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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R.C. SHARMA, AM & SHRI RAM LAL NEGI, JM
सुनवाई की तायीख / : 30/05/2016 Date of Hearing घोषणा की तायीख / : 13/07/2016 Date of Pronouncement आदेश / O R D E R Per R.C. SHARMA, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)- 22, Mumbai (‘CIT(A)’ for short) dated 21.03.2012 for the assessment year (A.Y.) 2009-10, in the matter of order passed u/s 143(3)(ii) of the Income Tax Act.
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT 2. The only grievance raised by assessee relate to addition of Rs.1,51,48,460/- u/s 69 of the Act.
Rival contentions have been heard and record perused. Facts in brief are that assessee and his group companies have given loan of Rs.1,57,00,000/- to M/s Jagdamba Realtors Pvt. Ltd., Nagpur as detailed below:- 08.12.2008 Gayatri (New 10,000,000 Copy of Annexure-1 Bombay) Account & Services Pvt. Balance Sheet Ltd. enclosed 17.12.2008 India.Com Pvt. 2,500,000 Copy of Annexure-2 Ltd. Account and Balance Sheet enclosed 17.12.2008 Aditya B. 1,200,000 Copy of Annexure-3 Yamsanwar Account enclosed 17.12.2008 Aditya B. 1,000,000 Yamsanwar 17.12.2008 Aditya B. 1,000,000 Yamsanwar Total Rs. 15,700,000 To secure the aforesaid loans, the Agricultural Land which belongs to M/s. Jagdamba Realtors Pvt. Ltd. was registered in assessee’s name vide Agreement dated 17.12.2008 and accordingly, the consideration was mentioned to the extent of loan amount of Rs.1.57Crores in the agreement.
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT
During the course of scrutiny assessment, assessee was asked to furnish details of loans given to M/s. Jagdamba Realtors Pvt. Ltd. The AO stated that assessee has purchased a property from M/s. Jagdamba Realtors Pvt. Ltd. for Rs.1,57,00,000/- . When the above fact was confronted to assessee on 25.07.2011 and asked to reconcile the same, the assessee vide letter dated 20.08.2011 submitted that he and his group companies [M/s. Gayatri (New Bombay) Services Pvt. Ltd. and M/s. India.Com Pvt. Ltd.) had given a loan of Rs.1,57,00,000/- to M/s. Jagdamba Realtors Pvt. Ltd., Nagpur. It was also submitted that to secure the aforesaid loans, the Agricultural land belonging to M/s. Jagdamba Realtors Pvt. Ltd. was registered in the name of the assessee vide agreement dated 17.12.2008 for the consideration of Rs.1.57 cores. The assessee furnished the copy of agreement. However the AO did not convince with the assessee’s explanation and added Rs.1,51,58,460/- u/s. 69. By the impugned order CIT(A) confirmed the action of AO against which assessee is in further appeal before us.
We have considered rival contentions and carefully gone through orders of authorities below and found from record that addition was made by AO under provisions of section 69 wherein addition is required to be made in respect of unexplained investment. Section 69 for better clarity is reproduced as under:
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT “Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year”.
From the above section, it is clear that addition u/s 69 can be made only if the assessee had made investment. It is a case of loan given by the assessee and his group companies, which had also been confirmed by the borrower (M/s. Jagdamba Realtors Pvt. Ltd.). This is further strengthening by the fact that almost the entire loan had since been repaid by the borrower. Section 69 has no application to the case of the assessee.
From the record we found that with respect to amount of Rs.1.57crores alleged by AO as amount given to M/s. Jagdamba Realtors Pvt. Ltd., we found that vide letter dated 3.10.11 filed before AO, M/s Jagdamba Realtors Pvt. Ltd confirmed that it had taken loan of Rs.1.57crores from assessee and its group companies. It was also submitted that company is in the real estate business and market conditions were unfavorable, hence assessee wanted security against the (A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT loan/advance given. For all these reasons the company entered into sale deed of agricultural loan and it showed a transaction of sale in its books of account. It was clarified by M/s. Jagdamba Realtors Pvt. Ltd. that as and when the full amount of loan will be repaid, the company will execute the purchase deed for the same amount. The amount of Rs.1.57crores was fully explained by assessee, out of total sum the assessee had given cheques of Rs.32lakhs drawn on Dena Bank dated 17.12.2008, a sum of Rs.1 crore was given by its group concern M/s services Private Limited by cheque no.626165 of Dena Bank dated 08.12.2008. Another group concern M/s India.Com Pvt. Ltd. had Rs.25lakhs through Cheque of HDFC Bank dated 17.12.2008 vide Cheque No.226891. The details of cheque so given are as under: Date Name of Bank Cheque No. Name of Lender Amount (Rs.) 08.12.2008 Dena Bank 626165 Gayatri (New Bombay 1,00,00,000 Services Pvt. Ltd. 17.12.2008 HDFC Bank 226891 India.Com Pvt. Ltd. 25,00,000 17.12.2008 Dena Bank 4246 Aditya B. Yamsanwar 12,00,000 17.12.2008 Dena Bank 4247 Aditya B. Yamsanwar 10,00,000 17.12.2008 Dena Bank 4248 Aditya B. Yamsanwar 10,00,000 Total Rs. 1,57,00,000
We had also verified the copies of Audited Balance Sheets of M/s. Gayatri (New Bombay) Services Pvt. Ltd. and M/s. India.Com Pvt. Ltd. which have been submitted during the course of assessment proceedings vide letter dated 20.8.2011.
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT In the Balance Sheet of M/s. Gayatri (New Bombay) Services Pvt. Ltd., Rs.1 crore is shown as loan given to M/s Jagdamba Realtors Pvt. Ltd. under Schedule ‘F’ and in the Balance Sheet of M/s. India.com Pvt. Ltd., Rs.25 lakhs is shown as loan given by M/s. India.Com Pvt. Ltd. under Schedule-E read with groupings on the asset side of both the Balance-Sheets was also placed before the lower authorities. Two cheques of Rs.10 lakhs each which were issued by the assessee and shown by M/s. Jagdamba Realtors Pvt. Ltd. as cheques in hand, but not encashed were reversed in the books of accounts of Jagdamba Realtors Pvt. Ltd. As such, the loan actually given by the assessee and his group companies were to the extent of Rs.1.37crores and not Rs.1.57 crores.
From the record we also found that the assessing officer has issued summons u/s 131 of the Act to M/s. Jagdamba Realtors Pvt. Ltd. calling for the details in respect of the above transactions along with the details of purchase, sale, loan and advance, etc. with the assessee. The Assessing Officer has also asked the details of any repayment o loan made to the assessee subsequently. In response to the summons u/s 131, M/s. Jagdamba Realtors Pvt. Ltd. submitted reply vide their letter dated 13.10.2011 to the assessing Officer, copy of which was given to the assessee by the AO. The relevant portion of reply given in the aforesaid letter dated 13.10.2011 is reproduced as under;-
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT “We wish to inform that the assessee has taken the amount of Rs.1,57,00,000/- from Aditya Bhaskar Yamsanwar and group companies as a loan. As we are in real estate business and due to unfavourable market condition, the said property wanted security against the loan/advance given to us. To secure the loan/advances, the company enters into sale deed of agricultural land situated at Mouza: Khasarmari-Kh No.70 admeasuring 2.14 hectare. The company has shown the above transaction as sale in its books of account as sale deed was executed. The company will execute purchase deed for the same amount as and when the full amount of loan will be repaid. Thus the transaction was purely a loan transaction and sale deed was executed only as a security measure. The mortgager deed was not executed due to reservation on recoverability of the amount through court process in case of default in repayment.”
From the above reply of M/s. Jagdamba Realtors Pvt. Ltd. to the AO, it is very clear that:- M/s. Jagdamba Realtors Pvt. Ltd. has taken loan of Rs.1.57crores from the assessee and his group companies initially. To secure the aforesaid loan, M/s. Jagdamba Realtors Pvt. Ltd. and assessee has entered into Sale Deed of Agricultural land on 17.12.2008 instead of mortgage deed. M/s. Jagdamba Realtors Pvt. Ltd. has shown the above (A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT transaction as sale in its Books of Accounts as Sale Deed was executed. M/s. Jagdamba Realtors Pvt. Ltd. will execute the purchase deed for the same amount as and when the full amount of loan will be repaid. The transaction was purely a loan transaction and sale deed was executed only for security measure. The mortgage deed was not executed due to reservation on recoverability of the amount through court process in case of default in repayment.
From the record we also found that the assessee had submitted letter dated 2.11.2011 to the Assessing Officer alongwith the letter dated 31.3.2009 received by the assessee from M/s. Jagdamba Realtors Pvt. Ltd. in which the said M/s. Jagdamba Realtors Pvt. Ltd. has stated as under:- “As a security to the aforesaid amount loans, the company was supposed to entered into Mortgage Deed but instead of that the Company has netered into Slae Deed on 17.12.2008 at the office of Joint Sub Registrar, Nagput No.1 vide Registration Number 08364-2008 with Aditya Yamsanwar for the agricultural land bearing Kh.No.70, Mouza- Khasarmari, Ph No.73, having an area of 2.14 Hector, Land Revenue Rs.7.06 yearly, held in Class-1 Rights, together with all trees, Shrubs, Passage, Right and all easementary rights appurtenant and belonging thereto, situated at Village Khasarmari, within limits of the Grampanchayat Khasarmari in Tahsil-Nagpur (Rural) District-Nagpur. It is hereby clarify that though a sale deed was entered, but the true nature of the transaction is to secure the aforesaid loan amounts and the aforesaid agricultural land is to be returned back by you after the repayment of loan This is for your record and information.”
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT Accordingly, it is not the purchase transaction as clarified by M/s. Jagdamba Realtors Pvt. Ltd. vide their letter dated 31.3.2009 addressed to the assessee and his group companies.
In view of the above, even if it is assumed that it was the purchase of agricultural land, even then payment of Rs.1.37 crores (1.57 crores - 20 lakhs) from the bank account of assessee as well as from his group companies were duly explained to the AO. Accordingly there is no justification for making any addition u/s 69 of the Act as unexplained investment.
We also found that to secure the loan, the assessee registered the agricultural land in its name and accordingly, there is no purchase of property. The assessee has entered into sale agreement instead of mortgage deed due to reasons as explained in above paras and accordingly, all clause of the sale agreement are standard clauses incorporated in almost all the sale agreements of immovable property. With regard to AO’s objection that the name of Gayatri (New Bombay) Services Pvt. Ltd. and M/s. Indi.Com Pvt. Ltd. were not made part of the said agreement dated 17.12.2008, we found that these companies are the closely held companies where assessee and his family are the director and shareholder and the purpose of securing of loan by them is served by the assessee by covering their
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT loan amount in the so-called agreement. However, respective cheque numbers issued by M/s. Gayatri (New Bombay) Services Pvt. Ltd. and M/s. India.Com Pvt. Ltd. has been mentioned in the aforesaid Sale Agreement dated 17.12.2008 on page no.3&4 and the same were issued by those companies from their own Bank Accounts, which is not in dispute.
With regard to observation of AO that stamp duty for registration was paid by the assessee, we found that in fact, the stamp duty and registration charges were not borne by the assessee, but ultimately borne and paid by M/s. Jagdamba Realtors Pvt. Ltd. who has taken the loan from the assessee. The same can be seen from the copy of ledger account submitted by the said M/s. Jagdamba Realtors Pvt. Ltd. to the AO in response to notice u/s 131. In the ledger account of the assessee for the F.Y. 2008-09, a sum of Rs.6,28,010/- as stamp duty and Rs.30,030/- towards registration charges were debited. However, the said entry was reversed by M/s. Jagdamba Realtors Pvt. Ltd. on 1.4.2010 by crediting Rs.6,58,040/- to the assessee’s account (stamp duty Rs.6,28,010/- and registration fees Rs.30,010/-). Thus, it is clear that the expenses of stamp duty and registration charges were borne and paid by borrower, namely M/s. Jagdamba Realtors Pvt. Ltd.
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT 11.1 With regard to allegation of AO that M/s. Jagdamba Realtors Pvt. Ltd. had shown sale transaction in its books, we found that as per reply given by the said M/s Jadgamba Realtors Pvt. Ltd. in response to notice u/s 131 in which they have clarified that the company has shown the above transaction as sale in its books of accounts as sale deed was executed, the assessee will execute purchase deed for the same amount as and when the full amount of loans will be repaid.
11.2 With regard to observation of the AO that M/s. Jagdamba Realtors Pvt. Ltd. was silent when it was specifically requested to furnish the details of repayment of so called loan transactions, we found that M/s. Jagdamba Realtors Pvt. Ltd. have submitted the ledger accounts for the Financial Years 2008-09, 2009-10&2010-11 in response to the notice u/s 131 in which it is clearly shown that the loan of M/s. Gayatri (New Bombay) Services Pvt. Ltd., M/s. India.Com Pvt. Ltd. and assessee were repaid during the next Financial Years. Further the assessee had also submitted during the assessment proceedings vide letter dated 2.11.2011 that loan of Gayatri (New Bombay) Services Pvt. Ltd. and India.Com Pvt. Ltd. has been fully repaid and assesseee’s loan has been partly repaid in next Financial Years. We also found that assessee had also filed bank statement of M/s. Gayatri (New Bombay) Services Pvt. Ltd., M/s. India.Com Pvt. Ltd. showing repayment of loan by M/s. Jagdamba Realtors Pvt. Ltd., before the AO.
(A.Y. 2009-10) Aditya Bhaskar Yamsanwar Vs.ACIT
In view of the above documentary evidences we do not find any merit in the action of AO for making addition u/s 69 on account of unexplained investment of Rs.1,51,58,460/-.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 13th July, 2016
Sd/- Sd/- (RAM LAL NEGI) (R.C. SHARMA) न्मायमक सदस्म / Judicial Member रेखा सदस्म / Accountant Member भुंफई Mumbai; ददनांक Dated : 13.07.2016 Ps. Ashwini आदेश की प्रनिलऱपि अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent 2. आमकय आमुक्त(अऩीर) / The CIT(A) 3. आमकय आमुक्त / CIT - concerned 4. ववबागीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, 5. Mumbai गार्ड पाईर / Guard File 6. आदेशधिुसधर/ BY ORDER,