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Facts
The assessee company, engaged in real estate development, was informed about the sale of an immovable property for Rs. 5.6 Cr. A notice u/s 148 was issued, and the AO assessed the income considering set-off of losses. The CIT(A) dismissed the assessee's appeal, confirming the AO's order. The case involves disputed sale deeds and ongoing civil litigation.
Held
The Tribunal held that the authorities below failed to properly appreciate the assessee's evidence and submissions and did not establish whether any consideration was received or transfer conditions were fulfilled. The addition made by the AO was deleted.
Key Issues
Whether the addition made by the AO, sustained by CIT(A), is valid when the transaction is disputed and under civil litigation, and if the assessee was denied adequate opportunity and proper appreciation of evidence.
Sections Cited
148, 250, 139(4), 147, 143(3), 139, 156(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “A”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
This appeal by the assessee is directed against the order of CIT(A), Jaipur -4 dated 15.10.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: -
The Learned CIT(A) has grossly erred in not considering the request of the Appellant to keep the appellate proceedings in abeyance and deciding the appeal without granting adequate opportunity to present relevant evidence, submission
and clarifications in support of Grounds of Appeal in the gross breach of natural justice.
1.1 The Ld. CIT(A) further erred in not appreciating a critical fact that sale deed of commercial shop no 2, Viva Heights, Kardhani Road, Jaipur was also fraudulently executed in F.Y. 2014-15 by an unauthorized person at the direction of former Director of the Company. This deed was subsequently annulled by a Competent Civil Court. Furthermore, the appellant company has filed a civil suit to invalidate the sale deed executed in F.Y 2015-16 for same commercial shop no 2, which forms the basis of the impugned addition made by the Assessing Officer (AO). The Appellant contends that the Ld CIT(A) would have served the justice by waiting for the outcome of civil suit filed by the Company and keeping the appellate proceedings in abeyance.
2. That the notice dated 31.03.2021 issued under section 148 of the Act is illegal, bad in law and without jurisdiction. Hence, the order passed under section 147/143(3) dated 03.03.2022 is illegal, bad in law and without jurisdiction and deserves to be quashed.
3. The Ld. CIT(A) erred in sustaining the addition of Rs. 3,62,04,377.00 made by the Ld Assessing Officer on the basis of a purported sale deed fraudulently executed by an unauthorized person on behest of former Director of the Company. The Ld. CIT (A) further erred in not appreciating the fact that the appellant company neither received the sale consideration stated in the sale deed nor parted with the possession of the property subject matter of the sale deed and thus there was no transfer of property as per the Provisions of Transfer of Property Act resulting into any taxable profit in the hands of appellant company. Hence the addition of Rs 3,62,04,377.00 deserves to be deleted.
4. That the appellant craves the right to add, delete, amend or abandon the ground of this appeal at the time or before the actual hearing of the case.”
The brief facts of the case are that the assessee filed its return of income on 14.02.2017 u/s. 139(4) of the Act declaring income at Rs. NIL. In the case of the assessee company information was received from the office of DIT(I&CI), Jaipur through an in-sight portal that the assessee sold an immovable property for consideration of Rs. 5.6 Cr for the year under consideration. Accordingly, a notice u/s. 148 of the Act was issued dated: 31.03.2021. It was further observed by the AO that no balance sheet and profit & loss account was filed by the assessee along with its return of income, hence calculations pertain to the above-said sale transaction have not been truly reflected in its return of income. After a detailed deliberation on the issue between the AO and the assessee, the case was assessed at Rs. 3,39,17,740/- (After giving set off B/f losses of Rs. 15,66,470/- and current year loss at Rs. 13,22,774/-). The assessee being aggrieved with the same preferred an appeal before the Ld. CIT(A), who in turn dismissed the appeal of the assessee and order of the AO was confirmed. The assessee, being further aggrieved with this, preferred the present appeal before us.
We have gone through the order of the AO, order of the Ld. CIT(A) and submissions of the assessee along with grounds taken before us. It is observed that the assessee has not filed any return of income for the year under consideration in compliance with the notice issued u/s. 148 of the Act and after A.Y. 2017-18 there was no return ever filed by the assessee u/s. 139 of the Act. Based on the order of the AO, order of the Ld. CIT(A) and submissions of the assessee, the following facts essential to adjudicate the issue emerged (Chronologically) as under:
A). The appellant company was engaged in development of real estate project “VIVA HEIGHTS” at plot no. 2, Kardhani, Kalwar Road, Jaipur and the project was under development during the relevant A.Y. B). During the year under consideration there were 4 directors in the company, i.e. Mr. Vijay Kumar Maheshwari, Mr. Shanker Lal Khandelwal, Mr. Guman Khandelwal and Mr. Siddharth Moondhra. Mr. Shanker Lal Khandelwal and Guman Khandelwal were removed from Directorship of the company w.e.f. 02.01.2017.
C). A sale deed was executed by some Dilip Kumawat authorised by Shankar Lal Khandelwal in favour of M/s. Shrisai Kripa Inframart, LLP for a sum of Rs. 5.8 Cr. Vide sale deed dated: 20.02.2015. Against this the prevailing directors of the assessee company filed a suit with the District& Sessions Court for cancellation of the sale deed mentioned (supra) and the same was cancelled by the Addl. Civil Judge, Mahanagar Jaipur-II vide his order dated: 27.02.2020 (Copy of the order is placed on page no. 108-120 of the PB).
D). Another transaction again done by the same Dilip Kumawat on the behest and authority of Shankar Lal Khandelwal in favour of Smt. Renu Khandelwal, w/o. Shri Tikam Khandelwal (Brother of Shankar Lal Khandelwal) for a consideration of Rs. 5.6 Cr vide Board Resolution dated: 05.11.2015 and the same was registered with the sub-registrar-III, Jaipur on 07.12.2015.
E). About the transaction mentioned (supra) the assessee came to know only after receiving departmental show cause dated: 25.01.2022 and after receiving certified true copies of the sale deed on 03.02.2022. Simultaneously it filed for a civil suit for cancellation of sale deed on 07.02.2022 with the District and Sessions Court, Mahanagar, Jaipur-II. The company also filed “Istgasa” with the court u/s. 156(3) of the Cr. P.C. to direct the Police to register an FIR and conduct necessary inquiry.
F). As per the last sale deed mentioned above at D and E, the buyer made payments as under:
S. No. Amount Cheque No. Date Bank Name 1. 1 Cr. 010176 16.11.2015 DCB Bank, Jaipur 2. 1 Cr. 010177 20.11.2015 DCB Bank, Jaipur 3. 1 Cr. 010178 25.11.2015 DCB Bank, Jaipur 4. 1 Cr. 010179 30.11.2015 DCB Bank, Jaipur 5. 1 Cr. 010180 03.12.2015 DCB Bank, Jaipur 6. 60 Lacs 010181 07.12.2015 DCB Bank, Jaipur On this issue we have gone through page nos. 1-23 and 24-37 of the PB pertaining to the bank statements of DCB Bank, Jaipur and Corporation Bank and no such payment found credited in these two accounts of the assessee company.
G). Photographs of the site submitted vide page nos. 61-63 of the PB and building was under construction and construction was stopped since early 2016 and till 03.11.2021 same condition was there. It confirms that the building was not habitable, and buyers will not buy any under construction building by paying full consideration. Further, the assessee contradicts the clause of sale deed, wherein it was stated that vacant and peaceful possession was handed over, as the present directors and the assessee company still possess the same.
H). The assessee company has taken loans from M/s. Reliance Home Finance Ltd. by mortgaging the title deed of the land on which the project is going on and without receiving NOC from the lender, transfer of the property is not legally feasible and there is no reference of this fact in any of the sale deed executed and discussed (supra).
In view of the above facts it can be reasonably hold that the transaction is not clear, and matter is sub-judice with the competent Court to examine the real character of the transaction and the claims of the assessee. In view of the above, we do not have any hesitation in holding that based on the facts narrated above the explanations/ evidence and submissions of the assessee were not properly appreciated by the authorities below and they simply rely on the information received from the office of DIT(I&CI), Jaipur. AO and Ld. CIT(A) failed to counter the evidence and submissions advanced by the assessee during hearing before them. Both the authorities failed to establish that the assessee really received any consideration out of the transaction and other conditions relating to transfer have been fulfilled by the assessee.
The orders of the authorities below are absolutely silent on the relevant issues raised by the assessee and passed without application of mind and applying the provisions of law, only real income can be taxed and there is no place for taxation of notional or unreal income. The assessee further relied on the decision of the Hon’ble Punjab & Haryana High Court in the case of Hira Lal Ram Dayal 122 ITR 461 and Hon’ble Apex Court in the case of CIT vs. Shoorji Vallabhdas & Co. [1962] 46 ITR 144. We have gone through the authorities of respective Hon’ble Courts w.r.t. sustainability of transactions based on forged documents and taxation of notional income respectively and found the same to be applicable in the case of the assessee. In the result, relevant grounds raised by the assessee are allowed and the addition made by the AO amounting to Rs. 3,62,04,377/- is hereby deleted. with a condition imposed on the assessee to safeguard the interest of the Revenue that the assessee has to file an undertaking with the AO about updating him about the final outcome of the litigation going on and there should be a personal undertaking from the company and the directors that in case they loose the litigation or the findings of the court confirmed the transaction in favour of the buyer, they will come forward and offer the tax on the same as computed by the AO in his original order.
In the result, the appeal of the assessee is allowed in above terms.
Order is pronounced in the open court on the 9th day of April 2025. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 09/04/2025 Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. आयकर आयु� CIT 3. 4. िवभागीय �ितिनिध, आय.अपी.अिध., Sr.DR., ITAT, 5. गाड� फाइल/Guard file.