THE ITO, WARD-2, GANDHINAGAR vs. M/S. ISCON PROCON PVT. LTD., GANDHINAGAR

आदेश/ORDER

PER : RAMIT KOCHAR, ACCOUNTANT MEMBER:-

These two appeals in ITA Nos. 10 & 29/Ahd/2020 both for the assessment year:2014-15, and both filed by the Revenue before Income Tax Appellate Tribunal, Ahmedabad Benches, Ahmedabad for two different assessee’s , have arisen from the separate appellate orders dated 29.10.2019( Appeal no. CIT(A)/GNR/22/2017-18) passed by ld. CIT(A), Gandhinagar u/s 250 of the Income-tax Act, 1961 & appellate order dated 31.10.2019( Appeal no. CIT(A)/GNR/21/2017-18) also passed u/s 250 by Ld. CIT(A), Gandhinagar respectively , which appeal(s) before ld. CIT(A) in turn has arisen from the separate assessment order(s) , firstly dated 29.12.2017 passed by learned Assessing Officer u/s 143(3) rws 147 & secondly dated 28-12-2017 passed by the learned Assessing Officer u/s. 143(3) rws 147 of the 1961 Act, respectively. Since both these appeals although for two difference assessee’s raises similar issues, they were heard together and are disposed off by this common order.

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ITA No. 10/Ahd/2020 A.Y. 2014-15

“i) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in deleting the addition of Rs. 2,79,50,000/- made by the AO on account of unexplained cash u/s.68 of the Act." ii) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in admitting the additional evidences without drawing satisfaction on one or more of the circumstances laid down in Rule 46A of the I.T. Rules 1962, when the AO has given ample opportunities to the assessee to furnish the requisite details." ⅲ) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in admitting the additional evidence merely relying on the decisions without examining their applicability on the facts of the case of the assessee." iv) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in deleting the addition of Rs.2,54,76,650/- u/s.40A(3) of the Act." v) On the facts and circumstances of the case, the Ld. Commissioner of Income- Tax(appeals) ought to have upheld the order of the Assessing Officer." vi) It is, therefore prayed that the order of the Ld. Commissioner of Income- tax(Appeals) may be set aside and that of the Assessing Officer be restored. vii) The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary.”

ITA No. 29/Ahd/2020 A.Y. 2014-15

“i) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in deleting the addition of Rs.2,79,50,000/- made by the AO on account of unexplained cash u/s.68 of the Act. ii) "Whether, the Ld. Commissioner of Income-Tax (appeals) has erred in law and on facts in admitting the additional evidences without drawing satisfaction on one or more of the circumstances laid down in Rule 46A of the I.T. Rules 1962, when the AO has given ample opportunities to the assessee to furnish the requisite details."

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iii) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in admitting the additional evidence merely relying on the decisions without examining their applicability on the facts of the case of the assessee. iv) "Whether, the Ld. Commissioner of Income-Tax(appeals) has erred in law and on facts in deleting the addition of Rs.2,72,95,650/- u/s.40A(3) of the Act." v) On the facts and circumstances of the case, the Ld. Commissioner of Income- Tax(appeals) ought to have upheld the order of the Assessing Officer. vi) It is, therefore prayed that the order of the Ld. Commissioner of Income- tax(Appeals) may be set aside and that of the Assessing Officer be restored. vii) The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary.”

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Officer u/s 147 after recording of reasons for reopening and after obtaining satisfaction and approvals from the Competent Authorities. Notice u/s. 148 was issued by the AO on 17-11-2016 , which was claimed by the AO to have been duly served on the assessee on 19.11.2016. The assessee filed reply to the aforesaid notice, and submitted that the return of income filed u/s. 139(1) declaring loss of Rs. 48,953/- be treated as the return of income filed in pursuance to notice issued u/s. 148 of the Act. The assessee sought from the AO reasons recorded for reopening of the assessment u/s 147, which were provided by the AO to the assessee. Notice u/s. 142(1) along with questionnaire was issued by the Assessing Officer to the assessee. During re-assessment proceedings , the assessee raised objection to the re- opening of the concluded assessment. The assessee claimed that it has received large amount of booking advance in cash towards booking of bungalows in the proposed residential scheme ‘Brij Residency’. The assessee submitted copies of group summary of booking advances of 12 parties , for total sum of Rs. 2,79,50,000/-, notarized banakhats(sale to agreement without possession of property) executed by two sellers i.e. Director of the assessee company and Director of Iscon Procon Pvt. Ltd and the purchasers, for the booking advance received by the assessee company. The assessee also submitted its ITR acknowledgement, statement of total income and copies of Form no. 26AS, 6th annual report of the assessee company, auditor report dated 30.08.2024, audited Balance Sheet , Profit and loss account, Notes No. 1 to 18 annexed to the audit report, bank book, cash book, sale deeds bearing registration no. GDR-6879-2013 of Sub- Registrar, Gandhinagar office on 13th May, 2013 etc. were furnished. The assessee submitted details of advance booking as under:-

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On 8th February, 2017, the letter was received by the Assessing Officer from the Director of the assessee company that return of income u/s. 148 was e- filed on 07-02-2017. The Objections raised by the assessee company against reopening was disposed off and rejected by the Assessing Officer , by passing a speaking order on 08-02-2017 , which was claimed by the Assessing Officer to have been duly served on assessee on 09-02-2017. The assessee being aggrieved by the reasons recorded by the AO for reopening and disposal of objections, filed Special Civil Application before the

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Hon’ble Gujarat High Court on 07th March, 2017 (Stamp No.(SPL CA) No. 3682 of 2017) challenging the reopening of the assessment proceedings u/s 147 , and prayers were made by the assessee before the AO that the re- assessment proceedings be not proceeded with further till the disposal of the said special civil application. The Assessing Officer observed from the website of Hon’ble Gujarat High Court that the Special Civil application bearing no. 6316 of 2017 filed by the assessee was disposed off by Hon’ble Gujarat High Court vide oral order on 27th March, 2017 and the request of the assessee to quash and set aside the notice issued by the AO u/s 148 for reopening the assessment was rejected , and the Special Civil Application of the assessee was dismissed by the Hon’ble High Court of Gujarat. Thereafter, the AO issued notice u/s. 143(2) dated 14-08-2017, selecting the return of income filed on 07.02.2017 by the assessee for scrutiny assessment. Statutory notices u/s 142(1) were also issued by the AO. The assessee was asked by the AO to produce documents, accounts and any other evidences which the assessee may rely in support of the return of income filed by the assessee. The Assessing Officer also directed the assessee to produce the seller of the land who sold land to the assessee as well depositors who booked the bungalows in the scheme of the assessee. The assessee could not produce for examination before the AO , the seller of the land from whom the assessee has claimed to have purchased the land in cash namely Sitaben Govabhai Rabari. The assessee filed written submissions. The assessee relied upon the confirmation deed(Kabulat no lekh) in which the seller of the land has confirmed the payment of sale consideration. The assessee also failed to produce the depositors who gave advance for booking of plots/bungalows . The Assessing Officer issued show cause notice dated

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15.12.2017 to the assessee. The assessee was asked to produce the seller of land for examination along with bank account statement and ITR details and other details of the receipt for verification of genuineness of transaction of purchase of land by payment of cash to the tune of Rs. 2,54,76,650/- . The Assessing Officer also show caused the assessee as to why the cash payments to the tune of Rs. 2,54,76,650/- for purchase of land be not disallowed u/s. 40A(3) of the Act. Similarly, the Assessing Officer asked the assessee to produce the depositors who have provided cash towards advance booking amount of Rs. 2,79,50,000/- in order to verify the genuineness of the transaction and the creditworthiness of the persons who have advanced the booking amount. The AO asked the assessee to furnish identity proof, bank statements, other evidences/documents of depositors to prove creditworthiness of the depositors and to prove genuineness of the transactions. The assessee was not able to produce the seller of the land, Sitaben Govabhai Rabari, who sold land to the assessee in cash. The assessee also expressed its inability to produce Bank details and ITR details of the seller, and the assessee reiterated the reliance placed upon the registered confirmation dated 21-08-2017 in which receipt of consideration in cash was affirmed in the office of Sub-registrar of Gandhinagar. So far as the disallowance u/s. 40A(3) is concerned, the assessee submitted that there is no impact of purchase of land in the P & L and hence it is not applicable. So far as depositors, the assessee relied upon the notarized banakhat , proving the identity of the depositors and it is stated that the advances have been utilized for making payment to Sitaben Govabhai Rabari for purchasing the land. The assessee , however, failed to produce the depositors for verification , and the assessee relied upon Banakhat which is registered

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before notary. The Assessing Officer observed that the assessee is able to prove the transfer of land from Sitaben Govabhai Rabari, but however, the genuineness of cash transactions could not be proved as neither Sitaben Govabhai Rabari (seller of land) nor the persons from whom the assessee claimed to have received booking amount stood proved by the assessee. The genuineness of transaction of cash payment of Rs. 2,54,76,650/- to Sitaben Govabhai Rabaro has not been proved. The AO further observed that similarly genuineness of cash transactions with the depositors and creditworthiness of the depositors to invest in scheme of the assessee , could not be proved by the assessee. The AO also observed that the assessee has not reported as to further outcome of the bookings of these depositors. The Assessing Officer observed that all the banakhat’s(sale to agreement) are notarized on 29.04.2013 and 01.05.2013, and are valid for 14 months only. Neither the amounts of advance were returned to the depositors , nor the sale deeds were produced even after 4 years have elapsed when the amount of bookings were received. Thus, the Assessing Officer observed that the banakhat’s(sale to agreement) are fake, defective and not reliable. The Assessing Officer observed that the assessee has entered into development agreement for this scheme and after completion of construction , two units were sold in the subsequent year to other parties(other than those from whom the booking advances were received), which also put question of the so called bookings received by the assessee. No reasons have been specified as to the non executing of the sale deed of the depositors. The AO observed that the assessee could not prove the nexus of cash transactions i.e. receipt of booking advances from the depositors and payment of the cash to seller of the land Sitaben Govabhai Rabari. The AO observed that both the cash

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transactions are sham transactions i.e. receipt of booking advance from depositors as well payment of cash to the seller of land , Sitaben Govabhai Rabari, and are devised to bring the unaccounted money of the assessee into books of accounts of the assessee, to carry the business of the assessee. Therefore, the Assessing Officer made addition to income of the assessee to the tune of Rs. 2,79,50,000/- claimed to have been received from the depositor as per books of accounts of the assessee as not been proved by invoking provisions of Section. 68 of the Act. Similarly, the Assessing Officer observed that the assessee has claimed cost of purchase of land and transaction is in cash , therefore it is liable for disallowance in terms of provisions of section 40A(3) of the Act, and hence cash payment towards land of Rs. 2,54,76,650/- was disallowed by the AO, and added to the income of the assessee u/s. 40A(3) of the Act.

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could not be produced during the course of reassessment proceedings. The assessee submitted copy of Annual Report and relevant ledger account for financial year 2017-18 , showing income arising from sale of plots of land/ bungalows to four parties were also enclosed as additional evidences before ld. CIT(A). The assessee prayed before ld. CIT(A) to admit additional evidences. The ld. CIT(A) admitted the additional evidences, and comment/ remand report was called for by ld. CIT(A) from the Assessing Officer. 4.2 The Assessing Officer submitted its remand report dated 12/07/2019 before ld. CIT(A), as under:- “2. The background of the case leading to additions is as under:- (i) During the assessment proceedings of Shri Bhavin M. Patel (Director of Iscon Procon Pvt. Ltd.), for A.Y.2014-15, it was noticed that the assessee company (Chehar Reality Pvt. Ltd.) had made substantial payment of Rs.2,64,88,300/- (½ share of the total payment of Rs.5,29,76,600/- made alongwith another company viz. Iscon Procon Pvt. Ltd.) for purchase of immovable property i.e. non- agriculture land for residential purpose, at Block No./Survey No.284/B/4, having area of 10724 sq.mtrs. at Ambapur village of Gandhinagar district. Therefore, proof of source of investment in the said property viz. bank statements, bank book, cash book and details and documents of funds borrowed for the purchase of property, were required from the director of the assessee company vide letter dtd.16.9.2016 and it was noticed that the assessee company has made entire payment of Rs.2,64,88,300/- in cash, for purchase of aforesaid land, source of which were not found to be justified, therefore, case of assessee company (Chehar Reality Pvt. Ltd.) was reopened. (ii) During reopened assessment proceedings, the assessee company claimed to have received booking advances of Rs.2,79,50,000/- in cash towards booking of bungalows in the proposed residential scheme 'Brij Residency' for which following details /documents were furnished :-

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(iii) It was noticed that copy of notarized banakhats were unregistered sale to agreement without possession of property executed by two sellers i.e. Shri Krunal V. Desai, as director for Chehar Reality Pvt. Ltd. and Shri Bhavin M. Patel, director as director for Iscon Procon Pvt. Ltd. with the purchasers.

(iv)Notice U/s.142(1) & 129 of the Act was issued & served on 22.11.2017 requiring details and production of seller of land to the assessee and the depositors who have booked the bungalows in the scheme of the assessee, with their details for verification before the Assessing Officer on 30.11.2017. Only written submissions were filed on 30.11.2017. The assessee company could not produce the seller Sitaben Govabhai Rabari, for examination from whom the assessee company claimed to have purchased the land in cash. The assessee company relied upon the confirmation deed (Kabulat no lekh) in which she has confirmed payment of sale consideration. The assessee affirmed to produce depositors in the first week of December, 2012(sic. 2017) however the assessee could neither produce seller of land to whom payment of Rs.2,64,88,300/- was claimed to have been in paid in cash by the assessee company nor produced 12 depositors from whom booking advance Rs.2,79,50,000/- was claimed to be received in cash. Therefore, show cause notice was given to the assessee company for addition of Rs.2,54,76,650/- as the assessee company could not prove the genuineness of transaction of cash payment of Rs.2,54,76,650/- to Sitaben Govabhai Rabari and also violated the provisions of section 40A(3) of the Income-tax Act, prohibiting cash transaction above Rs 20,000/- otherwise than by an account payee cheque drawn on a bank or account payee bank draft, for any business expenditure, liable to disallowance of deduction of expenditure of Rs.2,54,76,650/- U/s.40A(3) of the Income-tax Act, 1961 The assessee company was also given show cause for addition of Rs. 2,79,50,000/- U/s.68 of the IT Act for failure to prove the genuineness of transactions (claimed to be have been made in cash with the 12 persons) and also for failure to prove the creditworthiness of 12 persons (from whom assessee company has claimed to have received booking advances of Rs.2,79,50,000/-). After considering the written reply given to the show cause notice as discussion in para 13 of assessment order, above two additions/disallowances were made after detailed discussion in para 14 to 18 of assessment order, which may kindly be perused by Ld CIT(A).

3.1 After assessment, the assessee filed appeal against the assessment order and filed additional evidences before Ld. LD.CIT (A) which are forwarded to this office by Ld.CIT (A) vide letter No. CIT(A)GNR/Remand Report/2018-19 dtd. 14.12.2018 as per Rule 46A. The appellant (hereafter mentioned as assessee company) has submitted that the assessee company alongwith other co-owner viz. Iscon Procon Pvt. Ltd. purchased land and planned to develop/build residential plots &bungalows through developer viz. M/s Ratnamauli Developers. It is claimed that since the planning was final, the assessee company and co-owner started accepting booking advances. The assessee company now states in appeal

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that after finalization of assessment order of A.Y.2014-15 under dispute, sale agreement for residential plot & bungalows has been executed with four parties out of twelve parties and with rest of the eight parties cancellation deed has been executed, hence these evidences could not be produced before A.O. during assessment

3.2 The assessee company has made arguments for admission of additional evidences under rule 46A which are examined by the undersigned and found to be not acceptable as per comments given below:-

i) At para 8 of the written submission for producing additional evidences, as the assessee company states that as per clause (a) of Rule 46A, the AO. has indirectly refused to take cognizance of vital evidences having material bearing on the issue.

In this regard, it is to reply that when the assessee company had not even executed sale deed/cancellation deed before finalization of assessment, how the assessee company is claiming that A.O. has refused to take cognizance of vital evidences having material bearing on the issue. Thus, the admission of additional evidences on this ground is objected by the undersigned.

ii) At para 9 & 10 of the written submission for producing additional evidences, the assessee company states that as per clause (b) & (c) of Ride 46A, the assessee company was prevented by sufficient cause from producing evidences (relevant to additions) as the sale deeds/cancellation deeds were executed after assessment.

In this regard, it is to reply that the assessee company all the banakhats (sale to agreements) are notarized on 29.4.2013 / 1.5.2013 were executed and as per conditions mentioned therein banakhat were valid for the period of 14 months only. After verification of banakhats, observation was made in the assessment order at para 15 that the banakhats (sale to agreement) were found to be fake, defective and not reliable as neither the assessee company had reported to have returned the amount of advance to the depositors nor the sale deed of the claimed depositors have been reported even after four years since 29.4.2013 of so called booking till finalization of assessment Le. 29.12.2017. Thus, the assessee company was moved by the observation of A.O. and tried to justify the booking advances by execution of 8 cancellation deeds and 4 sale deeds. Thus, there is no sufficient cause that prevented the assessee from producing the evidences. Execution of 4 sale deeds & 8 cancellation deeds are mere attempt of the assessee company to justify the unreliable booking advances. Thus, the admission of additional evidences on this ground is objected by the undersigned.

iii) At para 11 of the written submission for producing additional evidences, the assessee company states that as per clause (d) of Rule 46A, the assessee. company

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was not given sufficient opportunity by the AO. during the assessment proceedings.

In this regard, it is to reply that the sequence of events of assessment of issue of notices and opportunities given to the assessee of producing documents/ evidences/being heard are as under :-

1) Notice U/s.148 of the Income-tax Act, 1961 (hereinafter referred as 'the Act") was issued to the company on 17.11.2016 duly served in person on 19.11.2016.

2) As the assessee company filed reply on 1.12.2016 that ITR filed Us. 139(1) should be treated as ITR filed U/s. 148. Therefore, reasons recorded for reopening were provided to the assessee and Notice w/s.142(1) of the Act, 1961 was issued on 24.01.2017 alongwith questionnaire. A.R. attended on 6.2.2017 and raised objection on reopening of assessment and filed claim of receipt of booking advances. Next hearing was fixed on 16.2.2017. The objection raised by the assessee company against the reopening was disposed and rejected by passing speaking order on 8.2.2017 by the ITO, Ward-1. Gandhinagar, duly served on 9.2.2017. The assessee company informed on 14.3.2017 that reopening is challenged by filing SCA in Hon'ble Gujarat High Court on 7.3.2017 and requested not to proceed the assessment proceedings further till disposal of said special civil application. Therefore, assessment proceedings were not proceeded further. It was noticed that the Hon'ble Gujarat High Court had dismissed the SCA of assessee on 27.3.2017 however assessee company did not responded till issue of subsequent notice.

3) Thereafter, Notice U/s.143(2) of the Act was issued by the undersigned, 14.8.2017, selecting the return of income filed by the assessee company on 7.2.2017 for scrutiny and the assessee was given opportunity to the assessee to produce any documents, accounts and any other evidence which the assessee may rely in support of return of income filed by the assessee company. The notice U/s.143(2) of the Act did. 14.8.2017 was duly served upon the assessee company on 14.8.2017 and hearing was fixed on 24.8.2017. In response to Shri Bijal Gandhi, CA, AR attended on 4.9.2017. No written reply/details were filed in support of return of income.

4) On 22.11.2017, notice U/s 142(1) & 129 of the Act was issued duly served on 22.11.2017 upon the assessee, requiring details from the assessee and also requiring production of seller of land to the assessee and the depositors who have booked the bungalows in the scheme of the assessee, with their details for verification by the Assessing Officer on 30.11.2017. Written submission were filed on 30.11.2017. The assessee could not produce the seller Sitaben Govabhai Rabari, for examination, from whom the assessee has claimed to purchase the land in cash The assessee relied upon the confirmation deed (Kabulat no lekh) in

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which she has confirmed payment of sale consideration. The assessee affirmed to produce depositors in the first week of December, 2012.

5) After verification of the written submission, and the assessee failed to produce seller and depositors, show cause notice was issued to the assessee on 15.12.2017 duly served upon the assessee on 15.12.2017 requiring reply of the assessee on 22.12.2017.

6) In response to the show cause notice, Shri Bijal Gandhi, AR attended on 21.12.2017 and furnished reply to the show cause notice.

In reply to SCN, he produced audit report as per which Rs.47,400/- is incurred towards purchase of sand bricks and mise. expense was pertaining to earlier year.

As regards, production of Sitaben Govabhai Rabari, seller of land to assessee, it was stated that assessee is unable to produce her for verification or furnish her bank details/ITR details and reiterated the reliance placed upon the registered confirmation deed did 21.8.2017 in which receipt of receipt of consideration in cash is affirmed in the office of Sub-registrar of Gandhinagar

As regards, disallowance U/s. 40A(3) of the Act is concerned, it is stated that there is no impact of purchase of land in the P&L account, therefore, it is not applicable. As regards depositors, assessee relied upon the notarized banakhat, proving the identity of the depositors and it is stated the advances have been utilized for making payment to Sitaben Govabhai Rabari in purchasing the land.

However, as regards production of depositors, assessee could not produce them for verification and assessee relied upon the banakhat which is registered before notary

7) After considering the reply, assessment was finalized on 29.12.2017. Thus, the assessee was given ample opportunity from 19.11.2016 to 29.12.2017 however the assessee disputed the reopening and did not furnished the required details/documents/evidences within the available time.

Thus, the argument of assessee company that the assessee company was not given sufficient opportunity by the A.O during the assessment proceedings is not correct and requires to be rejected. Therefore the admission of additional evidences on this ground is objected by the undersigned.

3.3 As regards comments admissibility of additional evidences on merits are concerned, it is found it is not even worth referring to the Assessing Officer for comments and the addition should have been confirmed without waiting for remand report. However, as required after perusal of additional evidences, enquiries were conducted and summons U/s.131(1) of the Income-tax Act, were

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issued on 23.1.2019 to the 12 persons from whom the assessee claimed to have received booking advances in cash attend before the undersigned to examine / record their statement on oath and they were also required to furnish following details/documents on 4th to 6th February, 2019:-

ii) Identity proof/copy of PAN Card & copy of ITR (iii) Nature of business activity/ income with supporting documentary evidences iv) Books of accounts, audit report (if apply) v) All bank passbooks/bank account statements of bank accounts held individually or jointly. vi) Details of movable & immovable assets held individually or jointly with documentary evidences vii) Nature, purpose, confirmation and details alongwith documentary evidences of transactions made with assessee company. viii) Documentary evidences of source of investment in assessee company for the year under consideration.

3.4 The summary/comments on the details available as per cancellation deed and the details / information gathered from enquiry conducted by issue of summons and the response/details received, are given below :-

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3.6 It is noticed from the written submission filed before LD.CIT(A) that out of 12 advance bookings, only 4 sales are stated to be executed and sale is claimed to be disclosed in ITR for AY 2018-19. The claim of the assessee can only be properly examined if the ITR is selected in CASS for complete scrutiny or the ITR is allowed to be selected in manual selection. 3.7 It is noticed that in the written submission before LD.CIT(A), the assessee has furnished copy of audit report with audited balance sheet & P&L account for the year ending 31.3.2018. It is noticed that the assessee has claimed current liabilities of Rs. 1,98,75,000/- as on 31.3.2018 in comparison to that of Rs.2,79,50,000/- as on 31.3.2017 in respect of the booking advances under dispute. It is not believable that how the booking parties would wait for period of more than 4 years after advancing the booking amounts in F.Y.2013-14 without finalization of sale for the booked plots / bungalows. It is also not believable that they would wait for such a long period for return of advance by the assessee without making any dispute before local authority/ police/court/without lodging/filing complaint/FIR etc. for getting return of the advanced money. It is clear that the assessee company has utilized these parties as entry providers to introduce its undisclosed money received through undisclosed sources in the books of accounts to evade payment of tax on the undisclosed money. As per knowledge of the undersigned, looking to the nature of these fake transactions, the then LD.CIT(A) had referred this case to the Benami Property Unit to verify and taken action on these transactions as transactions made for benami property and hold the booking parties as benamidars and assessee company as the benami property beneficiary under the Benami Property (Prohibition) Act. It is noticed that during the enquiry proceedings before the undersigned only 1 attended out of 12 booking parties and after his examination on oath, no other parties attended to undergo examination and only written replies were received in the name of some of these booking parties in identical format / in similar manner. Therefore, the written replies are also appearing to be further devise / arrangement of the assessee to justify the claim of fake booking advances."

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4.3 The copy of Remand Report was forwarded by ld. CIT(A) to assessee, who submitted rejoinder to the remand report on 22.08.2019, in which it was submitted that the assessee along with Iscon Procon Pvt. Ltd. decided to go for residential project and therefore they purchased a piece of land in joint ownership from Sitaben Govabhai Rabari. The project is to be developed by Ratanmauli Developers. It was submitted that since everything was planned properly, the assessee and other co-owner started accepting booking advances for plot and bungalow. The assessee received Rs. 2,79,50,000/- from 12 parties for booking of bungalows , and in support thereof the assessee has placed on record copies of registered Banakhat. The assessee submitted that the Assessing Officer did not accept the submission made by the assessee during the course of re-assessment proceedings and made huge additions of Rs. 2,79,50,000/- u/s. 68 after holding that the assessee has not established identity, capacity, genuineness and creditworthiness of the booking paying advance parties. The assessee submitted that in all total 12 bookings of bungalows were accepted, out of which 8 bookings were cancelled while sale deed was registered with respect to 4 bookings, in the financial year 2017-18.The assessee submitted copies of the cancellation deed and sale deeds which are filed as an additional evidences, and submitted that since cancellation deeds and sale deed were entered into in the financial year 2017-18 subsequent to assessment order dated 28-12-2017 and same could not be placed on record before the Assessing Officer and hence the additional evidences are filed. It was also submitted by the assessee that the Assessing Officer has issued summons u/s. 131 to the 12 parties who deposited booking advance amount and it is only one party Shri Pravinbhai Rabari responded and attended before the

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AO, and statement was recorded by the Assessing Officer wherein he accepted that he had made advance booking of the bungalows and thereafter the cancellation deed was entered into on 24-10-2018. It was submitted by the assessee that although 11 parties did not appear before the Assessing Officer, they furnished their reply and confirmation which has not been held to be false by the Assessing Officer. The assessee submitted identity proof of the said lenders viz. election card, aadhar card, address proof which is sufficient to prove identity of the creditors. It was submitted that the AO has not denied the identity of the creditors. It is also submitted that genuineness and creditworthiness of the transaction is also proved as assessee has in fact received the amount from the said parties, and assessee has also placed on record name and address of the creditors, copy of confirmation, agreement to sale, cancellation deed, sale deed to prove genuineness and creditworthiness of the transaction. Hence the assessee has discharged its onus. The assessee submitted that it has discharged initial burden to establish the identity, genuineness and credit worthiness of the creditor , and now burden is very heavy on revenue to bring on record cogent evidence to dislodge the same. The burden now stood shifted to Revenue. The assessee also submitted that it cannot be asked to prove the source of source. The assessee also relied upon judicial precedents which are enumerated by ld. CIT(A) in its order at page number 28-36.

4.4With respect to the disallowance u/s. 40A(3) on the ground that the assessee had made payment in cash of Rs. 2,54,76,650/- to Sitaben Govabhai Ravari to purchase the non-agricultural land and the same land has been shown as purchase as well as closing stock in the profit and loss account of

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the assessee. Hence, on that basis, the Assessing Officer made addition u/s. 40A(3). It was submitted that assessee has not claimed any expenditure with respect thereto and the said land was shown as purchase and the closing stock in the profit and loss account. The assessee prayed for deletion of the aforesaid addition. The assessee submitted that it has purchased the land from Sitaben Govabhai Ravari and had produced all documents before the Assessing Officer which were not found bogus by the Assessing Officer. The assessee also submitted its comments depositor wise, as under:-

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4.5 The assessee also stated before ld. CIT(A) , which is reproduced as hereunder:

“6 Insofar as the burden on the Appellant with regard to source to source is concerned, it is most respectfully submitted that it is settled proposition of law that the Appellant is not required to prove source to source. The Appellant further mast respectfully submits that the proviso to S68 as inserted by the Finance Act, 2012 w.e.f. 01.04.2013 is applicable where the credit entry in the books of accounts of the assessee is with respect to share capital, share application etc kind of transactions. For ready reference first proviso to S.68 as inserted by the Finance Act, 2012 w.e.f. 1.4.2013 is reproduced hereunder:

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money share capital, share premium or any such amount by whatever name called any explanation offered by such assessee-company shall be deemed to be not satisfactory unless-

(a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such name so credent and (b) Such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory” 7 The Appellant most respectfully submits that by way of insertion of proves to 5.68 of the Act in the Finance Act. 2012 wef 14.2013, an addition burden is casted upon on the assessee-company to prove source to source of investment At this juncture, a is pertinent to note that the said first proviso can be made applicable when the rum so credited consisted of share application money, share capital, share premium etc by the Company It will not be out of place to refer to the relevant extract of Memorandum explaining provisions of the amendment as inserted by the Finance Act, 2012 wef 01.04.2013 S.68 of the Act as under:

Section 68 of the Act provides that if any sum is found credited in the books of an assessee and such assessee either (i) does not offer any explanation about nature and source of money, or (ii) the explanation offered by the assessee is found to be not satisfactory by the Assessing Officer then, such amount can be tasted as income of the assessee.

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The onus of satisfactorily explaining such credits remains on the person in what hooks such sun is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added to the total income of the person Certain medical pronouncements have crewed doubts about the out of proof and the requirements of this section, particularly in cases where the sum which is credited an share capital, share premium etc. Judicial pronouncements, while recognizing that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company. The Courts have drawn a distinction and emphasized that in case of private placement of shares the legal regime should be different from that which is followed in case of a company seeking share capital from the public at large.

In the case of closely held companies, investments are made by known person. Therefore, a higher onus is required to be placed on such companies besides the general onus to establish identity and credit worthiness of creditor and genuineness of the section. This additional onus, needs to be placed on such companies to also prove the source of money in the hands of such shareholder or persons making payment towards issue of shares before such sum is accepted as genuine credit. If the companies fails to discharge the additional onus, the sum shall be treated as income of the company and added to its income.

It is, therefore, proposed to amend section 68 of the Act to provide that the nature and source of any sum credited, as share capital, share premium etc., in the books of a closely held company shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, would not apply if the shareholder is a well regulated entity, ie a Venture Capital Fund Venture Capital Company registered with the Securities Exchange Board of India (SEBI).

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4.6 The ld. CIT(A) accepted the contention of the assessee and deleted the entire additions made on both the counts by holding as under:- “6. In the background of the above discussion and examination of the fresh evidences which have also been admitted as additional evidence, the issue of addition of Rs 2,79,50,000/- is required to be decided on merits of the case of the

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appellant. Therefore, all the evidences and submissions made by the appellant through first submission and the rejoinder to remand report alongwith findings of the A.O. are examined afresh and the decision on each of the 12 persons is given in the discussion made party-wise as under:-

(1)Desai Chhaganbhi Lilabhai (Rs. 27,50,000/- to Chehar Reality Private Limited and Rs.27,50,000/- to Iscon Procon Private Limited)

(a) This person had booked the bungalow in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, confirmation letter, aadhar card, bank statement, 7/12 extract and election card. In the remand report, the A.O. has stated that confirmation letter has been filed and the PAN has not been made available. This party has furnished the Aadhar card as ID/address proof and also filed the copy of bank statement, 7/12 abstracts. The summons issued u/s 131 of the Act dated 23.01.2019 could not be served due to insufficient address. However, the summon issued u/s 131(1) of the Act dated 23.01.2019 by the Assessing Officer of the M/s Iscon Procon Private Limited in its remand proceedings, it was served to him. The A.O. has stated that this party was a farmer and no details of sources of making advance payments to the appellant have been fumished and the bank statements did not prove any deposit/withdrawal of cash so as to prove that there was genuineness of the cash transaction and also the creditworthiness of this party in this proceedings, the AO also received the copy of 7/12 extracts as submitted by the said party showing his holding of land.

(b) On going through the copy of banakhat entered into by the party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for purchase of Plot Bungalow No. 45 & 46 in the scheme 'Brij Residency floated by the appellant company jointly with Mis Iscon Procon Pvt. Ltd. This banakhat was notarized before one Shri V.T Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs. 55,00,000 was paid in cash. As per this banakhat, a sum of Rs.5,00,000/- has been received on 05.04.2013 and the amount of Rs. 50,00,000/- has been paid in piecemeal till 24.04.2013 against the agreed sale consideration of Rs. 55,00,000/- Thereafter, vide cancellation deed made before the notary on 24.10.2018, this party has received the amount of Rs. 10,00,000/-back and consented to receive the balance amounts in 12 installments.

(c) Since both the documents,ile the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as (D. proof has been also attached with the sale agreement, the identity of this person viz. Raban Chhaganbhai Lilabhai is proved beyond doubt. Further this party has booked two units bearing number 45 and 46 admeasuring 111 sq mts Rs. 27,50,000/- each and paid Rs. 55,00,000/-.

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(d) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Isoon Procon Private Limited and the same was given for development to Mis Ratanmaull Developers is found to be genuine. It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation deed and sale deed as furnished by the appellant with regard to home-buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in "Brij Residency scheme Under the circumstances, the genuineness of the transaction is also established

(e) In so far as the third limb the creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co- owner M/s Iscon Procon Private Limited. In connection thereto, I am of the opinion that when the assessee has given the names and addresses of the creditors, the burden cast upon the assessee can be said to have been duly discharged In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, he is free to inquire in the case of such person, but the addition cannot be made in the hands of the appellant. My view is supported by the following decisions:-

A. Murlidhar Lahorimal V/s CIT [280 ITR 512 (Guj)] Facts: The assessee, an individual filed a return of income accompanied by a copy of his capital account in the partnership firm wherein he was a partner. The capital account contained a credit entry, showing a non of Rs 50,000 as gift received. The donor had filed return of gift in respect of the gift of Rs. 50,000 and the assessment came to be completed under section 15(3) of the Gift-tax Act, 1958. Assessment was made accepting the gift but the notice was subsequently issued under section 148 on the ground that the gift was not genuine and the amount of Rs. 50,000 was assessable under section 68 of the act. The tribunal found that the gift was given by way of bank draft and donor appeared before the assessing officer and confirm, the fact of having made the gift. He produced evidence in support of the source from which the funds for making the gift were available with him. The tribunal, however held that the motivation for making the gift was not established. It upheld the addition.

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Held: The tribunal failed to note the fact that the identity of the donor was established the donor having appeared in person before the assessing officer, the genuineness of the transaction was established, not only by the receipt of the bank draft, but also by the fact of transaction having borne gift-tax once the assessment was framed. The primary onus which rested with the assessee, thus, stood discharged. Thereafter, if the revenue was not satisfied with the source of the funds in the hands of the donor, it was up to the revenue to take appropriate action. The tribunal considered the motivation for making the gift was not relevant. The addition of Rs 50,000 was not justisfy. B. CIT V/s Pragat Co.Op. Bank Ltd. [278 ITR 170 (Guj)] Facts: The assessment year is 1983-84 and the relevant accounting period is July 1, 1981, to Jane 30, 1982. The assessee, a co-operative society, is engaged in the business of banking against returned income of Rs. 14,317 the Assessing Officer assessed at a total income of Rs 2,02,61,628 by an order of assessment dated March 31, 1986. It appears that there were search proceedings under section 132 of the Act on December 24, 1983, at the premises of the bank and due to various discrepancies/irregularities in the records maintained by the assessee-bank, with special reference to issuance of various fixed deposit receipts the authorised officer issued a prohibitory order of attachment sander section 132(3) of the Act. directing the assessee-bank not to take any action in relation to fixed deposit receipts It is an admitted position that the said prohibitory orders were modified lifted from time to time on partial basis depending on different applications moved by the assessee-bank The Assessing Officer has made additions to the tune of Rs. 1,80,95,811 as income from undisclosed sources representing fixed deposits as unexplained for the reasons stated in the order He also made an addition, as a consequence to the tune of Rs. 21,71,500 towards interest on the aforesaid fixed deposits by applying the rate of 12 per cent per cent to the figure of Rs 1,80,95,811. The principal grounds on which the additions have been made by the Assessing Officer are: (i) There are various discrepancies in the record maintained by the bank (ii) The assessee has failed to furnish complete details, including addresses of various depositors in whose name fixed deposits have been issued Held: Section 68 of the Act requires that there has to be a credit is the hooks maintained by an assessee Such credit has to be of a sum during the previous year, and the assessee offers to explanation about the nature and source of such credit, or the explanation offered by the assessee is not, in the opinion of the assessing authority, satisfactory, then the run to credited may be charged to tax as income of the assessee of that previous year. The apes court in the case of CIT v. Smt. PK Noorjahan [1999] 237 ITR 570 has laid down that the word "may" indicated the intention of the Legislature that a discretion was conferred on the Assessing Officer in the matter of treating the source of investment/credit which had more been satisfactorily explained as income of an assessee, but it was not obligatory

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to treat such source as income in every case where the explanation offered was found to be not satisfactory. Applying the aforesaid principle to the facts found it is not possible to state that the Tribunal committed any error when it confirmed the findings of the Commissioner of Income-tax (Appeals) deleting the addition. The assessee offered an explanation. The said explanation is not found to be false. The Assessing Officer merely does not accept the explanation because he finds it not satisfactory From that, legally there is no obligation, on the Assessing Officer to treat the fixed deposits as income of the assessee. XXX This court is in respectful agreement with the aforesaid principles. In the case of Deputy CIT v Rohini Builders [2002] 256 ITR 360, this court has while dismissing the Departmental tax appeal upheld the approach of the Tribunal based on the judgment of the Patna High Court that an assessee can be asked to prove the source of credit in books but cannot be asked to prove the source of the source XXX The opinion expressed by the Patna High Court has been impliedly approved by the apex court in the case of CIT v Orissa Corporation P. Lid [1986] 159 ITR 78 when it its stated that once the assessee had given the names and addresses of the alleged creditors and it was in the knowledge of the Revenue that the said creditors were income-tax assessees of the Revenue did not make any effort to pursue the so-called alleged creditors the assessee could not do anything further and the assessee had discharged the burden that lay on the assessee It was for the Revenue to examine the source of income of the alleged creditors to fond out their creditworthiness.

C. Commissioner Of Income-tax, Orissa V/s Orissa Corporation P. Ltd. 1986- (159)-ITR-0078-SC

1 Whether in the absence of proving confirmation letters and hundis by the assessee, the assessee has discharged his initial onus by producing merely the confirmation letters and hundis to prove the nature of the transaction? 2. Whether on the facts and circumstances of the case, the Tribunal was right in ordering deletion of Rs 1.50.000 as the assessee's income from undisclosed sources? 3. Whether on the facts and circumstances of this case, the cash credit is the assessee's income from undisclosed sources? XXXXXX The assessee, at the relevant time, was a private limited company and maintained accounts according to the calendar year. For the accounting year ending on December 31. 1961 corresponding to the assessment year 1962-63, the Income- tax officer did not accept the assessee's accounts showing cash credits of Rs. 1,50,000. Three amounts were shown to have been received by way of loans from three individual creditors of Calcutta sunder hundis. The assessee produced

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before the Income-tax Officer, the letters of confirmation, the discharged hundis and particulars of the different creditors whore general index numbers were with the Income-tax Department. Attempts had been made to bring those creditors before the Income-tax Officer by issue of notices under section 131 of the Act, but the said notices were returned with the endorsement "left" The Income-tax Officer therefore, treated the entire amount of Rs. 1,50,000 as unproved cash credit and added the same to the income of the assessee. The appeal of the assessee to the Appellate Assistant Commissioner was dismissed. Then after there was a further appeal to the Tribunal. XXXXXXX The Tribunal noted that the credit entries stood in the names of third parties in the account books of the assessee. The explanation was that the amounts represented loans to the assessee from the concerned persons. The assessee had produced discharged hundis and confirmation letters from these alleged lenders The Tribunal was of the view that if the assessee could not produce these persons alleged to be the creditors, it did not follow automatically that an adverse inference should be drawn that these amounts represented undisclosed income of the assessee. It was further noted that the creditors were Income-tax assessees and while being assessed, they had made statements before the respective Income tax Officers admitting that they were allowing their names to be lent was not really giving loans as creditors of different assessees. A list of the assessees had also been given but the name of the present assessee did not figure in that list. The Tribunal came to the conclusion that the Revenue was not justified in drawing an adverse inference against the assessee and adding these amounts in the assessment of the assessee. The Tribunal also on those circumstances, could not sustain the imposition of the penalty could so deleted such imposition. The Revenue sought for a statement of case on both these aspects on the aspect of the addition of Rs 1,50,000 to the total income of the assessee and also on the imposition of penalty. The questions sought for by the Revenue were to the effect noted before The Tribunal refused to refer any statement of the case to the High Court on these questions. The Revenue went up in an application under section 256(2) of the Act before the High Court The High Court also refused to accede to the prayers of the Revenue Hence these appeals.

Our attention was drawn to the statements in the assessment order where the become-tax Officer had observed certain inconsistencies in the confirmation letters and observed further that the confirmation letters did not inspire confidence It also observed that the assessee had stated that after making all possible attempts in their own way, had failed to produce the parties and thereupon requested the Income tax Officer so surrender 131 to all the alleged creditors and the notices under section 111 of the Act which had come back unserved with the remarks "left" The assessee thereafter wanted further opportunity find out the present whereabouts of the alleged tenders The Income- tax Officer observed further that the wide prevalence of hundi racket was well-

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brown and it had been e beyond doubt that most of the so-called hundiwallas are not genuine but mere name-lenders.

It was argued that in view of the provisions of section 68 of the Act, the onus in there types of cases was on the assessee and in this case, the assessee had not discharged that onus and in the premises, questions of law as indicated above arose. Section 68 of the 1961 Act introduced for the first time in the Act. There was no provision in the 1922 Act corresponding to this section. The section states that where any sun is found crested in the books of an assessee maintained for any previous year and the assessee offers explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Income-taxes Officer, satisfactory the sun so credited may be charged to Income- tax as the income of the assessee of that previous year. The section only gives a statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The section enacts that if a sum is found credited in the books of an assessee maintained for any previous year (which might be different from the financial year), the cash credit might, in cases where it is assessed at undisclosed income, be treated as the income of that previous year, and the financial year may not be taken as the previous year for such a cash credit even if the undisclosed income was not found to be from the assessee's regular business for which the books were maintained. The cash credit might be assessed either as business profits or as income from other sources. XXXX In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assesses. Their index numbers were in the file of the Revenue. The Revenue, apart from using notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditrs to find out whether they were credit worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors in these circumstances the assessee could not do anything further in the premises if the Tribunal came to the conclusion that the assessee hag discharged the burden that lay on him, then it could not he said that such a conclusion was unreasonable or perverse or based on no evidence If the conclusion is based on some evidence on which a conclusion could be arrived at no question of law as such arises. XXXXXX In the premises, it cannot be said that any question of law arose in these cases. The High Court was therefore, right in refusing to refer the questions sought for. The appeals therefore, fail and are dismissed with costs.

Appeals dismissed.

D. Nemi Chand Kothari V/s Commissioner Of Income-tax (264)-ITR- 0254-GAU

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"Whether on the facts and circumstances of the case, the learned Tribunal was justified in demanding the proof regarding the creditworthiness of the sub- creditor and in drawing an adverse inference against the appellant on his alleged failure to satisfy the respondents regarding the creditworthiness of the sub- creditors?"

In a short compass, the facts leading to the present appeal may be put as follows:

The appellant carries on the business of supply of bamboo in the name of Bamboo Bagicha as its proprietor. For the assessment year 1992-93, the appellant filed his return of income and the same was processed under section 143(2) of the Income-tax Act, 1961. During the course of the assessment, the Assessing Officer examined the relevant books of account and various other particulars and completed the assessment vide order, dated March 30, 1995 In the course of the assessment so made, the Assessing Officer found that the assessee had taken loans from Nemichand Nahata and Sons (HUF) amounting to Rs. 4,35,000 and from one Sri Pawan Kumar Agarwalla amounting to Rs 5,00,000 during the previous year ending on March 31, 1992 The Assessing Officer declined to treat the loan of Rx 4.35,000 claimed to have been taken by the appellant from Nemichand Nahata and Sons (HUF) and added the entire amount of Rs 4,35,000 in the assessee's total income from undisclosed sources under section 68 of the Income-tax Act 1961. As regards the loan from Sri Pawan Kumar Agarwalla amounting to Rs 5,00,000, the Assessing Officer declined to treat the loan amount to the extent of Rs. 4,25,000 as genuine and added the said amount of Rx 4,25,000 to the total income of the assessee as income from undisclosed sources. As regards the first creditor, namely, Nemichand Nahata and Sons (HUF), the Assessing Officer, in the course of the assessment, examined the Hindu undivided family under section 131 of the Income-tax Act. In his statement so recorded. Sri Nemichand confirmed to have advanced the loan of Rs. 4,35,000 to the appellant on two different dates by cheques. Explaining the source from which he had received the said amount of Rs. 4,35,000. Sri Nemichand stated that the Hindu undivided family had taken loans from three different persons, namely, 1 Smt. Jhumku Devi Nahata, 2 Smt. Shanti Devi Nahata, and 3 Smt. Madhu Devi Nahara amounting to Rs 1,20,000, Rs 1,25.000 and Rs. 1,20,000, respectively Sri Nemichand further claimed that out of the said amount of Rs. 4.35.000 advanced to the assessee, a non of Rs. 70,000 was from his own source and that the said three loans amounting to Rs 3,65,000 had been taken from the said 3 (three) different sub-creditors by the Hindu undivided family by means of account payee cheques. It was also clarified, during the course of this assessment proceeding, that Nemichand Nahata and Sons (HUF) and all the three sub-creditors were income-tax assessees The Assessing Officer, upon examining the assessment records of the three sub- creditors namely, I Smt. Jhumku Devi Nahata 2. Sent Shanti Devi Nahata, and 3. Smt. Madhu Devi Nahata, found that all the three sub-creditors had submitted their return of income for the first time on February 17, 1992 showing that the said income had been derived by them from seasonal business without however

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mentioning the amounts involved in purchase, sales, etc. The Assessing Officer held that the returns of income submitted by the creditor as well as the sub- creditors were actually submitted by them merely for enabling them to advance the loan of the said loan amounts to the appellant. The Assessing Officer also held that no genuine loan had been taken by the creditor, namely, Nemichand Nahata and Sons (HUF) from the three sub-creditors amounting to Rs 3,65,000 and the creditor had no fund of his own amounting to Rs. 70,000 to advance the loan to the appellant and, therefore, declined to accept the loan of Rs 4,35,000 as genuine and added the said amount of Rs. 4,35,000 to the total income of the assessee as his income from undisclosed sources under section 68 of the Income- tax Act. As regards the loan claimed to have been taken by the assessee from the creditor, namely, Sri PK. Agarwalla, the Assessing Officer found that the said PK Agarwalla had taken loan of Rs. 4.25,000 from five different parties by account payee cheques for advancing the loan to the appellant. The said sub-credaors were also examined and they confirmed that they had advanced the loans to the creditor, namely, Sri PK. Agarwalla. It was also found by the Assessing Officer that the creditor as well as the sub-creditors aforementioned were all income-tax assessees. On examining the creditor and the sub-creditors aforementioned and also the assessment records of the sub-creditors, the Assessing Officer concluded that their income files were nothing, but capital building exercise aimed at accommodating others without support from any documentary evidence regarding their own business activities. The Assessing Officer, therefore, accepted as genuine the loan said to have been advanced by Sri PK. Agarwalla to the assessee from his own source, but so far as the amount of Rs. 4,25,000 was concerned, the Assessing Officer added back the said amount to the assessee's total income from undisclosed sources under section 68 of the Income-tax Act.

Feeling aggrieved by the assessment order, dated March 30, 1995, aforementioned, the assessee preferred appeal before the Commissioner of Income-tax (Appeals), Guwahati who, vide his order dated February 29, 1996, deleted both the additions of Rs. 4,35,000 and Rs. 4,25,000 on the ground that the assessee-appellant had not only established the identity of the creditors, but also the genuineness of the loans taken by the appellant and that the same could not be controverted by the Assessing Officer. On appeal preferred by the Revenue, the learned Income-tax Appellate Tribunal, Guwahati, vide order dated May 27, 2002, passed in LTA No. 311 (Gauhati) of 1996, set aside the said order of the Commissioner of Income-tax (Appeals) and upheld the order of the Assessing Officer on the ground that neither the sub-creditors nor the creditors, in question, had creditworthiness to advance the said loans. Not satisfied with this order, the assessee has, now, preferred the present appeal. XXXXXX Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, NemichandNahata and Sons (HUF) and Pawan Kumar Agarwalla The

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appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned In fact, the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub- creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from undisclosed sources merely on the failure of the sub- creditors to prove their creditworthiness.

It is, no doubt, true that in the present case, the findings arrived at by the Assessing Officer as well as the learned Tribunal are findings of fact, but since these findings are based on anwholly erroneous view of law, such findings cannot be said to be mere findings of facts. It is trite that no assessment can be made contrary to the provisions of law. In the case at hand, the very basis for making assessment is under challenge. If the assessment is based on a completely erroneous view of law, such findings cannot be regarded as mere findings of fact, but must be treated as substantial question of law, particularly, when the very basis of the assessment is on a wrong interpretation of law. Viewed from this angle, we are firmly of the view that the question raised in the present appeal is a substantial question of law inasmuch as the same goes to the very root of the assessment made and we have no hesitation in answering the same in the negative.

Mr. Bhuyan's contention that a payment made by cheque cannot be reated as sacrosanct and his reliance on the law laid down in Precision Finance P. Ltd's case [1994] 208 ITR 465 (Cal) are wholly misplaced inasmuch as even we do not hold that a transaction, which takes place by way of cheque, is invariably sacrosanct. What we hold is that so far as the present assessee-appellant is concerned, his burden stood discharged, when he had proved the identity of his creditors, the genuineness of the transactions, which he had with his creditors,

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and the creditworthiness of his creditors vis-a-vis the transactions, which he had with the creditors. The burden had, then, shifted to the Revenue to show that though covered by cheques, the amounts, in question, actually belonged to, or were owned by, the assessee himself, but no material, direct or indirect, exists on record to come to such a conclusion confidently and boldly.

For the reasons, discussed above, this appeal succeeds and the impugned orders are set aside and quashed.

With the above observations and directions, this appeal stands disposed of No order as to costs.

E. Additional Commissioner Of Income-tax, Bihar V/s Hanuman Agarwal (151)- ITR-0150-PAT

CASH CREDIT- Burden of proof

Submission of confirmatory letter stating address and GIR number of creditor - Primary onus under s. 68, therefore, discharged

HEADNOTE

Cash credit Burden of proof Submission of confirmatory letter stating address and GIR number of creditor- Primary onus sonder s. 68, therefore, discharged. Held Once the ITO or the authority concerned is satisfied that the creditor is not telling the truth it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay by cross-eng him. Where, therefore an assessee gives the correct name, address and the GIR member of the creditor he has discharged his onus and unless a notice in due form under s. 131 of the Act is issued by the revenue authority concerned to test the veracity or the genuineness of the transaction or the capacity of the creditor to pay, the assessee has to succeed. Conclusion

Where an assessee gives the correct name and address and the GIR number of creditor, he has discharged his onus

F. Sarogi Credit Corporation V/s Commissioner Of Income-tax, Bihar. 1976- (103)-ITR-0344-PAT

CASH CREDIT-Burden of proof

-Entries accepted by creditors Burden of proof on assessen discharged

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HEAD NOTE

Cash credit- Burden of proof-Entries accepted by creditors Burden of proof on assessee discharged Held The last, but to the least of all the situation favorable to the assessee, in which the Tribunal, by its appellate order has placed it with regard to the source of income of the creditors, is by partly accepting the source to the extent of Rs. 5,000 and partly rejecting to the extent of Rs. 15,000. Having accepted the genuineness of the entries in the books of account, having accepted the explanation offered by the third parties with regard to their sources of money, in part at least there was no material for the Tribunal to hold that the assessee had not discharged the onus, and the finding to that effect must be held to be without any evidence and hence wholly illegal, and conclusion drawn perverse. Therefore the assessee discharged the onus wherein the meaning of section 68 of the Act, for the cash credits.

Conclusion

Where the entries were accepted by the creditors the assessee discharged the onus within the meaning of s. 68 for the cash credits.

(f) Further I am conscious that the Finance Act. 2012 has inserted the first proviso to section 68 of the Act which has been made effective in the case of a company wef 01.04.2013, whereby a heavy burden is cast upon the company- assessee to prove source of amount so credited in the books of the company- assessee For ready reference, first proviso to section 68 as inserted by the Finance Act, 2012 wef 1.4.2013 is reproduced as under:-

Provided that where the assessee is a company (not being a company in which the public are substantially interested) and the sum to credited consists of share application money share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless-

(c) The person being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such rum to credited and

(d) Such explanation in the opinion of the Assessing Officer aforesaid has been found the satisfactory

(g) Thus, by the Finance Act 2012 w.e.f. 14.2013, an additional burden is placed on an assessee-company to prove source to source of investment However, the said first proviso can be made applicable when the sum so credited consisted of share application money, share capital, share premium. etc by the company. At

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this juncture, I would like to refer to the relevant extract of memorandum explaining provisions of the amendment as inserted by the Finance Act, 2012 wef 01.04.2013 to section 68 of the Act as under:-

Section 68 of the Act provides that if any son is found created in the books of a assessee and such assessee either (i) does not offer any explanation about nature and source of money or (ii) the explanation offered by the assessee is found to be not satisfactory to the Assessing Officer, then, such amount can be saved as income of the assessee.

The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation tam found to be satisfactory then the sun is added to the income of the person. Certain judicial pronouncements have created doubts about the out of proof and the requirements of this section, particularly in cases where the ram which a credited share capital, share premium etc.

Judicial pronouncements, while recognizing that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company. The Courts have drawn a distinction and emphasized that in case of private placement of shares the legal regime should be different from that which is followed in case of a company seeking share capital from the public at large.

In the case of closely held companies, investments are made by known persons, Therefore, a higher onus is required to be placed on such companies besides the general onus to establish identity and credit worthiness of creditor and genuineness of transaction. This additional onus, needs to be placed on such companies to also prove the source of money in the hands of such shareholder or persons making payment towards issue of shares before such sum is accepted as genuine credit. If the company fails to discharge the additional onus, the sum shall be treated as income of the company and added to its income,

It is, therefore, proposed to amend section 68 of the Act to provide that the nature and source of any sum credited, as share capital, share premium etc., in the books of a closely held company shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder. However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, would not apply if

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the shareholder is a well regulated entity, ie a Venture Capital Fund, Venture Capital Company registered with the Securities Exchange Board of India (SEBI)

(h) The above relevant extract of memorandum explaining clauses of amendment demonstrates that in the case of closely held companies, investments are made by known persons and therefore, the legislature wanted a higher onus to be placed on such companies besides the general onus to establish identity and credit worthiness of creditor and genuineness of transaction in the form of proving the source of money in the hands of such shareholder or persons making payment towards issue of shares before such sum is accepted as genuine credit. However, that additional burden is restricted to only those transactions where the amount received is in the form of share capital, share application money etc and not in the form of non- share capital transactions Therefore, the last limb of the first proviso to section 68 which refers to "any such amount by whatever name called also refers to the transactions similar to investment in the form of share capital or share application money etc and it does not refer to any other non-share capital transactions. My view is further supported by the Delhi tribunal order in the case of ACIT vs Smt Prem Anand in ITA No.3514/Del/2014, wherein the Delhi tribunal vide para 7 1 of the said order has held that the amendment does not give power to the AO to examine source of source of non-share capital cases.

(i) In the present case before me, the sum so credited was in the form of booking advances which is non share capital transactions and therefore the first proviso as inserted by the Finance Act, 2012 w.e.f. 01.04.2013 is not applicable in the present case In other words, the catena of authorities which have held that the assessee is not required to prove source of source still holds the water and are still good law.

(j) Considering all these facts and the prevailing law, I am of the opinion that the amount of Rs 27,50,000/- received from Shri Chhaganbhai Lilabhai Desai is explained by the appellant and the onus is discharged by it. Therefore, the impugned addition made by the A.O. u/s 68 of the Act is deleted

2) Desai Nagjibhai Laxmanbhai (Rs.28,00,000/- to Chehar Reality Private Limited and Rs.28,00,000/- to Iscon Procon Private Limited)

(a) This person had booked the bungalow in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, confirmation letter PAN Card Aadhar card and election card On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for the purchase of Plot/Bungalow No 41 in the scheme "Brij Residency" floated by the appellant company and M/s Iscon Procon Pvt Ltd. This banakhat was notarized before one Shri V.T. Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs

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56,00,000/- was paid in cash. As per this banakhat, a sum of Rs 5,00,000/- has been received on 02.04.2013 and the amount of Rs.51,00,000/- has been paid in piecemeal till 15.04.2013 against the agreed sale consideration of Rs 56,00,000/- Thereafter, vide cancellation deed made before the notary on 24.10.2018, this party did not receive any amount but agreed to receive the entire amount of Rs 62,00,000/- (inclusive of late payment charges of Rs.6,00,000/-) within 4 to 6 months.

(b) Since both the documents, i.e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as I.D. proof has been also attached with the sale agreement, the identity of this person viz. Nagjibhai Laxmanbhai Desai has been proved beyond doubt. In so far as not appearing before the AO is concerned in pursuant to notice issued u/s 131 of the Act and served to him, it cannot be said that the addition was to be made in the hands of the appellant for fault of that person not appearing before the AO My view is supported by the Supreme Court decision in the case of Anis Ahmad & Sons v/s CIT(A) 297 ITR 441

(c) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation deed and sale deed as furnished by the appellant with regard to home-buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in "Brij Residency scheme. Under the circumstances, the genuineness of the transaction is also established.

In so far as the third limb the creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances. In this connection, I have already taken a view in the case of Shri Chhaganbhai Lilabhai Desai that when the assessee has given the names and addresses of the creditors, the burden cast upon the assessee can be said to have been duly discharged In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, he is free to inquire in the case of such person

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however, the addition cannot be made in the hands of the appellant. I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai and therefore, the same are not repeated here The addition of Rs.28,00,000/- made by the AO u/s 68 of the Act is, therefore, deleted.

(3) SMT. KANTABEN KARSANBHAI PATEL (Rs.33,00,000/- to Chehar Reality Private Limited and Rs. 33,00,000/- Iscon Procon Private Limited)

(a) This lady has booked two bungalows in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, sale deed, aadhar card and election card. On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for the purchase of two Plots/Bungalow No.31 and 38 in the scheme "Brij Residency" floated by the appellant company and Iscon Procon Pvt. Ltd. This banakhat was notarized before one Shri VT Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration an amount of Rs.66,00,000/- was paid in cash. As per this banakhat, a sum of Rs. 11,00,000/- has been received on 10.04.2013 and the amount of Rs.55,00,000/- has been paid in piecemeal till 14.04. 2013 against the agreed sale consideration of Rs 66,00,000/- Thereafter, vide cancellation deed made before the notary on 24 10.2018. this lady has stated that she had purchased another plot/bungalow No 16 and she did not want to purchase the plots/bungalows at Sr.No.31 and 38 and the advance money of Rs.66,00,000/- received by the appellant through sale agreement was to be transferred to the Plot/Bungalow which was purchased for Rs. 32,50,000/- for which the sale deed has been made This lady agreed to receive the balance amount of Rs. 33,50,000/- within 6 months.

(b) Since both the documents, i.e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as ID proof has been also attached with the sale agreement, the identity of this person viz Smt. Kantaben Karsanbhai Patel has been proved beyond doubt

(c) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation deed and sale deed as furnished by the appellant with regard to home-buyers are not genuine or bogus. It is also accepted by the said home-buyer in her confirmation cum reply furnished to the Assessing Officer in the remand proceedings that she had made advances to book the bungalow in "Brij Residency scheme. Under the circumstances, the genuineness of the transaction is also established.

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(d) In so far as the third limb i.e. creditworthiness of the person is concerned the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner Mis Iscon Procom Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and thes co-owner M/s Iscon Procon Private Limited. In this connection, I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the assessee has given the names and addresses of the creditors, the burden cast upon the assessee can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc. and therefore having discharged the initial burden no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, he is free to inquire in the case of such person, however the addition cannot be made in the hands of the appellant. I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai, and therefore, the same is not repeated here. The addition of Rs. 33,00,000/- made by the A.O. wls 68 of the Act is therefore, deleted

(4) KOMALBEN SAHDEVBHAI RABARI(Rs. 16,50,000/- to Chehar Reality Private Limited and Rs. 16,50,000/- to Iscon Procon Private Limited)

(a) This lady has booked the bungalow in the scheme of the appellant and has filed the copy of banakhat, confirmation letter. PAN card, cancelation deed and election card. On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for the purchase of Plot/Bungalow No.42 in the scheme "Bry Residency" floated by the appellant company and Iscon Procon Pvt. Ltd This banakhat was notarized before one Shri VT Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration an amount of Rs 33,00,000/- was paid in cash. As per this banakhaft, a sum of Rs.5,00,000/- has been received on 10.04.2013 and the amount of Rs. 28,00,000/- has been paid in piecemeal till 10.05.2013 against the agreed sale consideration of Rs 33,00,000/- Thereafter, vide cancellation deed made before the notary on 24.10.2018, this party did not receive any amount but agreed to receive the entire amount of Rs.35,00,000/- (inclusive of late payment charges of Rs 2,00,000/-) within 4 to 6 months

(b) Since both the documents, i.e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as I.D. proof has been also attached with the

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sale agreement, the identity of this lady viz Komalben Sahdevbhai Raban has been proved beyond doubt.

(c) The factum of the case that the impugned land is owned by the appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine It is also not the case of the Assessing Officer that Agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that she had made advances to book the bungalow in "Brij Residency" scheme. Under the circumstances, the genuineness of the transaction is also established.

In so far as the third limb se creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co owner M/s Iscon Procon Private Limited. In this connection, I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc, and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, he is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant. I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhal Desai, and therefore, the same is not repeated here The addition of Rs. 16,50,000/- made by the A.O. u/s 68 of the Act is, therefore deleted

5) Shri Pravinbhai Sankabhai Rabari (Rs.27,50,000/- to Chehar Reality Private Limited and Rs.27,50,000/- to Iscon Procon Private Limited)

(a) This person has booked two bungalows in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, PAN card, bank statement. election card and copy of 7/12 extracts. On going through the copy of banakhat entered into by this party with the appellant, it is noticed that the same was made on 29.04.2013 for the purchase of Plot/Bungalow Nos. 43 & 44 in the scheme "Brij Residency" floated by the appellant company and Iscon Procon Pvt Ltd. This banakhat was notarized before one Shri V.T. Acharya, a notary and in pursuant to

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that sale agreement and towards part sale consideration, an amount of Rs.55,00,000/- was paid in cash. As per this banakhat, a sum of Rs 5,00,000/- has been received on 05.04.2013 and the amount of Rs 50,00,000/- has been paid in piecemeal till 24.04.2013 against the agreed sale consideration of Rs 55,00,000/-. Thereafter, vide cancellation deed made before the Notary on 24.10.2018, this party has received the amount of Rs. 10,00,000/- back and consented to receive the balance amounts in 12 installments.

(b) Since both the documents, i e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as I.D. proof has been also attached with the sale agreement, the identity of this person viz. Pravinbhai Sankabhai Rabari has been proved beyond doubt. This person is the only person who attended the office of the A.O. during the course of remand report proceedings and his statement on oath has been recorded u/s 131 of the Act. Further, this party has booked two plots bearing 43 and 44 admeasuring 111 sq. mtrs. for Rs.27,50,000/- each and paid Rs. 55,00,000/-.

(c) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine. It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalows in "Brij Residency" scheme. Under the circumstances, the genuineness of the transaction is also established. (d) Insofar as the third limb de creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co- owner M/s Iscon Procon Private Limited. In this connection, I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person,

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however, the addition cannot be made in the hands of the appellant I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai), and therefore, the same is not repeated here. Considering the same, the addition of Rs 27.50,000/- is hereby deleted.

6) Shri Pareshbhai Talabhai Rabari (Rs.13,00,000/- to Chehar Reality Private Limited and Rs. 13,00,000/- to Iscon Procon Private Limited)

(a) This person has booked the bungalow in the scheme of the appellant and has filed the copy of banakhat, cancelation deed, confirmation letter PAN card Aadhar card, 7/12 extracts, bank statement and election card. On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for the purchase of Plot/Bungalow No.50 in the scheme "Brij Residency floated by the appellant company and Iscon Procon Pvt. Ltd. This banakhat was notarized before one Shri VT. Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs 26,00,000/- was paid in cash. As per this banakhat, a sum of Rs 5,00,000/- has been received on 03.04.2013 and the amount of Rs. 21,00,000/- has been paid in piecemeal till 18.04.2013 against the agreed sale consideration of Rs 26,00,000/- Thereafter, vide cancellation deed made before the notary on 24.10.2018, this party did not receive any amount but agreed to receive the entire amount of Rs 29,51,000/- (inclusive of late payment charges of Rs. 3,51,000/-) within 4 to 6 months.

(b) Since both the documents, i e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as I.D. proof has been also attached with the sale agreement, the identity of this person viz. Shri Pareshbhai T Rabari has been proved beyond doubt.

(c) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine. It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in "Brij Residency" scheme. Under the circumstances, the genuineness of the transaction is also established.

(d) Insofar as the third limb i.e. creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were

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agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner Mis Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co- owner M/s Iscon Procon Private Limited In this connection. I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc. and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances If the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai and therefore, the same is not repeated here Considering the same, the addition of Rs 13,00,000/- made by the AO u/s 68 of the Act is, therefore, deleted

(7) Shri SAKABHAI LILABHAI RABARI (Rs. 13,00,000/- to Chehar Reality Private Limited and Rs. 13,00,000/- to Iscon Procon Private Limited):-

(a) This person has booked a bungalow in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, confirmation letter aadhar card and election card On going through the copy of banakhat entered into by this party with the appellant, it is noticed that the same was made on 29 04 2013 for the purchase of Plot/Bungalow No 49 in the scheme "Brij Residency" floated by the appellant company and Iscon Procon Pvt. Ltd. This banakhat was notarized before one Shri VT. Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs.26,00,000/- was paid in cash. As per this banakhat, a sum of Rs. 5,00,000/- has been received on 03.04.2013 and the amount of Rs. 21,00,000/- has been paid in piecemeal till 26.04.2013 against the agreed sale consideration of Rs 26,00,000/- Thereafter, this person expired and his wife Smt. Harkaben Sakabhai Rabari entered in the said property transaction as legal heir. Vide cancellation deed made before the notary on 24 10 2018, the said agreement was cancelled. This party did not receive any amount but agreed to receive the amount of Rs 29,51,000/- (inclusive of late payment charges of Rs 3,51,000/-) within 4 to 6 months.

(b) Since both the documents, i.e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as ID. proof has been also attached with the

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sale agreement, the identity of this person viz. late Shri Sakabhai Lilabhai Rabari and the his legal heir has been proved beyond doubt.

(c) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in Brij Residency" scheme. Under the circumstances, the genuineness of the transaction is also established.

(d) In so far as the third limb i.e. creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co- owner M/s Iscon Procon Private Limited. In this connection. I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, he is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai and therefore, the same is not repeated here. The addition of Rs 13,00,000/- made by the A. O u/s 68 of the Act is, therefore, deleted.

(8) Shri VAGHUBHAI HARIBHAI (Rs. 16,50,000/- to Chehar Reality Private Limited and Rs. 16,50,000/- to Iscon Procon Private Limited):-

(a) This person has booked a bungalow in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, confirmation letter. PAN card, aadhar card. 7/12 extract and election card On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for the purchase of Plot/Bungalow No.47 in the scheme "Brij Residency" floated by the appellant company and Iscon Procon

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Pvt. Ltd. The same was notarized before one Shri VT Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs. 33,00,000/- was paid in cash. As per this banakhat, a sum of Rs.5,00,000/- has been received on 04.04.2013 and the amount of Rs 28,00,000/- has been paid in piecemeal till 22.04.2013 against the agreed sale consideration of Rs. 33,00,000/- Thereafter, vide cancellation deed made before the notary on 24 10.2018, this party did not receive any amount but agreed to receive the entire amount of Rs.35,00,000/- (inclusive of late payment charges of Rs 2,00,000/-) within 4 to 6 months

(b) Since both the documents, i.e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as I.D. proof has been also attached with the sale agreement, the identity of this person viz Vaghubhai Harjibhai Rabari has been proved beyond doubt.

(c) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine. It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in "Brij Residency" scheme Under the circumstances, the genuineness of the transaction is also established.

(d) In so far as the third limb i.e. creditworthiness of the person is concerned the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon. Procon Private Limited In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co-owner M/s Iscon Procon Private Limited. In this connection, I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances if the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant. I have given detailed

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reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lillabhai Desai, and therefore the same is not repeated here. The addition of Rs. 16,50,000/-made by the A.O u/s 68 of the Act is, therefore, deleted

(9) Shri VALJIBHAI KHENGARBHAI RABARI (Rs. 20,50,000/- to Chehar Reality Private Limited and Rs.20,50,000/- to Iscon Procon Private Limited):-

(a) This person has booked the bungalow in the scheme of the appellant and has filed the copy of banakhat, sale deed and election card. On going through the copy of banakhat entered into by this party with the appellant it has been noticed that a banakhat was made on 29.04.2013 for the purchase of Plot/Bungalow No 51 in the scheme "Brij Residency floated by the appellant company and Iscon Procon Pvt. Ltd This banakhat was notarized before one Shri VT Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs.41,00,000/- was paid in cash. As per this banakhat, a sum of Rs 5,00,000/- has been received on 07.04.2013 and the amount of Rs 36,00,000/- has been paid in piecemeal till 15.04.2013 against the agreed sale consideration of Rs. 41,00,000/- As has been reported by the AO in the remand report that no copy of cancellation deed has been made available. However, it is noticed that a cancellation deed has been made in the name of Shri Vikrambhai Khengarbhai (appears to be elder brother of this person) made before the notary on 24.10.2018 in respect of Bungalow/Plot No. 48 (whereas in the sale agreement, the Plot/Bungalow No. 51) Thus, it is apparent, no copy of cancellation deed has been made available during the course of remand report proceedings and also in the rejoinder to the remand report. However, looking into the remand report of the Assessing Officer in the case of Iscon Procon Private Limited, it is seen that copy of sale deed having reference no. GDR/3351/2018 dated 23.02.2018 is placed on record before the Assessing Officer and no adverse comment is found in this connection. Under the facts and circumstances of the case, the identity of the person is proved beyond any doubt

(b) The factum of the case that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in "Brij Residency scheme Under the circumstances, the genuineness of the transaction is also established.

In so far as the third limb i.e. creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were

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agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co-owner M/s Iscon Procon Private Limited In this connection. I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant. I have given a detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai, and therefore, the same is not repeated here The addition of Rs 20,50,000/- made by the A.O. u/s 68 of the Act is, therefore, deleted.

10) Shri VIKRAMBHAI KHENGARBHAI RABARI (Rs.17,50,000/- to Chehar Reality Private Limited and Rs.17,50,000/- to Iscon Procon Private Limited):-

(a) This person has booked the bungalow in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, sale deed and election card On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04.2013 for the purchase of Plot/Bungalow No 48 in the scheme "Brij Residency floated by the appellant company and Iscon Procon Pvt. Ltd. This banakhet was notarized before one Shri VT. Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs.35.00.000/ was paid in cash. As per this banakhot, a sum of Rs.5,00,000/- has been received on 04.04.2013 and the amount of Rs 30,00,000/- has been paid in piecemeal till 28.04.2013 against the agreed sale consideration of Rs 35,00,000/- Thereafter, vide cancellation deed made before the notary on 24 10.2018, this party has agreed to purchase the property at Plot No 1 and expressed his unwillingness to purchase the booked property at Plot No.48 in the said scheme In exchange of this property, the plot/bungalow at Plot No 1 was sold to this party. In support of this affirmation, the appellant has filed the copy of sale deed registered at Sr.No. 3357 on 23.02.2018 with the SRO. Gandhinagar The careful perusal of this sale deed revealed that this party has purchased the bungalow with land for the apparent sale consideration of Rs 35,00,000/- and the said payment has been adjusted against the advances given by the party for booking of plot/bungalow No.48 of the said scheme which has been evidenced through banakhat and referred to in the sale deed also.

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(b) This is a case where the person Shri Vikrambhai Khengarbhai Rabari has purchased the property through registered sale deed and the payments of Rs 35,00,000/- made earlier through a notarized banakhat have been adjusted against the sale consideration as evidenced in the registered sale deed. Thus, this is a case where the identity of the person has been proved beyond doubt and the transactions of giving money to the appellant (to the extent of ½ share in the banakhat amount and sale consideration) are found to be genuine so far as receiving of the money in cash of Rs. 35,00,000/- is concerned.

In so far as the third limb se creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co-owner M/s Iscon Procon Private Limited. In this connection. I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case. the appellant has admittedly given the names and addresses of the creditors, confirmation account etc. and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances If the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant. I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai, and therefore, the same is not repeated here. The addition of Rs. 17,50,000/-made by the A.O. u/s 68 of the Act is, therefore, deleted.

(11) Shri VINODBHAI RAMBHARTI SWAMI (Rs.50,00,000/- to Chehar Reality Private Limited and Rs. 50,00,000/- to Iscon Procon Private Limited):-

(a) This person has booked three bungalows in the scheme of the appellant and has filed the copy of banakhat, cancellation deed, confirmation letter PAN card, Aadhar card, bank statement, 7/12 extract and election card. On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 01.05.2013 for the purchase of three Plots/Bungalows No 03, 13 and 20 in the scheme "Brij Residency floated by the appellant company and Iscon Procon Pvt. Ltd. This banakhat was notarized before one Shri VT Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs. 1,00,00,000/- was paid in cash. As per this banakhat, a sum of Rs.5,00,000/- has been received on 01.04.2013 and

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the amount of Rs 95,00,000/- has been paid in piecemeal till 01.05.2013 against the agreed sale consideration of Rs. 1,00,00,000/- In the cash book (refer page 178 of the paper book), the amount of Rs. 2,50,000/-on 01 04 2013 and of Rs.47,50,000/-on 01.05.2013 has been shown as received. Thereafter, vide cancellation deed made before the notary on 24.10.2018, this party has agreed to get the booking of three plots/bungalows cancelled and to receive the money of Rs. 1,05,00,000/- back in installments within 4 to 6 months from the date of execution of cancellation deed.

(b) Since both the documents, i.e. the sale agreement made on 29.04.2013 and cancellation of sale agreement made on 24.10.2018 have been made before the two different notaries, photographs of the concerned parties have been affixed and photo copy of the election card as ID proof has been also attached with the sale agreement, the identity of this person viz Vaghubhai Harjibhai Rabari has been proved beyond doubt.

(c) The factum of the case is that the impugned land is owned by appellant alongwith co-owner M/s Iscon Procon Private Limited and the same was given for development to M/s Ratanmauli Developers is found to be genuine It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation deed and sale deed as furnished by the appellant with regard to home-buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalows in "Brij Residency" scheme Under the circumstances, the genuineness of the transaction is also established.

(d) In so far as the third limb i.e. creditworthiness of the person is concerned the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner M/s Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co-owner M/s Iscon Procon Private Limited. In this connection, I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances. If the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person, however the addition cannot be made in the hands of the appellant I have given detailed reasonings alongwith the authorities in above para while deleting the

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addition made in Shri Chhaganbhai Lilabhai Desai, and therefore, the same is not repeated here The addition of Rs. 50,00,000/-made by the A. O u/s 68 of the Act is, therefore deleted.

(12) SHRI VITHALBHAI NATHABHAI PATEL(Rs. 16,50,000/- to Chehar Reality Private Limited and Rs. 16,50,000/- to Iscon Procon Private Limited):-

(a) This person has booked the bungalow in the scheme of the appellant and has filed the copy of banakhat sale deed and election card. On going through the copy of banakhat entered into by this party with the appellant, it is noticed that a banakhat was made on 29.04 2013 for the purchase of Plot/Bungalow No.39 in the scheme "Brij Residency floated by the appellant company and Iscon Procon Pvt. Ltd. This banakhat was notarized before one Shri VT Acharya, a notary and in pursuant to that sale agreement and towards part sale consideration, an amount of Rs.33,00,000/- was paid in cash. As per this banakhat, a sum of Rs.5,00,000/- has been received on 10.04.2013 and the amount of Rs.28,00,000/- has been paid in piecemeal till 16.04.2013 against the agreed sale consideration of Rs. 33,00,000/- Thereafter, vide cancellation deed made before the notary on 24 10 2018, this party has agreed to purchase the property at Plot No.27 and expressed his unwillingness to purchase the booked property at Plot No.39 in the said scheme In exchange of this property, the plot/bungalow at Plot No.27 was sold to this party In support of this affirmation, the appellant has filed the copy of sale deed registered at Sr. No 3337 on 23.02 2018 with the SRO Gandhinagar However, the appellant has filed the copy of sale deed bearing registration No 12031 and registered on 18.06.2018, made between Shri Vithalbhai Nathabhai Patel and Shri Ranjitsinh Kesarisinh Rathod and Manharba Ranjitsinh Rathod showing the sale consideration Rs. 33,00,000/- in respect of Plot/Bungalow No. 27 The careful perusal of this sale deed revealed that this party had earlier purchased the bungalow with land for the apparent sale consideration of Rs 35,00,000/- and the said payment has been adjusted against the advances given by the party for booking of plot/bungalow No 39 of the said scheme which has been evidenced through banakhat.

(b) This is a case where the person Shri Vithalbhai Nathabhai Patel has purchased the property through registered sale deed and the payments of Rs 35,00,000/- made earlier through a notarized banakhat have been adjusted against the sale consideration as evidenced cancellation deed and a reference of purchasing this property has been found to be made in the subsequent sale deed selling this property to another two persons as mentioned above. Thus, this is a case where the identity of the person has been proved beyond doubt and the transactions of giving money to the appellant to the extent of ½ share in the banakhaf amount and sale consideration) are found to be genuine so far as receiving of the money in cash of Rs.35,00,000/- is concerned.

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(C) The factum of the case that the impugned land is owned by appellant alongwith co-owner Mis Iscon Procon Private Limited and the same was given for development to M/s Ratanmaull Developers is found to be genuine. It is also not the case of the Assessing Officer that agreement to sell, identity cards, cancellation and sale deeds as furnished by the appellant with regard to home- buyers are not genuine or bogus. It is also accepted by the said home-buyer in its confirmation cum reply furnished to the Assessing Officer in the remand proceedings that he had made advances to book the bungalow in "Brij Residency scheme. Under the circumstances, the genuineness of the transaction is also established.

(D) In so far as the third limb le creditworthiness of the person is concerned, the only objection of the assessing officer was that these 12 home-buyers were agriculturist and they did not have much more capacity to make the booking advances to the appellant and the co-owner Mis Iscon Procon Private Limited. In other words, the Assessing Officer was not satisfied with the source of source in making booking advances with the appellant and the co-owner Mis Iscon Procon Private Limited in this connection. I have already taken a view in Shri Chhaganbhai Lilabhai Desai that when the appellant has given the names and addresses of the creditors, the burden cast upon it can be said to have been duly discharged. In the present case, the appellant has admittedly given the names and addresses of the creditors, confirmation account etc and therefore having discharged the initial burden, no addition u/s 68 of the Act can be made. It is also a settled proposition of law that the assessee would not be expected to prove source of source of such person making booking advances If the Assessing Officer is having doubt about the capability of the said person making booking advances, the Assessing Officer is free to inquire in the case of such person, however, the addition cannot be made in the hands of the appellant I have given detailed reasonings alongwith the authorities in above para while deleting the addition made in Shri Chhaganbhai Lilabhai Desai, and therefore, the same is not repeated here The addition of Rs 16,50,000/- made by the A.O u/s 68 of the Act is, therefore, deleted. 6.1 Thus, in view of the above discussion & analysis made, the total addition of Rs.2,79,50,000/- made by the A.O. invoking the provisions of section 68 of the Act is directed to be deleted. Accordingly, ground no.1 of the appeal is allowed.”

4.3 With respect to second addition of Rs. 2,54,76,650/- made by the Assessing Officer u/s. 40A(3). The ld. CIT(A) deleted the addition by holding as under:- “7.3 I have examined this issue afresh in view of the provisions of section 40A (3) of the Act. It is not doubted that the appellant had paid its share of cost of acquisition of the land in question in

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cash which is also evidenced through sale deed, copy of which has also been made available during the course of appellate proceedings. Section 40A (3) of the Act provides as under:- "(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. (34) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees: Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub- section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed it, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors

[Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (34) shall have effect as if for the words "twenty thousand rupees", the words "thirty-five thousand rupees" has been substituted.”

7.4 For the purpose of application of this section, it has to be examined as to whether the expenditure has been debited in the Profit & Loss account or taken into account for arriving at the profit of the business. As per the accounts drawn for the financial year ending on 31.03.2014, the appellant has shown "0" receipts (being no receipts or income) and debited the expenses of Rs.5,069/- being the amount of depreciation or amortization and other nominal expenses of Rs.48,952/-. Thus, the expenses by way of purchase of land have not been debited. The appellant has taken the inventory of Rs 2,91,62,059/- in the balance-sheet which included the project land of Rs.2,91,14,659/-. There being no sales affected during the year under consideration, entire inventory has been taken over to the closing stock and without routing through the Profit & Loss account. Thus, it is clear that the appellant did not charge any expenses in the Profit & Loss account and has neutral effect of debiting the inventory and crediting the closing stock for the same amount. Therefore, prima facie, there is no applicability of the provisions of section 40A (3) of the Act.

7.5 Further, on a close perusal of the sale deed in respect of this land, it is noticed that the sale deed has been executed by Shri Krunal Virambhai Rabari as a power of attorney holder of Smt. Sitaben Govabhai Rabari. Shri Krunal Virambhai Rabari is also a director of the appellant company and therefore, the money giver and money receiver happened to be the same party. Further, there is no specific date mentioned in the sale deed for receiving the cash consideration which exceeded Rs.20,000/- in a single day. Further, there was no ban on making the cash payments for the purchase of any immovable property and the provisions of section 269SS and 269T were amended with effect from 01.06.2015 wherein the term "specified sum has been defined to be the sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer takes place. Considering all these facts, the A.O. is not justified in invoking the provisions of section 40A (3) of the Act on three scores:-

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(1) No expenses have been booked in the profit & loss account but the entries were made in the balance-sheet neutralizing the inventory and closing stock. (2) The payee and payer are the same persons (money received as power, of attorney holder of Smt. Sitaben Govabhai Rabari)

(3) There was no specific ban on purchase of immovable land in cash till 31.05.2015.

7.6 I also rely on the decision of Hon'ble tribunal of Vishakhapatnam bench rendered in the case of Ch. Hanumantha Rao Vs. IT.O.Ward-2(2), Guntur reported at (2017) 81 Taxmann.com 421. The relevant head notes and facts/held are reproduced as under- "Section 40.4/3) of the Income-tax Act, 1961-Business disallowance-Cath payment exceeding prescribed limits (Conversion of land into stock-in-trade) Assessment year 2010-11-Assessee-developer claimed that he had purchased impugned lands at agricultural lands for investment purpose - As said lands were converted into stock in- trade, Assessing Officer disallowed cash payments made towards purchase of lands on ground that impugned lands were purchased as stock-in-trade for trading purpose and not for investment purpose-Assessee fled necessary evidences to prove that impugned lands were acquired as investment and, subsequently, converted into stock-in-trade in business as there existed a business expediency Whether since payments were genuine, section 404(3) could not be invoked to disallow impugned cash payments-Held, yes [Para 7](In favour of assessee)

FACTS The assessee was engaged in the business of developments of sites and flats He claimed to have purchased lands as an agriculturist for investment purpose; however, same were stock-in-trade in his business during the year. The Assessing Officer disallowed the cash payments made by the assessee invoking section 404(3) taking ground that impugned lands were not agricultural lands and no agricultural operations were carried on because the said land had been immediately converted into flats and sold to customers. On appeal, the Commissioner (Appeals) observed that purchased of impugned lands was for the purpose of business and not as investment and thus, cash payment was to be disallowed He, therefore, upheld the addition made by the Assessing Officer. On further appeal to the Tribunal:

Section 40.1(3) provides for disallowance of expenditure, in respect of which any payment is made to any person in cash in excess of Rs. 20,000 in a single day Similarly, the proviso provided to section 404(3), provides for no disallowance shall be made and no payments shall be deemed to be the profits and gains and business or profession under sub-section (3) of this sub-section, where a payment or aggregate of payment male to a person in a day. otherwise than by an account payee cheque drawn on a bank or account payee bank draft exceeds Rs. 20,000, in such cases and under such circumstances at may be prescribed, having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors. A plain reading of provisions of section 404(3) makes it clear that the said provision applicable where the assessee has male cash payments in excess of prescribed limits in the course of his business. The said provision does not apply when the payments are made for acquiring any capital assets or investment. [Para 6)

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It is found force in the arguments of the assessee for the reason that the provisions of section 404(3), does not apply to a care where the payment is made for acquisition of capital assets or investments. In this case the Assessing Officer as well as the Commissioner (Appeals) never disputed the fact that the assessee has purchased the impugned lands as investment and subsequently converted into stock-in-trade. The Assessing Officer's allegation is that since both the instances have occurred in the same financial year, the assessee failed to prove the lands were acquired for the purpose of investment Once the impugned lands were acquired as an investment and subsequently converted into stock-in-trade in the business, the provisions of section 40A(3), cannot be invoked to disallow the cash payments. Moreover, the lower authorities did not dispute the genuineness of payments. Further, each and every payment in cash are not automatically get disallowed under section 40A(3). In a particular case where there exist a business expediency and other relevant factors and also the payments are genuine, then the Acts provide for immunity from disallowance of expenditure, if the assessee proves to the satisfaction of the Assessing Officer that there exists a business expediency in making the cash payments. In this case, the assessee has filed necessary evidences to prove that the impugned land has been acquired as an investment and subsequently, converted into stock-in-trade of his business. Therefore, the Assessing Officer was erred in disallowing cash payment by invoking provisions of section 40A(3). Hence, the Assessing Officer is directed to delete additions male towards cash payments under section 40A(3). [Para 7] 7.7 In view of the above facts, the disallowance of Rs.2,54,76,650/- made by the A.O. by invoking the provisions of section 40A(3) of the Act is deleted. Accordingly, ground no.2 of the appeal is allowed.”

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filed additional evidences before ld. CIT(A). The remand report was called from the Assessing Officer by the ld. CIT(A). The assessee has filed rejoinder. Summons were issued by the AO even during remand proceedings to 12 persons who have deposited advance booking amount and only one party appeared before the Assessing Officer. The assessee has filed confirmation and PAN of some parties. The ld. Sr DR further submitted that the assessee has failed to prove creditworthiness and identity of the parties , and the genuineness of the transactions. The assessee is required to prove three limbs i.e. the identity and creditworthiness of the parties and also genuineness of the transaction. The ld. Sr. D.R. relied upon the judgments and orders of Hon’ble Supreme Court in the case of CIT v. Durga Prasad Maurya(1971) 82 ITR 540(SC), Kale Khan Mohammad Hanif v. CIT, reported in 50 ITR 1(SC), A. Govindarajulu Mudaliar v. CIT, reported in 34 ITR 807(SC), PCIT v. NRA Iron & Steel Private Limited AIRONLINE 2019 SC 1729. Our attention was drawn by ld. Sr. DR to the assessment order. It is contended by ld. Sr. DR that the assessee has paid cash for purchase of land and there is violation of section 40A(3) as purchase as well sale has been made in cash. The ld. CIT(A) has deleted the addition on the ground that the entry was taken directly in the balance sheet and not routed through P & L account. It was submitted that this is purchase of land and the assessee is engaged in the real estate development, and thus the entry is to be routed through P & L account. The ld. Departmental Representative relied upon the decision of ITAT “C” Bench order in the case of Shreeji Developers in ITA No. 2065/Chen/2018 dated 11th January , 2023 , and the ld. Sr. DR relied upon the assessment order and the remand report.

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5.2 The ld. Counsel for the assessee submitted that the assessee is a real estate developer . The booking advance was received from the clients of the assessee and provision of Section 68 were wrongly invoked. It was submitted that some of the persons who booked flats have cancelled the flats. Cancellation deeds were filed. Reference was placed by ld. Counsel for the assessee on the decision of Hon’ble Supreme court in the case of CIT v. Balbir Singh Maini ( AIRONLINE 2017 SC 775) , Hon’ble Gujarat High Court judgment and order in the case of Rohini Builders (2002) 256 ITR 360(Guj HC). It was submitted that it is a business transaction and these customers of the assessee have booked the plot/bungalows in the residential scheme of the assessee, and they have paid booking advance in cash to the assessee. It was submitted that this is a residential scheme situated at the outskirt of Ahmedabad , and the plot/bungalows were booked by the agriculturist who have actually paid in cash . Prayers was made by ld. Counsel to delete the additions or alternatively it can be remanded back for de-novo adjudication as proper opportunity was not given by the Assessing Officer. Booking persons have confirmed the transaction and onus is discharged by the assessee and the department can make additions in the hands of the persons who have advanced the money and not in the hands of the assessee. The assessee relied upon the decision of Hon’ble Bombay High Court in the case of R B Jessaram Fatehchand (Sugar Deptt.) v. CIT, reported in (1970) 75 ITR 33(Bom.) and judgment and order of Hon’ble Supreme Court in the case of CIT v. Orissa Corporation Private Limited, reported in (1986) 52 CTR 138(SC). It was submitted that except the person at serial no 5 all are new to the assessee and hence prayer were made that no addition can be made u/s. 68 of the Act. Regarding ground no. 2, the

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counsel for the assessee relied upon the order of ld. CIT(A) , and submitted that no expenses were claimed under the year under consideration. The ld. Counsel for the assessee also relied upon the Accounting Standard AS-7 and it was submitted that the assessee has discharged the onus. It was submitted that the matter can be remanded back to the ld. CIT(A) for fresh adjudication.

5.3 The ld. Sr. DR in rejoinder submitted that Cancellation was done in the year 2017 after the assessment was completed and the payments were also not made to them. It was submitted that these are not genuine transactions. The ld. Sr. DR submitted that only Rs. 10 lacs was refunded. The liability as on 31.03.2018 was Rs. 1.98 crores, while as on 31.03.2017, it was Rs. 2.79 crores. The ld. Sr. DR relied upon assessment order and remand report.

5.4 The ld counsel for the assessee submitted that cancellation was done in the year 2017 and if the assessee had made full payment on cancellation of plots/bungalows, the said parties could not have come forward and submitted the information.

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2,64,88,300/- (being one half share of Rs. 5,29,76,600/- ) for purchase of immovable properties i.e. non agricultural land for residential purposes , at Block No./Survey No. 284/B/4 having area of 10724 square meters at Ambapur village of Gandhinagar District , Gujarat. The said land was acquired by assessee jointly(with 50:50% share) with Iscon Procon Private Limited(the other assessee covered by this order) from Sitaben Govabhai Rabari. The total consideration for land being Rs. 5,29,76,600/- , which was paid equally by the assessee as well Iscon Procon Private Limited , as both the assessee as well Iscon Procon Private Limited , held 50% share each in the said land. The AO asked assessee to submit proof of sources of investment n the said property viz. bank statements, bank book, cash book and details/documents of funds borrowed for acquiring the said property. The AO observed that the assessee has made entire payments in cash to the tune of Rs. 2,64,88,300/- , for purchase of land, sources were found to not satisfactorily explained. The AO reopened the assessment by invoking provisions of Section 147 of the 1961 Act. The reasons for reopening were recorded and approvals from competent authorities were obtained by the AO. The assessee issued notice u/s 148 to the assessee , dated 17.11.2016. The assessee informed AO that return of income filed u/s 139(1) filed by the assessee be treated as return of income filed in response to notice issued u/s 148. The assessee asked for the reasons recorded , which were supplied by the AO. The assessee objected to the reopening of the concluded assessment by the AO by invoking provisions of Section 147. The AO disposed off the objections raised by the assessee to reopening of the concluded assessment, by rejecting the same. The assessee also filed writ petition before Hon’ble Gujarat High Court, which stood dismissed by Hon’ble High Court. The AO

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issued statutory notices u/s 143(2) and 142(1), during the course of reassessment proceedings. The assessee filed submissions during the course of reassessment proceedings. The AO observed that the entire consideration towards its 50% share in the land acquired from Sitaben Govindben Rabari to the tune of Rs. 2,64,88,300/- was paid by the assessee in cash. The AO asked assessee to produce Sitaben Govindben Rabari for examination before the AO and also asked the assessee to submit copies of ITR, Bank statements and other details to prove the genuineness of the transaction for purchase of land. The assessee did not produce Sitaben Govindbhai Rabaro before the AO for examination, nor the assessee produced copy of ITR and bank statements of Sitaben Govindbhai Rabari. The assessee only relied on copy of registered confirmation deed(agreement to sell) dated 21.08.2013 in which confirmation of cash receipt by Sitaben Govindbhai Rabari was acknowledged. The AO observed that genuineness of the transaction for purchase of land could not be proved, although transaction for purchase of land stood proved. The AO further observed that the assessee is into the business of real estate developers, and the cost of acquisition of land is the expenditure incurred by the assessee which is debited to P&L Account, and being in excess of Rs. 20,000/- being paid in cash, the provisions of Section 40A(3) are violated, and hence an amount of Rs.2,54,76,650/- stood disallowed by the AO by invoking provisions of Section 40A(3), although the assessee claimed that the said amount was not debited to P&L Account. The AO further observed that the assessee has shown to have received deposits being booking advance in cash from 12 persons towards booking in the scheme of the assessee, as under :

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The AO asked the assessee to produce before the AO for examination these 12 depositors who have paid booking advance in cash and to also produce their ITR’s, bank statements, agreements etc. , in order to prove the identity and creditworthiness of the depositors as well genuineness of the transaction.The assessee did not produce these depositors before the AO, and merely produced the notarized copy of Banakhat(agreement to sale without possession). The AO observed that the assessee is not able to prove genuineness of the transaction nor the creditworthiness of the depositors stood proved. The AO observed that all the banakhats were notorized on 29.04.2013/01.05.2013 and were having validity of 14 months. The said 14 months had already expired during the assessment period, and the assessee did not produce any evidences of returning the said money to the depositors nor the assessee produced sale deeds executed in favour of the 12 persons who claimed to have made in booking in the scheme of the assessee . Thus, the AO observed that these Banakhat’s are fake , defective and not reliable. The AO observed that the assessee did develop this scheme and only 2 units have been sold to two other parties other than 12 persons who claimed to have initially booked the plots/bungalows in the said project. The AO made the addiitons to the tune of Rs. 2,79,50,000/- in the hands of the asssessee by invoking provisions of Section 68, as the assessee could not produce genuineness of the transaction nor the creditworthiness of the depositors. The assessee filed first appeal before ld. CIT(A) and filed additional evidences by way of sale deed executed in favour of 4 persons and cancellation deed executed with respect to 8 persons. The ld. CIT(A) called for remand report from the AO. During remand proceedings, the AO asked the assessee to produce the sellers of the land Sitaben Govindbhai Rabani to

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whom the assessee made the payment in cash to the tune of Rs. 2,54,76,650/- for purchase of its share in land, and the 12 depositors who claimed to have paid in cash towards booking advance for booking of plot/bungalows in ‘Brij Residency’. The assessee did not produce the seller of land , and 11 out of 12 summons issued by the AO u/s 131 to the depositors remained uncompiled with. Only one depositor appeared who denied to have cancelled the booking and also denied the contents of the transaction in the booking agreement. The AO asked the assessee to file following details wrt to the 12 depositors who have given booking advance to the assessee :- ii) Identity proof/copy of PAN Card & copy of ITR (iii) Nature of business activity/ income with supporting documentary evidences iv) Books of accounts, audit report (if apply) v) All bank passbooks/bank account statements of bank accounts held individually or jointly. vi) Details of movable & immovable assets held individually or jointly with documentary evidences vii) Nature, purpose, confirmation and details alongwith documentary evidences of transactions made with assessee company. viii) Documentary evidences of source of investment in assessee company for the year under consideration. The summary/comments on the details available as per cancellation deed and the details / information gathered by AO from enquiry conducted by issue of summons and the response/details received, are given below :-

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The AO prayed in its remand report submitted before ld. CIT(A) to confirm the additions as were made by the AO in its assessment order. The assessee submitted its comments before ld. CIT(A) in response to the AO remand report , as under:

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The assessee claimed that few of the depositors are farmers and their land holding extract 7/12 were produced. The assessee also filed confirmation letters, PAN , voter cards, aadhar card etc to support its contentions. The detailed comments of the assessee are produced hereinabove. The ld. CIT(A) deleted the entire additions as was made by the AO u/s 68 with respect to the booking advance received from the 12 depositors. Similarly ld. CIT(A) deleted the additions as were made by the AO u/s 40A(3) by holding that the said cash payment to the tune of Rs. 2,54,76,650/- towards acquisition of land was not debited to P&L Account and Section 40A(3) is not attracted, despite the fact that the assessee is into the business of real estate development and the said land purchased was a trading asset acquired for development and sale. On perusal of the entire records carefully, it is observed that the apparent is not real . As per the claim of the assessee booking advance in cash from 12 depositors to book plots/bungalows in a residential scheme ‘Brij Residency’ was taken which cash raised was claimed by the assessee to have been used to purchase the aforesaid land from Sitaben Govabhai Rabari. Thus, it could be seen that even before the assessee claimed to have acquired land from Sitaben Govabhai Rabari, the booking amounts were raised and that too in cash wherein all 12 depositors who were claimed to have booked plots/bungalows paid cash to the assessee and that too huge cash of Rs. 2,79,50,000/- It was a devise used by the assessee to introduce and channelize the undisclosed income of the assessee in the garb of booking advance for plots/bungalows. We say so because as

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per the claim of the assessee , the said 12 depositors have deposited in cash in aggregate Rs. 2,79,50,000/- even before land was purchased by the assessee. As per the claim of the assessee itself , the assessee claimed to have utilized these booking advance of Rs. 2,79,50,000/- , to pay for its share for purchase of land(assessee share is 50% while 50% share in land is held by Iscon Procon Private Limited) to the tune of Rs. 2,64,88,300/- which was also paid by the assessee in cash to Sitaben Govindbhai Rabani, to purchase 50% share in Block No./Survey No. 284/B/4 having area of 10724 square meters at Ambapur village of Gandhinagar district, close to Ahmedabad. Thus, even as per the claim of the assesse, the assessee did not use any of its own resources to purchase land, and all the amount paid for purchase of land and that too in cash had originated by way of booking advance in cash from these 12 depositors , who have paid all in cash even before the land is acquired by the assessee. The entire transaction of purchase of land to the tune of Rs. 2,64,88,300/- was in cash as well the entire booking advance to the tune of Rs. 2,79,50,000/- was received in cash. The payments for acquiring land was claimed by the assessee to be made out of booking advance. The sale deed for purchase of land was a registered document registered on 21.08.2013, while the assessee entered into notarized Banakhat(agreement to sale without possession) with the 12 depositors on 29.04.2013 and 01.05.2013. The said Banakhat was valid for 14 months.The assessee developed/constructed the said residential project ‘Brij Residency’ through ‘Ratnamauli Developers’. But, even by the time assessment was completed by AO on 29.12.2017, the plots/bungalows were not transferred to the said 12 Depositors although all the 12 Banakhats got expired. Later , during remand proceedings before the AO at the behest of

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directions of ld. CIT(A) in the year 2019 , the assessee submitted that 8 of the original depositors who gave booking amount in cash in 2013 cancelled the booking , while 4 of the depositors , the units were transferred. Further, it transpired that even with respect to 8 bookings which stood cancelled, the amount was not refunded by the assessee to the persons who booked the plots/bungalows, and merely Rs. 10 lacs was refunded. It is incomprehensible that even after their Banakhat expired , the said 12 depositors did not persue legal remedy against the assessee. Further, it is further incomprehensible that after keeping booking for several years , the 8 depositors got their booking cancelled without refund of their booking advance as only Rs. 10 lacs was refunded to one of the depositors and the balance deposit amount was not refunded . It is further incomprehensible to believe that land/bungalows being appreciable assets which appreciates with time, these 8 persons simply cancelled their booking without seeking any appreciation/profits on cancellation and also allowed cancellation without actual refund of their booking amount. It is further observed that the assessee transferred 2 units to some other buyers of the said units but not to the original depositors, by the time assessment proceedings got completed in 2017 , and no update on the status of booking advance paid by original depositors in cash in 2013 was brought on record during reassessment proceedings. The assessee produced some basic documents in remand proceedings carried out by ld. AO at the directions of ld. CIT(A) in the year 2019, such as election card, aadhar card, bank statements , 7/12 land extract in order to establish identity and creditworthiness of the depositors and genuineness of the transaction of payments in cash of booking advance, but again against the 12 summons issued by the AO to all the original

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depositors during remand proceedings, only 1 depositor appeared whose statement was recorded by the AO, and that too he denied to have signed on any booking agreement.He also denied to have cancelled the booking. He also could not explain the details of transaction in the booking agreement. Rest of the 11 parties did not appeared before the AO. The AO has culled out details in his remand report, which is reproduced above. The AO has made detailed and proper enquiry. The assessee has received Rs. 2,79,50,000/- as booking advance in cash from 12 depositors which is recorded in its books of accounts, and now the onus is very heavy on the assessee to prove identity and creditworthiness of the persons who have advanced the booking amount in cash and the genuineness of the transaction. No nexus of the cash payment by these 12 depositors with the withdrawal from their bank account or any other credible sources etc. could be produced by the assessee and/or by these depositors who made bookings in the plots/bungalows. When the banking facilities are so easily and widely available in the State of Gujarat , then there was no reasons and justification for making payments in cash towards booking advance and that too in the project in which as per assessee’s claim land was even not taken by the assessee prior to receiving the booking amount. None of the depoistors appeared before the AO during reassessment proceedings despite being called by the AO to assessee to produce them. In remand proceedings, 11 of the 12 depositors did not appear before the AO in response to summons issued by the AO . Merely filing election card , aadhar card, PAN card, bank statements where meager balances are maintained vis-à-vis huge booking advance paid by these depositors , 7/12 extracts of these depositors, are not sufficient to discharge the onus cast on the assessee u/s 68 of the 1961 Act.

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The amount stood credited in books of the assessee, and it is for the assessee to have discharged the said onus. The onus is very heavy once the huge amount to the tune of Rs. 2,79,50,000/- is accepted by the assessee in cash within a short period of time, which is claimed by assessee to have been used for acquiring land whose payments were also made in cash. Thus, these whole edifice of receiving huge cash from the 12 depositors to the tune of Rs. 2,79,50,000/- towards booking amount on a non existing project(as per the claim of the assessee) where even the land was not acquired by that time of accepting deposits, is a make belief arrangement entered into by the assessee to bring into its books of account by recycling its own undisclosed income under the garb of booking advance for booking of plots/bungalows. The apparent is not real, and it is the assessee’s own undisclosed income which got introduced in its books of accounts under the garb of booking advance. The agreements with these depositors were not registered and was merely notarized, having validity of 14 months.The said period expired , but no plots/bungalows were transferred to these depositors even when the re- assessment was completed by the AO in 2017. The said depositors did not took any legal action against the assessee nor the said agreements were renewed. During remand proceedings in 2019, the assessee submitted that 8 of the depositors cancelled their bookings , no justifiable reasons for cancellation of booking are provided , keeping in view surrounding circumstances and these are make belief justification which are merely an eye wash.Even the booking amount was not refunded by the assessee and the booking of plots/bungalows stood cancelled. It could not be explained that when land/bungalows are appreciating asset, what was the need for cancelling the same in 2018 i.e. 5 years after booking and that too without

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taking any appreciation value as well even the booking amount was not refunded by the assessee. Thus, the entire story set up by the assessee is a make belief false story which does not inspire confidence. The assessee is not able to prove creditworthiness of the depositors nor the assessee is able to prove the genuineness of the transaction. The onus u/s 68 is very heavy on the assessee as the amount of Rs. 2,79,50,000/- received by the assessee towards booking advance for booking of plots/bungalow and that too in cash is a huge amount, and three ingredients are to be cumulatively satisfied by the assessee u/s 68. Out of 12 depositors, only 1 depositor appeared before the AO in response to summons issued u/s 131 during remand report proceedings , whose statement was recorded by the AO, and he denied to have signed on the booking form as well denied to have cancelled the booking. He was not able to explain the sources satisfactorily for making such an huge payment in cash to the assessee . He could not explain the contents of the transactions as recorded in the booking agreement. Section 68 of the Act cast onus on the assessee to satisfy the ingredients of Section 68 to establish the identity and creditworthiness of the creditors and to establish the genuineness of the transactions. Once assessee filed the basic details such as name and address of creditor, PAN, income tax return, confirmation and bank statement , the initial onus gets discharged. Since the Revenue has doubted the creditworthiness of the depositors and genuineness of the transaction as per the reasons cited and set out above keeping in view facts surrounding the case, the onus shifts back to the assessee company to offer an explanation to the satisfaction of the AO as contemplated u/s 68 of the Act which could have been discharged by producing the aforesaid depositors before the AO so that truth behind the smokescreen could have

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been unraveled by the AO by interrogating them. In the absence of the same, the AO has the powers to make additions to the income as unexplained cash credit u/s. 68 of the Act. We are of the considered view that Section 68 of the Act creates a legal fiction which cast obligation on the assessee to explain to the satisfaction of the AO about nature and source of credit in case any amount is found credited in the books of the assessee maintained for any previous year. This creates a legal fiction and in case the assessee did not offer explanation to the satisfaction of the AO as to the nature and source of credit of any amount found credited in the books of the assessee for any previous year by cumulatively satisfying the AO about the identity and creditworthiness of the creditor and about the genuineness of the transaction , the amount found credited in the books of the assessee shall be treated to be the income of the assessee as unexplained income under legal fiction created by Section 68 of the Act. The Section 68 of the Act created a legal fiction which does not require that the Revenue has to show the sources of the income before bringing the amount to tax since the amount is found to be credited in the books of the assessee in case the assessee has not offered explanation to the satisfaction of the AO. Section 68 of the Act cast obligation on the assessee where any sum is found credited in the books of an assessee maintained for any previous year , and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum so credited may treated as income and charged to income-tax as income of the assessee of that previous year. The burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the

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creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s 68 of the Act as an income. Burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 of the Act as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO , otherwise the AO shall be free to proceed against the assessee company and make additions u/s 68 of the Act as unexplained cash credit. The use of the word ‘any sum found credited in the books ’ in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof . The AO can go to enquire/investigate into truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit worthiness of the creditor and the genuineness of the transactions, the AO is empowered to make additions to the income of the assessee u/s 68 of the Act as an unexplained credit in the hands of the assessee company raising the share capital because the AO is both an investigator and adjudicator. In our considered view, merely submission of the name and address of the depositor, PAN, election card, adhar card, confirmation letters, notorized banakhat , cancellation deed 7/12 extract , bank statement are not sufficient, rather the assessee has to prove the capacity of the depositors to deposit such a huge amount of booking advance in cash with cogent evidences co-relating the cash available with them with credible sources of generation of cash , and also the necessity of carrying out such a huge transaction in cash despite the fact that advanced

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banking facilities are available , and that too all the 12 depositors having given booking advance to the aggregate tune of Rs. 2,79,50,000/- in cash, which is against the preponderance of human probabilities and does not inspire confidence. The genuineness of these cash deposits by 12 depositors to the aggregate tune of Rs. 2,79,50,000/- does not inspire confidence into the genuineness of the entire transaction of booking done by these 12 depositors if also seen in the context that the assessee has not even holding land when the booking advance was received from these 12 depositors as claimed by the assessee itself , and in fact it is the cash raised through these alleged bookings from these 12 depositors which were claimed by the assessee to have been used by the assessee in paying for the purchase of land. If the land is not available with the assessee on the date of raising the booking advance, it is quite obvious that the assessee did not held any approvals from the authorities to develop the project such as RERA approval, Municipal Corporation approval, project approval by the Development Authority, electricity connection approval , swereage approval, Fire approval etc. for development of this residential project, as none of the said approvals were brought on record even before us. The evidence which could be produced if not produced shall be against the asssessee if so produced. The assessee could not update the status of these 12 bookings before the AO upto the conclusion of re-assessment proceedings in 2017. There were 2 units registered by that time and that too in the name of some other persons and not in the name of these 12 depositors. The unregistered agreement with these 12 depositors was for 14 months, which expired when the reassessment proceedings got completed, and none of the 12 depositors filed any legal suit or availed other legal

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remedy against the assessee despite the expiry of banakhat. 8 out of 12 depositors who booked plots/bungalow cancelled their bookings in 2018, without even taking their refund amount not to say that plots/bungalows appreciate with time and that did not consider fit to take appreciated value of plot/bungalows. Even with respect to 4 units which were registered by the assessee in favour of the depositors who gave original booking amount, the creditworthiness of these 4 depositors is also not proved nor the sources of making huge cash payments could be proved in conjunction with bank withdrawal or credible sources of cash for making deposit payment to the assessee . The delay in getting the sale deed registered in their favour beyond the agreement period of 14 months and these 4 depositors not taking any legal action or availing other legal remedy against the assessee is fatal. It shakes the foundation of genuineness of transaction, apart from other inconsistencies such as non appearance before the AO despite being called by the AO during assessment proceedings and in response to summons issued u/s 131 during remand report proceedings conducted at the behest of ld. CIT(A). Thus, the entire edifice of creating a façade of booking of plots/bungalows keeping in view the entire facts and circumstances of the case is a sham transaction , and in fact it is the assessee undisclosed income which got channelized into books of accounts through this dubious route. The depositors in this instant case did not appear before the AO at the instance of the assessee as well in pursuance to the summons u/s 131 of the Act issued by the AO(only 1 depositor out of 12 to whom summons were issued appeared) and thus, the onus shifts back to the assessee to produce the depositors before the AO and if the assessee falters the additions can be made u/s 68 of the Act.Thus, under the 1961 Act, the entire surrounding

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circumstances , human conduct as well preponderance of human probabilities are to be seen , to unravel the truth behind the smoke screen , in order to establish whether what is apparent is real or not. Thus, what is relevant is the substance of the transaction over the form. The Courts can look behind the smoke screen to see whether apparent is real or not and in order to unravel the truth . Reference is drawn to the judgment(s) and order(s) of Hon’ble Supreme Court in the case of CIT vs. Durga Prasad More, [1971] 82 ITR 540(SC) , A. Govindarajulu Mudaliar v. CIT (1958) 34 ITR 807(SC) and Smt. Sumati Dayal vs. CIT, (1995) 214 ITR 801 (SC). Thus, keeping in view the aforesaid facts and circumstances , we hold that ld. CIT(A) erred in deleting the additions and we have no hesitation in reversing the appellate order passed by ld. CIT(A) and uphold the additions to the tune of Rs. 2,79,50,000/- as was made by the AO u/s 68 of the 1961 Act being cash credit. Thus, we set aside the appellate order of ld. CIT(A) passed on this issue and sustain the addiitons as was made by the AO. The appeal of the Revenue is allowed on this ground.We order accordingly.

6.2 Regarding , second addition to the income of the assessee to the tune of Rs. 2,54,76,650/- as was made by the AO and later deleted by the ld. CIT(A), we are of the considered view that the assessee is into real estate development business. The assessee purchased non agricultural land for residential purposes , at Block No./Survey No. 284/B/4 , having area of 10724 square meters at Ambapur Village of Gandhinagar district, Gujarat, and cash payment of Rs. 2,54,76,650/- was made to Sitaben Govabhai Rabari(seller of land). The sale deed was registered on 21.08.2013 before Sub-Registrar, in which it is acknowledged by Sitaben Govabhai Rabari that

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cash was received in consideration for transfer of land in favour of the assessee . This land was acquired for development and sale of plots/bungalows for residential purposes. The said payment was admittedly made in cash. The assessee is into real estate development, and thus this land acquired for development and sale of residential plots/bungalows, and shall for assessee be a trading asset on revenue field . The assessee has although not debited the cost of acquisition of the said land in the P&L account and rather has taken the inventory of the said land to Balance Sheet as closing stock, but the cost of acquisition of the said land and other expenses associated therein with the said project were on revenue field. The assessee has taken directly the inventory into closing stock in the Balance Sheet without routing through Profit and Loss Account, but that does not mean that expenditure in the revenue field was not incurred during the year under consideration or the same will not be claimed as expenditure during the year under consideration , and is not to be claimed in the year of incurring. Since, this cost of acquisition of land was rolled over to next year(s) as the opening stock of inventory of land , the expenditure to that effect is necessarily claimed as expenditure on revenue field , which will be subject to verification by authorities to see that rigors of the 1961 Act are complied with, in order to allow the assessee to carry forward the same to succeeding year(s), and the carried forward to subsequent year is to necessarily done since the assessee has not booked any sale in the year under consideration, and hence the entire amount of cost of acquisition of land is to be rolled over to the next year as opening stock and so on, or else the assessee should give concession that the assessee does not want to avail the benefit of deduction of expenditure in the subsequent year(s) as ‘opening stock’ and would

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forego such benefit which will then increase its profits under the 1961 Act to that effect, then in that situation no disallowance is warranted but it is not the case here, as we could cull out that the assessee has not sold any land/bungalow in the said residential project in the year under consideration, and has claimed to carry forward the said land cost to the subsequent year(s) to be allowed as deduction as expenses from the sale arising from this project in the subsequent years. Thus, this cash payment made towards acquiring land as revenue/trading asset in cash exceeding threshold limit, is hit by provisions of Section 40A(3).

The provisions of Section 40A(1) and 40A(3) as were applicable at the relevant period, are reproduced hereunder: “Expenses or payments not deductible in certain circumstances. 40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession".

(2)****

[ (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.”

Thus, it could be seen that Section 40A falls under Chapter IV-D which deals with Computation of Income and further with the ‘Profits and gains of

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business or profession’ .We are presently concerned with computing income from Business , as the assessee is into business of real estate development and also that land was admittedly acquired for development of residential project ‘Brij Residency’ , thus as claimed by the assessee itself intention was manifested by the assessee ab-intio at the stage of acquiring land that the assessee wants to develop the said land for the purposes of developing a residential project named ‘Brij Residency’. The title of the section 40A states that ‘Expenses or payments not deductible in certain circumstances’. Sub-section 1 of Section 40A stipulates that the provisions of section 40A shall have effect notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to computation of income under the head ‘Profits and Gains of business or profession’ . Thus, Section 40A shall have over-riding effect notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head “Profits and gains of business or profession”. Section 40A(3) clearly stipulates that where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. Thus, the assessee has undisputedly incurred expenditure towards revenue field by purchasing a land for real estate development activity which forms its inventory on trading/revenue field and the payment of more than Rs. 20000 is made in a day to the sellers of the land Sitaben Govabhai Rabari, which is also acknowledged to be received in cash by Sitaben Govabhai Rabari in the sale deed dated 21.08.2023, the assessee has clearly breached the provisions of Section

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40A(3). Reference is drawn to the judgment and order of Hon’ble Supreme Court in the case of Dilip Kumar & Co.(supra). In taxing statute, there is no equity and there is no room for indentment. If the simple, plain and literal language of the statute is clear and unambiguous, then the same is to be applied, howsoever harsh the consequence may be. As has been held by Hon’ble Supreme Court , the exemption provisions are to be interpreted strictly and thus to be strictly construed, and any ambiguity in strict interpretation is to be decided in favour of Revenue. But, while interpreting charging section and bringing the subject to tax is also to be strictly construed but any ambiguity is to be decided in favour of subject. As could be seen that language of Section 40A(3) is clear, simple and unambiguous.The assessee having infringed the provisions of Section 40A(3) by incurring expenditure on revenue/trading field by purchasing land for real estate development business, the said expenditure cannot be allowed as deduction. The ld. CIT(A) erred in granting relief to the asssesee by getting influenced that no amount was debited to P&L Account and that the inventory was taken directly into Balance Sheet which included closing stock of the aforesaid project land, ignoring the fact that the expenses were incurred in the Revenue field by the assessee.The ld. CIT(A) also thus concluded no expenses were debited to P&L Account and has neutral effect of debiting the inventory and crediting the closing stock. Merely because, the said expenditure was not routed through P&L account and was directly taken to Balance Sheet as inventory is of no consequence, as per detailed discussion by us as above. Thus, we hold that the assessee has infringed provisions of Section 40A(3), and the expenditure to the tune of Rs.2,54,76,650/- incurred by the assessee in cash for acquiring land for real

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estate project being on revenue filed , cannot be allowed as deduction while computing income of the assessee being hit by Section 40A(3). The assessee has also failed to demonstrate that its case falls under exceptions as are stipulated in Rule 6DD. Thus, the appeal of the Revenue stand allowed on this ground and we set aside the appellate order of ld. CIT(A) and sustain the addition as was made by the AO to the tune of Rs.2,54,76,650/- u/s 40A(3) of the 1961 Act.Appeal of the Revenue on this issue is allowed. We order accordingly. 7. The ground no. vii raised by Revenue in memo of appeal filed with ITAT is general in nature and does not require separate adjudication.

ITA NO. 29/Ahd/2020 -Assessment Year 2014-15

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Order pronounced in the open court on 27 -09-2024 at Ahmedabad

Sd/- Sd/- (TR SENTHIL KUMAR) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 27/09/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद