ASSISTANT COMMISSIONER OF INCOME TAX ,CENTRAL CIRCLE-3(4), HYDERABAD vs. ANKAA REALTORS, HYDERABAD

The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called upon the assessee to file necessary evidences, including source for cash deposited into bank account. In response, the assessee submitted that Mr.Amit Bansal has made land syndication agreement, received advances from M/s Sonic Battery Pvt. Ltd. and M/s Clutch Auto Ltd., way back in the year 2002 and 2006 respectively, in terms of MOU between Mr.Amit Bansal and the above companies. Further, Mr.Bansal, in turn entered into land syndication agreement with Mr.Afzal and advanced money to him. Since the land syndication is failed due to various reasons, Mr.Bansal has received the advances given to Mr.Afzal and the same has been deposited into bank account. In support, the assessee has submitted relevant MOUs, land syndication agreement, cancellation of land syndication agreement and ledger extracts in the books of Ankaa realtors.

The Assessing Officer, after taking into account relevant submissions of the assessee and also taking note of the main business activity of the assessee, observed that although the assessee has made huge cash deposits into bank account year after year, converted cash deposits into fixed deposits and earned huge interest income, but has not filed its return of income u/s 139(1) of the Act. Further, the assessee firm has not obtained PAN and furnished to bank and because of this, interest earned by the firm on the bank deposits suffered TDS @20%. Therefore, opined that although the assessee firm has filed return of income before the date of search, but the said return is non-est in the eyes of law. The said returns filed by the assessee is beyond the due dates provided u/s 139(5) of the Act. Therefore, the Assessing Officer considered the return of income filed by the assessee, in response to notice u/s 153A of the Act and observed that apparently, the firm did not carry out any business activity and is made functional, to open bank accounts, to make cash deposits in the guise of business transactions. The cash deposits made in the bank were maintained in the form of fixed deposits. Although the assessee explained the source for cash deposits, out of opening cash in hand available as per books of accounts, but the fact remains that the assessee does not have any credible business activity to explain huge cash in hand available, as per books of accounts. Further, the arguments of the assessee, in light of certain evidences, including land syndication agreement between Mr.Amit Bansal and the two Delhi based companies and further MOU between Mr.Amit Bansal and Mr.Afzal are only a make belief story created by the assessee to explain the cash deposited into bank account. The Assessing Officer has discussed the issue in length, in light of investigation carried out by the department on Delhi based companies and statement recorded from certain individuals including Mr.Amit Bansal and came to the conclusion that the arguments of the assessee that Mr.Amit Bansal received advances from M/s Sonic Battery India Pvt.Ltd and Clutch Auto Ltd. way back in the year 2002 to 2006 is not supported by necessary evidences, because, enquiries conducted during post search investigation and during the post search proceedings clearly shows that those companies are paper companies and are not carrying out any business activity. Further, a survey u/s 133A of the Act was conducted at the registered office of M/s Sonic Battery India Pvt.Ltd. and found that, no such company was operating from the said premises. Similarly survey operation conducted at the registered office of M/s Clutch Auto Ltd. and a statement recorded from Mr.Manish Roy, Legal Advisor of the company, revealed that, the company is under litigation before NCLT. Further, he was not aware of any land syndication agreement with Mr.Amit Bansal. A statement was also recorded from Mr.Vijay Krishna Mehta, Managing Director of the company on 27.09.2017, where he stated that he never met Mr.Amit Bansal and the company, M/s Clutch Auto Ltd. never entered into any kind of agreement with him for land syndication. Therefore, he opined that the assessee has not explained the source for cash deposit into bank account and thus, rejected the explanation of the assessee and made additions towards cash deposit of Rs.2,92,09,400/- as unexplained cash deposit and added back to the total income of the assessee.

Being aggrieved, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), the assessee has filed written submissions on the issue, which has been reproduced at para 5.1 on pages 28 to 31 of the Ld.CIT(A) order. The sum and substance of the arguments before the Ld.CIT(A) are that the cash deposited in the bank account has been explained, out of opening cash in hand available as per books of accounts of the assessee maintained for the relevant assessment year, which is further supported by refund of advances given to various parties for land syndication purpose. The assessee further submitted that Mr.Amit Bansal, partner of the assessee firm has entered into land syndication agreement with M/s Sonic Battery India Pvt. Ltd and M/s Clutch Auto Ltd. and received advances from 2002 and 2006 and the same has been given to Mr.Afzal for the purpose of land syndication. Since the MOU with Mr.Afzal was failed, Mr.Bansal has received cash from Mr.Afzal and the same has been deposited into bank account. Although, the Assessing Officer has considered enquiries conducted on Delhi based companies and statement recorded from few individuals, but the fact remains that the assessee has filed various evidences, including, name and address of the persons from whom advances were received, their financial statements and also confirmation letters from the parties to prove the advances received for land syndication purpose.

The Ld.CIT(A), after considering the submissions of the assessee and also taking note of various evidences filed by the assessee, observed that the Assessing Officer failed to brought out the transactions as recorded in the books of the assessee are not correct and real, in view of various evidences filed by the assessee, including relevant land syndication agreement, MOU between the parties and confirmation from Delhi based companies. Further, Mr.Amit Bansal has been searched and no incriminating material is seized from him. No enquiries were made with Mr.Afzal and stated to have received cash, which was deposited into the bank account of the assessee. The evidences filed by the assessee clearly shows that the assessee has established sources for cash deposited, out of refund of cash received from Mr. Afzal towards land syndication purpose and in the absence of any evidence to the contrary, the Assessing Officer, cannot made additions, merely on the basis of enquiries conducted on Delhi based companies and statement recorded from certain individuals. Therefore, directed the Assessing Officer to delete the additions made towards deposits made in the bank account as unexplained cash deposits. The relevant findings of the Ld.CIT(A) are as under :

Shri Srinath Sadanala, Ld.DR, submitted that the Ld.CIT(A) erred in deleting the addition towards cash deposited in the bank account as unexplained cash deposit, without appreciating the fact that the claim of source of the cash deposit has been the alleged land syndication advances taken in 2002 and 2006 from M/s Sonic Battery (India) Pvt. Ltd. and M/s Clutch Auto Ltd by Mr.Amit Bansal, employee of key person Mr.Ajaz Farooqi was not genuine. The Ld.CIT(A) erred in ignoring the survey conducted on M/s Sonic Battery (India) Pvt. Ltd and M/s Clutch Auto Ltd. and failed to appreciate that no prudent person would have advanced huge amount in cash in 2002 and 2006 to an employee drawing salary of Rs.40,000/- that too, without proper documentation. Further, the enquiry conducted during the course of survey clearly established the fact that, those two companies were not in existence at the given address and directors of the company were not assessable. Further, the Ld.CIT(A) failed to appreciate the statement of MD of M/s Clutch Auto Ltd., wherein, he denied to have entered into any land syndication agreement with Mr.Amit Bansal and also stated that the alleged signature on the document is not his. The Ld.DR further submitted that the Ld.CIT(A) failed to appreciate the fact that there are no legitimate source for cash deposited and the alleged cancellation of land syndication is only an after thought based on fabricated documents, as this document was neither found nor seized during the course of search. The Ld.DR further submitted that the Ld.CIT(A) given relief to the assessee, only on the ground that no enquiries were conducted on Mr.Afzal, without appreciating the fact that when the other documents furnished by the assessee are not genuine and fabricated, it is sufficient enough to hold against the assessee, that the assessee could not prove the source for cash deposited and the question of examining Mr.Afzal does not arise. Therefore, he submitted that the Ld.CIT(A), without bringing relevant facts, simply deleted the additions made by the Assessing Officer and therefore, the order of the Ld.CIT(A) should be set aside and the additions made by the Assessing Officer should be upheld.

The learned counsel for the assessee, Shri P.Murali Mohan Rao submitted that, the Assessing Officer erroneously made additions u/s 68 of the Act towards cash deposit, without appreciating the fact that, the assessee has filed relevant evidences, to prove the source for cash deposited including land syndication agreement, MOU between the parties, confirmation from Delhi based companies etc. The learned counsel for the assessee, further submitted that the Assessing Officer, solely relied upon the statement recorded from certain individuals from Delhi and the enquiry conducted on two companies, during the course of search u/s 132 of the Act, but the fact remains that, nowhere in such statement, there was any adverse finding on the advances given to the assessee company for land syndication purpose. The Assessing Officer also has not disputed the fact that Amit Bansal has entered into MOU with Mr.Afzal and given advance from Delhi based companies for land syndication purpose and because of failure of transactions, Mr.Afzal returned advances to the assessee in the A.Y.2007-08 and the same was stood as opening cash in hand as on 01.04.2009. The assessee has filed all evidences including relevant cash book, to explain source for cash deposit. The Ld.CIT(A) after considering the relevant facts has rightly deleted the additions and therefore, their order should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. We have also carefully considered relevant case laws relied upon by both the parties, in support of their arguments. There is no dispute with regard to the fact that the assessee has made cash deposit into the bank account maintained with IDBI bank and the same has been explained, out of opening cash in hand available as per books of accounts maintained for the relevant assessment year. It is also an admitted fact that the assessee has explained the source of opening cash in hand available as per books of accounts, out of refund of advances by Mr.Afzal, in light of cancellation of land syndication agreement and MOU between Mr.Amit Bansal and Mr.Afzal. Admittedly, Mr.Amit Bansal had entered into land syndication agreement with Mr.Afzal in the year 2007, for procurement of land and developing them into commercial flats etc. vide agreement dated 12.03.2007 and given advances. The source for advances given to Mr.Afzal was explained out of land syndication advances received from M/s Sonic Battery India Pvt. Ltd. and M/s Clutch Auto Ltd., two Delhi based companies in the year 2002 and 2006. Since there was huge crash in the real estate market, because of recession, the land syndication activity could not progress much and Mr. Afzal could not make headway in the land syndication. Mr.Amit Bansal cancelled land syndication agreement vide cancellation deed dated 13.01.2009. At this stage, it is pertinent to mention that the MOU was entered into between Mr.Amit Bansal and Ankaa Realtors and as per the terms of agreement, it was agreed between the parties that land syndication advances given to Mr.Afzal would be transferred to the assessee and the assessee firm will record the same in its books of accounts. As per the agreement between the parties, Mr.Amit Bansal has recorded refund of advances from Mr.Afzal in the books of accounts of the assessee in the F.Y.2006-07, relevant to A.Y.2007-08 and the said amount was available as opening cash in hand in the books of accounts of the assessee. The said advances related to the earlier years returned back to the firm from A.Y.2010-11 onwards and the same was deposited in the bank account of the assessee. Further, the assessee had also explained the remaining amount of deposits, out of amount received from other group companies and for which, relevant ledger extracts and confirmation letters have been filed. Therefore, from the evidences filed by the assessee, it is undisputedly clear that the assessee is having sufficient opening cash in hand as per books of account as on 01.04.2009, which is available to explain the deposit of cash into the bank account for the year under consideration. The Ld.CIT(A), after considering relevant facts has rightly held that the assessee is able to explain the sources for cash deposited into the bank account.

Having said so, let us come back to the various reasons given by the Assessing Officer, to come to the conclusion that, the land syndication agreement and MOU between the parties is an afterthought and not supported by relevant evidences. We find that the Assessing Officer came to the above conclusion only on the basis of post search enquiries conducted on two Delhi based companies, where, during the course of survey u/s 133A of the Act, it was noticed that the said companies were non-existent in the given address and the Directors of the company were not traceable. Further, the department has recorded statement from few individuals, who are not connected to the company, but claimed to be one way or the other related to company and came to conclusion that, the said persons are not aware of any land syndication agreement with Amit Bansal and the assessee firm. The Assessing Officer on the basis of said findings came to the conclusion that the assessee’s claim of receipt of advances from two Delhi based companies in 2002 and 2006 is without any supporting evidences. In our considered view, the Assessing Officer has relied upon the statement of few persons, who are not connected to the two companies and also not parties to the land syndication agreement with Amit Bansal. Further, in the said statement, although, their answers are evasive on the issue of advances given to assessee company, but there is no conclusive statement on whether the companies have given advances to the assessee company or not. On the other hand, the assessee firm has filed relevant evidences, including confirmation letters from the parties to prove that the said company has given advances to Mr.Amit Bansal in the year 2002 and 2006 and the same has been given to Mr.Afzal. The department has conducted search in the case of Mr.Amit Bansal, but has not found any incriminating material related to above transactions. Further, the Assessing Officer has not conducted any enquiry with Mr.Afzal, who stated to have returned cash, which was deposited into the bank account of the assessee. The Assessing Officer, without carrying out any enquiries, simply concluded that the assessee’s argument of source for cash deposit is an afterthought, even without conducting any basic enquiries like examining the person from whom the assessee has received back advances. On the other hand, advances filed by the assessee, including relevant MOUs and land syndication agreement and the land cancellation agreement, clearly shows receipt of advances from Delhi based companies in the year 2002 and 2006 and the same has been given to Mr.Afzal. The assessee has also recorded refund of advances from Mr.Afzal in the books of accounts. These facts are not disputed by the Assessing Officer. From the details filed by the assessee, it is undisputedly clear that, the assessee has filed sufficient evidences to establish source for the cash deposit. Therefore, we are of the considered view, that the Assessing Officer is erred in making advances towards cash deposit, as unexplained deposit u/s 68 of the Act. The Ld.CIT(A), after considering the relevant facts, has rightly deleted the additions made by the Assessing Officer. Thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.

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

Coming back to appeal filed by the assessee. The assessee has filed appeal and raised grounds on various legal aspects, including validity of notice issued u/s 153A, in light of warrant of authorisation in the name of the assessee and argued that the bank account statement of the assessee firm was not incriminating in nature and based on the said material, no additions can be made. In this regard, the assessee has also taken support from the decision of Hon’ble Supreme Court, in the case of Principal Commissioner of Income-Tax Vs.Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC). Although the assessee has challenged the assessment order passed by the Assessing Officer, in light of notice issued u/s 153A of the Act on legality of proceedings, but the grounds taken by the assessee in their appeal is purely academic in nature, for the simple reason that the additions made by the Assessing Officer, towards cash deposit into bank account has been dealt in the appeal filed by the Revenue and we held that the Assessing Officer is erred in making additions towards cash deposited u/s 68 of the Act. Since the additions made by the Assessing Officer u/s 68 of the Act are deleted on merits, in our considered view, the grounds raised by the assessee, challenging the validity of assessment order passed by the Assessing Officer becomes infructuous and thus, the appeal filed by the assessee is dismissed as infructuous.

In the result, appeal filed by the Revenue and the assessee for the A.Y.2011-12 are dismissed.

At the outset, it is observed that the appeal has been filed by the assessee with the delay of 27 days. The assessee filed a petition for condonation of delay and submitted that the order of the Ld.CIT(A) was received on 03.11.2020 and the appeal ought to have been filed before the Tribunal on or before 03.01.2021, but the appeal could be filed on 08.02.2021 with the delay of 27 days, due to the reason that the office of the assessee was closed due to Covid-19 pandemic from 23.03.2020 to 08.05.2020 and the staff were allowed to work only on rotational basis on alternate days for few hours. The office was closed frequently due to detection of new corona positive cases among staff. The assessee, therefore, submitted that the delay in filing of the appeal is due to the reasons beyond the control of the assessee, which are neither intentional nor deliberate. He, therefore, pleaded to condone the delay and admit the appeal for hearing, for which the Ld.DR has not raised any objection.

We have gone through the condonation petition filed by the assessee and find that there is a reasonable cause for the assessee to file the appeal belatedly before the Tribunal. We, therefore, condone the delay and admit the appeal for hearing in the interest of justice.

The facts and issues involved in the appeal filed by the Revenue and the appeal filed by the assessee are identical to the facts and issues, which we had considered in assessee’s own case in for the A.Y.2011-12. The reasons given by us in preceding paragraph Nos.10 to 12 shall apply equally to these appeals as well. Therefore, for similar reasons, we are inclined to uphold the order of the Ld.CIT(A) and dismiss the appeal filed by the Revenue. Similarly, for the reasons stated in paragraph No.13, we dismiss the appeal filed by the assessee as infructuous.

In the result, appeal filed by the Revenue and the assessee for the A.Y.2012-13 are dismissed.

At the time of hearing, the learned counsel for the assessee submitted that the assessee wish to withdraw the appeal filed by the assessee for the A.Y.2013-14 and 2014-15 for which the Ld.DR has not raised any objection. Therefore, the appeal filed by the assessee for the A.Y.2013-14 and 2014-15 are dismissed as withdrawn. (Revenue Appeal) and (Assessee Appeal), A.Y.2015-16

The facts and issues involved in the appeal filed by the Revenue and the appeal filed by the assessee are identical to the facts and issues, which we had considered in assessee’s own case for the A.Y.2011-12 in 102/Hyd/2021. The reasons given by us in preceding paragraphs No.10 to 12 shall mutatis mutandis apply to these appeals as well. Therefore, for similar reasons, we are inclined to uphold the order of the Ld.CIT(A) and dismiss the appeal filed by the Revenue. Similarly, for the reasons stated in paragraph No.13, we dismiss the appeal filed by the assessee as infructuous.

In the result, appeal filed by the Revenue and the assessee for the A.Y.2015-16 are dismissed.

Brief facts of the case are that the assessee M/s Ankaa Realtors is engaged in the business of engineering works, acting as a consultant and advisor in all matters relating to real estate, filed its return of income for the A.Y.2016-17 on 31.07.2018, A search and seizure operation u/s 132 of the Income Tax Act, 1961 (“the Act”) was conducted in the case of the assessee on 20.03.2017 and a warrant in the name of the assessee and its bank account held with IDBI Bank Hansiguda branch Secunderabad was executed. During the course of search, it was noticed that the assessee has made huge cash deposits during demonetisation period in the bank account held with IDBI bank account, Hansiguda branch. It was further noticed that the assessee firm has made cash deposits into bank account during the F.Y.2009-10 to 2014-15, however has not filed any return of income on or before the due date provided u/s 139 of the Act. During the post search proceedings, Shri Amit Bansal, managing partner of the assessee firm was summoned to explain the cash deposited into bank account. In the absence of any explanation of sources of cash deposits by assessee firm and its partners, the cash was seized on 28.03.2017. Consequent to search, notice u/s 153A of the Act was issued and called upon the assessee to file return of income for the A.Y.2010-11 to 2015-16. In response, the assessee has filed return of income on 31.07.2018, declaring total income of Rs.46,17,743/- for the A.Y.2016-17.

The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called upon the assessee to file necessary evidences, including source for cash deposited into bank account. In response, the assessee submitted that Mr.Amit Bansal has made land syndication agreement, received advances from M/s Sonic Battery Pvt. Ltd. and M/s Clutch Auto, way back in the year 2002 and 2006 respectively, in terms of MOU between Mr.Amit Bansal and the above companies . Further, Mr.Bansal, in turn entered into land syndication agreement with Mr.Afzal and advanced money to him. Since the land syndication is failed due to various reasons, Mr.Bansal has received the advances given to Mr.Afzal and the same has been deposited into bank account. In support, the assessee has submitted relevant MOUs, land syndication agreement, cancellation of land syndication agreement and ledger extracts in the case of Ankaa realtors.

The Assessing Officer, after taking into account relevant submissions of the assessee and also taking note of the main business activity of the assessee, observed that although the assessee has made huge cash deposits into bank account year after year, converted cash deposits into fixed deposits and earned huge interest income, but has not filed its return of income u/s 139(1) of the Act. Further, the assessee firm has not obtained PAN and furnished to bank and because of this, interest earned by the firm on bank deposits suffered TDS @20%. Therefore, opined that although the assessee firm has filed return of income before the date of search, but the said return is non-est in the eyes of law. The said returns filed by the assessee are beyond the due dates provided u/s 139(5) of the Act. Therefore, the Assessing Officer considered the return of income filed by the assessee, in response to notice u/s 153A of the Act and observed that apparently, the firm did not carry out any business activity and is made functional to open bank accounts, to make cash deposits in the guise of business transactions. The cash deposits made in the bank were maintained in the form of fixed deposits. Although the assessee explained the source for cash deposits out of opening cash in hand available as per books of accounts, but the fact remains that the assessee does not have any credible business activity to explain huge cash in hand available as per books of accounts. Further, the arguments of the assessee, in light of certain evidences including land syndication agreement between Mr.Amit Bansal and two Delhi based companies and further MOU between Mr.Amit Bansal and Mr.Afzal are only a make belief story created by the assessee to explain the cash deposited into bank account. The Assessing Officer has discussed the issue in length, in light of investigation carried out by the department on Delhi based companies and statement recorded from certain individuals including Mr.Amit Bansal and came to the conclusion that the arguments of the assessee that Mr.Amit Bansal received advances from M/s Sonic Battery India Pvt.Ltd and Clutch Auto Ltd. way back in the year 2002 and 2006 is not supported by necessary evidences, because, enquiries conducted during post search investigation and during the post search proceedings clearly shows that those companies are paper companies and are not carrying out any business activity. Further, a survey u/s 133A was conducted at the registered office of M/s Sonic Battery India Pvt.Ltd. and found that, no such company was operating from the said premises. Similarly survey operation conducted at the registered office of M/s Clutch Auto Ltd. and a statement recorded from Mr.Manish Roy, Legal Advisor of the company, revealed that, the company is under litigation before NCLT. Further, he was not aware of any land syndication agreement with Mr.Amit Bansal. A statement was also recorded from Mr.Vijay Krishna Mehta, Managing Director of the company on 27.09.2017, where he stated that he never met Mr.Amit Bansal and the company, M/s Clutch Auto Ltd. never entered into any kind of agreement with him for land syndication. Therefore, he opined that the assessee has not explained the source for cash deposit into bank account and thus, rejected the explanation of the assessee and made additions towards cash deposit of Rs.2,72,16,570/- as unexplained cash deposit and added back to the total income of the assessee.

Being aggrieved, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A) the assessee has filed written submissions on the issue, which has been reproduced at para 5.1 on pages 28 to 30 of the Ld.CIT(A) order. The sum and substance of the arguments before the Ld.CIT(A) are that the cash deposited in the bank account has been explained, out of opening cash in hand available as per books of accounts of the assessee maintained for the relevant assessment year, which is further supported by refund of advances given to various parties for land syndication purpose. The assessee further submitted that Mr.Amit Bansal, partner of the assessee firm has entered into land syndication agreement with M/s Sonic Battery India Pvt. Ltd and M/s Clutch Auto Ltd. and received advances from 2002 and 2006 and the same has been given to Mr.Afzal for the purpose of land syndication. Since the MOU with Mr.Afzal was failed, Mr.Bansal has received cash from Mr.Afzal and the same has been deposited into bank account. Although, the Assessing Officer has considered enquiries conducted on Delhi based companies and statement recorded from few individuals, but the fact remains that the assessee has filed various evidences, including, name and address of the persons from whom advances were received, their financial statements and also confirmation letters from the parties to prove the advances received for land syndication purpose.

The Ld.CIT(A), after considering the submissions of the assessee and also taking note of various evidences filed by the assessee, observed that the assessee failed to brought out the transactions as recorded in the books of the assessee are not correct and real, in view of various evidences filed by the assessee, including relevant land syndication agreement, MOU between the parties and confirmation from Delhi based companies. Further, Mr.Amit Bansal has been searched and no incriminating material is seized from him. No enquiries were made with Mr.Afzal and stated to have received cash, which was deposited into the bank account of the assessee. The evidences filed by the assessee clearly shows that the assessee has established sources for cash deposited out of refund of cash received from Mr. Afzal towards land syndication purpose and in the absence of any evidence to the contrary, the Assessing Officer, cannot made additions merely on the basis of enquiries conducted on Delhi based companies and statement recorded from certain individuals.

Shri Srinath Sadanala, Ld.DR, submitted that the Ld.CIT(A) erred in deleting the addition towards cash deposited in the bank account as unexplained cash deposit, without appreciating the fact that the claim of source of the cash deposit has been alleged land syndication advances taken in 2002 and 2006 from M/s Sonic Battery (India) Pvt. Ltd. and M/s Clutch Auto Ltd by Mr.Amit Bansal, employee of key person Mr.Ajaz Farooqi was not genuine. The Ld.CIT(A) erred in ignoring the survey conducted on M/s Sonic Battery (India) Pvt. Ltd and M/s Clutch Auto Ltd. and failed to appreciate that no prudent person would have advanced huge amount in cash in 2002 an 2006 to an employee drawing salary of Rs.40,000/- that too, without proper documentation. Further, the enquiry conducted during the course of survey clearly established the fact that those two companies were not in existence at the given address and directors of the company are not assessable. Further, the Ld.CIT(A) failed to appreciate the statement of MD of M/s Clutch Auto Ltd., wherein, he denied to have entered into any land syndication agreement with Mr.Amit Bansal and also stated that the alleged signature on the document is not his. The Ld.DR further submitted that the Ld.CIT(A) failed to appreciate the fact that there are no legitimate source for cash deposited and the alleged cancellation of land syndication is only an after thought based on fabricated documents, as this document was neither found nor seized during the course of search. The Ld.DR further submitted that the Ld.CIT(A) given relief to the assessee, only on the ground that enquiries were conducted on Mr.Afzal, without appreciating the fact that when the other documents furnished by the assessee are not genuine and fabricated, it is sufficient enough to hold against the assessee, that the assessee could not prove the source for cash deposited and the question of examining Mr.Afzal does not arise. Therefore, he submitted that the Ld.CIT(A), without bringing relevant facts, simply deleted the additions made by the Assessing Officer and therefore, the order of the Ld.CIT(A) should be set aside and the additions made by the Assessing Officer should be upheld.

The learned counsel for the assessee, Shri P.Murali Mohan Rao submitted that the Assessing Officer erroneously made additions u/s 68 of the Act towards cash deposit, without appreciating the fact that the assessee has filed relevant evidences to prove the source for cash deposited including land syndication agreement, MOU between the parties, confirmation from Delhi based companies etc. The learned counsel for the assessee, further submitted that the Assessing Officer, solely relied upon the statement recorded from certain individuals from Delhi and the enquiry conducted on two companies, during the course of search u/s 132 of the Act, but the fact remains that, nowhere in such statement, there is any adverse finding on the advances given to assessee company for land syndication purpose. The Assessing Officer also has not disputed the fact that Amit Bansal has entered into MOU with Mr.Afzal and given advance from Delhi based companies for land syndication purpose and because of failure of transactions, Mr.Afzal returned advances to the assessee in the A.Y.2007-08 and he same was stood as opening cash in hand as on 01.04.2009. The assessee has filed all evidences including relevant cash book to explain source for cash deposit. The Ld.CIT(A) after considering the relevant facts has rightly deleted the additions and therefore, their order should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The Assessing Officer made addition of Rs.2,72,16,570/- towards unexplained cash credit, on the ground that the assessee could not explain the source for cash deposited into the bank account. The assessee explained total amount of additions made by the Assessing Officer, in light of relevant bank statements. On perusal of relevant bank statements of State Bank of Hyderabad, Himayat Nagar Branch, we find that three fixed deposits aggregating to Rs.1,63,22,637/- were matured and credited to the current account of the assessee on different dates as follows :

Further, remaining credits of Rs.1,08,93,933/- were the amount of FDs matured during the assessment year under consideration, one of which, a sum of Rs.61,97,695/- has been credited to bank account, out of fixed deposit with State Bank of Hyderabad, Maredpally branch and the same got credited in the Andhra Bank account. Similarly, an amount of Rs.58,42,172/- relates to fixed deposit held with State Bank of Hyderabad, Maredpally, got credited to Andhra Bank account. Therefore, in our considered view, the Assessing Officer is erred in making additions on inter bank transfers to bank accounts of the assessee, by presuming that the said credits are cash deposits into bank account. Since the assessee is able to explain the credits in the bank account, out of fixed deposits matured during the year under consideration and the same were crept out of cash deposits of earlier years, in our considered view, the additions made by the Assessing Officer on the ground that the explanation offered by the assessee towards source for cash deposit is not supported by evidences is not correct. If we go by assessment order passed by the Assessing Officer for the year under consideration, it is verbatim repetition of assessment order passed for earlier assessment years, except for figures. In the earlier assessment years, there was no dispute with regard to cash deposit in the bank account and the same has been explained by the assessee, out of advances by Mr.Afzal in connection with cancellation of land syndication agreement with Mr.Amit Bansal. The Assessing Officer copied findings recorded for earlier assessment years and made additions for the year under consideration of Rs.2,72,16,570/-, even though, there were no cash deposits in the bank account as alleged by the Assessing Officer. On the other hand, the assessee has made out a case with relevant evidences that credits in the bank account is out of maturity of fixed deposits and transfer from other bank account. Therefore, in our considered view, the additions made by the Assessing Officer on the basis of incorrect findings cannot be sustained. The Ld.CIT(A), after considering the relevant facts has rightly deleted the additions made by the Assessing Officer. Thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.

Coming back to appeal filed by the assessee. The assessee has filed appeal and raised grounds on various legal aspects, including validity of notice issued u/s 153A, in light of warrant of authorisation in the name of the assessee and argued that the bank account statement of the assessee firm was not incriminating in nature and based on the said material, no additions can be made. In this regard, the assessee has also taken support from the decision of Hon’ble Supreme Court, in the case of Principal Commissioner of Income-Tax Vs.Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC). Although the assessee has challenged the assessment order passed by the Assessing Officer, in light of notice issued u/s 153A of the Act on legality of proceedings, but the grounds taken by the assessee in their appeal is purely academic in nature, for the simple reason that the additions made by the Assessing Officer, towards cash deposit into bank account has been dealt in the appeal filed by the Revenue and we held that the Assessing Officer is erred in making additions towards cash deposited u/s 68 of the Act. Since the additions made by the Assessing Officer u/s 68 of the Act are deleted on merits, in our considered view, the grounds raised by the assessee, challenging the validity of assessment order passed by the Assessing Officer becomes infructuous and thus, the appeal filed by the assessee is dismissed as infructuous.

In the result, appeal filed by the Revenue and the assessee for the A.Y.2016-17 are dismissed.

Brief facts of the case are that the assessee M/s Ankaa Realtors is engaged in the business of engineering works, acting as a consultant and advisor in all matters relating to real estate, filed its return of income for the A.Y.2017-18 on 23.11.2016, A search and seizure operation u/s 132 of the Income Tax Act, 1961 (“the Act”) was conducted in the case of the assessee on 20.03.2017 and a warrant in the name of the assessee and its bank account held with IDBI Bank Hansiguda branch Secunderabad was executed. During the course of search, it was noticed that the assessee has made huge cash deposits during demonetisation period in the bank account held with IDBI bank account, Hansiguda branch. It was further noticed that the assessee firm has made cash deposits into bank account during the F.Y.2009-10 to 2014-15, however has not filed any return of income on or before the due date provided u/s 139 of the Act. During the post search proceedings, Shri Amit Bansal , managing partner of the assessee firm was summoned to explain the cash deposited into bank account. In the absence of any explanation of sources of cash deposits by assessee firm and its partners, the cash was seized on 28.03.2017. Consequent to search, notice u/s 153A of the Act was issued and called upon the assessee to file return of income for the A.Y.2010-11 to 2015-16. In response, the assessee has filed return of income on 31.07.2018, declaring total income of Rs.Nil for the A.Y.2017-18.

The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called upon the assessee to file necessary evidences, including source for cash deposited into bank account. In response, the assessee submitted that Mr.Amit Bansal has made land syndication agreement, received advances from M/s Sonic Battery Pvt. Ltd. and M/s Clutch Auto, way back in the year 2002 and 2006 respectively, in terms of MOU between Mr.Amit Bansal and the above companies . Further, Mr.Bansal, in turn entered into land syndication agreement with Mr.Afzal and advanced money to him. Since the land syndication is failed due to various reasons, Mr.Bansal has received the advances given to Mr.Afzal and the same has been deposited into bank account. In support, the assessee has submitted relevant MOUs, land syndication agreement, cancellation of land syndication agreement and ledger extracts in the case of Ankaa realtors.

The Assessing Officer, after taking into account relevant submissions of the assessee and also taking note of the main business activity of the assessee observed that although the assessee has made huge cash deposits into bank account year after year, converted cash deposits into fixed deposits and earned huge interest income, but has not filed its return of income u/s 139(1) of the Act. Further, the assessee firm has not obtained PAN and furnished to bank and because of this, interest earned by the firm on bank deposits suffered TDS @20%. Therefore, opined that although the assessee firm has filed return of income before the date of search, but the said return is non-est in the eyes of law. The said returns filed by the assessee are beyond the due dates provided u/s 139(5) of the Act. Therefore, the Assessing Officer considered the return of income filed by the assessee, in response to notice u/s 153A of the Act and observed that apparently, the firm did not carry out any business activity and is made functional to open bank accounts to make cash deposits in the guise of business transactions. The cash deposits made in the bank were maintained in the form of fixed deposits. Although the assessee explained the source for cash deposits out of opening cash in hand available as per books of accounts, but the fact remains that the assessee does not have any credible business activity to explain huge cash in hand available as per books of accounts. Further, the arguments of the assessee, in light of certain evidences including land syndication agreement between Mr.Amit Bansal and two Delhi based companies and further MOU between Mr.Amit Bansal and Mr.Afzal are only a make belief story created by the assessee to explain the cash deposited into bank account. The Assessing Officer has discussed the issue in length, in light of investigation carried out by the department on Delhi based companies and statement recorded from certain individuals including Mr.Amit Bansal and came to the conclusion that the arguments of the assessee that Mr.Amit Bansal received advances from M/s Sonic Battery India Pvt.Ltd and Clutch Auto Ltd. way back in the year 2002 to 2006 is not supported by necessary evidences, because, enquiries conducted during post search investigation and during the post search proceedings clearly shows that those companies are paper companies and are not carrying out any business activity. Further, a survey u/s 133A was conducted at the registered office of M/s Sonic Battery India Pvt.Ltd. and found that, no such company was operating from the said premises. Similarly survey operation conducted at the registered office of M/s Clutch Auto Ltd. and a statement recorded from Mr.Manish Roy, Legal Advisor of the company, revealed that, the company is under litigation before NCLT. Further, he was not aware of any land syndication agreement with Mr.Amit Bansal. A statement was also recorded from Mr.Vijay Krishna Mehta, Managing Director of the company on 27.09.2017, where he stated that he never met Mr.Amit Bansal and the company, M/s Clutch Auto Ltd. never entered into any kind of agreement with him for land syndication. Therefore, he opined that the assessee has not explained the source for cash deposit into bank account and thus, rejected the explanation of the assessee and made additions towards cash deposit of Rs.12,97,27,500/- as unexplained cash deposit and added back to the total income of the assessee.

Being aggrieved, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A) the assessee has filed written submissions on the issue, which has been reproduced at para 5.1 on pages 27 to 29 of the Ld.CIT(A) order. The sum and substance of the arguments before the Ld.CIT(A) are that the cash deposited in the bank account has been explained, out of opening cash in hand available as per books of accounts of the assessee maintained for the relevant assessment year, which is further supported by refund of advances given to various parties for land syndication purpose. The assessee further submitted that Mr.Amit Bansal, partner of the assessee firm has entered into land syndication agreement with M/s Sonic Battery India Pvt. Ltd and M/s Clutch Auto Ltd. and received advances from 2002 to 2006 and the same has been given to Mr.Afzal for the purpose of land syndication. Since the MOU with Mr.Afzal was failed, Mr.Bansal has received cash from Mr.Afzal and the same has been deposited into bank account. Although, the Assessing Officer has considered enquiries conducted on Delhi based companies and statement recorded from few individuals, but the fact remains that the assessee has filed various evidences, including, name and address of the persons from whom advances were received, their financial statements and also confirmation letters from the parties to prove the advances received for land syndication purpose.

The Ld.CIT(A), after considering the submissions of the assessee and also taking note of various evidences filed by the assessee, observed that the assessee failed to brought out the transactions as recorded in the books of the assessee are not correct and real, in view of various evidences filed by the assessee, including relevant land syndication agreement, MOU between the parties and confirmation from Delhi based companies. Further, Mr.Amit Bansal has been searched and no incriminating material is seized from him. No enquiries were made with Mr.Afzal and stated to have received cash, which was deposited into the bank account of the assessee. The evidences filed by the assessee clearly shows that the assessee has established sources for cash deposited out of refund of cash received from Mr. Afzal towards land syndication purpose and in the absence of any evidence to the contrary, the Assessing Officer, cannot made additions merely on the basis of enquiries conducted on Delhi based companies and statement recorded from certain individuals.

Shri Srinath Sadanala, Ld.DR, submitted that the Ld.CIT(A) erred in deleting the addition towards cash deposited in the bank account as unexplained cash deposit, without appreciating the fact that the claim of source of the cash deposit has been alleged land syndication advances taken in 2002 and 2006 from M/s Sonic Battery (India) Pvt. Ltd. and M/s Clutch Auto Ltd by Mr.Amit Bansal, employee of key person Mr.Ajaz Farooqi was not genuine. The Ld.CIT(A) erred in ignoring the survey conducted on M/s Sonic Battery (India) Pvt. Ltd and M/s Clutch Auto Ltd. and failed to appreciate that no prudent person would have advanced huge amount in cash in 2002 an 2006 to an employee drawing salary of Rs.40,000/- that too, without proper documentation. Further, the enquiry conducted during the course of survey clearly established the fact that those two companies were not in existence at the given address and directors of the company are not assessable. Further, the Ld.CIT(A) failed to appreciate the statement of MD of M/s Clutch Auto Ltd., wherein, he denied to have entered into any land syndication agreement with Mr.Amit Bansal and also stated that the alleged signature on the document is not his. The Ld.DR further submitted that the Ld.CIT(A) failed to appreciate the fact that there are no legitimate source for cash deposited and the alleged cancellation of land syndication is only an after thought based on fabricated documents, as this document was neither found nor seized during the course of search. The Ld.DR further submitted that the Ld.CIT(A) given relief to the assessee, only on the ground that enquiries were conducted on Mr.Afzal, without appreciating the fact that when the other documents furnished by the assessee are not genuine and fabricated, it is sufficient enough to hold against the assessee, that the assessee could not prove the source for cash deposited and the question of examining Mr.Afzal does not arise. Therefore, he submitted that the Ld.CIT(A), without bringing relevant facts, simply deleted the additions made by the Assessing Officer and therefore, the order of the Ld.CIT(A) should be set aside and the additions made by the Assessing Officer should be upheld.

The learned counsel for the assessee, Shri P.Murali Mohan Rao submitted that the Assessing Officer erroneously made additions u/s 68 of the Act towards cash deposit, without appreciating the fact that the assessee has filed relevant evidences to prove the source for cash deposited including land syndication agreement, MOU between the parties, confirmation from Delhi based companies etc. The learned counsel for the assessee, further submitted that the Assessing Officer, solely relied upon the statement recorded from certain individuals from Delhi and the enquiry conducted on two companies, during the course of search u/s 132 of the Act, but the fact remains that, nowhere in such statement, there is any adverse finding on the advances given to assessee company for land syndication purpose. The Assessing Officer also has not disputed the fact that Amit Bansal has entered into MOU with Mr.Afzal and given advance from Delhi based companies for land syndication purpose and because of failure of transactions, Mr.Afzal returned advances to the assessee in the A.Y.2007-08 and he same was stood as opening cash in hand as on 01.04.2009. The assessee has filed all evidences including relevant cash book to explain source for cash deposit. The Ld.CIT(A) after considering the relevant facts has rightly deleted the additions and therefore, their order should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The assessee has explained cash deposit of Rs.2,87,77,500/-, out of opening cash in hand available with the assessee firm as on 31.03.2016 for Rs.3,44,38,282/- and the source for opening cash in hand was out of refund of land syndication advance given to Mr.Afzal. The assessee has filed relevant evidences including land syndication cancellation agreement between Mr.Amit Bansal and two Delhi based companies and the land syndication agreement between Mr.Amit Bansal and Mr.Afzal. The assessee also explained, why the land syndication agreement with Md.Afzal was cancelled and received back the advances given in pursuant to said agreement. On going through the cancellation agreement with Ami Bansal and Md.Afzal, we find that the assessee firm has received back the amount from Md.Afzal and recorded in the books of accounts in the F.Y.2007-08 and 2008-09 and the same has been carried forward as opening cash in had, which is the source for cash deposit of Rs.2,87,77,500/- In so far as the remaining cash deposits, the assessee has filed evidences and proved that three DDs of Rs.1,80,50,000/- each were taken from the Axis bank account and the same were credited in the IDBI bank account of the assessee firm. The assessee has filed relevant evidences including ledger account in respect of books of accounts of the firm and also balance sheet for the A.Y.2016-17, which is available in paper book page 5 and 6. On going through the evidences filed by the assessee, we find that the Assessing Officer made addition of Rs.12,97,27,500/- as unexplained cash credit, even though the cash deposited in the bank account is only to the extent of Rs.2,87,77,500/- and the balance amount is out of credit is the form of DDs from other bank account of the assessee and the source has been explained with relevant evidences. Therefore, we are of the considered view that the Assessing Officer is erred in making additions on incorrect facts that the assessee has made cash deposits in the bank account and the same has not been explained. Further, the assessee had explained the source towards cash deposits and other credits out of refund of loans syndication advances given to Md.Afzal and the same has been given by Mr.Amit Bansal to Md.Afzal, in pursuant to land syndication agreement and MoU. This fact has been gathered during the course of search in the case of Amit Bansal. The assessment of Amit Bansal was completed u/s 153A of the Act and Amit Bansal has explained the transactions with M/s Sonic Battery Private Limited and M/s Clutch Auto Limited. The Assessing Officer has not taken any adverse view in his assessment in respect of advances received from M/s Sonic Battery Private Limited and M/s Clutch Auto Limited. Further, the assessee has also filed documentary evidences for land syndication agreement, confirmation from M/s Sonic Battery Private Limited and M/s Clutch Auto Limited., MoU with Mr.Afzal and cancellation of their all MOUs with firms, in which Mr.Amit Bansal was partner was also filed. The return of income of the assessee was also filed before the date of search and the same has been accepted by the Assessing Officer. Therefore, in our considered view, in the absence of any material as to incriminating in nature, which suggest unaccounted income of the assessee firm, merely on the basis of enquiries carried out on Delhi based companies no adverse inference can be drawn against the assessee. The Ld.CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer. Thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.

The assessee has filed appeal and raised grounds on various legal aspects including validity of notice issued u/s 153A in light of warrant of authorisation in the name of the assessee and argued that the bank account statement of the assessee firm was not incriminating in nature and based on the said material, no additions can be made. In this regard, the assessee has also taken support from the decision of Hon’ble Supreme Court in the case of Principal Commissioner of Income-Tax Vs.Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399 (SC). Although the assessee has challenged the assessment order passed by the Assessing Officer, in light of notice issued u/s 153A of the Act on legality of proceedings, but the grounds taken by the assessee in their appeal is purely academic in nature, for the simple reason that the additions made by the Assessing Officer, towards cash deposit into bank account has been dealt in the appeal filed by the Revenue and we held that the Assessing Officer is erred in making additions towards cash deposited u/s 68 of the Act. Since the additions made by the Assessing Officer u/s 68 of the Act are deleted on merits, in our considered view, the grounds raised by the assessee, challenging the validity of assessment order passed by the Assessing Officer becomes infructuous and thus, the appeal filed by the assessee is dismissed as infructuous.

In the result, appeal filed by the Revenue and assessee for the A.Y.2017 -18 are dismissed.

To sum up, appeals filed by the Revenue for the A.Y.2011-12, 2012-13, 2015-16, 2016-17 and 2017-18 are the appeals filed by the assessee for the A.Y.2011-12 to 2017-18 are dismissed.