SAKTHI REALTY HOLDINGS PVT. LTD.,COIMBATORE vs. DCIT, CC-2,, COIMBATORE

(िनधा)रण वष) / Assessment Year: 2016-17) M/s Sakthi Realty Holdings Ltd. DCIT बनाम/ #62, Dr. Nanjappa Road, Central Circle-2, Vs. Coimbatore-641 018. Coimbatore. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAECA-8414-H (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri R. Venkata Raman (CA) - Ld.AR � थ�कीओरसे/Respondent by : Shri R. Clement Ramesh Kumar (CIT) -Ld. DR सुनवाईकीतारीख/Date of Hearing : 20-09-2024 घोषणाकीतारीख /Date of Pronouncement : 10-12-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

1. Aforesaid appeal by assessee (SRHL) for Assessment Year (AY) 2016-17 arises out of the order of learned Commissioner of Income Tax (Appeals), Chennai-20, [CIT(A)] dated 23-02-2024 in the matter of an assessment framed by the Ld. AO u/s 153A r.w.s 143(3) of the Act on 31-12-2018. The grounds raised

by the assessee read as under:-

1. That the Learned Commissioner of Income Tax (Appeals) - 20, Chennai ["Ld. CIT(A)] failed to appreciate that the assessment order dated 31.12.2018 passed by the Deputy Commissioner of Income Tax, Central Circle - 2, Coimbatore ["Assessing Officer"] u/s.153A r.w.s 143(3) of the Income-tax Act, 1961 ["Act"] is without jurisdiction, bad in law, barred by limitation and consequently erred in upholding the assessment.

2. Sakthi Realty Nil Rs.42.23 Crores Rs.33.45 Crores Rs.75.68 Crores Holdings Ltd. (Assessee) Total 151.35 Crores It was also admitted by Shri Senthilkumar that aforesaid cash was not accounted for in the books of any of the entities. 3.4 A statement was also recorded from Shri Velusamy (Sr. President- Operations) on 25-11-2016 who made similar admission. Shri T.

Rajkumar (Director) also submitted an affidavit dated 26-12-2016 to investigation wing admitting Rs.37.47 Crores as income in the hands of SFHL and another amount of Rs.76.65 Crores in the hands of the assessee company. However, the said income was not offered in the return of income. 3.5 During the course of assessment proceedings, the assessee defended its stand and submitted that there was no unaccounted income in the hands of the assessee. It was stated that there was no seized evidences regarding unaccounted asset for the alleged amount as found during the course of search. The said advances were received towards real estate business as carried out by the assessee. Subsequently, refunds were processed for Rs.36.89 Crores. As per seized sheet, the cash receipts upto 31-05-2015 were Rs.58.43 Crores being advances received towards real estate activity of the company. Out of this, sum of Rs.20.96 Crores had already been refunded to the concerned parties leaving a balance of Rs.37.47 Crores. The details of land advances refunded to the extent of Rs.20.96 Crores were furnished to Ld. AO. The confirmation of land advances with respect to the sum of Rs.37.47 Crores was also furnished. It was also submitted that Annexure-I Sources and applications of funds was a rough work / draft sensitivity analysis report prepared by the trainees on board. Therefore, the same was to be disregarded. The assessee also furnished reconciliation statements and made various submissions to establish that there was no unaccounted income in the hands of the assessee. 3.6 However, Ld. AO, going by the statements made by Shri Senthil Kumar, Shri Velusamy and affidavit of Shri T. Rajkumar, rejected the aforesaid contentions of the assessee. The assessee produced list of parties from whom Rs.37.47 Crores was stated to be received. Out of the same, 50 persons were selected randomly by Ld. AO and the assessee was asked to produce the confirmations from them. The same was provided by the assessee. The assessee also produced details of persons who were refunded the land advances. From this list, seven persons were summoned. Three persons appeared whereas summons was returned back in remaining case. It was alleged by Ld. AO that the three persons who appeared were not able to prove their creditworthiness and they were having agricultural income. No acceptable proof of income could be furnished by them towards land advances. Finally, the explanation furnished by the assessee was rejected and the amount of Rs.42.23 Crores was treated as unaccounted income of the assessee. 3.7 In AY 2013-14, Ld. AO made certain addition of Rs.11 Crores on the allegation that the assessee paid cash advance for purchase of land. A sum of Rs.70 Lacs was allegedly paid in this year and accordingly, the same was also added in the hands of the assessee as unaccounted income. Aggrieved, the assessee assailed the impugned addition in further appeal. Appellate Proceedings 4.1 The Ld. CIT(A) noted that Shri Senthil Kumar and Shri Velusamy admitted that the amount noted in the seized material represent cash deposits received from various customers and the amounts were not recorded in the regular books of accounts. Shri T, Rajkumar filed an affidavit on 26-12-2016 in which he admitted an amount of Rs.76.65 Crores in the hands of the assessee and another amount of Rs.37.47 Crores in the hands of SFHL.

4.2 During appellate proceedings, the assessee submitted that these deposits were not income of the assessee. All the persons admitted that the above deposits were procured through various branches. The assessee also stated that the amount as admitted by Shri T. Rajkumar belonged to other entities and the sum of Rs.66.70 Crores was already declared under PMGKY Scheme in the hands of various entities (detailed in impugned order). It was also stated that except for affidavit given by Shri T. Rajkumar, the department did not seize any material to prove that the unaccounted receipts were in the nature of income for the assessee. Taxing the receipt as income would be against the principles of taxation. These receipts were in the nature of land advances which was to be repaid if the sale deeds were not executed. The assessee also assailed the addition of Rs.70 Lacs on various grounds. 4.3 The various contentions as raised by the assessee were summarized by Ld. CIT(A) as under: -

1. 1. Seized material shows that amount received constitutes liability in hands of Appellant but not income. Seized material confirms that they are mere receipts.

2. Charging section and computation provision together constitutes integrated code. If either of them is not attracted, then there can’t be any levy of tax. As per Principles of taxation, receipts can’t be subjected to tax.

3. No evidence could be found during search that contents of seized material constitute undisclosed income of appellant. Neither Mr. Senthil kumar nor Mr Velusamy have admitted cash receipts found in seized material as unaccounted income of the appellant.

4. The deposit taken against sale of land amounting to Rs.24.96 Crores out of Rs.37.47 Crores reflected by seized material after excluding refund of Rs.20.96 Crores is duly reflected in the return of income filed in response to notice issued u/s.153A under the head ‘current liabilities.’ 6. The AO has relied only the affidavit filed by Shri T Rajkumar for making the addition while finalizing the assessment.

7. The AO has not considered statements of persons who appeared before him and confirmed repayment of land advance.

8. The appellant has filed confirmation letters with respect to land advance. With filing of confirmation letters, the appellant has discharged the initial onus of proving credits/receipts.

4.4 The Ld. CIT(A) noted that the assessee was not disputing the receipts of amounts. It was the contention that the aforesaid receipts actually represent cash received from different individuals towards land advance. Therefore, the issue was two-fold i.e., first, whether the amount was received from same individuals against whose names the amount was recorded in seized documents and secondly, to determine the nature of the receipts in hands of assessee. Only when the assessee could establish that the amount was received from persons as mentioned in seized material, question of determining the nature of receipts become important. The onus was on assessee to prove the identity of the depositors, their creditworthiness and the genuineness of the transactions. As per the findings of Ld. AO, the assessee had failed to prove creditworthiness by filing relevant evidences with respect to even fifty persons who were randomly identified by Ld. AO from seized list. From the confirmation letter reproduced by AO in assessment order, it was noted that though one individual named Smt. P.Chandana confirmed site advance of Rs.12 Lacs, the confirmation do not specify the location of the site, area of the site for which the amount was advanced. It was stated that the amount of Rs.12 Lacs was out of accumulated savings, the evidence thereof was no furnished and accordingly, creditworthiness was not established. The assessee failed to discharge this onus not only with respect to 50 persons as randomly selected by Ld. AO but also in remaining cases wherein the assessee did not even make any effort to proved the identity of the parties. 4.5 The assessee also claimed that it already refunded a portion of land advances as received from some of the individuals before the date of search itself. However, out of seven persons as examined by Ld. AO by issuing summons, only three persons appeared and they could not file evidences to prove genuineness of amount as advanced to the assessee by establishing creditworthiness. The immediate source of cash advances could not be proved by any of the lenders. Mere statements with regard to source for funds without any evidence in support of same could not establish the creditworthiness of the lenders. When the assessee could not establish the source of lenders, the question of refund of the same would not arise. As per the provisions of Sec.68, the onus was on assessee to file documentary evidences to establish Identity, creditworthiness and genuineness of loan creditors. Only thereafter, the onus would shift on Ld. AO to conduct further enquiries to verify the genuineness of the claim of the assessee. In the present case, initial onus was not discharged by the assessee and therefore, the receipts would be deemed to be the income of the assessee. Reference was made to various decisions to support this conclusion. 4.6 The Ld. AO, in para 7.15 of the impugned order, noted that though the assessee claimed that land advances were received from various parties, the assessee never furnished details of land purchase. The assessee did not furnish the details of land for which advances were collected. Nothing was shown that the assessee entered into sales deeds in subsequent years to prove the genuineness of entries in seized material. 4.7 The assessee contended that the affidavit as filed by Shri T. Rajkumar was under coercion. The Ld. CIT(A) noted that the affidavit was filed on 26-12-2016 whereas the search took placed on 24-11-2016 and therefore, the affidavit was filed after one month from the date of search. In this affidavit, it was clearly stated that the names mentioned in the seized material were fictitious and the amount of Rs 76.65 Crores actually belonged to the assessee company. It was only during assessment proceedings, it was stated by the assessee that the amounts were mobilized on behalf of other entities as well which was to be rejected. So far as the claim that the income was admitted under PMGKY Scheme was concerned, the assessee was not able to establish such a link and therefore, no credit could be given for such disclosure. Finally, the impugned addition was confirmed. The Ld. CIT(A) also confirmed the addition of Rs.70 Lacs. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that the only primary evidence which has led to impugned addition is excel sheet titled as “Corpus” as found from the laptop of Shri Senthil Kumar. The copy of the same has been placed on record at Page Nos. 1 to 36 of the paper-book. Upon careful consideration of the same, it could be seen that there is inflow of cash from various parties and there is also outflow of cash under some abbreviations. The parties from whom deposits have been received are identified by clear names / description. The outflow of cash entries also bear incentives / interest paid by assessee to various parties. The assessee has refunded various amounts to lenders from time to time. A careful perusal of these entries would show that inflow of cash is primarily deposits / advances received from various persons by different branches of the assessee. The Ld. AO has considered these deposits as the income of the assessee and taxed the receipts considering the same to be the unaccounted income of the assessee. The same is in contrast to the fact that the seized material also contain the details of refund as well as payment of incentive / interest. It could be seen that the assessee is engaged in real estate business and it would have received land advances from prospective buyers so as to carry out its business activities. In our considered opinion, the conclusion of Ld. AO that these receipts constitute the income of the assessee is clearly opposed to nature of entries as recorded in the seized material. It is trite law that the purpose of assessment is to determine the correct income of the assessee and only real income could be taxed. No addition could be made on mere suspicion, conjectures or surmises.

6. Our aforesaid conclusion is supported by the fact that the excel sheet was found from the Asus Laptop belonging to Shri Senthilkumar. The sheet contains date-wise deposits of cash along with the names of the depositors and summary of cash deposits made with the assessee- company as well as with SFHL. The excel sheet also contains the details of application made out of the funds so received from the depositors. The outflow entries, inter-alia, include the entries of incentive / interest as well as refund made to the depositors. Shri Senthilkumar admitted that the laptop belonged to him and the excel sheet was maintained by him for storing the details of cash deposits received from customers on various dates for the purpose of reporting to Shri Veluswamy (Senior President-Operations) at regular intervals. The same was confronted to Shri Velusamy who made similar admission. Thus, both the statements are in agreement with each other and the perusal of the same would suggest that the impugned inflow of cash is nothing but deposits as received from various customers at different branches. The deposits represent liabilities which are to be repaid by the assessee. By no stretch, a conclusion could be drawn that the same would represent unaccounted income of the assessee and the assessee has written some random names to record these deposits. Unless a finding has been rendered that such deposit represent unaccounted income of the assessee, no such addition could have been made in the hands of the assessee.

7. Proceeding further, the secondary evidence that is available with Ld. AO is the affidavit filed by Shri T. Rajkumar. However, during search, no incriminating material is found which would suggest that the assessee was in possession of any unaccounted asset which is represented by such unaccounted receipts. In fact, the assessee furnished reconciliation statements during assessment proceedings wherein it was established that the refunds were processed to the tune of Rs.36.89 Crores. As per seized sheet, the cash receipts up-to 31-05-2015 were Rs.58.43 Crores being advances received towards real estate activity of the company. Out of this, sum of Rs.20.96 Crores had already been refunded to the concerned parties. The detail of such refunds was duly furnished to Ld. AO. The confirmation of land advances with respect to remaining sum of Rs.37.47 Crores was also furnished. Having furnished such statements, the assessee in our considered opinion, had duly discharge the primary onus of proving that the deposits, in fact, represent liabilities for the assessee. The onus was on Ld. AO to rebut the same. However, Ld. AO has simply gone by the statements made by Shri Senthil Kumar, Shri Velusamy and affidavit of Shri T. Rajkumar without carrying out any independent investigation to bring on record any concrete material to rebut the contentions as made by the assessee. It is another fact that Ld. AO has not even otherwise acted on the averments made in the affidavit and already disregarded the same while framing the assessment.

Facts being pari-materia the same, taking the same view, we delete the impugned addition of Rs.70 Lacs and allow the corresponding grounds as raised by the assessee. 11. The appeal stand allowed in terms of our above order.

Order pronounced on 10th December, 2024