KAVIT CORPORATION,VADODARA vs. INCOME TAX OFFICER, WARD - 1(2)(3), VADODARA, VADODARA

Aggrieved with the order of the AO, the assessee has filed an appeal before the First Appellate Authority, which was decided by the CIT(A) vide impugned order and the appeal of the assessee was dismissed. The assessee had filed certain additional evidences before the Ld. CIT(A) on which remand report was called from the AO. After considering the submission of the assessee and the report of the AO, the Ld. CIT(A) confirmed the addition as made by the AO. It was also noticed by the Ld. CIT(A) that the assessee had made investment in another land during the year, the source of which also remained unexplained. Therefore, he enhanced the addition as made by the AO after allowing an opportunity to the assessee and the total addition in

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

Shri Karan Shah, Ld. AR appearing for the assessee submitted that no compliance could be made before the AO for the reason that notices were not received in timely manner. He explained that the show cause notice issued by the AO dated 25.11.2016 was received by the assessee on 01.12.2016 whereas the assessment order was already passed by the AO on 30.11.2016 itself. Thus, the assessee was not given sufficient opportunity by the AO to explain the investment. He explained that the all the relevant documents were furnished before the Ld. CIT(A) on which remand report of the AO was also obtained. As regarding the merits of the addition, the Ld. AR submitted that the assessee had purchased two lands for a consideration of Rs.1.40 crores and the assessee has paid a sum of Rs.20 lakhs only towards the purchase consideration and the balance amount of Rs.1.20 crores was shown as outstanding as sundry creditors. He further submitted that the sum of Rs.20 lakhs was paid out the capital contribution by Shri Jayesh Thakkar, partner of the firm, in support of which the copy of bank statement of Shri Jayesh Thakkar was brought on record. The Ld. AR submitted that the financial statement, copy of bank statement, confirmation of Shri Nand Co-operative Housing Soc. Ltd. and Shri Sharan Co-operative Housing Soc. Ltd. from whom lands were purchased and confirmation of the partner Shri Jayesh Thakkar was all

Per contra, Shri C. Dharni Nath, ld. Sr. DR submitted that the assessee neither filed its return of income nor the accounts of the assessee was brought on record. He had drawn our attention to the sale deed of the purchase of the properties brought on record in the course of this proceeding and submitted that the consideration of Rs.70,00,000/- each for the two properties was already paid by the assessee and no amount was shown as outstanding in the sale deeds.

We have carefully considered the rival submissions. The AO had made the addition of Rs.70,00,000/- in respect of unexplained investment in one land for the reason that he had information about one land transaction only and no compliance was made by the assessee before him. The assessee had filed additional evidences before the Ld. CIT(A) from which it transpired that the assessee had, in fact, purchased two plot of lands for Rs.70,00,000/- each. In the course of appellate

As regarding the source of investment, the assessee has submitted that the source was duly explained before the Ld. CIT(A). A copy of the sale deed has been brought on record before us. It is found that the assessee had purchased a plot of land from Shri Sharan Co-operative Housing Soc. Ltd. vide sale deed dated 19.07.2010 for a consideration of Rs.70,00,000/-. As per the sale deed the seller has acknowledged receipt of consideration of Rs.70,00,000/- in the following manner. Sr.No. Amount Cheque No. Bank and Branch 1. 20,00,000/- 102827 The Baroda City Co- operative Bank 2. 20,00,000/- 102828 Fatehganj Sakha, 3. 20,00,000/- 102829 Vadodara 4. 10,00,000/- 102830 Total Rs.70,00,000/- received in full

The another land was purchased by the assessee from Shri Nand Co-operative Housing Soc. Ltd. vide sale deed dated 19.07.2010 and as per the sale deed the consideration was received by the seller as under:

Thus, as per the two sale deeds the entire sale consideration of Rs.1.40 crores was acknowledged as received by the two sellers. On the other hand, the assessee has submitted that only a sum of Rs.20,00,000/- was paid to Shri Nand Co-operative Housing Soc. Ltd. and the balance sale consideration of Rs.1.20 crores was outstanding. The assessee had also filed a confirmation of Shri Sharan Co-operative Soc. Ltd. and Shri Nand Co-operative Soc. Ltd. showing outstanding of Rs.70,00,000/- and Rs.50,00,000/- respectively, in support of the land transactions. The Ld. CIT(A) had rejected the confirmations for the reason that the complete address of the parties and their PAN was not appearing in the confirmation. Apart from the deficiency in the confirmation as noted by the Ld. CIT(A), the basic issue to be considered is that no outstanding amount was shown in the two sale deeds. The amount of Rs.20,00,000/- paid to Nand Co-operative Housing Soc. Ltd. was encashed on 07.12.2010 i.e. much after the registration of sale deed on 19.07.2010. It thus transpires that the assessee had purchased the two pieces of land without making any payment to the sellers. It is inconceivable to believe that someone would sale his land without receiving any payment. No evidence has been brought on record by the assessee to establish that the sellers had sold their land without receiving a single penny from the

The assesse has submitted that the payment of sale consideration was made afterwards as and when the funds were available. It is found that the assessee has made payment of Rs.40,00,000/- in AY 2013-14 and Rs.10,00,000/- in AY 2014-15 to Shri Sharan Co-operative Housing Soc. Ltd. and the balance sale consideration of Rs.20,00,000/- was still not paid. Similarly, assessee had made payment of Rs.20,00,000/- in AY 2010-11 and Rs.20,00,000/- in AY 2013-14 and Rs.10,00,000/- in AY 2014-15 to Nand Co-operative Housing Soc. Ltd. and the balance amount of Rs.20,00,000/- was still outstanding. Thus the entire sale consideration has still not been paid after expiry of 14 years from the registration of sale deeds. No seller will sit idle for such an inordinate long period. The only explanation for non-action on the part of the sellers can be that they had already received the payments towards sale consideration at the time of registration of sale deeds.

The sale deeds and confirmation of the two sellers are found to be contradictory to each other. While as per the sale deeds the entire sale consideration was acknowledged as received, as per the confirmation the majority of amount is shown outstanding. Considering the fact that no amount was acknowledged as outstanding in the sale deeds, the

As regarding the addition of Rs.11,75,000/- in respect of stamp duty paid on purchase of two lands, this payment was made before the execution of the sale deed. The assessee had explained that this amount was paid out of loan of Rs.15,00,000/- taken from Pavitra Corporation on 16/07/2010. A copy of confirmation of Pavitra Corporation was also filed by the assessee. The ld. CIT(A) has not given any reason for rejecting the evidences as filed by the assessee. Similarly, the document registration charges of Rs.1,41,000/- and legal and security charges of Rs.2,30,256/- for purchase of two lands was made out of cash withdrawals from the bank account and the assessee had brought on record a copy of bank statement in support thereof. It is found that the Ld. CIT(A) had not given any comment on the evidences as brought on record by the assessee. Considering the totality of the facts and evidences as brought on record, we are of the opinion that no addition was called for in respect of stamp duty of Rs.11,75,000/-, document registration charges of Rs.1,41,000/- and legal & security charges of

In the result, the appeal filed by the assessee is partly allowed.