the

payer. He held that, in fact, the transaction was just a cover up by the

assessee to bring his own unaccounted money into the books of account.

He, accordingly confirmed the addition so made by the Assessing

Officer.

our attention to the assessment order dated 26.12.2018 passed u/s 143(3)

read with Sec. 148 of the Act in the case of the brother of the assessee

namely Shri Paramjit Singh Bains for the assessment year 2012-13, who

had also received a sum of Rs. 4 crores in the same transactions out of

the total amount of Rs. 7 crores paid by M/s M/s Bhumiputra (India)

Pvt. Ltd. The assessee in the said case namely Shri Paramjit Singh Bains

during the assessment proceedings u/s 143(3) read with section 147 of

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 7 the Act gave the details of the amount received through banking

channels from M/s Bhumiputra (India) Pvt. Ltd. Further, from the

copy of the bank statement of the M/s Bhumiputra (India) Pvt. Ltd was

provided to prove the creditworthiness of the said company. Further,

also the assessee produced the evidence of the refund / remittance of the

aforesaid amount of Rs. 7 crores by way of 13 RTGS to M/s to M/s

Uchit Construction Pvt. Ltd. on the instructions of M/s Bhumiputra

(India) Pvt. Ltd. Further, the PAN of M/s Bhumiputra (India) Pvt. Ltd.,

certificate of incorporation of the said company, Form IB with ROC in

respect of change of the name of the company and Form INC-22 in

respect of change of address of registered office of the company was

also supplied. Balance sheet of the company for the year ending

31.3.2005 to 31.3.2012 and assessment order of the company for

assessment year 2009-10 was also supplied. Further, on an enquiry from

M/s Bhumiputra (India) Pvt. Ltd., director of the said company Shri

Hem Parkash Sharma appeared before the Assessing Officer and his

statement was recorded whereby he admitted the transactions with the

said Shri Paramjit Singh Bains.

After considering the evidences as well as statement of the

director of M/s Bhumiputra (India) Pvt. Ltd., the Assessing Officer held

that the creditworthiness of the payer and genuineness of the transaction

was proved beyond doubt. Further, since the agreement to sell was

cancelled, amount was refunded by the assessee as well as his brother

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 8 and was remitted to M/s Uchit Construction Pvt. Ltd. at the instructions

of M/s Bhumiputra (India) Pvt. Ltd. The Assessing Officer, therefore,

accepted the explanation offered by Shri Paramjit Singh Bains and did

not make any addition.

assessee was made only because of the director of company did not

appear when called upon to verify the transactions. However, director

of the company M/s Bhumiputra (India) Pvt. Ltd. appeared before the

Assessing Officer in the assessment proceedings in the case of his

brother Shri Paramjit Singh Bains relating to the same transactions who

confirmed the payment along with evidences of the transactions as well

as creditworthiness of the payer which was accepted by the Assessing

Officer in the case of Shri Paramjit Singh Bains.

prove the identity and creditworthiness of the buyer, genuineness of the

transactions. Further that out of the total amount received of Rs. 7

crores in respect of transactions in question, Rs. 4 crores was received

by the brother of the assessee Shri Paramjit Singh, in whose case the

director of the payer company appeared and confirmed the transactions.

The Income tax return of the payer company and the balance sheet of the

payer company as well as bank statement of the payer company were

also provided to the Assessing Officer to show the creditworthiness of

the payer.

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 9 In view of this, we do not find any justification on the part of the lower authorities in doubting the genuineness of the transactions in

question. The assessee, in our view, has successfully discharged the onus cast upon it to prove the identity and creditworthiness of the payers as well as genuineness of the transactions which otherwise has also been accepted by the Department / Assessing Officer in the case of

brother of the assessee in the inquiries made during the assessment proceedings in respect of the same transaction. In view of this, the

impugned order of the CIT(A) is set aside. The addition made by the lower authorities is hereby ordered to be deleted.

In the result, the appeal of the assessee is hereby allowed.

Order pronounced in the Open Court on 24.07.2019.

Sd- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 24.07.2019 “आर.के.” आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar

ITA No. 668-C-Chd-2017 Shri Simrajit Singh Bains, Ludhiana 10