M/S. STRIDE INFRASTRUCTURE (P) LTD.,NEW DELHI vs. ITO, NEW DELHI

Following grounds have been raised in this appeal:

Facts of the case in brief are that the assessee filed electronic return declaring loss of Rs.44,956/- on 07.09.2010 which was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed from the balance sheet of the assessee that it had shown advance booking amount received for Rs.13,22,23,000/- as on 31.03.2010 and the amount shown as opening balance was Rs.3,18,76,872/-, as such there was an increase of Rs.10,03,46,128/-. The AO asked the assessee to file detail of persons with name and address from whom this amount was received and also the description of the unit for which this advance booking was received. The assessee vide reply dated 10.12.2012 furnished the list of persons from whom booking amount had been received containing the name, addresses and amount received. The assessee also filed copy of the site plan of the project. The AO again asked the assessee to file agreement made with customers for taking advance from them with the portion of stock marked for sale and the opening balance of customer advance received. In response the assessee furnished the location of the stock in trade and copies of application forms of persons from whom advances were received. The AO again asked the assessee to explain as to why the amount shown in bank book as advance from customer was received from different account than the applicants and to file brochure of township for which advance had Stride Infrastructure (P) Ltd. been received. In response the assessee vide letter dated 11.02.2013 submitted as under: “The company started its business initially with the object of development of land owned by it to do the sale of the said developed land by splitting in plots of different sizes. Therefore the assessee company applied with HPDA for necessary approval of proposed lay out of the land which had been approved by HPDA as on dated 15.02.2007. The copy of the site plan is enclosed. Later on three more companies named M/s Nutech Buildcon Private Limited, M/s Nauge Buildcon Private Limited and M/s Gain Infrastructure Private Limited belonging to the same group of companies having land adjoining to the land owned by the assessee company joined hands with the assessee company to establish a group housing project over the land owned by them and to do this all these four companies executed a joint consortium agreement dated 01.02.2008 (copy enclosed) and in pursuance thereof prepared a joint layout of the proposed Group housing project and applied with HPDA for its necessary approval has been approved by HPDA as on dated 15.07.2003. The copy of the approved out of the project is enclosed. As per the norms of the HPDA it is mandatory to use some of the front portion of the land for green belt purposes and therefore the said space is not available either for residential or commercial use purposes. Therefore the said front portion of the land has been approved by HPDA for development of Nursery in accordance with the approval site plan dated 07.01.2010 (copy enclosed).

Further vide clause 3 of the approval it has been stated that development work was to be completed within 2 years from the date of approval. (2) the assessee filed an agreement of the same date with M/s. Mahamedha Builders stating that they would be entrusting the work of managing its affairs like issuance of prospectus, doing publicity and calling for applications from public. From the perusal of these two documents it was seen that the assessee was only given the sanction for development of the said site by HPDA whereas the agreement filed by the assessee talks of collection of funds from public for sale of plots/flats. Moreover the authenticity of this agreement was also called for by asking the assessee to produce the original Stamp paper of Stride Infrastructure (P) Ltd. agreement which it has not been able to do so. Also the brochure filed and the application form filed it is seen that nowhere it has been stated that the amount was been given for M/s. Stride Infrastructure Private Limited developed unit. A reading of the application form states the following, which is being reproduced here - "I/We wish to book a residential plot for premium villa size >>>>> sq. yards/flat having super area___ sq. feet/commercial plot of size ___ sq. yards in your upcoming township at NH-24, Hapur". Further as per clause 1 of the agreement it is stated that the allotment of plot in the scheme was to be made within 12 months. Nowhere in the application form it has been mentioned that M/s. Mahamedha Builders were acting as agents for collecting of allotment money on behalf of the assessee. Further to verify the facts, notice u/s. 133(6) of the Act were issued to four of the applicants. Among this, reply was received from Ms. Asha Prem Nath denying any transaction with the assessee company. The relevant portion of her reply is being reproduced here - "..that M/s. Stride Infrastructure is not known to me. The name of this company I come to know through your notice only. I further declare that I have never done any transaction with this company during my lifetime... " It falls to my understanding that how could an applicant have invested an amount through an agent/broker without being aware of the name of the company or any group of consortium in which the company was also a part of, for giving advance for purchase of plot? Hence on the above stated facts, the agreement copy filed between the assessee and M/s Mahamedha Builders is not found to be genuine and for the purpose it is stated to be for. Further the assessee vide the said letter filed photocopy of supplementary agreement between itself and M/s. Mahamedha Estates private Limited as one party and M/s.

Thereafter, the AO asked the assessee to show cause that as to why the booking amount received was not to be treated unexplained credit entry. In response the assessee submitted as under: “The letters/notices and other documents sought as above said, are very much necessary for the assessee to give correct reply in the matter. The assessee has placed reliance on following case law wherein the Hon’ble Punjab & Haryana High Court has held that the Assessing Authority is duly bound to disclose all the evidences Stride Infrastructure (P) Ltd. collected by him to give the assessee a reasonable opportunity of rebutting it. Chiranji Lal Steel Rolling Mills Vs CIT Punjab – (1970) 84 ITR 222 (P&H).”

However, the AO did not find merit in the submissions of the assessee and made the addition of Rs.10,03,46,128/- by observing as under: “I have carefully gone through the submission of the assessee and also to the documents collected in this regard. The contention of the assessee was that burden of the assessee in respect of the advance received against booking from the two parties stands discharged and therefore no addition is tenable. Further that once the amount has been received by account payee cheques and the creditors have duly confirmed the transactions no adverse inference can be drawn. In this regard it is to be stated that the advance has been received from two parties, which I have discussed above had no locus standi vis a vis the assessee to collect such amount on behalf of the applicant in its name. The creditors stands in the books of the assessee in the name .of advance for booking and these advance are stated by it to have been received from individuals who have denied that they know the existence of the assessee company. Hence the whole matrix of transaction stated is sham and not proved to be genuine in the name of the assessee. The amount merely being received through cheques does not discharge the onus from the assessee company to obligate it from the liability to prove it not to be falling within the ambit of section 68 of the Act. The assessee has further stated that plots have been finally given to the customers and have filed sale agreement for few of them. Perusal of the same shows that these sale agreements were with M/s. Gain Infrastructure Private limited and M/s. Pushpanjali Builders Private Stride Infrastructure (P) Ltd. Limited and that the Khasra no. given for the plots sold were not the same as Khasara no. 77 which the assessee owns. Also that in the consortium approval as per HPDA both these companies i.e. M/s. Gain Infrastructure Private limited and M/s. Pushpanjali Builders Private Limited were not in the approved layout plans with the other three companies. The layout plan approval given to these two parties vide approval dated 20.06.2008 by HPDA has no mention of the assessee company or the other two companies of the consortium. Under such circumstances 1 am of the view that the booking amount received by the assessee has not been conclusively proved by the assessee as being genuine receipt of the assessee. The credits in the name of third parties have not been proved by the assessee on their identity, capacity of creditors and genuineness of transaction. Judgments in support of the above view:

Pradeep Kumar Agarwal v. Income-tax Officer, Giridih [2011] 12 taxmann.com 328 (Jhar.) dated MAY 3, 2011 2. Hacienda Farms (P.) ltd, v. Commissioner of Income Tax [2011] 198 TAXMAN 509 (Delhi) 3. Yash Pal Goel vs. Commissioner of Income-tax (Appeals), Chandigarh IT APPEAL NO. 389 OF 2008 4. Shankar Industries vs. CIT(Cal) 114 ITR 689 5. CIT Vs Presicion Fianance Private Limited (Cal) 208 ITR 465 Hence the amount of Rs.10,03,46,128/- is treated as income of the assessee as unexplained credit as per the provisions of section 68 of the Act in view of the detailed discussion above.”

It was further stated that in order to support the factum of advance against booking, the assessee had placed on record copy of the ledger account in the name of M/s Mahamedha Builders and M/s Stride Infrastructure (P) Ltd. Superior Associates and also furnished copies of the affidavits of the proprietors of the aforesaid firms, copy of agreement and supplementary agreement between the parties, list of customers from whom booking amount had been collected by the two agents. It was accordingly submitted that the burden of the assessee in respect of the advance against booking from the two parties stood discharged and therefore, addition was not tenable. It was also stated that the amount had been received by account payee cheques and creditors had duly confirmed the transactions, no adverse inference could have been drawn.

The ld. CIT(A), however, did not find merit in the submissions of the assessee and sustained the addition made by the AO by observing in paras 3.4 to 3.7 of the impugned order which is reproduced verbatim as under: “3.4 In this case under consideration, it was noted by the assessing officer that in the balance sheet of the assessee company there is increase in current liabilities of Rs.10,03,46,128/ on account of advance received from customers. Accordingly the assessee was asked to furnish necessary details as per questionnaire dated 23.05.2012 and subsequent noting, In response the assessee furnished copy of the ledger account of the appellant in the hooks of M/s Mahamedha Builders and M/s Superior Associates. Copy of Affidavit of Sh. Raj Singh, Prop M/s Mahamedha Builders and Shri Sunil Singh prop M/s Super Associates, list of customers from whom booking amount have been Stride Infrastructure (P) Ltd. collected by the two agents, copy of application of 15 customers. 3.5 On verification of the various agreement and confirmations from Hapur Palakhwa Development Authority the A.O found lot of contradictions in the submission of the assessee as discussed in detail on page 3 and 5 of the assessment order. Further to verify the genuineness of the customers, notice under section 133(6) was issued to applicants of 24 plots namely Ms Asha Premnath (applicant shown for 6 plots), Sri. Inder Singh (applicant shown for 5 plots), Sri. Jogider Singh Mavi( applicant shown 7 plots) and Ms Meena Devi (applicant shown for 6 plots). All the notices were returned un- served except notice sent to Ms Asha Premnath, stated to have made payment of Rs.61,20,000/- for booking of 6 plots. In her reply to the said notice Ms Asha Premnath categorically denied to have made any payment to the assessee. It was further stated that she has never done any transaction with the company during her life time. It was also confirmed by her that she has not purchased any fixed asset neither from the assessee company nor from any other concerns. Accordingly after issuing show cause notice to the assessee and confronting with the evidence collected and taking into account the reply of the assessee the amount in question was held to be unexplained cash credit and Rs.10,03,46,128/ was added under section 68 of the Act. 3.6 I have carefully considered the fact of the case, finding of the assessing officer and the submission of the ld. A.R. On verification of the ledger account of the booking agents it is noted that only one entry has been shown on 31.03.2010 that is "by debit to parties for booking made on their behalf. Further on perusal of Stride Infrastructure (P) Ltd. application forms of the customers, it is noted that no where it is mentioned that the booking is being made or advance money is being received on behalf of the assessee company M/s Stride Infrastructure Pvt. Ltd. Further the form are incomplete and the Colum "Advance registration amount received by cheque no.------- Date --- --- for Rs.------- Drawn on ----- Banker name" is left blank. Accordingly during the course of the appellate proceeding the appellant was asked to furnish the copy of account of the customers in the books of account of the booking agents. However even after being given sufficient opportunity neither the copy of account of the customers in the books of account of the booking agents were filed nor the details of the amount received from the customers were furnished. 3.6 The filing of an affidavit from the proprietors of related concerns (1) M/s Mahamedha Builders and M/s Super Associates that they have received booking amount in question i.e. Rs.4,75,57,230/ & Rs.5,06,90,000/ from the customers does not established the genuineness of the transactions. In the case of Krishan Kumar Jhamb vs. I.T.O High Court of Punjab & Harayna (2009) 179 Taxman 141 has opined that in case of amount received in cash, on stated execution of agreements for sale of shops, same does not stand proved merely by filing of affidavits of payers, when those could not be produced for authentication; Similarly production of agreement to sale, incomplete and unsigned does not prove assessee's version. Moreover in the case under consideration it is apparent that the amount of advance was not received by the booking agents by account payee cheques or by the bank drafts. Further since credits had been received in assessee's books of accounts. Section 68 put certain obligations on the assessee, which he has to prove. The Stride Infrastructure (P) Ltd. assessee has to prove the identity of the person from whom the amount has been received. The assessee has also to prove the creditworthiness from whom the credit has been received. The assessee has also proved the genuineness of the transaction. The Assessing Officer had found many discrepancies. It was necessary to verify whether the booking amount came from the person who the assessee claimed to have paid to his booking agents. However on verification the same was not confirmed by the so called buyers. Moreover even the detail of amount received from the so called buyers were not furnished. 3.7 Hence it is apparent that the appellant had been given proper opportunities of being heard to prove the creditworthiness of the individual customers and consequently the genuineness of the advance recorded in the books of account in their names but the appellant failed to discharge its onus by proving the identity, genuineness and creditworthiness of the creditors. In order to establish the fact of the receipt of the cash credit as required under section 68, the assessee must prove 3 important conditions namely (1) the identity of the person, (2) the genuineness of the transaction and (3) the capability of the person given the cash credit and all the conditions should be met cumulatively Failure to prove /fulfill any one of the conditions would render the cash credit as unexplained. In the case of the appellant, neither the identity of the creditors has been established nor the other two conditions namely genuineness of the transaction and creditworthiness of the creditors have been proved. Considering above I don't find any infirmity in finding of the Assessing officer that the burden of the assessee is not discharged only by stating that it has received the amount in question from the booking agents through account payee cheques. Since according to the Stride Infrastructure (P) Ltd. assessee the booking agents were collecting the money in question on behalf of the company, hence it is responsibility of the appellant company to explain and prove the identity of the buyers and genuineness of the transaction. Accordingly the addition of Rs.10,03,46,128/- made by the Assessing Officer on account of unexplained cash credit under section 68 of the Act is confirmed.”

Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and it was further submitted that the assessee had received the advance from the customers against sale of plots and had shown duly in its balance sheet in earlier years which has been accepted by the department and that there was no cessation of liability. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. It was further submitted that the assessee furnished the confirmation from the concerned persons and appointed two firms as marketing agents, the said firms, namely, M/s Mahamedha Builders and M/s Superior Associates were duly assessed to tax and furnished copy of acknowledgment of their respective returns of income (copies of which are placed at page nos. 60 and 61 of the assessee’s paper book). It was further submitted that the proprietors of the aforesaid firms furnished their affidavits and stated in the said affidavits that the advances collected from customers against booking of plots/flats had been remitted to the assessee and the detail was given in the said affidavits each dated 15.03.2013 (copies of which Stride Infrastructure (P) Ltd. are placed at page nos. 58, 59 and 62 of the assessee’s paper book). It was accordingly submitted that neither the AO nor the ld. CIT(A) appreciated the facts in right perspective. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. Alternatively, it was submitted that the matter may be remitted back to the AO to be adjudicated afresh after considering all the relevant documents furnished by the assessee and by giving a proper opportunity of being heard to the assessee.

In his rival submissions the ld. DR strongly supported the orders of the authorities below and reiterated the observations made in their respective orders. It was further submitted that the AO had given the proper opportunity of being heard to the assessee and thereafter made the addition as the assessee failed to discharge the onus cast upon it.

We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee was engaged in the business of Real Estate and was developing the plots which were sold to the customers. The assessee appointed two marketing agents, namely, M/s Mahamedha Builders proprietorship concern of Sh. Raj Singh Bhati, S/o Late Sh. Bhim Singh and M/s Superior Associates proprietorship concern of Sh. Sunil Singh S/o Sh. Daya Singh. The Stride Infrastructure (P) Ltd. said persons were appointed as marketing agents vide an agreement dated 19.02.2007 with M/s Mahamedha Builders and agreement dated 16.03.2007 with M/s Superior Associates and M/s Seven Heaven Developers Pvt. Ltd. The assessee claimed that Rs.4,84,06,128/- were received from M/s Mahamedha Builders and Rs.5,19,40,000/- were received from M/s Superior Associates who in turn received the said amount as an advance from prospective buyers of plots/flats. Both the aforesaid firm are assessed to tax and copy of acknowledgment for filing the return of income for the assessment year under consideration i.e. assessment year 2010-11 by Sh. Raj Singh Bhati proprietor of M/s Mahamedha Builders is placed at page no. 60. The affidavit dated 15.03.2013 is placed at page nos. 58 to 59 of the assessee’s paper book. The contents of the said affidavit read as under: “I, Raj Singh Bhati S/o Late Sh. Bhim Singh, aged 44 years, R/o A-30/31, Ashok Nagar, Ghaziabad, do hereby solemnly affirm and declare as under:-

That the details of advances collected by M/s Mahamedha Builders from customers against booking of plots/flats and remitted to M/s Stride Infrastructure (P) Ltd, is as under: Sr. No. Assessment Year Amount (Rs.) i) 2007-08 17,28,000/- ii) 2008-09 2,90,56,000/- iii) 2009-10 10,92,872/- iv) 2010-11 4,84,06,128/- Total 8,02,83,000/- 4. That the entire advances received by M/s Mahamedha Builders stand credited in its bank accounts and thereafter remitted to M/s Stride Infrastructure (P) Ltd.

That I am having PAN No. AGQPS6977A and duly assessed to tax with Ward No. 2 (2), Ghaziabad Sd/- DEPONENT VERIFICATION I, the above named deponent do hereby verify that the contents of the above affidavit in para 1 to 5 are true and correct to the best of my knowledge and belief. Verified today the 15th day of March 2013 at Ghaziabad.” Sd/- DEPONENT 14. Copy of account obtained from the said firm M/s Mahamedha Builders is placed at page nos. 56 & 57 of the assessee’s paper book. Similarly, confirmation of accounts from M/s Superior Associates is placed at page no. 61 and the affidavit of Sh. Sunil Singh proprietor of M/s Superior Associates is placed at page no. 62 of the assessee’s Stride Infrastructure (P) Ltd. paper book. The contents of the aforesaid affidavits has not been doubted. The assessee also furnished the affidavit of Sh. Raj Singh at page nos. 79 & 80 wherein it has been stated that being a Director of the assessee company he entered into an agreement with other three companies namely, M/s Nutech Buildcon ‘P’ Ltd., M/s Nuage Buildcon ‘P’ Ltd. and M/s Gain Infrastructure ‘P’ Ltd. Another affidavits from the Directors of the aforesaid company with whom Sh. Raj Singh entered into an agreement in capacity of Director of the assessee company are placed at page nos. 83 to 88 of the assesse’s paper book. In the said affidavits it has been mentioned that the agreement was executed to carry on the Real Estate business mainly to develop and construct group housing project on the land owned by them. The assessee also furnished the affidavit of Sh. Sunil Singh proprietor of M/s Superior Associates, copy of the same is placed at page no. 62 of the assessee’s paper book and reads as under: “I, Sunil Singh S/o Sh. Daya Singh, aged 40 years, R/o D- 198, Sec-47, Noida, do hereby solemnly affirm and declare as under:-

In the present case, it appears that neither the AO nor the ld. CIT(A) appreciated the facts in right perspective and did not make the further inquiry from those persons who furnished the confirmations and affidavits stating therein that the impugned amount was given to the assessee and the said amount was received by them from different customers from whom booking amount for plots/flats had been collected. We, therefore, considering the totality of the facts deem it appropriate to set aside this issue back to the file of the AO to Stride Infrastructure (P) Ltd. be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.

In the result, the appeal of the assessee is allowed for statistical purposes. (Order Pronounced in the Open Court on 15/05/2017)