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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SH. R. K. PANDASH. K. N. CHARY
Appellant by Sh. Piyush kaushik, Advocate Sh. Ajay Bhagwani, CA Respondent by Ms.Pramita Biswas, CIT DR. Date of hearing: 14/11/2019 Date of Pronouncement: 05/12/2019 ORDER PER R.K PANDA, AM:
This appeal filed by the assessee is directed against the order dated 27.03.2015 of the CIT(A)-13, New Delhi relating to A.Y. 2011-12. 2. Facts of the case, in brief, are that a search and seizure operation was carried out at the various premises of M/s. BPTP Limited and its group concerns and associated persons on 07.12.2010 and was finally concluded on 05.02.2011. The assessee is associated with M/s. BPTP Group of cases. The assessee filed its return of income on 08.10.2011 declaring total income at Rs.8,67,430/-. During the course of assessment proceedings the AO noted that the first search and seizure operation was carried out in M/s. BPTP Group of cases and some of its group companies on 15.11.2007. During the earlier assessment proceedings u/s. 153 A of the Act, it was very well proved that the assessee used to wave 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) 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 PDC’s and this cash payment of interest by the vendee company was not accounted for by it, in its books of account. The addition on this 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.
The AO, therefore, asked the assessee to explain as to why additions should not be made on PDC’s. Rejecting the various explanations given by the assessee and observing that the assessee was following a business model as part of which only part payments of the sale consideration in respect of lands purchased were paid at the time of execution of sale deed and the Page | 2 payments of balance sale considered were invariably made through post dated cheques and for the intervening period interest was paid in cash to the vendors of the land by the vendee company on monthly basis @ 1.25 per month on the amount of PDC’s, the AO made addition of Rs.1,10,07,688/- to the total income of the assessee. The details of such calculation as computed by the AO at para 2.4 page 5 of the order read as under :- S. Sale Name of Date of sale Amount of Date of No. of Amount of No. deed the vendor deed PDC (in Rs.) encashme month PDC interest No. nt of (in Rs.) PDC’s (AXBX1.125%) 1 868 Shivanand 04/11/2010 5,90,00,000 -- 5 3687500 Real Estate Pvt. Ltd 2 786 Jaswant 22/02/2010 1,39,94,500 -- 12 2099175 Ram 3 786 Khushal 22/02/2010 2,08,12,250 -- 12 3121838 Chand 4 786 Ishswar 22/02/2010 1,39,94,500 -- 2099175 Das Total 1,10,07,688/-
Before CIT(A) the assessee submitted that the company was incorporated on 06.07.2009 and the company was not in existence at the time of first search. It was submitted that in the matter of PDC interest the AO has not brought any fresh material on record to show and demonstrate that the interest was paid in cash outside books of accounts and has been accepted by the recipients. It was argued that the AO has made the addition by referring to common human conduct but in absence of any material available on record the observations of the AO are merely based on summarises and presumptions. It was further submitted that under identical circumstances the CIT(A) has deleted the addition on account of interest on PDC’s in the case of Group concerns and the appeal filed by the revenue has been dismissed by the Tribunal. Relying on various decisions it was argued that the addition made by the AO is not justifiable.
4.1 However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the addition made by the AO by observing as under :-
I have considered the assessment order, written submission and arguments of Ld.AR. The addition has been made by the Ld. assessing officer on account of unaccounted payment of interest payment on post dated cheques on the basis of findings of search in BPTP group of cases conducted on 15.11.2007 that BPTP group is engaged in payment of unaccounted interest on post dated cheques given for acquisition of land.
I have heard many appeals in BPTP group of cases. On this issue my findings after considering the evidential value of seized documents as a result of search was that the BPTP group of companies are paying unaccounted interest payment on post dated cheques wherever the same get extended for the period of extension & if such period of extension cannot be ascertained then unaccounted interest payment on PDCs should be Page | 4 computed after six month from date of conveyance deed. Such findings in the case M/s Business Park Promoters Pvt. Ltd. being one of BPTP group of companies A.Y. 2006-07 in dt.24/12/2012 is reproduced as under:-
Learned AR has been maintaining all along that interest is not paid as all the receipts are only memorandum only. Analysis of these above seized document reveals that these seized documents definitely proves that interest is paid on PDCs. Various vouchers in seized documents conclusively proves that the recipient has signed on voucher for receipt of the interest. Ld AR’s contention that these are only working of interest claimed by seller for putting up before senior management does not appear to be convincing. In case of claim, the receiver will not sign the voucher as recipient. Amounts are specific and calculation is 15% per annum. Therefore, Ld. AR without conceding that the interest is paid on PDCs has taken the stand that in none of the seized material, i.e. even in receipt seized, the interest is from date of issue of PDCs. Now issue arises whether interest on PDCs are paid from date of issue or for extension of PDCs. Documents discussed above where there is clear evidence of receipt of interest is for extension of period of PDCs. Ld AR’s arguments that calculation of interest on PDCs has been considered while entering into agreements holds some logic. But when date of PDCs are extended, the recipient will definitely ask and settle for some additional compensation in form of interest. There is no evidence which proves that interest is paid from the date of sale to date of encashment of post dated cheques. However, there Page | 5 is concrete evidence in form of seized material to show that interest is paid and received by seller on the extension of PDCs as discussed above while analyzing the seized document. Therefore, in my view where ever the date of PDCs are extended interest is paid @15% per annum in cash out of Books of accounts, which are evident from seized material. Therefore, interest on PDCs to the extent of extension period appears to quite reasonable and logical. Accordingly, interest on PDCs either as sale consideration or additional payment may be recomputed to the extent of extended period of PDCs by the A.O. and to that extent addition is confirmed. The above formulae will apply to all group companies under the management of BPTP i.efi M/s BPTP and Associate companies) including the appellant company as evidence is found in respect of various companies of BPTP and some seized paper could not be related to specific company. Therefore, it is proper to apply this formula for all companies under the common management of BPTP Group, head by Shri Kabul Chawla. All these companies are closely linked. Some companies purchase land and transfer the same to M/s BPTP Ltd, or Countrywide Promoters (P) Ltd. for Housing or commercial projects are ultimately developed and sold by M/s BPTP Ltd and Countrywide Promoters Ltd. or in stray case by some other companies. Assessing Officer has applied the case of Eusuf Ali for applying interest on PDCs for all companies of BPTP Group for all Assessment Year under consideration. LdAR has tried to differentiate the above cited case on facts. In my view, as interest payment on extension of period of PDCs are established on numerous seized documents. A trend is established for the group as the overall management is controlled by one person Sh. Page | 6
Kabul Chawla and activities of all companies are interrelated.
If it is not possible to work out the extension of PDCs in each case then A.O. is directed to recomputed interest on PDCs after six months from date of issue of PDCs i.e. date of sale, as six months is taken as reasonable period for giving PDC as per sale deed. This view is formed on the basis the statement of Sh. Chhotu Ram which says that normally PDCs are given for 8 to 10 months. Further Ld AR has also submitted few Sale Deed in respect of some of Seized record in the case of Ramvati Beero etc where the interest working is made after 9/15 months. Taking these facts into consideration. It would be proper to compute interest after 6 months from date of Sale on conservative side. Accordingly this ground is partly allowed.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :- That on the facts and circumstances of the case, the 1. assessment made by the Assessing Officer, and confirmed by the CIT(A), is bad on facts and in law on the grounds that -
i) as per Panchnama no material whatsoever, was seized in the course of search u/s 132 of the Act on 07.12.2010 on the assesee and therefore the returned income ought to have been accepted, and ii) the utilization of the material seized in the course of search on 15.11.2007 on M/s BPTP Ltd. (and not on the assessee) was not permissible in the present assessment in as much as the assessee company was not even in existence on the date (a) of search on 15.11.2007 , that it is proved/evidenced from AO’s own record that no material (b) whatsoever was found in the course of aforesaid search, which belonged to the assessee that in any view of the matter, the alien material could not have (c) been used against the assessee and that in any case it would amount to revisiting the matter on same (d) facts as taking action in respect of documents seized during the course of search on 15.11.2007 had become barred by limitation.
That without prejudice, on the facts and circumstances of the case and in law, the CIT(A) has erred in not deleting the addition made by the A.O. on account of alleged interest paid as PDCs from undisclosed sources, despite the fact that it was duly shown that it was not a case where land was purchased against issue of PDCs.
2.1 That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding the addition on account of alleged interest paid on PDCs, despite the fact that it was duly shown to CIT(A) that it was not a case of purchase of land against issue of PDCs, which fact was verified by the AO in assessee’s own case for the AY 2012-13 and duly accepted by him and copy of assessment order was duly filed before CIT(A). That the orders passed by the Assessing Officer and 3. Commissioner of Income Tax (Appeals)-XXX, New Delhi are bad in law and void ab initio.
The appellant craves permission to add, amend, alter or vary 4. all or any grounds of appeal on or before the date of hearing of the appeal.
The Ld. Counsel for the assessee strongly challenged the order of the CIT(A) in confirming the addition made by the AO. He submitted that the AO in assessee’s own case in scrutiny assessment for the A. Y. 2012-13 has passed the order u/s. 143 (3) and has not made any addition on account of interest on PDC’s. In that year also the payments to sellers of the land were outstanding in the books of the assessee company.
Referring to the decision of Hon’ble Supreme Court in the case of CIT Vs. Excel Industries reported in 358 ITR 295 he submitted that the Hon’ble Supreme Court in the said decision has held that when the revenue itself has accepted the position in favour of the assessee, than the revenue cannot be allowed to flip flop on the issue and it ought laid the matter to rest. He submitted that the AO in the assessment order has made addition with respect to four sale deeds. The first sale deed dated 04.11.2010 relate to assessment year 2011-12 whereas the three remaining sale deeds pertaining to assessment year 2010-11. He submitted that the Ld. CIT(A) has deleted the interest on PDCs in respect of the first sale deed whereas he sustained the interest on PDCs in respect of the remaining three sale deeds which pertain to A.Y.2010-11 and, therefore, these three sale deeds cannot be a matter of consideration for the present assessment year since every assessment year is an independent year which needs to be considered separately.
Referring to the provisions of section 153 (B), he submitted that the time limit for taking action with respect to material etc Page | 9 recovered pursuant to search is 21 months from the end of financial year in which the search was executed. Since the search in the instant case was executed in financial year 2007-08, therefore, action can be taken with materials seized in the search conducted on 15.11.2007 latest 31.12.2009. However, the order in the instant case was passed by the AO on 28.03.2013, therefore, the same is barred by limitation. 9. Referring to the decision of the Tribunal in the case of M/s. Impower Infrastructure Private Limited Vs. ACIT vide and vice versa vide ITA No.6818/Del/2014 order dated 18.05.2018 for A.Y. 2011-12, he submitted that the Tribunal under identical facts and circumstances has deleted the addition sustained by the CIT(A) where the company was incorporated much after the first date of search i.e. on 15.11.2017. He accordingly submitted that this being a covered matter in favour of the assessee the addition sustained by the CIT(A) should be deleted since no incriminating material was found during the course of second search and the company was not in existence at the time of first search and the addition was based merely on presumptions. 10. The Ld. DR on the other hand heavily relied on the order of the AO and the CIT(A). 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO on the basis of the findings given in the case of M/s. BPTP Group of cases that Page | 10 the assessee used to pay part payment 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 and for the intervening period used to pay interest in cash to the vendors of the land @ 1.25 % per month, made addition of Rs. 1,10,07,688/- to the total income of the assessee in respect of four sale deeds, the details of which are given at para 3 of this order. We find in appeal the Ld. CIT(A) deleted the interest of Rs. 36,87,500/-in respect of one sale deed and sustained the balance amount of Rs.73,20,188/- in respect of three sale deeds the reasons of which have already been reproduced in the preceding paragraph. It is the argument of the Ld. Counsel for the assessee that the company was incorporated only on 06.07.2009, copy of which is placed at page-150 of the paper book whereas the first search took place on 15.11.2007 and, therefore, when the company was not in existence at the time of first search the AO could not have inferred the modus operandi adopted by the group companies prior to the date of first search. Further during the course of second search nothing was found belonging to the assessee either from its own premises or from the premises of any of its related concerns. It is also his submission that while the CIT(A) deleted the addition in respect of the sale deed related to the impugned assessment year, however, he sustained the addition of interest on PDCs relating to three sale deeds pertaining to the preceding assessment year which is not correct. It is also his argument that in the immediately subsequent assessment year AO in the Page | 11 assessment order passed u/s. 143 (3) has not made any such addition although the lands were purchased during that year also.
We find merit in the arguments of the Ld. Counsel for the assessee. Admittedly the first search took place on 15.11.2007 whereas the assessee company was incorporated on 06.07.2009, copy of which is placed at page 150 of the paper book. Further there is nothing on record to show that during the course of search that took place on 07.12.2010 which was concluded on 05.02.2011, any document either belonging to the assessee or relating to the assessee were found i.e. either from the premises of the assessee or any of its group concerns. We, therefore, find merit in the submission of the Ld. Counsel for the assessee that when the assessee company was not in existence at the time of first search and when none of the documents found during the course of second search belong to the assessee and considering the fact that the AO in the body of the assessment order has not referred to any seized material found during the course of second search pertaining to assessee which gave any clue even in remotest manner with respect to payment of interest on PDCs out of books beyond 6 months from the sale deed, no addition could have been sustained.
We find under identical circumstances the Tribunal in the case of M/s. Improper Infrastructure Private Limited, another sister concern, has deleted the addition made by the AO and sustained by the CIT(A) by observing as under :-
17….. “We have considered the rival arguments made by both the sides, perused the orders of the AO and the Ld. CIT(A) and the Paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO on the basis of material found during the course of search conducted on BPTP group of cases on 15.11.2007 formed the opinion that the assessee is making payment of interest on PDCs for which he made addition @ 1.25% per month on PDCs from the date of sale deed till the encashment of PDCs on the premises that the interest must have been paid out of the books. He accordingly made addition of Rs.38,05,534/-. While doing so, the Assessing Officer followed the decision in the case of M/s Business Park Promoters Pvt. Ltd. for assessment year 2006-07. While following the above decision, he noted that although the Id. CIT(A) has given part relief to the said assessee, however, the said decision has not been accepted by the Department and appeal is pending before the Tribunal. We find the Id. CIT(A) following his decision in the case of M/s Business Park Promoters Pvt. Ltd. for assessment year 2006-07 directed the Assessing Officer to compute the interest on the PDCs after a period of six months from the sale deed, as a result of which only an amount of Rs.2,92,851/- was sustained and the balance amount was deleted. 18…..
19….
20… Now, coming to the amount sustained by the Id. CIT(A) is concerned, it is a matter of fact that the assessee company was incorporated on 30.12.2009 which is much after the past date of search i.e. 15.11.2007. Similarly, during the course of second search that has taken place on 07.12.2010 and concluded on 05.02.2011, we find none of the documents belong to the assessee or relate to Page | 13 the assessee. Similarly, none of the seized documents also belong to assessment year 2011-12 and no notice u/s 153C has been issued. We, therefore, find merit in the submission of the Id. counsel for the assessee that when the assessee company was not in existence at the time of first search and when none of the documents found during the course of second search belonged to the assessee and considering the fact that the Assessing Officer in the assessment order has not referred to any seized material found during the course of second search pertaining to assessee company which gave any clue even in a remotest manner with respect to payment of interest on PDCs out of books beyond six months from the sale deed, no addition could have been sustained. The decisions relied on by the Id. counsel for the assessee also support its case that addition cannot be made for a particular year without there being any incriminating material qua that assessment year which would justify such addition. Accordingly, the ground raised by the assessee is allowed.
Since the facts of the present case are identical to the facts of the case decided by the Tribunal, therefore, respectfully following the decision cited (supra) and in view of our discussion above in the preceding paragraph the addition sustained by the CIT(A) is not justified. We, therefore, direct the AO to delete the disallowance. The grounds raised by the assessee are accordingly allowed.
In the result the appeal filed by the assessee is accordingly allowed
Order pronounced in the open court on 05.12.2019.