ITO, NEW DELHI vs. M/S TURNER BUILDERS & PROMOTERS (P) LTD.,, NEW DELHI

Brief facts of the case are that the assessee company, in the relevant assessment year was engaged in the business of real estate. It had filed its return of income declaring income at Rs. 50,797/-. The assessment was made at a total income of Rs. 56,21,040/- after making following additions: (a) On account of unexplained U. Loans u/s 68 Rs. 37,90,000/- (b) Value of plot not fully disclosed Rs. 17,50,000/- (c) Source of stamp duty being unexplained Rs. 30,240/- Rs. 56,21,037/- Rounded off: Rs. 56,21,040/- 3. Ld. CIT(A) while partly allowing the assessee’s appeal deleted the additions made u/s 68 aggregating to Rs. 28,70,000/- and confirmed the addition to the tune of Rs. 3,95,000/- and further addition of Rs. 50,000/- in respect of cash deposit in bank.

Being aggrieved with the order of ld. CIT(A), the department preferred appeal before us and the assessee filed cross objections.

Ground taken by the revenue in its appeal are as under:

At the time of hearing ld. counsel for the assessee pointed out that the department’s appeal is to be dismissed as the tax effect involved is less than Rs. 10,00,000/-.

Ld. DR did not dispute this factual aspect but submitted that since the department’s appeal is to be dismissed, therefore, the assessee’s cross- objection also becomes infructuous.

We have considered the submissions of both the parties. There is no dispute that as far as the department’s appeal is concerned, the same is to be dismissed in view of CBDT Circular No. 21/2015 dated 10.12.2015 stipulating that no departmental appeal, involving tax effect below Rs.10 lakhs, shall be filed before the ITAT. Para 10 of the Circular specifies that such instruction would apply retrospectively and the pending appeals below the specified tax limit of Rs.10 lakh may be withdrawn/not pressed. However, we are not in agreement with the submission of ld. DR that the assessee’s CO becomes infructuous.

Ld. counsel has rightly pointed out that in view of section 253(4), the cross objection is to be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3) or sub-section (3A). The right to file cross objection crystallizes the moment appeal is filed by either party. As per mandate of section 253(4), it is an irrelevant consideration that cross objector had originally not filed any appeal. Therefore, mere dismissal of department’s appeal does not result into making the cross objection infructuous and the same has to be disposed of as an appeal. We, accordingly, proceed to decide the appeal on merits.

The assessee has taken following grounds of cross objection:

Brief facts apropos ground no. 1 are that assessee, inter alia, had taken a loan of Rs. 1,50,000/- from Atul Katyal. The AO has observed that from the replies received to notice u/s 133(6) it transpired that cash of Rs. 1 lakh was deposited in the bank a/c of this vendor before issuing cheque to assessee company. He observed that Shri Atul Katyal is a petty cloth seller (pheriwala), selling clothes in villages. He was also stated to have been earning between Rs. 5000/- to Rs. 6000/- per month.

Before ld. CIT(A) the assessee explained as under:

A bare perusal of the findings recorded by both the lower revenue authorities clearly shows that the submissions made by assessee have not at all been considered including the availability of opening balance of Rs. 44,090/- as on 1.4.2005. The lender submitted all the evidences and confirmed the giving of loan. The assessee had also pointed out that the cash deposit was only Rs. 10,000/- and not Rs. 1 lakh which aspect has not at all been considered by lower revenue authorities while deciding the creditworthiness and genuineness of the transaction. Under such circumstances, we do not find any reason to confirm the findings of lower revenue authorities in regard to this amount. Accordingly, ground is allowed.

Apropos loan from Ashok Kumar, brief facts are than loan of Rs. 2,65,000/- was taken from him. The AO has observed that there was cash deposit of Rs. 2,66,000/-, before issuing cheques of loan to the assessee company. The assessee’s submission was that Ashok Kumar was owning 6 acres of agriculture land and a small kiryana store. The AO observed that it is hard to comprehend that such small farmers, residing in a a far off village or doing petty businesses were advancing money interest free and without any other benefit to a company engaged in real estate business with sole motto of earning profits. He pointed out that the creditworthiness was not established.

Ld. CIT(A) deleted the addition to the extent of Rs. 1,50,000/- after considering the following submissions made by assessee:

Ld. CIT(A) observed as under: 8.5.2 It is seen from the account copy, the amount received during the financial year relevant for A. Y. was only Rs. 1,50,000/-. Hence the addition, if at all to be made, is only Rs. 1,50,000/--. I am in agreement with the contention of the AR in this regard. As seen from the details furnished, there is no proper sources for lending money, though he had confirmed the advance in the statement recorded. On careful consideration of the material available on record, the amount of Rs. 1,50,000/-,

From bare perusal of the observations made by CIT(A) it is evident that he has not at all examined the creditworthiness of the lender particularly with reference to the documents showing agricultural holding and produce thereon. Ld. CIT(A) has not given any cogent reasons for confirming the addition to the extent of Rs. 1,15,000/-.

Considering the entirety of facts and circumstances and the detailed documents submitted by lender, we are of the opinion that the addition deserves to be deleted as lender has been able to establish its identity, genuineness of the transaction and the capacity to advance the loan. Accordingly, this ground is allowed.

Apropos third addition of Rs. 95,000/- in respect of Manju Khatri ld. counsel did not press the same. Accordingly this ground is dismissed as not pressed.

Brief facts apropos ground no. 2, AO noticed that there was cash deposit amounting to Rs. 50,000/- in the bank account of the assessee on 16.6.2005. the source of the said cash was explained as Rs. 17,000/-n each received from Manoj Kumar, Mohd. Saffique and Mohd. Aslam. He observed that in response to notice u/s 133(6), which were received back it transpired that there was no such person. Assessee also could not produce them before the AO. Accordingly, addition of Rs. 50,000/- was made, which was confirmed by CIT(A).

After hearing both the parties we do not find any reason to interfere on this count as the assessee miserably failed to explain the basic three ingredients in respect of these three loans. In the result, this ground is dismissed.

In the result, revenue’s appeal is dismissed and the assessee’s cross objection is partly allowed.