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Facts
A search operation on Earth Infrastructure Limited led to the seizure of documents indicating cash and cheque payments totaling Rs. 9.68 crores by "Shivmurti" for land purchases in AY 2012-13. The Assessing Officer (AO) initiated reassessment proceedings against Shiv Murti Developers P. Ltd. (assessee), treating the Rs. 5.21 crore cash component as undisclosed income, despite the assessee's claim of being a commission agent for Murlidhar Infracon Pvt. Ltd., in whose name all land deeds were registered. A protective addition for a part of the cash payment was also made in Murlidhar Infracon Pvt. Ltd.'s assessment.
Held
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, ruling that the AO's addition against the assessee was based purely on presumption without corroborative evidence. The Tribunal noted that the assessee was a commission agent, had no direct link to the seized documents, and the land deeds were in Murlidhar Infracon Pvt. Ltd.'s name, which also accepted making payments. The substantive addition in the assessee's hands was deleted, and the AO was directed to proceed against the correct entity under section 150 of the Act.
Key Issues
Whether cash payments for land purchases, documented as made by "Shivmurti" in seized records from a third party, could be attributed as undisclosed income to the assessee company (Shiv Murti Developers P. Ltd.) when the assessee claimed to be merely a commission agent and the properties were registered in another entity's name.
Sections Cited
132, 131, 148, 151(1), 143(3), 153A, 153C, 292C, 250(4), 150
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
(Assessment Year: 2013-14) ACIT, Central Circle 28, vs. Shiv Murti Developers P. Ltd., New Delhi. 59/11, Old Rajinder Nagar, New Delhi – 110 060. (PAN : AAICS3870P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Sanjay K. Agarwal, CA Ms. Apoorva Bhardwaj, CA REVENUE BY : Shri Dharam Veer Singh, CIT DR Date of Hearing : 24.06.2024 Date of Order : 30.08.2024 ORDER
PER S.RIFAUR RAHMAN,AM:
The assessee has filed appeals against the order of the Learned Commissioner of Income Tax (Appeals)-XXXVI, New Delhi [“Ld. CIT(A)”, for short] dated 07.09.2018 & 12.09.2018 for the Assessment Years 2012-13 & 2013-14 respectively.
(AY 2012-13) 3. Brief facts of the case are, a search and seizure operation under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) was conducted in the case of Earth Infrastructure Limited, Industrial Area Naraina, Delhi and certain documents were found and seized. As per the seized documents at pages 20, 23, 34, 35, 84 and 88 of Annexure A-79 revealed that assessee had made cash payment to the tune of Rs.5,21,34,953/- and payments by cheque to the tune of Rs.4,47,00,000/- to various farmers (land owners) and Earth Infrastructure Limited for purchase of certain land at Najafgrh, Delhi during the period from 01.04.2011 to 31.03.2012. The relevant extract of the above payments were produced in assessment order at page 2. In order to verify the source of the aforesaid payments, the summons under section 131 of the Act were issued to the assessee. During the course of investigation, the same was returned unserved. After verification of the records with the department, he observed that the opening cash and bank balance for the assessment year 2012-13 in which the assessee had made payments aggregating to Rs.9,68,34,953/- was nil. He observed that the source of the above payments made by the assessee were not found established, therefore, there is sufficient reason to believe that income to the tune of Rs.9,68,34,953/- has escaped assessment. After recording the reasons and approval under section 151(1) of the Act, he issued notice under section 148 and served on the assessee but in response, assessee submitted return of income declaring loss of Rs.5,16,000/- and requested for copy of reasons recorded which was provided to the assessee. Ld. AR of the assessee attended and submitted various details from time to time. After considering the submissions of the assessee and fully relying on the & 7889/DEL/2018 assessment proceedings under section 143(3) read with section 153A/153C of the Act for the assessment year 2012-13 in the case of Murlidhar Infracon Pvt. limited and response from assessee vide letter dated 21.03.2016, the same was reproduced by the AO in his order. For the sake of brevity, the same is reproduced below :- “1. The Promoters / Management of Earth Group of Companies were interested to undertake a Farm House project in New Delhi locality.
Sh Pawan Sharma father of Aditya Sharma who is shareholder and Director of Shiv Murti Developers (P) Limited was also keen to undertake such a project. Sh. Pawan Sharma has vast experience of 25 years in Land Procurement, Farm House Business.
As their business interest met, they (i.e. Management of Earth Group and Sh Pawan Sharma alias Shiv Murti alias Aditya Sharma alias SM) came together and mutually agreed among themselves that a new company will be incorporated (i.e. Murlidhar Infracon Private Limited) for the purpose and they will hold the share capital of the company in the profit sharing ratio.
There was an understanding in between Murlidhar and Sh.Pawan Sharma alias Shivmurti. As per the understanding, land pooling and consolidation of land was the responsibility of Sh. Pawan Sharma alias Shivmurti due to his vast experience and Development of the same was to be done by Murlidhar, a company of the Earth Group.
As per initial arrangement the share in capital of Murlidhar was to be 60 % of the Earth Group and 40 % of the Sh. Aditya Sharma son of Pawan Sharma alias Shivmurti (SM). Investment was also to be done by Earth Group and SM alias ShPawan Sharmal Aditya Sharma in the same ratio (i.e. 60:40). Land was to be consolidated in the name of M/s Murlidhar Infracon (P) Limited, whose capital was held by both in the Profit sharing ratio (i.e. 60:40).
Since land pooling and consolidation of land was the responsibility of Sh. Pawan Sharma alias Shivmurti (SM) , so the role at initial stage was dominantly of Sh. Pawan Sharma alias Shivmurti (SM) .
After some initial deals handled and done by Sh.Pawan Sharma alias Shivmurti (SM) as per the initial understanding, Sh Pawan Sharma had come to EIL Management with papers relating to Advances / Biyanas allegedly done by him with selling parties. But the Promoters of Earth Group smelled siphoning off funds by Sh Pawan Sharma alias SM in the dealing either in individual capacity or in connivance with the prospective sellers, point blank refused into or even recognize any such deal at such exorbitant rates. In turn Sh Pawan Sharma alias SM turned up later on and submitted that all deals were renegotiated and Murlidhar had to pay only the renegotiated prices as per the Registries. However, & 7889/DEL/2018 the payments through ATS and Receipts shown to Murlidhar were requested to be ignored, but cheque payments were requested by him to be considered.
However, when asked to contribute his share of 40% as agreed, Sh. Aditya Sharma / Pawan Sharma alias Shiv Murti requested that presently he is short of liquidity and accordingly would contribute not more than 20% /30% in the deal. As a consequence, on 03rd November, 2012 and 12th December, 2012 Murlidhar increased its share to 70% and 80% respectively and Sh. Pawan Sharma alias Shiv Murti reduced its share to 30% and 20% respectively, as already brought on record in the statement of Sh Avdhesh Goel.
9. When after reduction of share to 20 %, again Earth Group asked for settlement of accounts, Mr Pawan Sharma alias SM again came in first week of January, 2013 with the papers, which are seized and again claimed that he has spent as per these papers. He was clearly told that Earth Group Management recognizes the dealing as per the Registry values only, as agreed earlier while getting the Registry done.
He raised a dispute and the left the papers at Earth Group Office to be reviewed/ seen by Promoters of Murlidhar.
In the mean time there was a Search operation on Earth Group on 16.01.2013 and these papers were seized.
Later on Mr Pawan Sharma alias SM also admitted in person, during talks that although at the stage of Biana, in some cases he had paid cash to negotiate, but with a clear understanding with the farmer(s) that when the cheque payment will be made the same is to be returned; and he acted accordingly. As time elapsed, Mr. Pawan Sharma alias SM admitted in talks with the Promoters of the Earth Group that Cash component infect never existed and the value of the Properties is as per the Registries only. " 4. By relying on the other response, the AO proceeded to make the addition of Rs.5,21,34,953/- with the following observation :- “8. The assessee in its reply has furnished copies of agreements with 3 parties as shown above alongwith details of cheque payments made to them and has also stated that it has never dealt with any purchase of sale of land and therefore denied that the documents belong to it. The reply of the assessee alongwith documents submitted by it has been considered vis-à-vis reply of M/s. Murlidhar Infracon Pvt. Ltd. for the A.Y. 2012-13 and the seized documents as per & 7889/DEL/2018 Annexure A-79. The reply of the assessee is not acceptable in view of the fact that as per the documents seized as per the said annexure the name of the assessee company i.e. “Payment Paid by Shivmurti" is clearly mentioned against the cash/cheque payments made to various farmers and to Earth and its name is repeatedly appearing on other pages of the said annexure as well as is displayed in the table at Page No.2 above. The assessee has not given any justification with regard to the fact that its name is repeatedly reflected as "Payment Paid by Shivmurti" against such payments on various pages of the seized documents. Therefore, denial of the assessee of not having made any payments in respect of land deals just on the pretext that the documents belong to M/s Murlidhar Infracon Pvt Ltd is not acceptable. Further, on perusal of the sale deed agreement submitted by the assessee company in three cases, as mentioned above, it is seen that M/s Murlidhar Infracon P Ltd (vendee) has been represented by its Director Sh Aditya Sharma S/o Sh Pawan Sharma and he has also signed these sale deed agreements for Murlidhar Infracon Pvt Ltd. It may be mentioned that Sh Pawan Sharma is Director of the assessee company. Therefore, the submission made by M/s Murlidhar Infracon P Ltd during the assessment proceedings in its case (reproduced supra) that there was an agreement between the management of ElL and Shiv Murti for purchase and development of Land is found to be acceptable and hence role and involvement of the assessee company in purchase of lands in respect of which cash and cheque payments have been made cannot be ruled out. Moreover, assessment u/s 153A r.w.s 153C in the case of M/s Murlidhar Infracon Pvt Ltd for A. Y. 2012-13 has already been completed wherein on the basis of the aforesaid seized documents protective addition of Rs.1,82,82,953 has been made in its case on account of cash payments out of total cash payments of Rs 5,21,34,953 pertaining to the period beginning from the date of incorporation of the said company viz 28.12.2011. From the above facts and the seized documents it is clearly evident that the said cash payments have been made by the assessee company on land deals and therefore substantive addition of Rs 5,21,34,953 is made in the hands of the assessee company as cash payments out of its undisclosed sources.”
5. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A)-XXVI, New Delhi and raised several issues on jurisdiction as well as on merits. Before the ld. CIT (A), ld. AR submitted as under :-
6. Ld. CIT (A) remanded the matter back to AO vide letter dated 23.04.2018 and further remanded the matter vide letter dated 04.01.2018. In response, the AO submitted the relevant remand report which is reproduced by the ld.CIT(A) at pages 21 to 23 of the order and in response, assessee has submitted rejoinder to the remand report and the same is reproduced at pages 24 to 29 of the order. Further, assessee also filed an affidavit before ld. CIT (A) and the same was considered under section 250(4) of the Act and same was reproduced at pages 31 to 34 of the order. After considering the remand report and response to the remand report and affidavit, ld. CIT (A) deleted the substantive addition in the hands of the assessee and directed to initiate the proceedings in respect of correct entity by observing as under :- “ Having considered the facts of the case, the affidavit filed supra is considered. The appellant has not undertaken any such transaction as there is no substantive evidence on record to establish. The appellant produced evidence in the form of conveyance deed for purchase of land executed in & 7889/DEL/2018 favour of Murlidhar Infracon Pvt. Ltd. during the year under consideration which contains cheque details which are also stated in seized material as well as issued from bank account of Murlidhar Infracon Pvt. Ltd. The AO concluded that appellant company M/s Shiv Murti Developers Pvt. Ltd. made cash payments to the tune of Rs.5,21,34,953/- and by cheques to the tune of Rs.4,47,00,000/- to various farmers (land owners) and M/s Earth Infrastructure Limited for purchase of land at Najafgarh from 01.04.2011 to 31.03.2012 but this imputation is not supported by any corroborative evidence. There is no detail of such lands having been purchased. I he appellant cate&,9rically denied having purchased any land during the period from 01.04.2011 to 31.03.2012 or made any cash or cheque payment to any farmers, land owners or Earth Infrastructure Limited for purchase of land. It appears to be a case of mistaken identity. The AO is directed to pick up the accounting train from the bank accounts of M/s Murlidhar Infra Pvt. Ltd. and identify the correct party to examine the veracity of seized documents against that person/ entity and then initiate the process of reassessment as per the Act. This direction is issued under section 150 of the Income Tax Act 1961.”
7. Aggrieved with the above order, Revenue is in appeal before us by raising following grounds of appeal :-
1. That on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in totally deleting the addition of Rs.5,21,34,953/- with regard to purchasing of lands from various farmers (land owners) and M/s. Earth Infrastructure Ltd. at Najafgarh from 01.04.2011 to 31.03.2012.
2. That the order of ld. CIT (A) is perverse, erroneous and is not tenable on facts and in law.
3. That the grounds of appeal are without prejudice to each other.”
8. At the time of hearing, ld. DR for the Revenue submitted that ld. CIT (A) has not forwarded any record to AO after accepting the additional evidence in the form of affidavit. In this regard, he brought to our notice page 31 of the first appellate order. Ld. DR submitted that assessee has purchased agricultural land from various farmers and made several payments to them. He submitted that Murlidhar Infracon Pvt. Ltd.
& 7889/DEL/2018 was incorporated only on 28.12.2011. However, several payments were made to farmers before its incorporation. By observing such payments, the AO has rightly made substantive addition in the hands of the assessee and protective addition in the hands of Murlidhar Infracon Pvt. Ltd.. He submitted that the same was reversed by ld. CIT(A) by relying on the submissions made by the assessee i.e. he deleted the substantive addition in the hands of the assessee. He brought to our notice para 7.2 of the assessment order and submitted that all the payments were made by cheques/cash before incorporation of Murlidhar Infracon Pvt. Ltd. and he submitted that ld. CIT (A) has not appreciated the above facts properly. He submitted that the payments were made before incorporation of Murlidhar Infracon Pvt. Ltd., who had made the abovesaid payments. He submitted that ld. CIT(A) also found that the information found in the seized documents are genuine. In this regard, he brought to our notice page 193 of the paper book which is the sale deed entered by Murlidhar Infracon Pvt. Ltd. with Palak Properties Pvt. limited and he brought to our notice page 197 of the paper book wherein certain payments were made during 2011-12 and submitted that a payment of Rs.22 lakhs vide cheque no.575073 was made on 21.11.2011 which is before incorporation of Murlidhar Infracon Pvt. Ltd.. Similarly, he brought to our notice page 204 which is another sale deed with Murlidhar Infracon Pvt. Ltd.. In this case also, similar payment was made before incorporation of Murlidhar Infracon Pvt. Ltd.. By bringing the above agreement, he submitted that cheque payments were matching with the seized document, therefore, cash payment also to be presumed as true. Further, he submitted that the affidavit filed by the assessee before the ld. CIT(A) should be remitted to the AO and submitted that as per para 5 of the abovesaid & 7889/DEL/2018 affidavit, the facts mentioned are wrong and incorrect. By referring to the findings of the ld. CIT(A), he submitted that factual incorrect findings were recorded by the ld. CIT (A). Therefore, he prayed that the issue may be remitted back to AO for proper verification.
On the other hand, ld. Counsel for the assessee submitted that a search on Earth Infrastructure Ltd. was conducted on 16.01.2013 and this fact on record that “SM” was mentioned in the seized document and it denotes Shiv Murali Dharam and it does not refer to Shiv Murti Developers P. Limited i.e. assessee. Further, he brought to our notice page 87 of the paper book which is the assessment order passed under section 153C read with section 153A/144 of the Act in the case of Murlidhar Infracon Pvt. Limited wherein protective addition was made in their hands of Rs.1,82,82,953/-. Further, he brought to our notice page 224 of the paper book which is the Notes to the Financial Statement of Murlidhar Infracon Pvt. Ltd. and the list of the shareholders are given and submitted that assessee is not a shareholder and assessee is only a commission agent. He brought to our notice page 35 of the paper book which is the balance sheet of the assessee company. Further he brought to our notice page 41 of the paper book wherein assessee was given various advances to land owners to the extent of Rs.1,66,00,000/-. Prior to incorporation of Murlidhar Infracon Pvt. Ltd. whatever the payments were made to various land owners, the AO presumed that the same have been made by the assessee. In this regard, he brought to our notice para 7.2 of the assessment order and brought to our notice sub-para no.4 wherein it is recorded as under :-
& 7889/DEL/2018 “4. There was an understanding in between Murlidhar and Sh. Pawan Sharma alias Shivmurti. As per the understanding, land pooling and consolidation of land was the responsibility of Sh. Pawan Sharma alias Shivmurti due to his vast experience and development of the same was to be done by Murlidhar, assessee company of the Earth Group.”
10. With the above submission, he brought to our notice page 35 of the first appellate order and supported the findings of the ld. CIT(A) and no prejudice is caused to the Revenue with the findings of ld. CIT (A) that the addition has to be made in the hands of Murlidhar Infracon Pvt. Ltd.. By referring to the submissions of the ld. DR for the Revenue, he submitted that no doubt, certain payments were made before the incorporation of Murlidhar Infracon Pvt. Ltd. but these payments were not made by the assessee and he submitted that absolutely no prejudice caused to the Revenue and ld. CIT (A) only gave direction to the AO to redo the assessment properly under section 150 of the Act.
11. Considered the rival submissions and material placed on record. We observed that the assessee is a private limited company engaged in the business of commission agent and as per records, the assessee has only one bank account maintained with HDFC Bank, Old Rajender Nagar, New Delhi. Subsequent to search conducted in the case of Earth Infrastructure Ltd., Delhi, certain documents were found and seized which included documents identified as Annexure A-79 whereby certain cash payments and payments by cheque were found which were made to various farmers during the period 01.04.2011 to 31.03.2012. We observed from the record that the AO initiated the proceeding under section 153C of the Act in the case of Murlidhar Infracon Pvt. Ltd. and made the addition of Rs.1,82,82,953/- on account of cash & 7889/DEL/2018 payments out of the total cash payment of Rs.5,21,34,953/- pertaining to the period beginning from the date of incorporation of Murlidhar Infracon Pvt. Ltd. on protective basis. However, in the case of assessee, the assessment was completed under section 143(3) read with section 147 of the Act.
12. We observed from the record that the assessee has submitted evidences in the form of conveyance deed for purchase of the land executed in favour of Murlidhar Infracon Pvt. Ltd. during the year under consideration and from various conveyance deed submitted before the authorities and also before us shows that cheque payments were made to various farmers and the same are recorded in the conveyance deed and also found that certain cash payments were made to the farmers and same was seized during search proceedings and corroborative evidences were submitted and available with the AO. Since all the conveyance deeds were registered in the name of Murlidhar Infracon Pvt. Ltd. and it is presumed reasonably that the cash payments also would have been made by Murlidhar Infracon Pvt. Ltd. and there is no corroborative evidence found and available with the AO which denotes to the assessee. Corroborative evidence found during search with the name Shiv Murthy, the AO presumed that it is belonging to assessee. Mere Shiv Murthy does not denote only to the assessee it may denote to any other person also. Since the conveyance deeds are registered in the name of Murlidhar Infracon Pvt. Ltd. and the assessee is merely a commission agent and as per the balance sheet submitted before us by the assessee, there is no evidence that assessee has purchased any asset during the year nor earlier. As per the affidavit filed before the ld. CIT (A), the facts are clear that assessee has acted merely as a commission agent and all the payments relate to & 7889/DEL/2018 Murlidhar Infracon Pvt. Ltd. only. Ld. DR raised certain issues relating to certain payments made to the farmers before the incorporation of Murlidhar Infracon Pvt. Ltd.. We observed from the conveyance deeds that Murlidhar Infracon Pvt. Ltd. has accepted that they have made payments by mentioning various payments made to farmers prior to its incorporation. It clearly denotes that the directors/shareholders of Murlidhar Infracon Pvt. Ltd. must have made the arrangement to make those payments. There is no record brought on record by the Revenue that these payments were routed through bank accounts maintained by the assessee. Therefore, in absence of any cogent material, we are inclined to agree with the findings of ld. CIT (A). We do not see any reason to disturb the finding of the ld. CIT (A) and ld. CIT (A) merely deleted the addition made in the hands of the assessee, however he remitted the issue back to the file of AO to redo the assessment after making proper verification. Therefore, there is no prejudice caused to the Revenue with the findings of ld. CIT (A). Accordingly, the grounds of appeal
filed by the revenue are dismissed.
13. The facts in in assessment year 2013-14 are mutatis mutandis to the above case, hence our above order applies to the AY 2013-14 also. In the result, both the appeals filed by the Revenue are dismissed.
14. Order pronounced in the open court on this 30th day of August, 2024.