THE ITO, WARD-3(2)(4), AHMEDABAD vs. M/S. RADHE KRISHNA DEVELOPERS, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member ITA No. 418/Ahd/2020 Assessment Year 2010-11

The ITO, M/s. Radhe Krishna Ward-3(2)(4), Developers, Ahmedabad Vs Nr. Narmada Colony, B/h Police Station, Telephone Exchange Road, Tal: Sanand, Dist: Ahmedabad PAN: AALFR8147G (Appellant) (Respondent)

Revenue Represented: Shri Ashok Kumar Suthar, Sr.D.R. Assessee Represented: Shri Aseem L. Thakkar, A.R. Date of hearing : 12-03-2024 Date of pronouncement : 05-04-2024 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Revenue as against the appellate order dated 12.03.2020 passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2010-11.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 2 ITO Vs. M/s. Radhe Krishna Developers

3.1. During the course of assessment proceedings, the Assessing Officer made the following additions: (a) understatement of value of investment in immovable property u/s. 69 of the Act Rs. 1,11,69,600/- (b) unexplained cash credit Rs. 54,50,000/- (c) disallowance u/s.40A(3) of the Act Rs. 11,00,000/-

Thus the Assessing Officer determined the total income as Rs.2,84,34,690/- and demanded tax thereon.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 3 ITO Vs. M/s. Radhe Krishna Developers

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 4 ITO Vs. M/s. Radhe Krishna Developers

payable by the Society. Copy of the Banakhat was placed by way of Annexure-A (page 1 to 5) of the assessment order. This fact has also been admitted by the Partner Shri Dilipbhai Sisodia in reply to question no. 12 of his statement recorded. However on account of adverse business environment and recession in the real estate market, financial viability of the project was not feasible as a result of which the parties to the Banakhat dropped the proposal. Subsequently, the very same plot of land came to be purchased by the assessee firm and sale deed was duly executed on 01.10.2010, for a consideration of Rs.2100/sq.mtrs and the premium for conversion from agricultural land to Non Agricultural land was to be borne by the original land owners not by the assessee firm.

6.1. The Ld. AO held after perusal of Sale Deed and statement recorded from the assessee Partner, the assessee firm had paid the premium of Rs.1,11,69,600/- towards conversion of land into NA lands and assessed as the deemed income of the assessee u/s.69B of the Act.

6.2. The Ld. CIT[A] considered the submissions of the assessee and after taking on record the Remand Report from the AO and Rejoinder from the assessee, deleted the addition by the AO by observing as follows:

“… The issue which requires consideration is whether the Banakhat so impounded during the course of survey operation and being relied upon was either in the name of the partnership firm or any of its partners. On examination of Banakhat it would be seen that the same was in the name of the proposed society Radhe Krishna Cooperative Housing Society Ltd. Further, the name of the chairman and secretary of the aforesaid society are as below:

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 5 ITO Vs. M/s. Radhe Krishna Developers

i. Damodardas Maniram Sadhu ii. Harpalsigh ghanshyamsingh Vaghela Therefore, as would be apparent from the perusal of the Banakhat impounded during the course of survey operation on which reliance has been placed for making the additions has no connection or nexus either with the appellant partnership firm or any of its partners and is an independent transaction on a standalone basis. Apart from that, the Banakhat between the proposed society and the land owners is not a registered document having any sanctity and therefore, no credence can be attached to the same particularly where neither the appellant firm nor its partners are a party to the document. Had the A.O. any doubts or suspicions of the appellant having any connection with the impounded Banakhat it would be the duty of the AO to cross verify these facts with the society or the appellant or its partners particularly where the unacted Banakhat has not been owned up the appellant or its partners during the assessment proceedings. The AO is duty bound to examine the contention and ascertain the factual position and thereafter draw a conclusion that the Banakhat has been acted upon. Merely rejecting the explanation and evidences furnished by the appellant cannot be the reason for making such additions particularly where registered sale deed of the same land has been brought on record whose existence and sanctity is not in challenge. Further the action of the AO in making the addition is self-contradictory by nature. The AO has placed reliance on the registered purchase deed with regards the sale rate of Rs.2100/- sq.mtr. However, with regards, the premium amount of Rs.1,11,00,000/-, the AO has completely ignored final sale deed executed and placed reliance upon the Banakhat to which the assessee or its partners are not a party or 'signatory thereto. It is a trite position of law that either the document has to be accepted in entirety or the same would have to be rejected wholly. Piecemeal reliance on the seized documents is not permissible under law. Either the terms in the registered purchase deed have to be accepted or the terms as enumerated in the Banakhat entered by the proposed society have to be adopted. Adoption of sale rates as per the executed sale deed and adoption of premium amount as per Banakhat would lead to abnormal situation which is not permissible under the law. Reliance is placed in the case of Dhanvarsha Builders and Developers P. Ltd c DCIT (2006) 102 ITD 375 (Pune) wherein it was held as under:- “So far as the argument of the assessee that the impugned papers not only showed the receipts but also the expenditure and, therefore, the document should be read as a whole and deduction for the expenditure incurred should be given to the assessee while computing undisclosed income was concerned, the seized document should be read as a whole if it has to be relied upon. It cannot be read only to the extent it is advantageous to the revenue and not read when it becomes disadvantageous to the revenue. It

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 6 ITO Vs. M/s. Radhe Krishna Developers

is an accepted principle of interpretation of documents that they should be read as a whole, as persons of common prudence will read them. They cannot be read in bits and parts to suit the convenience of one party or the other. Therefore, the expenditure would also have to be read on proper appreciation of the document." It is also relevant to note that the AO has not been able to correlate the Banakhat between the proposed society and the sale deed executed. Neither the names of the parties to the agreement nor any of the amounts paid in pursuance are in agreement with the final sale deed executed are correlated. I have also gone through the Banakhat on which reliance has been placed by the AO which only indicates that an amount of Rs.21,000/- being paid in pursuance thereof. The perusal of the final sale deed duly executed does not mention any such payment of Rs.21,000/- which forms a part of the total consideration of Rs.1,47,65,970/-. Therefore, the Banakhat impounded and final sale deed are two distinct documents and the action of the AO in relying upon the Banakhat for premium amount and on the final sale deed for the rate of Rs.1200/sq.mtr. is misplaced and unjustifiable. Coming to the issue of the premium amount payable on the conversion of land into non-agricultural and the liability of the party to bear the costs, I have gone through the purchase deed executed and examined clause 7 of the aforesaid agreement in particular to which the AR has drawn attention. The English translation of clause 7 of the purchase deed is reproduced below: "The land in question was that of a restricted nature, however, for the removal of the restrictions an application was made to the Dy. Collector of Dholka Prant and with reference to that application, the Collector of Ahmedabad, vide his order no. Jamin/Ganot Dharo, Sec.43/Sanand/ S.R.41/09A/ashi8323/09 dated 09.12.2009 fixing the premium payable for conversion of land for non-agricultural purpose of the said land and as per the same we the Seller had paid the premium for the entire survey no. and that amount, we the seller have paid from the amount of consideration stated hereunder received from the purchasers and the said amount has not been included in this sale deed.” The same clearly reveals that the premium in question is paid by the vendors of the land and also the fact that the aforesaid amount is separate and distinct from the sale consideration as decided upon. Therefore, the allegation made in the assessment order that premium has been separately paid by the appellant is completely contrary to the facts on record. The AO has not brought any material or other evidence on record to support his contention that the premium amount for conversion of land has been paid by the appellant.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 7 ITO Vs. M/s. Radhe Krishna Developers

It is also relevant to note that during the course of survey operations no material or other evidence has been found by which it can be inferred that such premium payments have been made by the assessee firm to the vendors of the land. Merely, because a Banakhat for land entered into by a 3rd party earlier had been found from the premises subject to a survey operation and which has been acquired by the assessee subsequently does not necessarily imply that the purchase of land by the appellant firm has been made on the same terms particularly when no corroborating evidence suggesting such payments have been impounded during the course of survey proceedings. The possibility of the availability of the Banakhat of a 3rd party at the premises subject to survey action be to ensure the regularity of the title of the land purchased by the appellant firm can also not be ruled out. No businessman would like to be/straddled with a property which may be a source of litigation. So as to ensure the title of the property being free from encumbrances may also be the reason for its presence at the premises of the present owners of the land. Mere presence of unacted documents at the survey premises cannot be the reason for visiting the appellant with an addition. Coming to the issue of the assessee having indicated his willingness to obtain confirmation from the vendor party during the course of assessment proceedings and which he subsequently failed to do so by itself cannot be the reason for making the addition. The assessee firm had during the course of assessment proceedings placed complete facts on record including the final sale deed and the reason why the earlier; parties had not acted upon the impounded Banakhat. The Banakhat as well as sale deed executed both included the detailed name, addresses including PAN of the vendors of the land. Therefore, the identity of the vendors of the land had been established beyond doubt and in the knowledge of the AO. If the AO had the slightest of doubts he could have himself conducted independent inquiries to ascertain the factual position. Once the documents have been placed on record identifying the parties to the transaction and the reason for the Banakhat not having been acted upon, by the buyer also made known the burden cast upon the assessee stands discharged. The burden now shifts on the AO to prove otherwise. It is also worthwhile to note that even in the remand report, the AO had further opportunity to examine the issue and bring the facts on record in support of his contention. However, once again, the AO has not chosen to utilize this opportunity and merely supported the assessment order. The decision relied upon by the appellant in the case of CIT v. Chankya Developers (2014) 222 taxman 164 (Guj.) (Mag.) squarely covers the issue that where the addresses and PAN were made available to the AO, the assessee had discharged: the primary onus cast upon him and if any doubt persisted in his mind necessary inquiries should have been conducted at his end by issuing letters u/s. 133(6) of the Act. Non conducting of such inquires cannot be the in spite of being in complete possession of the details cannot be reason to sustain the addition.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 8 ITO Vs. M/s. Radhe Krishna Developers

In view of the above facts and circumstances, the addition of Rs.1,11,69,600/-on account of unexplained investment is deleted. Ground no.2 is allowed.” 6.3. Ld. Sr DR Shri Ashok Kumar Suthar appearing for the Revenue could not place on record any infirmity in the order passed by the Ld. CIT[A] as well as any materials on record that the assessee firm paid the premium of Rs.1,11,69,600/- towards conversion of the lands into Non-Agricultural lands. Per contra Ld. Counsel Shri Aseem L Thakkar appearing for the assessee reiterated the submissions made before the Appellate Authority and requested to uphold the same.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 9 ITO Vs. M/s. Radhe Krishna Developers

particularly when the registered Sale Deeds dated 01-10-2010 of the same lands were been on record before the AO.

7.1. Further as per clause 7 of the aforesaid registered Sale Deeds the premium amount was paid by the original land owners out of the Sale Consideration received by them and not by the Assessee Firm. Further the Ld. AO has not brought any material or other evidence on record to support his contention that the premium amount for conversion of land has been paid by the assessee. The Ld. AO ought to have conducted enquiry under section 133[6] with original sellers of the land on this issue, but without doing so, the alleged additions made in the assessment order is completely contrary to the facts on record and therefore liable to be deleted. Thus we do not find any infirmity in the order passed by the Ld. CIT[A] and this Ground No.1 raised by the Revenue is hereby dismissed.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 10 ITO Vs. M/s. Radhe Krishna Developers

8.1. The Ld. CIT[A] considered the additional evidences filed by the assessee and after taking on record the Remand Report from the AO deleted the addition by the AO by observing as follows:

“… During the course of appellate hearing it was explained that substantial amounts have been received from M/s. Avas Construction, Radhe darshan Construction and Bhanubhai Vaghela, etc who are also being assessed with the same AO. The AO has also complete assessment of these contributors and no adverse inference have been drawn in their respective individual assessments. Attention was drawn to Sr.no.23 and 26 of the list contained on pg.16 of the assessment order in support of this argument. It was explained that the amounts which had been received from such parties was in fact booking money for the proposed sale of unit in the scheme. The AO had also accepted the sales conducted and therefore to disbelieve the booking money would not be justifiable particularly where sales has been believed. It was explained that rather than routing the payments to be made to the land owners through the bank accounts of the appellant, the cheques in respect of booking money was taken in the name of land owners and credit of the same was granted to the respective members. During the course of appellate proceedings additional evidences had also been furnished in support of the booking money received and the same are placed on page-1 to 30 of the PB. The evidences comprised of affidavit, copy of accounts with confirmation etc. Where the PAN were available the same have also been provided. In case of Velubhai Vaghela direct inquiries had also been conducted by the AO by issuing notices u/s. 133(6) of the Act. These parties have also been responded and their replies have been placed on page 15 and 16 of the PB. Where the bookings had been made which had come to be subsequently cancelled, affidavits in support of cancellation of the booking and the fresh allotment details had also been furnished. All these documents had been forwarded to the AO for his comments. The AO has not been able to discredit any of these evidences and merely reiterated what has been stated in the assessment order. The AO has no adverse comments to offer on the evidences which have been furnished. However, he has only requested that such evidences so furnished may be rejected out rightly since adequate opportunity had not been granted. I have examined the facts of the case and reached a conclusion that the appellant has completely discharged the onus cast upon him to explain the money received from the members which have been forwarded to the land owner towards the purchase of land. The assessee has furnished all relevant evidences by which the identity, creditworthiness and genuineness of the transactions can be established. The AO has not been able to bring any material or other evidence on record by which it can be stated that the amounts so received from these members are not genuine. In fact, the AO himself has accepted the sales which comprise

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 11 ITO Vs. M/s. Radhe Krishna Developers

of cash credit and therefore, the question of genuineness of cash credit by merely rejecting the evidences is not tenable. I agree with the AR on the legal proposition of the evidentiary of the value of the evidences furnished. The affidavit has to be accepted unless the deponent of the maker of such affidavit has been cross examined and the contents thereof have been found to be false. In the case of the appellant no such evidence has been brought on record by which an inference can be drawn that the affidavits furnished are not reliable or self-serving in nature. The AO has not bothered to verify or cross examine the author of the affidavits and merely requested in the remand report not to place reliance on the affidavits. Such an action would not be justifiable. Reliance is placed in the case of Mehta Parikh v. CIT 919556) 30 ITR 181 (SC) wherein it was held as under: "The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The assesses took it that the affidavits of these parties were enough and neither the AAC, nor the ITO considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits." Even in the case of the appellant treatment of cash credits as sales is not disputed by the AO. In support of such payments made the conformations/affidavits etc. have been placed on record. The contents of the affidavit are also not challenged. Merely to make an addition because they had not been furnished during the assessment proceedings would not be a justifiable approach particularly where the additional evidences have been admitted and confronted to the AO for his comments. Had the AO raised doubts about the sanctity of the evidences by demonstrating its unreliability the contentions raised would have been understandable. However, the AO has not demonstrated in any manner whatsoever that the evidences furnished are not reliable and therefore not acceptable. In my opinion, the appellant has furnished credible evidences in support of cash credits including confirmations, PAN, affidavits etc. Affidavit placed on record and the contents of the said affidavit have remained uncontroverted. The same was not disproved or found to be false. If that be so Hon'ble Gujarat High Court in the case of Glass Line Equipment 253 ITR 454 has held that when affidavit was not controverted, it has to be taken as accepted. The affidavit is accepted as genuine and the addition of Rs.54,50,000/- is deleted. Ground no. 3 is allowed.”

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 12 ITO Vs. M/s. Radhe Krishna Developers

9.1. Further in the case of Shri Bhanubhai Vaghela, Awas Construction, Radhedarshan Construction, etc. who are the major contributors are being assessed with the same, Assessing Officer who has completed their assessments, after verification of the investments made by them and accepted to be genuine in their individual cases. Thus, we do not find any infirmity in the findings arrived by Ld. CIT(A) by deleting the additions made u/s. 68 of the Act. Thus the Ground No. 2 raised by the Revenue is devoid of merits and the same liable to be dismissed.

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 13 ITO Vs. M/s. Radhe Krishna Developers

disallowed by the Assessing Officer u/s. 40A(3) of the Act. The assessee submitted that the amount of Rs.11,00,000/- by cash pertain to one Kishor Poria who was an employee drawing monthly salary of Rs.10,000/- and he was site Supervisor and all the payments in the construction site were made through him. His salary account was not doubted by the A.O. The site expenses which were less than Rs.20,000/- were made through this Supervisor for the petty expenses. Therefore the provisions of Section 40A(3) would not apply. Considering the above explanation of the assessee, the Ld. CIT(A) deleted the addition made by the Assessing Officer by observing as follow:

“… There is no dispute to the fact that the assessee has not disclosed any expenditure in the books of accounts by the name of Kishore Poria. The AO has chosen to make the disallowance on the basis of the notings in the impounded cash book where such alleged disbursements have been noted. Therefore, first and foremost where no such expenditure has been claimed in the books of accounts with regards payments made to Kishore Poria the question of making disallowance would not arise. The provisions of section 40A(3) of the Act would be applicable only where the payment has been made to a person in excess of Rs.20,000/- and noted in the books of accounts. The AO has not pointed out any such payments made in the books of accounts regularly maintained on the basis of which the return of income have been filed. The AO has referred to the impounded material seized during the course of survey proceedings which indicated outgoings to Kishore Poria for making disbursements to contractors and other subcontractors. The individual payments made to such contractors and subcontractors as appearing in the books of accounts being less than Rs.20,000/- no adverse inference has been drawn while completing the assessment. This fact is not in dispute that that there are no payments made in the books of accounts to Kishore Poria which are in violation of the provisions of section 40A(3) of the Act. The explanation of the appellant that notings had been made in the impounded rough cash book which revealed payments made to Kishore Poria for making further payments to the contractors is not denied by the AO. What has to be examined is whether such payments are reflected in the regular books of accounts. Where the regular books of accounts do not reflect any such payment to Kishore Poria and only payment to the various contractors and such individual cash payment not exceeding Rs.20,000/- the same would not qualify for disallowance

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 14 ITO Vs. M/s. Radhe Krishna Developers

under section 40A(3) of the Act. Further, the fact cannot be ignored that the payments made to the subcontractors as noted in the regular books of accounts have come to be accepted by the AO and the source of the same has also been found to be acceptable. In view of the same no adverse inference can be drawn for making the addition of Rs.11,00,000/- particularly when the aforesaid amount has not been recorded in the books of accounts regularly maintained and on the basis of which the/ return of income has been filed. In view of the above facts the addition of Rs.11,00,000/- is hereby deleted. Ground No, 5 is accordingly allowed.” 11. Ld. Sr. D.R. appearing for the Revenue supported the order passed by the Assessing Officer and requested to uphold the same, but could not contravent the factual findings arrived by the Ld. CIT(A). It is undisputed fact that the notings made in the impounded rough cash book, revealed payments made to the Supervisor Shri Kishore Poria for various payments payable to contractors, labourers and petty expenses which is below 20,000/. Therefore the provisions of Section 40A(3) cannot be invoked. In fact, the assessee itself has made a disallowance of Rs.14,04,065/- in the total cash payment of Rs.26,21,191. Therefore we do not find any infirmity in the findings arrived by Ld. CIT(A). Thus Ground No. 3 raised by the Revenue is devoid of merits and the same is liable to be dismissed.

Order pronounced in the open court on 05-04-2024 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 05/04/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:-

I.T.A No. 418/Ahd/2020 A.Y. 2010-11 Page No 15 ITO Vs. M/s. Radhe Krishna Developers