GIGAPLEX ESTATE P.LTD,MUMBAI vs. DCIT OSD II CEN RG 7, MUMBAI

The facts in brief are that the assessee is a company incorporated with the objectives of undertaking construction and development of residential and commercial projects. The assessee is presently developing an IT SEZ at Airoli, Navi Mumbai. The assessee filed the return of income on 23.11.2006 declaring a total income of Rs. 2,95,820/-.The assessment was framed u/s 143(3) of the Act vide order dated 22.12.2008 by the Deputy Commissioner of Income Tax, Central Circle-29, Mumbai accepting the returned income. Thereafter case of the assessee was re-opened by the assessing officer (hereinafter called “AO’) after four years from the end of the assessment year on the basis of assessment order passed in the case of M/S OM Metals Ltd (hereinafter called OM) who happened to be a joint venture partner by issuing notice u/s 148 of the Act dated 28.05.2012. In reply to the said notice the assessee filed return of income at an income of Rs. 8,83,666/- and also requested the AO to supply the reasons recorded u/s 148 for re-opening the assessment which were supplied vide letter dated 13.12.2012 purporting that the income has escaped assessment owing to arrangement between OM. and M/S Wellwisher Construction and Finance Pvt. Ltd (hereinafter called WW) which was a sham and non genuine arrangement. The assessee was a joint venture partner with these two companies and had applied for allotment of 100 acres of land at Airoli, Navi Mumbai to Maharashtra Industrial Development Corporation(hereinafter called as MIDC). The said authority MIDC has allotted 50 acres of land for a consideration of Rs.50,58,62,500/-. After allotment the assessee bought the interest of OM. and WW in the said land with the previous sanction and permission of MIDC for Rs. 100,80,00,000/- from both the parties in equal proportion. The said payment was made by the assessee partly out of own funds and partly out of borrowed funds. The objections raised by the assessee against the re-opening of assessment were rejected and dismissed and ultimately the re-assessment was framed u/s 143(3) r.w.s. 147 of the Act on 5.3.2013 by reducing Rs. 100.80 Cr from inventories by describing the transaction as sham and non genuine and also disallowing interest on money borrowed to make payment to the above parties for relinquishment of their interest in the said piece of land.

The assessee filed objections to the re-opening of assessment which were also dismissed.

4.2. The ld PCIT upheld the re-opening of assessment after considering and rejecting the submissions of the assessee as has been incorporated in para no 8 of the appellate order by observing and holding as under:-

4.4 The third limb of argument of the ld AR was that the CIT has not recorded any satisfaction in granting permission for re-opening a concluded assessment in terms of provisions of section 151(1) of the Act. The satisfaction should not be mechanical but should be recorded after due application of mind. The ld AR submitted that the AO recorded the reasons on 22.5.2012 as filed at page no 115 & 116 of paper book. On 23.5.2012 the AO forwarded the same to the Addl. CIT who sanctioned the same on 25.5.2012 and forwarded the same to CIT(Central) Mumbai on the same day i.e 25.5.2012 who on the same day accorded approval in a mechanical manner by noting ” I have gone through the reason and agree with the reasons given by the AO.I consider it a fit case for invoking proceedings u/s 147.” The ld CIT granted approval within 24 hours by just mentioning his satisfaction in one line. The ld AR submitted that due diligence is a pre-requisite for re-opening and mechanical approval is not valid. The ld AR relied on a number of decisions in support of his arguments namely (i) Arjun Singh and Other VS Assistant Director of Income Tax (Investigation) & others 246 ITR 363(MP), (ii)CIT Vs S. Goyanka Lime & Chemical Ltd 56Taxman.com390(MP), (iii) CIT Vs S. Goyanka Lime & Chemical Ltd 64Taxman.com313(SC), (iv) German Industries Ltd Vs DCIT 287 ITR 494 (Bom).

4.5. The ld DR while heavily relied on the order of ld. PCIT submitted that as there was non disclosure of material facts by the assessee all through from the return of income, tax audit report , audited accounts to the assessment proceedings. As contended during the hearing proceedings and admitted by appellant that management of M/s.B.Raheja Builders Pvt. Ltd. (the assessee) was earlier with the Vijay Raheja Group but subsequently taken by K. Raheja Group. The assessee's paperbook is based on evidences taken by K. Raheja Group from the AO. The assessee neither before the AO nor during appellate proceedings before Ld.PCIT or before Hon'ble ITAT submitted any evidences so required and existing with the Vijay Raheja Group. To have a Holistic view about the transaction for the impugned assessment, entire material as gathered by AO, Ld.PCIT were made part of departmental book. Evidences gathered by the AO of OM during the course of assessment of OM and also by the assessing officer of WW was included in the department's paper book. These evidences reflect that assessee neither submitted nor interested to submit such crucial evidences before the AO or appellate authority to hide crucial information. Further, there are different averments made by assessee at different level without producing and substantiating the same with evidences. The ld DR submitted that the upon examination of the assessment records as has been filed in the paper book it is amply clear that no details were called for by the AO and filed by the assessee in respect of joint venture, joint application for allotment of land from MIDC, terms and conditions of allotment and cost of acquisition of rights in the land from OM ands Well Construction and Finance Pvt Ltd. Similarly no details of allotment of shares to these companies were filed. For a big deal like this a due diligence is normally conducted but in the present case no such exercise was undertaken. The ld DR submitted that all these facts cumulatively taken together shows that the assessee the concealment has take place due to non disclosure of materials facts by the assessee. The ld DR also submitted that the AO has made due enquiries qua the purchase of land or rights therein by calling for details from the assessee vide letter dated 19.05.2010 but the assessee supplied details only in respect of payments to the two companies who surrendered their interest in the land. The ld DR while taking us through the relevant pages of the paper book submitted that when the interest in the land was surrendered vide deed of assignment dated 6.8.2007 relevant to AY 2008-09 how the assessee could foresee and created provisions as on 31.3.2006 relevant to AY 2006-07. Thus assessee has not furnished any basis for doing so. The said assignment deed did not refer to any agreement or understanding which preceded the deed of assignment. The ld DR also pointed out that initially the amount payable to these two JV partners were Rs. 50.40 Cr each but in the assignment deed only Rs.43.52 Cr was stated. According to the ld DR there was no clarity as to the settlement of payment to the JV partners. All these proves beyond doubt that the assessee did not want to divulge the details to the tax authorities. On the recording of reasons, the ld DR submitted that before re-opening the case the reasons were recorded after eliciting information from the assessee and also with reference to the copy of assessment order of OM with annexures which with two JV partners was sham. The ld DR also brought to the notice of the bench that Rs.3.00 crores was paid to Well Construction and Finance Pvt Ltd on19.08.2005 just after joint venture agreement but much before the allotment of land by MIDC. The ld DR further submitted that the AO has tangible and credible materials before him for re-opening the assessment. The ld DR also submitted that the case laws relied by the ld AR are not applicable in the present case as the assessee has concealed the disclosure of material facts and thus the re-opening has correctly been made. Finally the ld DR prayed before the bench that the order of PCIT upholding the re-opening is correct and deserved to be upheld.

4.6. We have heard the rival contentions of the parties and perused the relevant records placed before us including the various case laws relied by both the parties and also the rebuttal by the ld AR. The undisputed facts are that the assessee bought over the interest in the land allotted by the MIDC from two other companies namely M/S OM. and M/S Well Construction and Finance Pvt Ltd for a consideration of Rs. 100.80 Cr. In the present case the assessment has been completed on 22.12.2008 u/s 143(3) of the Act and was re-opened by issue of notice u/s 148 of the Act on 28.5.2012 apparently four years after the end of relevant assessment year. The case of the assessee was re-opened after the AO of the assessee received information from the AO of M/S OM after the assessment of OM for AY 2008-09 was framed in December, 2010 stating that the transaction between assessee, OM and WW was a sham and non genuine. As per the provisions of the Act, the re-opening after a period of four years from the end of relevant assessment year can only be done only if income has escaped assessment due to assessee’s failure to disclose fully and truly all material facts for completion of assessment during the assessment proceedings. The assessee has duly disclosed the purchase of interest in land measuring 50 acres from two other companies for a consideration of Rs.100.80 Cr which was shown in the inventories of the assessee and money outstanding to the two companies was also shown as payable in the Sundry creditors in the balance sheet of the company. It is also true that the AO raised specific query during the assessment proceedings qua the inventories and sundry creditors which were supplied to the AO. It is only thereafter the AO after being satisfied accepted the said transaction and the assessment was framed accordingly u/s 143(3) of the Act vide order dated 22.12.2008. The AO raised a specific query to the assessee qua the inventories and sundry creditors which the assessee complied with by filing the details of inventories and sundry creditors, however the copies as a result the AO could not examine the transaction among the trio. Looking the facts in totality, we are of the view that there was failure on the part of assessee to disclose fully and truly all material facts for completion of assessment during the assessment proceedings. The case laws relied upon by the assessee are not applicable to the facts of the case as the necessary agreements qua joint venture, relinquishing the interest in the said land were not furnished before the AO in the course of assessment proceedings and there is a failure on the part of the assessee to disclose the material facts during the course of assessment and hence in our opinion the re-opening is validly done under 1st proviso to section 147 of the Act. We are, therefore, inclined to hold that re-opening of assessment u/s 147 of the Act is valid and accordingly the ground raised by the assessee is dismissed.

by the assessee after taking into consideration the contentions and submissions of the assessee as has been incorporated in para 13 of the appellate order by observing and holding as under:- "14. I have considered the facts of the case, submissions and contentions of the appellant, as also the order of the AO. It is gathered that the assessee paid a sum of Rs.1 OO.8O crores to OM. and Wellwisher Construction & Finance Pvt. Ltd., who happened to be joint venture partners for acquisition of land from M/DC at Navi Mumbai, but later the joint venture was terminated. The AO, while completing the assessment, observed that it was wholly unnecessary and superfluous on the part of the assessee to pay a sum of Rs.100. 80 crores to the alleged joint venture partners, viz. OM. and Wellwisher Construction & Finance Pvt. Ltd., and that such parties remained in existence, as far as the joint venture is concerned, for a period of only three days and walked away with a whopping sum of Rs.100.80 crores, without any contribution to the capital or taking any liability, etc. in the whole exercise. The AO also observed that such amount paid by the assessee was in nature of professional fees and as the assessee did not deduct any tax u/ s.194J of the Act on such payments, the same ,was liable to be disallowed u/ s.40(a)(ia) of the Act. The AO in this' regard also relied upon the judgment of Hon'ble Supreme Court in the CQ.!5e of Mcdowell & Co. Ltd. vs. Commercial Tax Officer. The AO, accordln.gly, reduced the amount of Rs.100.8O crores out of the closing work-in-progress of the assessee in respect of the concerned project.

15. I have examined the facts of the case. Before proceeding further, it will be relevant to mention the sequence of events, as mentioned by the assessee itself before the AO, as under :- Date Event 16/08/2005 The assessee company entered into a joint venture agreement with Wellwisher Construction & Finance Pvt. Ltd. and OM., with a object of Developing an IT. Park in Navi Mumbai. 18/ 8/2005 The companies jointly made an application to MIDC for allotment of land for developing an IT park. 19/O8/2005 After signing the joint venture agreement the companies mutually decided to part ways and the assessee company proposed to go ahead independently with the project in case the plot is allotted to them jointly. 19/O8/2005 The assessee company made payment of Rs.3 crores up front to Wellwisher Construction and Finance Pvt.Ltd. on 19/8/2005 as a token amount for relinquishing its ri9.~ in the joint venture, just three days after the signing of joint venture agreement. 15/09/05 Consequent to proposal made by the assessee company with other two companies jointly to MIDC a plot of land was offered for a premium of Rs.50 crores by MIDC 23/09/2005 Vide letter dated 23/9/2005, this offer was claimed to have been accepted by all three companies. 14/11/2005 MIDC, through letter dated 14/11/2005, allotted plot of land of 50 acres for a premium of Rs.50 crores on a condition that initial payment of Rs.25.29 crores to be paid within thirty days of allotment 10/12/2005 A formal agreement dated 10/12/2005 was signed between. the assessee company and OM. and" Wellwisher Construction & Finance Pvt. Ltd., as per which they agreed to relinquish their rights in the plot of land for a compensation. 12/12/2005 The initial premium amount of Rs.25.29 crores was paid by, the assessee company. 10/12/2005 Rs. 40 lacs each was paid to Wellwisher & Om Metals 02/01/2006 Rs.3.12 crores was paid to Om Metals 02/01/2006 Rs.12.50 lacs was paid to Wellwisher. 24/02/2006 MIDC allotted land vide letter dated 24/2/2006 25/03/2006 All the three companies made a request to MIDC to execute the lease deed in favour of the assessee company 31/03/2006 The assessee company made provision in the books of accounts towards balance compensation payable of Rs.46.87 crores to each of the companies and the same was added to capital WIP towards cost of plot by the assessee company 03/08/2007 Lease Deed was executed by all three companies with MIDC 06/08/2007 Well Wisher and Om Metals signed Deed of Assignment assigning their rights in plot in favour of the assessee 21/08/2007 A request was made to MIDC for granting permission for assignment of rights in favour of the assessee company, which was followed by another request letter dated 21.8.2007 29.10.2007 MIDC finally granted permission for assignment of rights in plot of land in favour of the assessee company, on payment of permission o f Rs.78,89,700. From the above sequence of events, mentioned by the assessee itself before the AO, it is quite clear that on 16/8/2005, the assessee company entered into a joint venture with OM. and Wellwisher Construction & Finance Put. Ltd., with the so-called object of developing an I. T. Park in Navi Mumbai. It further appears that they jointly made an application to MIDC on 18/8/2005 for allotment of land for development of I. T. Park. Immediately thereafter, on 19/8/2005, OM. and Wellwisher Construction & Finance Pvt. Ltd. decided to part ways with the assessee, as far as the project is concerned, and the' 'assessee decided to proceed with the project independently. Subsequently, on 15/9/2005, MIDC offered a plot of land to the assessee company, though it is claimed that it was offered to all the three companies, and thereafter on 23/9/2005, the proposal of allotment was claimed to have been accepted by all the three companies. Later, MIDC, through a letter dated 14/11/2005, allotted a plot of land of 50 acres for a premium of Rs.50 crores, on the condition that initial premium. 0/Rs.25.29 crores will be paid within 30 days of allotment. Thereafter, on the basis of earlier understanding that the assessee would develop the plot independently, OM. and Wellwisher Construction & Finance Put. Ltd. agreed to relinquish their rights over the land.' vide agreement dated 10/12/2005 {for a compensation of Rs.l00.80 crores}. From the above sequence of events, it appears that a joint venture of the three companies, namely, the assessee company, OM. and Wellwisher Construction & Finance Put. Ltd., came into existence on 16/8/2005 and the same fell apart just after two days on 19/8/2005, which appears to be quite strange. It. is also clear that even before the allotment of land was made to the so-called joint venture on 14/11/2005, the assessee company chose to pay a sum of Rs.3 crores upfront to Wellwisher Construction & Finance Put. Ltd. on 19/8/2005 itself, for relinquishing rights in the joint venture, which is strange and surprising. It further appears that neither OM. nor Wellwisher Construction & Finance Put. Ltd. undertook any liability in the whole exercise of formation of this joint venture, nor they made any investment or capital contribution, and they just walked away with a whopping amount of Rs.100.80 crores, which they tried to claim in their accounts as capital receipt, so that they' were not required to pay any tax on this amount, and, at the same time; the assessee chose to claim this amount as part of project work-in-progress/ cost of the project, which amounts to revenue expenditure. Therefore, on one hand, the assessee was trying to claim this amount as revenue expenditure and on the other hand, the recipients were trying to claim this amount as capital receipt. Further it is relevant to mention over here that even before any land was allotted to the - so-called joint venture or permanently to the assessee company, a sum of Rs.3 crores had been paid to Wellwisher Construction & Finance Put. Ltd. one of the companies of the joint venture, without any basis or justification. It is also interesting to note that the other two companies have not brought in any capital or expertise to the project and even the entire amount for the plot, payable to MIDC, had been paid by the assessee company, but still they were paid a whopping amount of Rs.1 00.80 crores. Further, as stated above, one of the partners of the joint venture was paid a sum of Rs.3 crores just after two days of formation: of the so-called joint venture and before allotment of the land by MIDC, which indicates that the entire exercise was pre- planned at the end of the assessee. It is further relevant to mention over here that as per the allotment letter dated 14/11/2005' issued by MIDC, a plot of land of 50 acres was allotted for an amount of Rs.50 crores. However, the assessee has paid a total amount of Rs.1 00.80 crores to the joint venture partners, which is more than two times of the cost of the plot of land. The assessee has not been able to explain the basis of huge amount of Rs.100.80 crores. This gives rise to serious doubts about the genuineness of the. whole transaction.

16. Before me, the learned AR has mentioned that certain observations of the AO regarding date of application for allotment of land, date of dissolution of joint venture, etc. However, the fact remains that the assessee has not been able to explain and justify the business exigency in making a payment of Rs.1 00.80 crores to the 50- called joint venture partners. As mentioned above, apart from lending their names for formation of a joint venture to apply for allotment of land from MIDC, these two companies had not made any contribution towards the project either by way of capital or expertise, etc. This is evident from the joint venture agreement dated 16/8/2005 and agreements dated 10/12/2005, which are silent on the contributions made by these companies. In fact, it has been clearly mentioned in the agreements dated 10/12/2005 that the entire premium for allotment of the plot of land had . been paid by the assessee company alone. The learned AR has referred to clause 4 and 5 of the joint venture agreement, with regard to the observation of the AO that the joint venture agreement does not mention anything about the duties and responsibilities of the parties, fund mobilization, etc. In these clauses, it had been mentioned that the commercial terms and conditions for development of the IT. park shall be set out in a separate agreement at a later date and that the management, execution and other details shall be set out between the parties following the allotment of land. It is also stated by the learned AR that due to various disagreements, the partners decided to terminate the joint venture agreement, and, therefore, the need for detailing the joint venture terms did not arise. These clauses of the joint venture agreement and the admission of the learned AR that no agreement in this regard was executed on account of termination. of the joint venture agreement make it amply clear that no contribution had been made by these companies towards the project, as no contribution would have been made by them in the absence of any agreement in that regard.

17. The learned AR has also contended that the credentials and, credibility that these companies brought to the venture was significant for ensuring that the land is allotted to the joint venture by MlDC. If the payment in question had been made on account of the goodwill that these companies are claimed to have brought to the venture, such fact would have been clearly mentioned in the joint venture agreement and the agreements relinquishing their rights. Surprisingly, the agreements dated 10/12/2005 do not mention any reason for termination of the joint venture and as to how the compensation is computed. In any case, it has not been explained as to how the compensation for the so called goodwill could be valued at an amount more than two times of the cost of the land. Hence, this explanation of the assessee is only an after-thought and the; same cannot be accepted. Further, the assessee company itself is a renowned developer of real estate and it was already developing an IT' park at Banqalore. The assessee company also had adequate infrastructure, manpower, financial strength, etc., to develop the IT park independently. It is also not the case that the MIDC would have allotted the land only in the name of more than one company. Therefore, the decision to form a joint venture, only to be terminated immediately thereafter, itself appears to be without any valid reason.

18. The learned AR has also contended that the AO's assumption that the joint venture was dissolved on 19/8/2005 was wrong, as the agreement for termination of the joint venture was entered into only on 10/12/2005, and that the actual payments and final termination of the joint venture took place only in August, 2007. Accordingly, the learned AR contended that the transaction could not be regarded as a pre determined or paper transaction. As per the sequence of events given by the assessee itself before the AD (which is reproduced by the AO on page Nos.12 to 14 of the assessment order), after signing the joint venture agreement on 16/8/2005, the parties had mutually decided to part ways and the assessee company proposed to go ahead independently with the project, in case the plot is allotted to them jointly. It has been further mentioned by the assessee itself that consequent to this understanding, it had also made on account payment of Rs.3 upfront to Well Wishers on 19/8/2005 itself. Thus, it is admitted by the assessee itself that the decision to terminate the joint venture had been taken by the parties and a payment of Rs.3 crores had also been made to one of the parties as per such understanding, immediately after formation of the joint venture and before allotment of any land by MIDC. Therefore, it is not material that the agreement in this regard was entered into later.

5.5. Per contra, the ld.DR while strongly opposing the arguments of the ld AR submitted that the transaction entered into between the assessee and the other two JV partners was sham. Taking us through the facts in chronology of the case, the ld DR submitted that the Jt.Venture agreement dt.16.08.2005 was executed between assessee , WW and OM. Though this unregistered JV on Rs.100 stamp paper was submitted before the AO of OM whereas another JV agreement was got registered on a stamp papers of Rs.1,000/- taken out by WW on 06.10.2005. Therefore, there were two Joint venture agreements dated 6.8.2005 i.e. one is on Rs.100 stamp paper and not registered and submitted by M/s 0M and another was registered one on Rs.1000 stamp paper submitted by M/s. WW before their respective AOs. The assessee has not submitted any of such agreements. Further, the unregistered JV is dated 16.08.2005 on Rs.100 stamp paper taken on 24.6.2005 by Shri Vijay B.Raheja but the registered JV is after 16.08.2005 on Rs.I000 Stamp paper i.e on dt.06.10.2005 taken by WW. The unregistered JV is signed by Shri Vijay Raheja, Director of assessee while the registered JV was signed by Aditya Raheja Director of assessee. The JV agreement provided for various terms of agreement "that for development of I.T.Park, all these parties hereto have decided to pool their financial resources, establishment, technical teams and other know how". The assessee neither submitted copy of JV agreement as applicable for his case for the impugned transaction nor substantiated about how the other two parties supplied any resources, fund, services, expertise, technical knowhow etc. Then an application for allotment of land was filed before the MIDC on 18.08.2005 which was referred to on the letter dt.09.09.2005 .This letter is written by the JV of all the three parties containing reference of application No. 32023. This original application was submitted by WW before their AO did not bear the name of OM. This application was signed by the Director of WW no.511 is a letter dt.16.08.2005 by Shri Vijay Raheja, Director of assessee B.R to Shri Chandrakant M.Bhansali , Director of WW in reference to his meeting dt.15.08.2005 for sending Rs.6000/- in advance in cash for the purpose of making application jointly in the name of assessee and WW This application dt.18.08.2005 is after the unregistered JV dt. 16.8.2005 but does not bear the name of OM explain the nature of such transaction and paperwork. The only resolution of the board was submitted by OM dt.15.11.2005 despite the fact that all the three corporate entities were bound by such resolution not only for joint venture but also for subsequent settlement about payment and relinquishment of right but none of them has given any such resolution. It can be concluded that not only the impugned transaction is based on make belief papers but also gave birth to several irregularities under the Companies Act also. These transactions are therefore, sham transaction.

5.6. The AO vide letter dt.25.02.2013 called for various details u/s. 131 of the Act from MIDC. Such details were supplied by MIDC vide letter dt.7.05.2013.The AO vide letter dt.02.07.2013 supplied these information to assessee and called for comment on the Joint Venture agreement as supplied by MIDC. The assessee vide letter dt.04.07.2013 called for copy of letter of MIDC dt.07.05.2013 which was provided. After seeking an adjournment vide letter dt.10.07.2013, the assessee made a reply to AO vide letter dt.15.07.2013 filing the chronology of events in a tabular form and submitted explanation in respect of the transaction. Following are the important findings from the details so furnished by the MIDC which included file noting related to allotment of the land. The assessee jointly with M/s. WW and M/s. OM made an application dt.09.09.2005 to Jt.CEO of MIDC for allotment of 100 acres land for the development of IT.Park. This letter has reference of one application no.32023 submitted on 18.08.2005. Neither the assessee nor MIDC submitted the copy of this application. However, this application is available from the details filed by WW in their assessment for A.Y 2008-09 before their AO i.e ACIT Rg.18(1), New Delhi. This application reflects that the same was made by WW and assessee only. The application is signed by Shri C.K.Bhansali , Director of WW only. The amount of EMV of Rs.5050 paid through a banker cheques dt.17.08.2005 was in fact sent by Shri Vijay.V.Raheja in cash as evident from the letter dt.16.11.2005 addressed to Shri Chandrakant M.Bhansali .In the joint application dt. 03.03.2005, it is mentioned that all the three parties have entered into a Joint venture for development of IT.Park. It is, therefore, clear that there was a Joint Venture Agreement before 09.09.2005. The details of experience of all the 3 parties were also there which reflect that only the assessee was having a past experience of developing an I.T.Park at White field, Bangalore. A complete proposal of development of land was submitted through various annexure which are not provided by the MIDC. In reference to such joint application with a reference to letter dt.17.08.2005, 09.09.2005 and 12.09.2005, the MIDC vide its letter 15.09.2005 issued an offer letter available at pg.no.166 to 167. One of the condition for compliance to accept such officer was to file documentary evidences that there is a "Joint Venture" between WW, OM and assessee. A copy of the Board resolution passed by the Board of Director for purchase of land was also called for. The offer letter was for 50 acre of land @ Rs.2500 per sq.mt. The assessee vide letter 23.09.2005 submitted the compliance report for offer letter dt. 15.09.2005. A MOU of JV of all the three parties and a copy of Board Resolution for purchase of land were filed. It was requested that a demand note may kindly be issued for an amount as offer was accepted. The joint venture agreement as submitted by the assessee alongwith WW and OM to MIDC is available at pg.187 to 200. This is "A joint venture and share subscription agreement dt.10.12.2005". The assessee has (when asked by the AO before reopening) not submitted this agreement. OM in their assessment for A.Y 2008-09 submitted a copy of JV agreement dt.16.8.2005 at point 3 (PB pg.189) mentioned about the JV agreement dt.16.8.2005. At point 4 it is mentioned that "The Raheja Group are the promoters and pvt. Ltd. ("JVC or Company). The parties have now agreed that M/s. WW and M/s.OM shall each subscribe for and acquire 125 equity shares of Rs.100 / - each in JVC so that WW, OM and Raheja Group shall hold the paid up equity share capital of JVC in the ratio 10: 10:80 with the intention of making assessee a joint venture company and to request MIDC to issue appropriate letters of allotment of the applied plot in favour of JVC". It is important to note here that effect of share holding was given by assessee as evident from audited balance sheet on 3l.03.2006. It is also evident that only after entering of such agreement dt.10.12.2006, the proceeding for allotment of land started as evident from the order sheet noting of MIDC office (PB pg.168 to 186). At pg.176 the order sheet noting dt.14.12.05 reflect the submission of "Joint Venture & share subscription agreement dt.10.12.2005" by which M/s.B.Raheja Builders Pvt. Ltd. shall be the " Joint Venture company" and other applicant i.e OM and WW will acquire share in JVC i.e assessee's company and develop the plot jointly. It is therefore, relinquishment of any right in property before 14.12.2005 is not supported by this finding leading to a conclusion of sham transaction. Therefore, no were compensated with huge amount of Rs.100.80 cr. Further, such compensation has already been paid to them before this agreement and allotment of land. Nowhere the basis of such amount is provided. It has been contended by the ld AR that payment made to WW and OM were paid by the banking channel and duly reflected by those parties as capital receipt. It is therefore, these transaction were considered as genuine, with business expediency and allowable. The DR further stated that question of payment to WW and OM for a considerable amount of Rs.100.80 cr. in the case of assessee as considered by AO is related to its allowability u/s.37 (1) of the Act. It is, therefore, immaterial as to how WW and OM reflected this amount in their books. The condition for allowability of such payment in the case of assessee has to be tested for "whether such payment was made wholly and exclusively for the purpose of assessee's business". The AO considered the transaction as Sham and payment to WW and OM not for any purpose of business. Hon'ble Bombay High Court while dealing with sec.37 of the Act held that "Any Expenditure which is specifically allowable under any other clause of 28 to 43 except 37 cannot be allowed/claimed u/s.37 of the Act. Tata Sons Ltd. v/ s. CIT (1950) 18 ITR 460, 469 (Bomb.). In order to claim deduction of expenditure u/s.37(1) of the Act four conditions must be fulfilled viz.(a) The expenditure in question is not of the nature described u/s 30 to 36,(b) The expenditure is not of the nature of capital expenditure,(c) It is not a personal expenditure and (d) The expenditure has been laid out or expanded wholly or exclusively for the purpose of business or profession. All conditions simultaneously should be satisfied. To support these contentions following legal authorities were relied on by the ld DR : a. Laxminarayan Madan Lal V/s. CIT - (1972) 86 ITR 0439 b. Killick Nixon Ltd. V /s. DCIT - (2012) 81 CCH 0066 Mum HC c. Vodafone International Holdings B.V V/s.Union of India & Anr. Bombay High Court Writ Petition No. 1325 of 2010 dt. 8.9.10 d. Swadeshi Cotton Mills Co. Ltd. V/s CIT- (1967) 63 ITR 0057 e. CIT V Is. Navsari Cotton & Silk Mills - (1982) ITR 0546 Finally the ld DR prayed that in view of facts and legal submissions cited by him the transaction was just a make belief arrangement and was a sham transaction not entered into for the business of the assessee wholly and exclusively and therefore was rightly rejected by the lower authorities.

5.7. In the rebuttal, the ld AR submitted that the facts of the decisions relied on by the ld DR are clearly distinguishable on facts and therefore not applicable. In the case of Killick Nixon Ltd Vs DCIT 2012 81 CCH 0066 the Hon’ble Bombay high court has held that where a transaction is a sham and not genuine then it cannot be considered to be part of tax planning or legitimate avoidance of tax liability. In the case of the assessee it is not a sham transaction as the receipts were assessed in the hands of recipients and not doubted. The AR finally submitted that the decisions relied upon by the ld DR are not be applicable to the assessee’s case as they are rendered or pronounced on different set of facts and circumstances. Thus transaction cannot be regarded as sham and non genuine. Hence the disallowance made by the AO is prayed to be deleted. 5.8. We have considered the rival contentions and perused the relevant records placed before us including case laws cited by the parties. The undisputed facts are that the land measuring 50 acres was allotted to assessee and two other JV partners OM and WW by MIDC upon a payment of Rs. Rs.50,58,62,500/-. The JV partners decided to surrender their interest in the land in favour of the assessee upon a payment of 100.80 Cr. The necessary sanction for the said transaction was obtained from MIDC. The assessee accounted and provided for the transaction in its books of accounts as on 31.3.2006 by increasing the cost of land/inventories and correspondingly crediting the two JV partners with Rs. 50.40 Cr each and showing the remaining payable at the year end under the head sundry creditors. The transaction was accepted by the AO during the scrutiny proceedings after raising specific query which was replied by the assessee after satisfying himself, the AO framed assessment u/s 143(3) of the Act vide order dated 22.12.2008. In the mean time the assessment of OM was completed for the assessment year 2008-09 in December,2010 in Jaipur approximately two years after the completion of assessment of the assessee and the AO at Jaipur forwarded copy of the assessment order with relevant annexures to the AO of the assessee. Thereafter the AO also sought the details of the transaction from the assessee vide letter dated 19.05.2010 and re-opened the case of the assessee by issuing notice u/s 148 of the Act on 25.05.2012 after four years from the end of the relevant assessment year. In the first para of the reasons recorded by the AO, he admitted that the assessee vide letter dated 18.10.2008 supplied the details of sundry creditors. Thereafter ,the AO while framing order u/s 143(3) r.w.s. 148 of the Act reduced the inventories of the assessee by Rs. 100.80 Cr on the ground that the transaction was a sham and non genuine despite the fact the same transaction was treated as genuine in the hands of OM and WW the two JV partners to whom the assessee paid Rs. 50.40 Cr each for acquiring the interest in the land. In the case of OM, the receipt from the assessee was treated as capital receipt but the same was treated as revenue receipts by the AO in the assessment framed u/s 143(3) of the Act which was accepted by OM and paid due taxes thereon. In the case of the WW the money received from the assessee was treated as capital receipt and MAT was paid thereon. The AO accepted the same in the assessment framed u/s 143(3) of the Act however the CIT invoked revisionary jurisdiction u/s 263 of the Act which stood quashed by the ITAT. In other words the amounts paid by the assessee to OM and WW were taxed in their hands as genuine transaction by the deptt. It is difficult to understand that when the revenue treated the transaction as genuine in the hands of two JV partners , how the same transaction can be non genuine and sham in the hands of the assessee. Moreover the chronology of events clearly shows that the application was made in the joint names of the assessee, OM and WW. The land was also allotted by MIDC on the said application made by the three joint venture partners . Thereafter MIDC on an application made by the JV partners approved the relinquishment of interest in the said land by two JB partners OM and WW in favour of the assessee on payment of specified premium. It is relevant to note that records of MIDC proved that the assessee , OM and WW were the joint owners of the plot of land till the relinquishment of rights by OM and WW was approved by MIDC which showed the transaction being genuine and out of business consideration. A business decision was taken a business decision taken by them in the best interest of the business. Moreover all the three parties are unrelated parties and not related to each other. Therefore the transaction can not be said to be non genuine and sham. Further we failed to understand as to how a transaction which is assessed to tax in the hands of two JV partners by the revenue treating the same as genuine was treated as sham in the hands of assessee. In our considered view the assessee has entered into the transaction of purchasing the interest in the land from the said two parties and after purchase, became the exclusive owner of the said land and therefore the said expenditure is wholly and exclusively incurred for the purpose of business and should be allowed to the assessee. Beside, the involvement of multiple agencies including Govt authorities like MIDC and AOs of OM and WW , professional consultants and escrow agents specially when none of them were related to each other further lends credence to the contention of the ld AR. The mere irregularities in the documents as pointed by the ld DR can not be the basis to draw conclusion as to genuineness of the transaction. So far as the reasonableness of the transaction is concerned , the valuation by the registered valuer and the deciding reasonableness of the transaction. After considering the rival contentions, records , written submissions and case laws filed by both the parties we are of the view that the order of PCIT upholding the order of AO treating the purchase of interest in the land from OM and WW as sham is incorrect and can not be sustained. The decisions relied by the revenue are also distinguishable on facts and therefore not applicable. In view of the above discussions , we set aside the order of PCIT on this issue and accordingly appeal of the assessee is allowed. AO is directed accordingly.

6.1. Since we have decided the ground no 2 in favour of the assessee holding the transaction to be true on the ground that the same transaction which was treated as genuine in the hands of both the JB partners namely WW and OM, the same can not be held to be non genuine and sham in the hands of assessee. In view of the said findings any interest which the assessee has incurred on the money borrowed has to be allowed to the assessee and accordingly we direct the AO to delete the disallowance. The ground no 3 is allowed.

ITA No.1133/Mum/2016 7. The issues raised by the assessee in these appeals are identical as have been decided by the us in ITA No. 1137/Mum/2016. Therefore our decision in would ,mutatis mutandis, apply to these appeals as well. Accordingly the appeals of the assessee are partly allowed.