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Income Tax Appellate Tribunal, DELHI BENCH “H”: NEW DELHI
Before: SHRI I.C.SUDHIR & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is preferred by revenue for the Assessment Year 2007- 08 against the order of the ld. CIT (A)-XXVII, New Delhi dated 02.02.2011, where the learned Commissioner of Income-tax (Appeals) has deleted the addition of Rs.1,01,61,987/- received as advance for booking of plots from various parties and Rs.11,50,000/- on account of disallowances of commission expenditure. 2. The following grounds of appeal were raised by the revenue:
1. On the facts and circumstances of the case, the Ld, CIT (A) has erred both in facts and law deleting an addition of Rs.1,01,61,987/- made by the AO U/s 68 of the I.T. Act, 1961 received as advance for booking of plots from various . parties as the assessee could not established the identity, genuineness of the transactions and creditworthiness of the creditors in ignoring the facts that the AO has specifically asked to prove the genuineness of the transaction and creditworthiness of the creditors could be ascertained, however, assessee has failed discharge his primary onus to submit this document and proving the creditworthiness.
2. On the facts and circumstances of the case, the Ld. CIT(A) has erred both facts and law deleting an addition of Rs.11,50,000/- as commission, moreover out of total commission of Rs.11,50,000/-, Rs.5,00,000/- pertain to partnership firm of the assessee and also the Page 2 of 9 assessee to fail to prove that the recipients render any service to get the commission.
3. The CIT(A) has ignored the provision laid down under section 68 of the I.T. Act while deleting the addition.
4. The CIT(A) has deleted the additions on the basis fresh documents filed during appellate proceedings and without calling the remand report form the AO, which is violation of the provision laid down Under Rule 46A of the I.T. Act.
5. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the hearing of this appeal.
3. The brief facts of the case are that the assessee is an individual engaged in the business of real estate. For the relevant Assessment Year the assessee filed return of income on 01.11.2007 declaring total income of Rs.9,62,250/- and assessment u/s 143(3) was made by the AO on 29th December 2009. During the course of assessment it was found that the assessee has received Rs.1,12,61,702/- as advance against sale of plot. The AO asked the assessee to furnish the identity, creditworthiness and genuineness of these transactions. The assessee submitted copy of the account along with the address, PAN and confirmation of those parties. Based on this confirmation out of those advance on account of several persons to the extent of Rs.1,01,61,687/- addition u/s 68 of the act was made by the AO. Further the assessee has paid commission of Rs.11,50,000/- for which the assessee filed only the copy of account on commission expenses. Summons were sent to the recipients. The AO further asked the assessee to prove identity and genuineness of the payment as summons issued return back as left. Before the AO the assessee explained that TDS was required to be deducted on these payments. And same has been deducted. Therefore the as assessee failed to justify the commission expenses AO disallowed the same.
4. Aggrieved by this assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) after calling the remand report from the AO who submitted such report vide letter dated 30th September 2010 and deleted the addition on account of advance against sale of ACIT V Smt Vijay Bansal Page 3 of 9 plot of Rs.11,61,687/-. Regarding the commission expenses he further deleted the addition of Rs.11,50,000/- in absence of any enquiry made by AO as such commission has been paid by account of payee cheque. Against this revenue is appeal the revenue is before us.
5. Before us the ld DR submitted that the learned Commissioner of Income-tax (Appeals) has deleted the addition without conducting any enquiry himself and but has merely deleted the addition and therefore he requested that the matter be set aside to the file of AO. He further stated the learned Commissioner of Income-tax (Appeals) should have sent back to the AO for further verification when AO asked further time for conducting inquiry.
6. In response to this the assessee stated that for advance against sale of plot it has submitted a detailed chart before the AO where in subsequently the sales have been booked and the consequent profit has been booked and taxed. Further he submitted that complete confirmation of all the parties were submitted stating names, address, PAN of the parties and copies of the accounts from the books of the assessee. Therefore therefore addition has been rightly deleted. Regarding commission expenses his submission was that despite submitting the details of commission paid , AO has not made any inquiry, merely because the summons have come back unserved cannot lead to disallowance. Therefore he supported the order of CIT (A) .
We have carefully considered the rival contention and the orders of the lower authorities.
Regarding ground no 1 and 3, It is evident from the orders of the learned Commissioner of Income-tax (Appeals) as well as chart submitted by the assessee that an amount of sales of the advance amounting to Rs.6611687/- sale has been booked in subsequent years. Regarding the other credits the assessee has submitted confirmation of those parties showing address, PAN No. etc. The 13 parties with respect to which addition has been made the learned ACIT V Smt Vijay Bansal Page 4 of 9 Commissioner of Income-tax (Appeals) has given its findings after obtaining the remand report from the AO. Additional evidences were also considered in the form of affidavit along with identity of the persons who booked the plot with the assessee and evidences in respect to sale of plots in subsequent years to these parties. In the remand report the AO has contended that these documents should to be admitted as additional evidences and further submitted that in some of the cases the cheques have not been given by the persons who have booked the plots but in some cases by the father of the depositor or his relatives etc. In his remand report AO could not controvert that advances against sale of plot of land has been converted in to sale by executing the conveyance deed by the assessee in favour of those persons. Regarding commission expenses AO submitted that assessee has not submitted any details. Ld Commissioner after affording opportunity to AO admitting the additional evidences has held as under :- “6. Determination : I have carefully gone through the submissions made by the appellant as well as the findings of the Assessing Officer. A reading of the assessment order Page- 2 Para 3.1 shows that the appellant assessee has submitted the copies of the ledger account, PAN number and the addresses of all the persons from whom the appellant has taken advances against the booking of the flats. This goes to show that the appellant has discharged its initial onus. The assessee is in the business of booking and selling of plots. Vide the remand report called for the AO took plea that the evidences submitted by the assessee are an afterthought. But the fact is that the appellant has during the course of assessment proceedings itself furnished the full particulars of advances from the various persons who booked the plots. 6.1. It is a different matter as to how the bookings were sourced. The fact that the appellant received the amounts for booking the flats is a sufficient ground for the Revenue to take on record the genuineness of the transaction. In fact the AO summoned some of ACIT V Smt Vijay Bansal Page 5 of 9 the persons at random in her discretion who booked the flats and all those people have confirmed the fact of booking of the plots. This being the case, the AO did not give any show cause or call for any further details from the appellant if it was considered that the said bookings were to be viewed as suspect. 6.2. The submissions made by the appellant were forwarded to the AO for his comments. But the "AO did not examine the same and stated that they are after thought explanations. However the fact of the matter is that the appellant has brought out in his written submissions as well as additional evidence filed, including affidavits from each persons the whole gamut of the issue of advances received from the customers for booking of the flats. I have also called for the assessment records and a perusal of the submissions made as well as the details available in the assessment records shows that the AO has not applied his mind in the right perspective in dealing with the above issue of advances from Customers. 6.3. For the purpose of invoking section 68, it is the primary onus is on the assessee to give explanation about the identity and genuineness of the transactions. A recent decision of the Hon'ble Delhi High Court in the case of Oasis Hospitality, these terms have been adequately explained. The submission of complete address, identification document, PAN number are sufficient proof of the existence of the persons. This supported with the books of accounts & bank statements showing evidence of transactions having taken place through normal banking channels, the genuineity of transactions cannot be doubted. Once the appellant had given these primary details of the existence of the persons advancing money, the primary onus cast upon the appellant is discharged. However, on the basis of these submissions by the appellant, it was for the Assessing Officer to make further enquiries, if he so desires. In the present case such enquiries were randomly made in some cases and nothing adverse came out of such enquiries. In such situation, when Assessing Officer opted for not carrying out any further enquiries in other remaining cases, no adverse inference is called for against the appellant in an arbitrary manner. Even in the case of Gulshan Gupta, where the enquiries ACIT V Smt Vijay Bansal Page 6 of 9 were made, without any adverse finding, the Assessing Officer had proceeded to make additions in his case which is bad in law. 6.4. The appellant has during the course of appellate proceedings furnished the details of the various advances received as follows :- S. No. Name of the party Addition made Evidences filed 4,22,327 1. Tilak Raj Kumar Address, PAN, Confirmation, booking forms, ledger accounts showing sale in subsequent year 2. Gulshan Gupta 2,50,0007- Address, PAN, confirmation, Photo of the applicant, 3. Saroj Gupta 2.50.000/- -do- 4. Gurminder Singh 15,37,360/- Address, Email US tax Registration No. , Booking form, photo of applicant, passport copy, Driving license, US citizen Card 5. 2,50,000/- Sadhna Bhatt Address, PAN, booking form & ledger account showing sale in subsequent year.
Sunil Kumar Kohli 3,00,000/- -do- 7. Amit Singla 3,62,000/- -do- 8. Amit Goel 6,50,000/- Address, Ledger account, PAN, confirmation & ledger showing money received from his father 9. Prem Singh 4,40,000/- Address, PAN, booking form Dhingra & ledger account showing sale in subsequent year.
Pramod Goel 5,00,000/- Transfer from his father's ACIT V Smt Vijay Bansal Page 7 of 9 account Mr. Vijender Goel 11. Vijender Goel 33,00,000/- Address, confirmation, PAN, ledger a/c showing transfer to his two sons Pramod Goel & Amit Goel along with sale of plot in subsequent year 12. Vickey Malhotra 1,00,000/- Booking form, address, PAN 15.00.000/- 13. Omexe Ltd. Address, PAN, confirmation showing a part as income 6.5. The appellant has submitted affidavits from all the above persons, except Gurminder Singh, who is resident of USA. An examination of the above details along with the submission made by the appellant as well as the facts submitted during the course of assessment, amply shows that the sum of Rs. 1,01,61,687/- made by the AO vide para 2.6 of the assessment order by treating the same as deemed income is erroneous and arbitrary. The AO has not come any findings based on enquiry. The adverse inference drawn by the AO has no basis and is bad in law. Therefore I hold that the above sums are properly sourced and explained by the appellant in detail which has not been properly appreciated by the AO. Accordingly, lam convinced that the impugned addition made of Rs.1,01,61,687/- deserves to be deleted.” We do not find any infirmity in the order of CIT (A) on this count and therefore confirm the order of CIT (A) in deleting the addition of Rs 10161987/- on account of advance against sales. In the result ground no 1 of the appeal is dismissed.
ACIT V Smt Vijay Bansal Page 8 of 9 9. Ground No 2 is against the deletion of disallowance on account of commission expenses of Rs 11,50,000/-. Commission has been paid by assessee to two parties and submitted the copy of commission expenses account, their address and PAN. The commission is paid through account payee cheques. The summonses were issued to them returned unserved as “ left’ remark assessee could not produce them. Assessee submitting before CIT (A) that this commission income is amount received as commission income of Rs 26 lacs from Omax Limited and out of that commission expenses have been incurred. Admittedly assessee did not submit the bill of the commission expenditure and also did not prove that expenses have been incurred by the assessee wholly and exclusively for the purposes of the business of the assessee. CIT (A) has deleted the addition on the reasoning that TDs is deducted at sources, payment is through cheque and assessee has also received income. In our opinion all these three reasons are irrelevant for deciding an issue whether the expenditure incurred by the assessee is for the purposes of the business. Expenditure which is disallowable u/s 37(1) also can be made through account payee cheques and subject to TDS . There is no correlation established by the assessee that income received of commission is in fact on account of services rendered by the persons to whom the commission has been paid. In our view irrespective of income, assessee is obliged to prove that expenses of commission incurred by the assessee is on account of services rendered by those assessee and such expenditure is whole and exclusively incurred for the purposes of the business of the assessee. Before CIT (A) assessee submitted that commission has been paid for purchases of land at para no 8 (ii) of the order of CIT (A). It was also submitted that assessee has received the commission from Omax Limited for purchase of land. It is not established that was that same land for which commission was received by the assessee from Omax Limited for which assessee has paid commission to those ACIT V Smt Vijay Bansal Page 9 of 9 parties. These details have not been examined by AO as well as CIT (A). Therefore in absence of this inquiry we are constrained to reverse the finding of CIT (A) and set aside this ground of appeal to the file of AO to decide it afresh after granting proper opportunity to the assessee. This ground of appeal of revenue is allowed accordingly.
10. Ground no 4 of the appeal is against the admission of additional evidence by the CIT (A) without calling for the remand report. We have pursued the order of CIT (A) and could find that CIT (A) has obtained the remand report from the assessing officer. Therefore factually this ground is erroneous and hence dismissed.
11. In the result appeal of the revenue is partly allowed.