SUDESH KUMAR SHARMA,GHAZIABAD vs. ITO, WARD- 2(3), GHAZIABAD

ORDER

PER VIMAL KUMAR, JUDICIAL MEMBER:

3. Being aggrieved, the appellant/revenue preferred present appeal with following grounds: 1. Whether on the facts and circumstances of the case, the Ld.CIT(A) is correct in deleting the addition made u/s 68 of the I.T. Act, 1961 amounting to Rs.12,12,10,380/- on account of advance received from customers by stating that the assessee has duly discharged the onus that lay upon it u/s 68 of the Act despite the fact that assessee has failed to prove the creditworthiness and genuineness of investor who have made investment in the assessee company during the course of assessment proceedings.

2.Whether on the facts and in law, the Ld.CIT (A) is correct in ignoring the facts that the assessee has failed to prove the creditworthiness and genuineness of the money received against expression of interest in the Project Booking amounting to Rs 2,31,61,925/- during the course of assessment proceedings.

6. Whether on the facts and in law, the Ld.CIT(A) is correct in deleting the additions made by the AO, ignoring, the judgement of the Hon'ble Apex Court in DCIT vs NRA Iron and Steel Pvt Ltd in civil appeal No. 29855 of 2018.

4. Learned Authorized Representative for Revenue submitted that Ld. CIT(A) erred in deleting addition under Section 68 of the Act despite the fact that assessee has failed to prove the creditworthiness and genuineness of investors who have made investment in the assessee company during the course of assessment proceedings. Ld. CIT(A) erred in ignoring the fact that assessee has failed to prove creditworthiness and genuineness of the money received against expression of interest in the Project Booking amounting to Rs.2,31,61,925/- . Ld. CIT(A) ignored the fact that assessee failed to prove identity, creditworthiness and genuineness of the unsecured loan received from M/s. Sagrika Seacraft Ltd. amounting to Rs.50,00,000/-. Ld. CIT(A) gave no discussion of facts before the decision deleting the addition.

5. Learned Authorized Representative for the respondent assessee, submitted that the remand report by the Ld. AO gave complete details discussion by the Ld. CIT(A) while giving relief.

has been raised by the appellant on the issue of addition of Rs. 14,95,89,670/- made by assessing officer as income from undisclosed sources. The appellant submitted that the Id.AO has made addition of Rs.14,95,89,670 without considering the written submissions of the appellant and alleging unexplained credit u/s 68 of the Act of the following amounts- i) Increase of amount of Rs.12,12,10,380 in Current Liabilities on account of Money received from Investors towards booking/instalment under Construction Linked Plan during the year ii) Increase of amount of Rs.2,31,61,925 as money received against Expression of Interest in the Project under Construction Linked Plan during the year iii) Unsecured Loan from Sagrika Seacraft Ltd., Rs.50,00,000. The appellant submitted that during assessment proceedings, the AO issued show cause notice dated 13.12.2019 requiring certain details as per Annexure to notice u/s 142(1) requiring the assessee to submit his reply on or before 14.12.2019 by 11

08. AM. Copy of the notice is enclosed as Annexure I. Even though hardly any time was allowed to the assessee to furnish the reply still the appellant furnished its reply to the notice along with necessary details with his explanation on 16.12.2019. Copy of assessee's reply along with supporting documents is enclosed as Annexure II. Further, the AO issued Show Cause Notice dated 19.12.2019 requiring the appellant to submit information on the above said three issues, on which addition was finally made in the assessment order, requiring the assessee to submit the reply before 11

15. AM ON 20.12.2019 i.e. within a day only. Copy of the show cause notice is enclosed for your honor ready reference as Annexure III. Inspite of there being a very short date of one day only the appellant submitted his reply to the show cause notice with all the details and annexures on the portal on 20.12.2019. Copy of the View Response dated 20.12.2019 is enclosed herewith along with copy of reply submitted Annexure IV. Further it is submitted that the opportunity allowed by the AO, giving just one day time to the assessee to furnish the reply, is not proper opportunity to the assessee. It is an established law that assessee needs to be given reasonable opportunity to submit his reply to the notice. One day's notice cannot be treated as reasonable by any stretch of imagination. The Id. AO framed the assessment in a tearing hurry and made haphazard additions in a summary manner absolutely ignoring the facts of the case and even ignoring the reply of the assessee. Each individual addition made by the AO is discussed hereunder:-

5.1 Addition of Rs. 12,12,10,380: Money received from Investors towards booking/instalment under CLP: The appellant submitted that the appellant has received total amount of Rs.32,06,70,245 till 31st March 2017 from large number of investors towards the booking and instalments under construction linked plan (CLP) for the project Trinity NX, at Plot No.6A Techzone-IV Greater Noida East. Out of the said amount of Rs.12,12,10,380 was received during the year under consideration and balance was received in preceding years. All the money was received through Account Payee cheque or banking channel. All the investors are KYC compliant; the appellant have the Address Proof, ID Proofs of all the investors and necessary agreement were executed with all the investors. The project is registered under RERA and all the necessary compliance are made 200459665 as per RERA provisions by the appellant. Booking amount received of Rs. 10,04,59,665 till AY 2016-17 was, duly verified and accepted by the department in past. Detailed books of account are maintained in the regular course of business and are duly audited. The audited Balance sheet with schedules and notes on accounts along with auditors report thereon were submitted to the Id. AO. The Id. AO had never asked to prove creditworthiness and genuineness of the money received against booking instalments under CLP before issue of SCN dated 19.12.2019 as alleged at point no.2 of the assessment order.

From the above facts it will be appreciated that the genuineness and identity of the buyers of the units under construction are duly proved with all the required details being already on the record of the appellant which was also supplied to the AO in this year as well as in the preceding year. All the payments were received through account payee cheque.

5.1.1 Further, the appellant submitted that as regards AO's assertion that the credit worthiness of the persons who paid the money to the company was not proved by the assessee, it is submitted that the amount of Rs.12,12,10,380/- was received from the persons who had purchased the units under construction from the company. Detail of the same numbering 402 is enclosed for your ready reference. From the perusal of this detail, it will be observed that most of the customers are old customers who had paid for the instalments during the year under appeal also. The genuineness of all such buyers was accepted by the AO in the preceding year. There can be no reason to disbelieve the same this year. Same is the position of new customers who purchased the units during the year under assessment and paid instalment to the company by entering into agreement through banking channel.

The assessee has supplied complete particulars of all the customers giving their names, complete address and PAN. All the transactions are through account payee cheques. In view of the above submissions the addition of Rs.12,12,10,380/- needs to be deleted.

5.1.2 The appellant has filed point wise submission which is as under:- i) The AO in his remand report has stated that assessee company failed to furnish evidence and did not make effort to substantiate the Identity, creditworthiness and authenticity of the parties from whom the assessee received Rs.121210380 as advance against booking of units in project under construction during the year. ii) From the perusal of detail of parties, already supplied to your honor with our written submissions from whom the Booking and Instalment amounts were received during the year it will be observed that assessee had filed complete detail giving name, address, PAN along with opening balances as well as payments received during the year along with closing balance in each case. The same detail was also filed with the AO. iii) Further it will be observed that most of the parties from whom payments were received during the year are old parties from whom further instalments were received during the year under appeal. All these parties were accepted as genuine in the preceding years. There are very few new parties and the detailed particulars of the same were also filed before the AO. iv) The AO during the remand proceedings made independent enquiries from 14 parties, of his own choice, seeking confirmations in respect of instalment/booking amounts paid to the company for the purchase of unit in the project along with the necessary documentary evidence. The detail of these parties is given by the AO at page 3 to 5 of the Remand Report. v) The AO has confirmed that necessary confirmations with other details and documentary evidence from 12 parties were received. There were only two parties from whom response was not received as stated by the AO. vi) For the two parties who did not respond to his notice the AO never required the assessee to get confirmation and necessary evidences from these two parties which were Naveen Kalra Sr.No.3 and Ekta Khaitan Sr.No.11 as per the remand report. The facts about these two parties are explained hereunder:-

1 Ekta Khaitan: Ekta Khaitan had booked two units No.C-05 & 12 and had paid total sum of Rs.13000000 for the same. In the subsequent year she had transferred the above two flats to Sandeep Jindal and Sh. Dayanand. The complete detail of these two flats originally purchased by Ekta Khaitan and their subsequent transfer is enclosed. Annexure IX. Naturally the said Ekta Khaitan did not respond to the notice issued by AO as she had already disposed them of. 2 Naveen Kalra: On enquiry this party has informed the assessee that he did not receive the notice of the AO as he was out of station most of the time. Copy of Allotment Letter and Agreement are available with the company and the same shall be produced before your honor for verification. 3 Further in the Remand Report the AO has made reference of another party i.e. Gejandra Kumar Yadav at Sr.No.4 stating that this party had supplied all the necessary details of payments made by him and confirmed the purchase of unit. However, he has stated that the payment for the same was made by him to M/s. Earth Apex Infra Project Pvt Ltd and not to Urbania Spaces Pvt Ltd. In this regard it is submitted that Earth Apex Infra Project Pvt Ltd got the booking amount of Rs.1000000 from this investor on behalf of the company and subsequently transferred the amount to assessee company and got the booking also transferred in the name of Gejandra Kumar Yadhav. Copy of transfer request received from Earth Apex Infra Project Pvt Ld and confirmation of copy of account from Gejandra Kumar Yadav are enclosed for your honor ready reference. Annexure X Vii In spite of the above facts the AO has raised objections to the acceptance of assessee's submissions.

Further, from the perusal of the remand report, it will be observed that stress of both the AO as well as Addl.CIT has been on the non "Recognition of Income" by the company as per Accounting Standard AS7 from the Project under construction. However, during the assessment proceedings, the issue of non-recognition of income as per AS7 was not raised at all by the AO. viii) Thus, in the remand report the AO is trying to raise an absolutely new issue of AS7 which has no relevancy to the issues under consideration. AS7 pertain to system of accounting to be followed for the recognition of income in the case of "Contractors" whereas the case of the appellant is not that of a contractor. The applicability of AS7 and the consequent addition under the provisions of AS7 has no relevancy with the issues under reference. ix) Further we may submit that addition was made by invoking the provisions of section 68 whereas amounts were received by the assessee against sale of "Units" in Project under construction. The amounts received are not in the nature of unsecured loans at all but are part of sale proceeds only. The same has duly been confirmed by the buyers also. Hence provisions of section 68 are not applicable at all in this case especially when all the investors have confirmed that the amounts were paid against the purchase of units and have also supplied the evidence of investment. x) Further in the Remand Report the AO has stated that how the investors did not contest or filed any complaint against the company for not giving possession to them for such a long time back. The AO has held that this raised suspicion about the money received from customers for booking/instalments. In rebuttal to this it is submitted that this is an absolutely illogical reasoning given by the AO to support the addition made by him. It is an established law that merely on suspicion, surmises and conjectures no addition can be made. Investors must be seeing the appreciation in the value of their investment with the passage of time for not taking any legal action or for some other reason. Moreover, it is a known fact that real estate project do take very long time for completion due to various unforeseen reasons.

5.1.3 I have considered the facts of the case and submissions filed by the appellant. The relevant facts are summarized below: i) During the assessment proceedings, the appellant was given only one day time in the show cause notice to furnish the details and its explanation which in my opinion was not the sufficient time given. ii) The AO made the addition based on suspicion as no adverse finding is made during the assessment. In the assessment order the AO mentioned that a show cause notice was issued on 19.12.2019 asking the assessee to prove identity, genuineness and creditworthiness of the money received and requiring the assessee to submit the reply before 11:15 AM ON 20.12.2019. iii) The AO concluded that since the assessee failed to furnish reply, all the advance received was disallowed U/s 68 of the Act. iv) The appellant submitted that Response dated 20.12.2019 was filed which is submitted before me. Further it is also submitted that the opportunity allowed by the AO, giving just one day time to the assessee to furnish the reply, is not proper opportunity to the assessee. v) During the appellate proceedings, the appellant has filed compete details regarding advance received for booking of units. The appellant had received total amount of Rs.32,06,70,245 till 31st March 2017 from large number of investors towards the booking and instalments under construction linked plan (CLP) for the project Trinity NX, at Plot No.6A Techzone-IV Greater Noida East. Out of the said amount of Rs.12,12,10,380 was received during the year under consideration and balance was received in preceding years. vi) Further, in the previous year, the same advance from customers were allowed after verification. It was also submitted that many of the advances are instalments from the same customers who had also paid in earlier years. vii) A remand report was also called, where in the AO has verified 14 parties and considering the remand report, submission of these parties and assessee, it has been observed that these advances are received from genuine parties. 5.1.4 In view of the above facts and findings, it is found that during assessment proceedings, the appellant had submitted details of total buyers numbering 402 to whom the company has sold units of the project and from whom payments were received by the appellant amounting to Rs. 12,12,10,380/-. The assessing officer has also conducted verification on random basis from certain entities from whom the appellant has received money against booking of units in its projects. The assessing officer has not found any deficiency in the submissions made by the different entities and with respect to parties who have not replied, the explanation provided by the appellant found satisfactory.

In view of the above, it has been concluded that the AO has made addition in haste, without making any adverse findings during the assessment proceedings and hence the addition made by the AO is not found to be sustainable. Therefore, the addition made by the assessing officer is deleted and accordingly, the ground of appeal taken by the appellant is allowed. 5.2 ADDITION OF Rs. 2,31,61,925/- Money received against Expression of Interest in the Project Booking: The appellant submitted that it has received money of Rs.6,26,86,250/- till 31st March 2017 from a number of investors towards Expression of Interest in the project Trinity NX, at Plot No:6A, Techzone IV Greater Noida (West), Out of the said amount, Rs.2,31,61,925/- was receive during the year under consideration and balance was received in the preceding year. All the money was received through account payee cheque or banking channel and necessary agreement are executed with all the investors. Money received against Expression of Interest of Rs. 3,96,24,325 till AY 2016-17 was duly verified and accepted by the department in the past. Detailed books of account are maintained in the regular course of business and are duly audited. The audited Balance sheet with schedules and notes on accounts along with auditor's report thereon was submitted to the Id. AO. The Id. AO has never asked to prove creditworthiness and genuineness of the money received against booking/instalments under CLP during the year under consideration before issue of SCN dated 19.12.2019 as alleged at point no. 2 of the assessment order. Since these amounts were also received against the booking by way of Expression of Interest and are not in the form of unsecured loans or advances the provision of section 68 are not applicable to this case and the ld.AO has gross erred in making addition of whole amount of Rs.2,31,61,925/- by invoking provisions of section 68 of the Act in a summary manner. 5.2.1 I have considered the facts of the case and submissions filed by the appellant. The appellant has furnished the details in respect of the parties who has paid by way of Expression of Interest. The appellant has submitted complete details giving the name, address, PAN of the parties. The assessing officer in the remand report has simply stated that the said amounts were rightly treated as unexplained. Once the appellant has provided all the necessary details the onus shift to the AO to make further enquires if he doubted the genuineness of these credits. However, the AO has neither made any effort to verify these advances directly from the parties during assessment/ remand proceedings nor he required the appellant to furnish the requisite details before making the addition of Rs. 2,31,61,925/-by passing a one-line order.

Further, the appellant submitted that as regards the amount of Rs.2,31,61,925/-received from various customers during the financial year 2016-17 against "Expression of Interest" against the project of the company known as Trinity NX Techzone Greater Noida (W) it is submitted that actual receipt during this financial year was only Rs:12,91,000:-

S.No. Name Address Amount Bank 1 Ankit D-166/33, Sector 50 Noida 591000 ICICI Bhatiani Gautam Budha Nagar UP Bank 201301- PAN: AHJPB1324N 2 Rakesh D-158, 1st floor, Preet Vihar, 700000 HDFC Suri Delhi 110092 Bank PAN: ANYPS2660P Total 1291000 The balance amounts of Rs.2,18,70,925/- was transferred from "Money received against Booking" Account. (As Per annexure XI) I view of the above facts and findings; it has been observed that the AO has made addition on the basis of suspicion, without making any effort to further verify the issue at hand. Therefore, it is held that the assessing officer was not justified in making addition of Rs. 2,31,51,925/- on account of disallowance of money received against the Expression of Interest in the project booking. Hence, the addition made by the assessing officer is deleted.

5.3 ADDTION OF RS.50,00,000/- Unsecured Loan from Sagrika Seacraft Ltd., Rs.50,00,000: The appellant submitted that it had taken an unsecured loan of Rs.1,00,00,000/- from Sagrika Seacraft Ltd having registered office at 1014, Roots Tower Plot No.7 Laxmi Nagar Distt Centre Vikas Marg Delhi 110092. Out of the said amount of Rs.50,00,000/- was received during the year under consideration vide RTGS bearing reference no. CNRBR52016082600530214 DATED 26TH August 2016 and balance Rs.50 lakhs was received in the preceding year. The credit worthiness and genuineness of the said lender has already been provided in past and accepted by the department when first Rs.50 lakhs were received. Books of account are maintained in the regular course of business.

The Id. AO has made all the above addition by invoking provision of section 68 of the Act. The addition made u/s 68 of the Act is bad in law, illegal and ab-initio void. The Id.AO in the present case had made the addition in summary manner by ignoring the online filed submissions of the assessee on portal within given time and with duly online generated acknowledgment. 1 books of account of the appellant company have been audited by duly appointed Chartered Accountant as per Companies Act 2012 and no question was raised on the maintenance of books of account and its accuracy during entire assessment proceedings. The appellant assesee would like draw your attention on judgments of various Hon'ble Courts of law given hereunder:- i. Sumati Dayal V CIT (1995) 214 ITR 801 Taxman 89 (SC) ii. Hindustan Tea Trading Company Limited V CIT(2003) 263 ITR 289(Cal HC) ii. iii. Tola Ram Daga V CIT (1966) 59 ITR 632 (Assam) iv. Dhansi Ram Agarwala V CIT (1966) 217 ITR 4 (Gau) v. Khandelwal Constructions V CIT 227 ITR 900(Gau)

5.3.1 I have considered the facts of case and the submissions filed by the appellant. The assessing officer has made addition of Rs. 50,00,000/- on account of unsecured loan from Sagarika Sea Craft Ltd. The appellant had filed confirmed copy of A/c of this party and had also informed the AO about the change of name of the company. The total transaction was through the banking channel. The AO has further stated that the notice u/s 133(6) of the Act was issued to the party for obtaining confirmation whereas the said notice was received back undelivered. Simply for this reason the said party was treated as non-existent and no effort was made by the AO himself or through the appellant to obtain the required detail and necessary confirmations from this company during the remand report. No such information was passed to the appellant during remand proceedings that notices issued to this party were received back. The notices were received back due to the fact that there was a change in the name of the company from Sagarika Sea Craft Ltd to Sagarika Produite Ltd with effect from 17.8.2019. The appellant has furnished evidence by way of fresh certificate of Incorporation issued by Registrar of Companies, Ministry of Corporate Affairs.

5.3.2 From the assessment order, it has been observed that the addition was made just by observing that the AO has not provided the genuineness and creditworthiness of the transaction about the money received from Sagarika Seacraft Ltd. Further, during the remand proceedings, the AO has issued notice u/s 133(6) to Sagarika Produite Ltd. address at 1014, Roots Tower, Plot no. 7, District Centre, Laxmi Nagar, Delhi, which the AO reported as non-delivered to the said party. The appellant submitted that it has provided fresh certificate of incorporation wherein the registered address is shown as H-46, Green Park Extension, New Delhi- 110016. Thus, the AO had issued the notice u/s 133(6) of the Act on old address. Further, the appellant informed that during the financial year 2017-18 the said company i.e. Sagarika Produite Ltd was allotted Villa Apartment No.15 on 2.6.2017 in company's project known as "Trinity NX" Plot No.6A, Techzone 4, Greater Noida(W). Copy of Allotment Letter along with confirmation of account in respect of allotment of Apartment No.15 by Sagarika Produite Ltd are enclosed. 5.3.3 In view of the above facts, it has been observed that the AO has not made proper effort to verify the genuineness of the transaction with Sagarika Produite Ltd. neither he had asked the appellant assessee to provide the proper explanation regarding loan taken from it. Thus, it is found that the appellant has duly discharged its onus by way of submitting copy of accounts of the said party including bank statements showing credit of Rs. 50,00,000/- received from Sagarika Produite Ltd., however the AO has failed to brought any adverse finding on record. The notice u/s 133(6) of the IT Act, 1961 could not be delivered as there was a change in the address of the company Sagarika Produite Ltd. Therefore, the addition made by the assessing officer is not found to besustainable and is directed to be deleted. Hence, the issue raised by the appellant is allowed. In light of the above facts and findings, the ground of appeal no. 1 raised by the appellant is allowed.”

7. From perusal of para no. 5, it is apparent on record that addition of Rs.14,95,89,670/- was made by the Ld. AO alleging unexplained credit under Section 68 of the Act. Addition of Rs.12,12,10,380/- was received from investors towards booking/instalments under CLP. Details of customers showed that all most of the customers were old who had paid the instalments./ Genuineness of all buyers was accepted by Ld. AO in the preceding years. The assessee has supplied complete particulars of all customers. All the transactions were made through account payee cheques. Remand report of Ld. AO was considered by and Ld. AO had verified 14 parties and considering the remand report, the advances received were found to be from parties. So, the addition of Rs.12,12,10,380/- was rightly deleted. 7.1 Addition of Rs.2,31,61,925/- received against expression of interest in the project booking was made by the Ld. AO under Section 68 of the Act on basis of suspicion without making any effort of further verified the amounts was rightly deleted. 7.2 Addition of Rs.50,00,000/- as unsecured loan from SagrikaSeacraft Ltd. was made by Ld. AO. Assessee had filed confirmed copy of ASSESSEE COMPANY/CO of the parties and informed Ld. AO about change of the company. The total transaction was through banking channel. Ld. AO made no efforts to obtain required details and necessary confirmation from the company after receiving notices under Section 133(6) of the Act undelivered. It was found