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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 and 2107/DEL/2022 are allowed statistical purposes.
The order is pronounced in the open court on 31.05.2024.