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Facts
The Assessing Officer (AO) made additions to the assessee's income concerning unsecured loans, cash deposits, and advance booking amounts. The CIT(A) partly allowed the assessee's appeal. Both parties are aggrieved and have filed cross-appeals before the Tribunal.
Held
The Tribunal considered the rival contentions and the orders of the lower authorities. The Tribunal decided to admit additional evidence submitted by the assessee and remitted the issue back to the AO for fresh adjudication. The AO's appeal was dismissed, and the assessee's appeal was allowed for statistical purposes.
Key Issues
Whether the addition made by the AO on account of unsecured loans, cash deposits, and advance booking amounts was justified, and whether additional evidence should be admitted.
Sections Cited
68, 143(3)
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
These are the cross appeals filed by the parties against appellate order passed by National Faceless
Grounds in filed by the learned assessing officer are as under:-
“1. whether on the facts and in circumstances of case and in the law the L. CIT (A) erred in deleting the unsecured loans.
2) Whether on the facts and in circumstances of case and in the law the Ld. CIT(A) erred in deleting the unsecured loans specially so when the AO clearly mentioned in the Remand report that the identity genuineness and creditworthiness were not established by the Ld. CIT(A) erred in entirely deleting the unsecured loans in so far as not restricting the loans of 9 related parties in view of the fact that in Remand proceedings the AO stated that many of the lenders have not furnished the Return of Income and have immediate cash deposit immediately preceding the loan transaction.
4) Whether facts and the circumstances the Ld. CIT(A) erred in deleting the addition of Rs. 74,39,883/- on account of being 25% of total advances of Rs. 2,97,59,530/- received by the assessee.
5) On the basis of facts and in circumstances of case the Ld. CIT(A) erred in deleting the advance taken by the assessee specially so when the assessee failed to prove the nature and genuineness of the transaction during the assessment proceedings and no remand report was called for in respect of this issue and in absence of any contrary findings regarding genuineness and nature of advances taken by the assessee, the Ld. CIT(A) erred in entirely deleting the addition.”
“Being aggrieved by the Order dated 04.11.2022 passed by the Commissioner of Income-tax (Appeals), Income Tax Department, National Faceless Appeal Centre, Delhi ("Ld. CIT(A)") u/s.250 of the Income- tax Act, 1961 ("Act"), your appellant prefers this appeal, among others, on the following grounds of appeal, each of which is without prejudice to, and independent of, the other:
1. On the facts and in the circumstances of the case, and also in law, the Ld. CIT (A) erred in confirming the addition of Rs.1,25,01,969/- made by the Ld. AO on account of alleged unexplained cash deposits. Your appellant, therefore, prays that the aforesaid addition of Rs. 1,25,01,969/- be deleted.”
Brief facts of the case shows that assessee company is engaged in the business of builders and developers, filed its return of income on 30/9/2013 at the loss of ₹ 707,929/–. The case was picked up for scrutiny and accordingly necessary notice under section 143 (2) was issued on 4/9/2014. During the course of assessment proceedings the AO noticed that the assessee has taken unsecured loan of ₹ 1,97,62,025/– and deposited cash of ₹ 12,501,969/– as well as received advance for booking of ₹
i. The assessee has taken an unsecured loan of ₹ 19,762,025 during the course of assessment proceedings the assessee did not furnish the confirmation substantiated the claim of the assessee by submitting the copy of the bank statement reflecting the loan transaction as well as the balance sheet and copies of the return of income of the lenders. Accordingly, the learned AO treated the above loan as unexplained crash credit under section 68 of the income tax act. ii. The learned AO also found that during the year as per ITS details it was noticed that assessee has time deposit of cash deposit of ₹ 2,377,500/– into the cooperative credit society. The assessee was asked the explanation about the same. It was iii. Ld AO also found that assessee has received booking deposit of ₹ 29,759,530/– of flats and shops as disclosed in working progress. Assessee did not offer any income on the said receipt of booking of flats. According to AO, assessee should have offered the sum. Assessee was asked to furnish certificate of architect for completion of the work at 31/3/2013 and assessee was also asked to explain as to why 25% of the booking amount deposit should not be taxed as income in the hence of the assessee. Assessee did not make any submission and therefore the learned AO made the addition to the extent of 25% of such deposit amounting to ₹ 7,439,883/–.
Aggrieved assessee preferred appeal before the learned CIT – A.
i. On addition under section 68 of unsecured loan of ₹ 19,762,025/– assessee submitted that new loans taken during the year are only ₹ 8,850,000/–. Assessee submitted details of nine persons from boom such loan is taken submitting their confirmation, bank statement, cheque details etc. with respect to determination of income at the rate of 25% of the booking amount of ₹ 29,759,530/back to the extent of ₹ 7,439,883/– the assessee submitted that is no construction activity has started on the plot of land as it was found to be the reserve plot, no income accrued to the assessee and nothing can be recognized as revenue. Therefore, as project has not started, the amount cannot be recognized as revenue from the Project. With respect to the addition of cash deposit in the bank account it was submitted that such amount is received from the members and employees of the various cooperative credit society is who have deposited money in cash and same has been ii. On the merits of the case, on the addition under section 68 of ₹ 19,762,025/– he found iv. With respect to the addition to the extent of 25% of advance booking amount of Rs. 297,59,530/– added as an income to the extent of ₹ 7,439,883/– as income recognition the addition was deleted for the reason that the plot of land owned by the assessee is affected by multiple corridor and no construction could be done on the reserved plot of land. The compensation by the government is also pending since 2012 to the date. As the project itself has not started, there cannot be any revenue recognition of that amount. Accordingly, he deleted the addition.
Such appellate order was passed by CIT – A on 4/11/2022. The assessee is aggrieved with the confirmation of the addition to the extent of cash deposited in the bank account and learned AO is aggrieved with the deletion of addition under section 68 and advance against sale of property to the extent of 25% as revenue recognition.
We first come to the appeal filed by and AO. Ground number 1, 2 and 3 of the appeal is with respect to the deletion of addition of ₹ 19,762,025/– under i. On Ground no 1-3 that assessee has failed to submit any detail with respect to the addition of ₹ 19,762,025/– under section 68 of the act. The assessee has a primary duty to establish identity, creditworthiness, genuineness of the above transaction, which the assessee failed in the assessment proceedings. Before CIT – A assessee has submitted additional evidences, which were sent back to AO, who examine them and held that assessee has failed to prove the creditworthiness and genuineness with respect to these credits. He submits that in most of the cases the income tax returns for the respective years are not furnished. He further submits that in most of the cases there are very few transactions other than the amount of loan given to the assessee. Therefore, as creditworthiness of these transactions are not proved. Assessee has not used any evidence with respect to the genuineness of the transaction. In view of this the addition made by the learned assessing officer and supported by the remand report
ii. With respect to ground number 4 and 5 of the act it is submitted that the AO has made addition to the extent of 25% of the total advances received of ₹ 29,759,530/– as assessee should have offered income out of the advances received towards sale of flats and shops on revenue recognition basis. The learned AO category find that assessee though received above sum, did not offer any sum towards the income. He further submits that the issue is also with respect to the addition under section 68 of the income tax act. He supported the order of the learned AO.
The learned authorized representative vehemently supported the order of the learned CIT – A on both the above grounds. It is the claim of learned AR that with respect to the addition deleted by the learned CIT – A, he submits that firstly the addition made by the learned assessing officer is incorrect because of the reason that sum received during the year is only ₹ 8,850,000/–. Therefore, out of the total addition of ₹ 19,762,025/– made by the AO under section 68 of the act, the balance sum is not credited during the year. Therefore, the addition to that extent has been correctly deleted. With respect to the balance sum of ₹ 8,850,000/–, he submits that assessee has
With respect to the addition of 25% of deposits towards flats and shops and received by the assessee, he submitted that assessee is plot is now following into a different John on which construction activity cannot be carried out. As the construction
We have carefully considered the rival contention and perused the orders of the lower authorities, paper book filed by assessee.
Ground number 1 – 3 of the appeal is against the deletion of the addition made under section 68 of the
Coming to ground number 4 and 5 where the AO has made an addition of ₹ 7,439,883/– being 25% of the advance booking amount received by the assessee of ₹ 29,759,530/–. Admittedly, assessee is a builder and developer. It has received and advances from lower class and lower middle-class persons who are members and employees of cooperative credit society is as advance towards booking of flats to be constructed on plot of land purchased by the assessee. Assessee purchased an agricultural land. At the time of conversion of the land to nonagricultural purposes, it was found that that land is reserved for the project for which construction is not permitted. The relevant notifications were also produced. That shows that there is an acquisition of the above land by government. Until now the compensation is not paid. This shows that project has not at all commenced. If the project has not commenced, there is no requirement of considering the same as income of the assessee. Assessing officer has made the addition of 25% of the booking amount received under section 68 of the act. CIT – A deleted the same. AO himself accepted that no addition could be made with respect to 75% of the
In the result, appeal of the learned AO is dismissed.
Coming to the appeal of the assessee where the only ground is the confirmation of addition of ₹ 12,501,969/– because of alleged unexplained cash deposits. Before the assessing officer, assessee did not furnish any explanation of cash deposited of ₹
Before us, assessee has made an application for admission of the additional evidences. The additional evidence is in the form of cashbook for the whole year, copy of the bankbook and copies of the receipt issued to the flat buyers. It was submitted that in the remand report also this ground was not the issue. It was submitted that that copy of the statement of account with ganraja Sahkari Patsanstha Maryadit was available with the assessing officer however as during the course of assessment proceedings nothing was submitted, before the learned CIT – A no additional evidences were submitted as well as learned CIT – A also did not ask for the same. Therefore, the assessee could not furnish the basic evidence in the form of cashbook, bankbook and copies of the receipt issued to the flat buyers. It was submitted that confirmation of the addition made by
The learned departmental representative vehemently opposed the same that assessee has not submitted any evidences before the learned CIT – A also, therefore assessee had the first opportunity available to submit them before the CIT – A which assessee failed to do so, therefore, now this additional evidences must not be admitted.
We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, in this case with respect to the submission to be made before the assessing officer, the learned CIT – A has given a reason that there was a sufficient cause available with the assessee for non-submission of the details. Undisputedly it was with respect to the unsecured loan. However, until the time of the first appellate authority decision, it was the fact that same reasoning will apply for non- submission of evidences. It is also a fact that
In the result, appeal of the assessee is allowed for statistical purposes.
In the result, appeal of the AO is dismissed and appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 22.03.2024.