GOLDEN LAND DEVELOPERS LTD,NEW DELHI vs. ITO, WARD-10(2), NEW DELHI
Facts
The assessee, a real estate developer, received substantial cash advances from over 2000 customers for a low-cost housing project during AY 2006-07 and 2007-08. The Assessing Officer treated these advances as unconfirmed cash credits under section 68 of the Income Tax Act due to the assessee's inability to prove their genuineness, and also made a disallowance under section 40A(3). The case involves ongoing investigations by the Economic Offence Wing (EOW) and the Central Bureau of Investigation (CBI) regarding the funds and a High Court order directing identification and refund to depositors.
Held
The ITAT observed that this was the second round of litigation and that the AO had disbelieved the assessee's claims regarding the genuineness of advances. Considering the EOW/CBI investigations, the Orissa High Court's cognizance of the matter, and the Government of Odisha's correspondence regarding depositor identification and refunds, the Tribunal restored the issue of cash credits under section 68 to the Assessing Officer. The AO is directed to conduct a fresh examination and verification of depositor details, providing the assessee a reasonable opportunity to be heard and furnish all necessary evidence.
Key Issues
Whether the cash advances received by the assessee can be treated as unconfirmed cash credits under section 68, and whether disallowance under section 40A(3) is applicable, necessitating re-examination given ongoing investigations and High Court intervention.
Sections Cited
Section 68, Section 40A(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
The above captioned two separate appeals by the assessee are
preferred against two separate orders of the NFAC, Delhi dated
23.08.2022 pertaining to A.Ys. 2006-07 and 2007-08.
Since both the appeals were heard together and involve common
issues, they are disposed of by this common order for the sake of
convenience and brevity.
Briefly stated, the facts of the case are that the assessee
company has been engaged in the business of real estate and land
developing. During the year under consideration, it carried out low
cost housing project at Kendrapara, Orissa with the approval of
Kendrapara regional Trust towards which, it received advance from
more than 2000 customers ranging from Rs.2,000/- to Rs.5,00,000/- all
in cash totaling to Rs.3,04,40,210/- in A.Y 2006-07 and Rs.
2,70,01,863/- in A.Y 2007-08.
During the original assessment proceeding, since the assessee
failed to prove the genuineness of the advances so received, the entire
amount of advances so received were treated as unconfirmed cash
credit in terms of section 68 of the Act in both the assessment years.
Besides, an amount of Rs. 46,31,453/- was disallowed u/s 40A(3) of the
Act in A.Y 2007-08.
Thereafter, the assessee preferred an appeal before ld.CIT(A)
challenging the findings of Assessing Officer.
The Ld.CIT(A)-XVIII, New Delhi vide his order dated 11.3.2013
modified the quantum of additions, wherein, a relief of RS.8,28,000/-
was given for AY 2006-07.As a result, the balance addition of
Rs.2,96,12,210/- was confirmed. The additions for AY 2007-08 was
confirmed on both counts of section 68 and section 40A(3) of the Act.
Thereafter, the assessee filed an appeal before ITAT challenging
the findings of CIT(A)-XVIII, New Delhi. While disposing off the appeal,
ITAT set aside the issue to the Assessing Officer to decide the issue
afresh after providing an opportunity of being heard to the assessee.
Subsequently, the AO again added the amount of RS.2,96,12,210/-for
AY 2006-07 and Rs 2,70,01,863/- for AY 2007-08 under section 68 of
Act on the ground that the assessee failed to prove, identify and
genuineness of the transaction which are the subject matter of
impugned appeal. Also an amount of Rs. 46,31,453/- was disallowed
u/s 40A(3) of the Act in A.Y 2007-08.
At the very outset of the opening of the hearing, the ld. counsel
for the assessee submitted that this is a case where the Economic
Offence Wing [EOW] and the Central Bureau of Investigation [CBI] were
investigating the funds received from various persons.
The ld. counsel for the assessee furnished a copy of the letter of
Additional Secretary to Government of Odisha to Competent Authority,
Cuttack requesting for initiation of action of refund of deposit to the
identified small depositors to support his argument that the depositors
were identified and action is being taken to refund the amount taken
from them and, therefore, addition made on that count u/s 68 of the
Act by the Assessing Officer cannot be sustained.
The ld. counsel for the assessee placed reliance on the decision
of the Hon'ble High Court of Orissa at Cuttack in WP(C) No. 14492 of
2021 order dated 01.09.2023 in the case of GLP Developers Ltd IA No.
13957 of 2023. The ld. counsel for the assessee drew our attention to
Para 6 of the said order where the Hon'ble High Court is giving
direction for identifying the investors and to make payments
accordingly to the investors/depositors.
The ld. counsel for the assessee fairly submitted that as these
documents and fate of the investigation being made by EOW and the
CBI was not before the Assessing Officer, the issue may be restored to
the file of the Assessing Officer for proper examination and
determination.
Per contra, the ld. DR fairly conceded that the issue may be
restored to the file of the Assessing Officer for fresh adjudication.
We have given thoughtful consideration to the rival submission
and to the orders of the authorities below. We find that this is the
second round of litigation before the ITAT. In the second round, as in
the first round, the AO disbelieved the claim of assessee that the
advances were received from various persons and held that the
assessee has not proved the identity of the persons and genuineness of
the transaction. The Assessing Officer this time has, however, has
mentioned about the CBI and EOW inquiry to support his action of
making addition u/s 68. The CIT(A), as in the first round, upheld the
findings of the Assessing Officer in this round too.
Before us, the assessee has placed the documents of the
Government of Odisha referring to the status report on the issue of
identifying the depositors in the schemes of Golden Land Developers
Ltd and GLP Developers Ltd and of refund of the deposits to them. The
assessee has also placed before us the order of Orissa High Court taking
cognizance of the issue of identification and return of deposits in the
case of GLP Developers Ltd and Another. In view of the Orissa High
Court cognizance of the matter and the Government of Odisha
correspondence, we are of the considered opinion, that the details of
depositors need further examination and verification in the context of
the provision of section 68 of the IT Act. We, accordingly, restore this
issue to the file of the Assessing Officer. The Assessing Officer is
directed to examine and verify details of the depositors and decide the
issue afresh after giving reasonable opportunity of being heard to the
assessee. The assessee is also directed to furnish evidences/documents
as required by the Assessing officer.
In the result, both the appeals of the assessee in ITA Nos. 2106
and 2107/DEL/2022 are allowed statistical purposes.
The order is pronounced in the open court on 31.05.2024.
Sd/- Sd/-
[SAKTIJIT DEY] [NAVEEN CHANDRA] VICE PRESIDENT ACCOUNTANT MEMBER Dated: 31st MAY, 2024.
VL/
