ENTELLUS BUILDERS & DEVELOPERS,,BHOPAL vs. ACIT, CENTRAL-2, BHOPAL

The grounds of appeal

Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee.

The Ld. A.R. submitted that the Assessing Officer was very aware that the said Joint Venture (“JV”) between Signature Group and the assessee was proposed to be executed but as no consensus could be reached on the terms and conditions of the MOU, the same could not be executed and hence the Draft MOU/agreement does not have any legal sanctity as such. This can be seen from the fact that the agreement was unsigned and undated. The Ld. A.R. further submitted that the Assessing Officer was informed that the agreement under reference was carrying on the work in Joint Venture, however as the same could not be executed and the other party to the agreement M/s. Signature Colonisers had purchased the land of its own which is a undisputed fact established that the Draft Joint Venture agreement was not executed at all. The assessee also submitted an affidavit from M/s. Signature Colonisers confirming on oath that the agreement under reference was never executed and no &55/Ind/2022 Entellus Builders & Developers vs. ACIT Asst.Years –2011-12 & 2012-13 - 4 – amount was given in cash. The Ld. A.R. further submitted that the terms and conditions is mentioned in the unsigned Draft MOU when read in totality clearly signifies that the amounts mentioned therein are paid as security deposit and/or advance for purchase of land and they do not signify earning of any income by the assessee as such. Para 9 of the MOU which mentions that out of the amounts received by the assessee from M/s. Signature Colonisers, Rs. 2 crore will be retained by the assessee as advanced for land/security deposit and M/s. Signature Colonisers will be entitled to get the registration of lands in its favour or in favour of any person nominated by it of the amount paid to the assessee in excess of Rs. 2 crore. The Ld. A.R. in alternate submitted that even if it is presumed that the unsigned MOU under reference was executed, the amount mentioned therein do not signify earning of any income by the assessee and therefore, the addition cannot be made as unexplained investment. The Ld. A.R. further submitted that in case of Signature Colonisers the addition was deleted related to the consideration all payments mentioned in the Joint Venture. Thus, once it has been held that the payment made by the Signature Colonisers is not established, there is no scope for the assessee to have been received any payment. Further once the addition on the basis of these loose papers were found not maintainable in the hands of the person in whose possessing the loose paper was found and in which case the presumptive provisions of Section 132(4A) were applicable, no addition can be made in the hands of the assessee. The Ld. A.R. submitted that these were the dumb documents &55/Ind/2022 Entellus Builders & Developers vs. ACIT Asst.Years –2011-12 & 2012-13 - 5 – and cannot be taken into account at all hence the addition based on such documents does not sustain on the eyes of law.

The Ld. D.R. submitted that the CIT(A) has categorically observed that there is a clear nexus between the said MOU/agreement and subsequent acquisition and purchase of land by the assessee and Signature Colonisers. The decision taken in the said document has been properly executed though it is unsigned, undated, unregistered. Thus, the document under consideration are not dumb document. The Ld. D.R. further submitted that subsequent MOU/agreement and sale deed are the conclusive proof regarding execution of the MOU/agreement. The assessee failed to bring any cogent material to discredit the reasons given by the Assessing Officer in the assessment order. Thus, the Ld. D.R. relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the MOU/agreement was unsigned and was a Draft MOU/agreement. There was a subsequent document which was properly registered and hence the Draft MOU/agreement does not have any value in the eyes of law. Thus, the said agreement upon which the Assessing Officer is relying is a dumb document. This fact also is confirmed after seeing the decision of Signature Colonisers and Group wherein the addition related to these documents (Draft MOU/Agreement unsigned and undated) have been treated as dumb document. The additions were also deleted in the case Signature Colonisers. It is pertinent to note herein that the very addition &55/Ind/2022 Entellus Builders & Developers vs. ACIT Asst.Years –2011-12 & 2012-13 - 6 – which was made by the Assessing Officer has been properly explained by the assessee as in consonance with the actual consideration received by the assessee and the terms and conditions which in practicality/reality has been concluded by the assessee and M/s. Signature Colonisers. Thus, the addition does not sustain.

In result, both the appeals of the assessee are allowed.