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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & Ms. SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
These are appeal filed by the Revenue and Cross Objection filed by the assessee against order dated 18.09.2020 passed by the CIT(A)-1, Ahmedabad for the Assessment Year 2015-16.
“(1). The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,53,59,000/- made on account of disallowance of non-genuine expenses claimed in Trading Account.
(2). The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,50,00,000/- made on account of expenditure claimed in Trading Account by way of Forfeiture of advance paid to Gautamchand S. Chaudhary (HUF).
(3). The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.66,30,000/- made on account of expenditure claimed in Trading Account by way of Forfeiture of advance paid to Ramesh M. Patel.
(4). The ld. CIT(A) has erred in upholding the disallowance of Rs.66,30,000/- in view of non-deduction of TDS u/s.194IA despite the fact that advance was given as per Banakhat dated 22.06.2013 as per assessee’s own admission.”
2.1 The Assessee in its Cross Objection has raised the following grounds :-
ITEM NO. I: Additions/Disallowances on Account of Bogus Expenses Claimed in the Trading Account-Compensation amount paid to Kunal S Shah HUF - Rs.1,53,59,000/
1.1 The learned A.O. has erred in law and on facts in not accepting the view taken by the leamed CIT(A). The learned A.O. has erred in law and on facts in not appreciating that the learned. CIT(A) has after considering the facts, documents submitted during the course of appellate proceedings and relying on various case laws has rightly observed that considering price appreciation of the property in subject for which compensation has been paid by the appellant and as the appellant has actually paid the compensation for non-delivery of the possession to Kunal S Shah HUF based on the Agreement to Sale (Without Possession) as per evidence on record which were submitted during the appellate proceedings appellant has rightly claimed the same allowable business expenses as Kunal & Shah HUF has sold the very property to third party and also offered short term capital gain of Rs.1,53,00,000/ which itself proves that transactions was done with genuine intention. Hence the leamed CIT(A) has rightly deleted the addition on account of Compensation amount paid to Kunal & Shah HUF Rs.1,53,59,000/-. In view of the above, the appellant humbly submits that the contention of the leamed AO is bad in law and hence the same should be deleted.
C.O. No.3/Ahd/2021 Assessment Year: 2015-16 ITO vs. Credo Real Estate Pvt. Ltd. Page 3 of 9 ITEM NO. II: Additions/Disallowances on Account of Bogus Expenses Claimed in the Trading Account - Forfeiture of Advance paid to Gautamchand S Chaudhary HUF – Rs.2,50,00,000/-
2.1 The learned A.O. has erred in law and on facts in not accepting the view taken by the learned CIT(A). The learned A.O. has erred in law and on facts in not appreciating that the learned CIT(A) has after considering the facts, documents submitted during the course of appellate proceedings and relying on various case laws has observed that appellant company is a subscriber to Credo Mineral Industries Ltd. CMIL and Gujarat Credo Minerals Industries Ltd. – GCMIL. GCMIL is a Joint Venture of CMIL and Gujarat Mineral Development Corporation Ltd. - GMDC, which is a Government of Gujarat Undertaking. The Director of the appellant company is Managing Director of Gujarat Credo Minerals Industries Ltd. and transaction was done in the interest of the group company and hence question of in-genuineness does not arise. The learned A.O. has erred in law and on facts in not appreciating that the learned CIT(A) has after relying on the copy of all survey reports submitted as a part of remand proceedings, observed that agreement was cancelled due to non-viability of bauxite as per survey conducted by Geo Info Mining Consultancy and hence appellant company has decided not to make balance payment and to forego the payment already made to Gautamchand S Chaudhary HUF which was forfeited by him. Hence the learned CIT(A) has rightly deleted the addition made on accounts of the Forfeiture of Advance paid to Gautamchand S Chaudhary - Rs.2,50,00,000/-. In view of the above, the appellant humbly submits that the contention of the learned A.O. is bad in law and hence the same should be deleted.
TEM NO. III: Additions/Disallowances on Account of Bogus Expenses Claimed in the Trading Account - Forfeiture of Advance paid to Ramesh M. Patel - Rs.66,30,000/-
3.1 The learned A.O. has erred in law and on facts in not accepting the view taken by the learned CIT(A). The learned A.O. has erred in law and on facts in not appreciating that the learned CIT(A) has after considering the facts, documents submitted during the course of appellate proceedings and relying on various case laws has observed that appellant was successful in acquisition of different survey numbers located at Mankol village of Sanand Taluka through Mr. Rameshbhai Patel and appellant is dealing with him since 2010 and having good amount of trust. Appellant has also entered in to Banakhat for purchase of land at survey no.98, 99 & 83, out of which land at survey no.98 & 99 were successfully acquired by the appellant company and land at survey no.83 could not be acquired because of it had no seamless access due to failure of acquiring land at survey No.82P. This proves that the appellant has cancelled the agreement for purchase of land at survey no.83 due to non-availability of land at survey no.82/P and hence appellant company has claimed forfeiture of the agreed amount of C.O. No.3/Ahd/2021 Assessment Year: 2015-16 ITO vs. Credo Real Estate Pvt. Ltd. Page 4 of 9 Rs.66,30,000/- to Rameshbhai Patel as allowable expenses. The learned CIT(A) has further observed that the parties involved are genuine and existing. The records of government offices cannot be manufactured. The acquisition of various lots of land as detailed by the appellant, is important piece of evidence. Hence the learned CIT(A) has rightly deleted the addition made on account of the Forfeiture of Advance paid to Ramesh M Patel - Rs.66,30,000/-. In view of the above, the appellant humbly submits that the contention of the leamed A.O. is bad in law and hence the same should be deleted.
IV. The respondent reserves its right to add, amend, alter, substitute or modify all or any of the grounds stated hereinabove as the facts and circumstances of the case may justify.”
During the year under consideration, the assessee company has carried out business of Real Estate. Return of income was filed on 30.10.2015 declaring income of Rs.6,09,940/-. The case was selected for scrutiny and notice under Section 143(2) of the Income Tax Act, 1961 was issued on 14.04.2016. Notice under Section 142(1) of the Act read with Section 129 of the Act dated 18.08.2017 was issued and served upon the assessee.
3.1 Subsequently, show cause notice under Section 142(1) of the Act dated 27.12.2017 was issued and all these notices were responded by the AR of the assessee. The assessee submitted copy of statement of total income, return of income, Balance Sheet, Profit & Loss Account on 06.11.2017. The Assessing Officer noticed that during the year under consideration, the assessee has shown revenue from operation of Rs.10,05,51,001/- and has shown purchase of stock in trade amounting to Rs.10.27,498/-. The assessee has sold two properties (1) for Rs.8,00,00,001/- on 30.01.2015 and (2) for Rs.2,10,51,000/- on 21.10.2014.
3.2 To verify the genuineness of the transactions made by the assessee, the Assessing Officer issued notice under Section 133(6) of the Act to the respective Sub- Registrars from whom copy of sale deed were received from the assessee. The Assessing Officer pointed out that the sale deed of property dated 30.01.2015 valued at Rs.8,00,00,001/- wherein the assessee was shown as confirming party no.1 alongwith other four confirming parties who were the relatives of the seller Dilipbhai Mulshankar Mehta. As per the said sale deed dated 30.01.2015, the assessee received an amount of Rs.3,96,00,000/- as confirming party on sale of the land.
C.O. No.3/Ahd/2021 Assessment Year: 2015-16 ITO vs. Credo Real Estate Pvt. Ltd. Page 5 of 9 3.3 In the second sale deed dated 21.10.2014, value of sale was shown at Rs.2,10,51,000/- and the seller was Shabbirali Nurmad Vaghmer who sold the property to Shri Gajendrakumar V. Doshi and three others. In the said sale deed, the assessee was shown at Sl. No.3 as confirming party who has received amount of Rs.1,92,00,000/-. Thus, as per the observation of the Assessing Officer, during the year under consideration, the assessee received total amount of Rs.5,88,00,000/- as a middle man i.e. confirming party on sale of the properties. However, in the Profit & Loss account the assessee has shown entire sale proceeds of Rs.10,05,51,001/- as assessee’s revenue from operation. After taking cognisance of the assessee’s reply, the Assessing Officer has proposed to make disallowance of Rs.4,69,89,000/-.
3.4 The Assessing Officer further observed that the assessee received Rs.11,41,000/- from Shri Kunal S. Shah HUF for the project known as “Abhishree Orchard” situated at Sanand. As per the sale agreement dated 11.05.2014, the assessee was required to give possession on or before 31.01.2015, failing which the buyer has the right to cancel the agreement and the seller has to pay reasonable compensation against the cancellation of the deal towards market value difference, if any, of the said property at the time of cancellation.
3.5 After taking cognisance of the assessee’s reply, the Assessing Officer held that as per the purchase ledger account prepared by the assessee, it has paid Rs.1,53,59,000/- to Shri Kunal S Shah HUF on 11.11.2014 which is much before the deadline mentioned in the original agreement for sale i.e. for giving possession on or before 31.01.2015. As per the cancellation deed, the assessee was supposed to pay Rs.1,65,00,000/- as compensation. The assessee did not provide any supporting evidence to prove the genuineness of the payment of Rs.1,65,00,000/- as compensation, therefore, the Assessing Officer made addition of Rs.1,53,59,000/- thereby disallowing expenses.
3.6 The Assessing Officer also made disallowance of Rs.2,50,00,000/- towards advances for land at Bhachau (being advance given to Gautamchand Sohanlal Chaudhary, HUF). The Assessing Officer further made disallowance of Rs.66,30,000/- towards the advance given to Shri Ramehkumar M. Patel relating to the agricultural land at Sanand.
C.O. No.3/Ahd/2021 Assessment Year: 2015-16 ITO vs. Credo Real Estate Pvt. Ltd. Page 6 of 9 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. DR submitted that the CIT(A) was not right in deleting the addition of Rs.1,53,59,000/- made on account of disallowance of non-genuine expenses claimed in Trading Account. The Ld. DR submitted that as per page no.25 of the Remand Report, the compensation given to Kunal S. Shah, HUF is not tenable because the purchaser to whom the assessee paid compensation of Rs.1,53,59,000/- has submitted during the assessment proceedings that he has sold the said property on 11.11.2014 much before the expiry of the agreement between them which was due on 31.01.2015 which shows that agreement and argument of the assessee is after thought. Thus, the Ld. DR submitted that the CIT(A) has totally ignored this remark of the Assessing Officer.
5.1 As regards ground no.2, the Ld. DR submitted that deleting the addition of Rs.2,50,00,000/- made on account of expenditure claimed in Trading Account by way of forfeiture of advance paid to Shri Gautamchand Sohanlal Chaudhary HUF, the CIT(A) ignored the fact that the assessee company never put forward any evidence with regard to forfeiture of Rs.2,50,00,000/- due to the non-availability of bauxite mineral on the alleged agricultural land in question. The agreement between Credo Real Estate Private Limited and M/s. Lucent Solar Private Limited dated 21.06.2013 was related to the land aggregation agreement between those parties and has nothing to do with the assessee Shri Gautamchand Sohanlal Chaudhary HUF. Thus, the Ld. DR relied upon the Assessment Order.
5.2 As regards ground no.3, the Ld. DR submitted that the CIT(A) was not right in deleting the addition of Rs.66,33,000/- made on account of expenditure claimed in Trading Account by way forfeiture of advance paid to Shri Ramesh M. Patel. The remand report categorically mentions that the agreement comes into effect on 22.06.2013 and the amount of Rs.1,01,15,000/- has already been paid by the assessee as on 04.04.2013. Thus, the agreement is only executed to give this transaction a nature of estimated transactions as given predesign by Ramesh M. Patel and consequently deleting the premium provided by the assessee company.
C.O. No.3/Ahd/2021 Assessment Year: 2015-16 ITO vs. Credo Real Estate Pvt. Ltd. Page 7 of 9 5.3 As regards ground no.4, the Ld. DR submitted that the CIT(A) was not correct in deleting the disallowance of Rs.66,30,000/- in view of non-deduction of TDS under Section 194IA despite the fact that advance was given as per Banakhat dated 22.06.2013 as per assessee’s own admission.
The Ld. AR submitted that as regards ground no.1, the CIT(A) has categorically given the finding in paragraph No.4.2 of the order of the CIT(A) that the non- registration of documents has no relation with the genuineness of the transaction as the assessee has actually made the payment towards the compensation. The assessee during the assessment proceedings as well as before the appellate proceedings has produced copy of valuation report obtained from Government Approved Valuer specifying the rate of the property as on 01.01.2015. Shri Kunal S. Sha HUF sold the very property on 11.11.2014 much before the expiry of the agreement between the assessee company and Shri Kunal S. Shah HUF and Shri Kunal S. Shah also offered short term capital gain of Rs.1,53,00,000/- which itself proves that the transaction was genuine. As regards ground no.2, the Ld. AR submitted that the remand report itself shows that the advance for land was given to Shri Ramesh M. Patel and compensation amount paid to Shri Kunal S. Shah HUF all are included in the purchase of the assessee. Thus, the observation of the Assessing Officer that the advance and compensation paid cannot be allowed is not justifiable. Thus, the Ld. AR relied upon the order of the CIT(A).
6.1. As regards ground nos.3 & 4, the Ld. AR submitted that the details of the consideration of the TDS component have been expressly pointed out in the agreement dated 03.01.2014 between Shri Gautamchand Sohanlal Chaudhary HUF and Credo Real Estate Private Limited and, therefore, the CIT(A) has rightly deleted the addition as well as deleted the disallowance of non-deduction of TDS.
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee in respect of the addition of Rs.1,53,59,000/- has categorically demonstrated that the Agreement between Shri Kunal S. Shah HUF and the assessee company was properly offered by the seller as short term capital gain and the entire transaction per se cannot be doubted merely on the conclusion that there was cancellation subsequent to the payment of C.O. No.3/Ahd/2021 Assessment Year: 2015-16 ITO vs. Credo Real Estate Pvt. Ltd. Page 8 of 9 compensation. This cannot be the criteria for making transaction non-genuine. Hence, ground no.1 of Revenue’s appeal is dismissed.
7.1 As regards ground no.2, the CIT(A) has observed that the assessee company entered into an agreement with Shri Gautamchand Sohanlal Chaudhary HUF on 03.01.2014 to purchase an agricultural land. After having paid the last instalment of Rs.65,00,000/- and the assessee has made advance payment of Rs.2,50,00,000/-. The assessee contended that the surveying firm has genuine expenditure and found that the amount was much below the earlier expectation of Rs.20,00,00,000/- i.e. it had no reserve beyond Rs.10,00,00,000/-. The assessee has submitted the land aggregation agreement between the assessee company and M/s. Lucent Solar Private Limited wherein the purpose of agreement was encompassing provision of services, funding, consultancy and other related business activities for bauxite-based land acquisition and the assessee company confirms to invest upto Rs.2,50,00,000/- towards advance payment for bauxite-based land acquisition in favour of prospective bauxite-based land sellers. But, the agreement to purchase with Gautam S Chand was on 03.01.2014 and the said land aggregation agreement as the period until 21.02.2015. Thus, the assessee’s plea that the estimated worth of Rs.10,00,00,000/- was not commercially viable actin for forfeiture of advance amount by Shri Gautam S Choudhary HUF. But the assessee has not given any details as to whether the reserve was worth Rs.10,00,00,000/- or not and there is no documentary proof to that effect. Therefore, this issue needs verification and is remanded back to the file of the Assessing Officer for taking into account all these details. Thus, ground no.2 of Revenue’s appeal is partly allowed for statistical purpose.
7.2 As regards ground nos.3 & 4 relating to deletion of addition of Rs.66,30,000/- and non-deduction of TDS under Section 194IA of the Act has been categorically discussed by the CIT(A) in paragraph no.4.4 wherein the assessee has acquired different survey numbers through Ramesh B. Patel and has also entered into Banakjhat for purchase of land but could not acquire the particular land and because the accessibility to the other respective land was depended on land which could not be acquired the assessee has cancelled the agreement. This appears to be genuine forfeiture of the agreed amount and are allowable expenses. Thus, the CIT(A) has rightly deleted the disallowance. Thus, ground nos.3 & 4 are dismissed.
In the result, appeal of the Revenue is partly allowed for statistical purpose.
As regards the Cross Objection filed by the assessee, the same is in support of the order of the CIT(A). Hence, the Cross Objection filed by the assessee is dismissed.
In the result, appeal filed by the Revenue is partly allowed for statistical purpose and the Cross Objection filed by the assessee is dismissed.
Order pronounced in the open Court on this 25th February, 2025.