INCOME TAX OFFICER-1(3), BHILAI vs. M/S AKRITI INFRASTRUCTURE , BHILAI

आदेश / ORDER

PER RAVISH SOOD, JM:

“1. "Whether in law and on facts & circumstances the case, the Ld.CIT(A) was justified in deleting the addition of Rs.3,36,23,500/- made by the AO on account of unexplained expenditure u/s. 69C of the Income-tax Act, 1961 by rejecting sundry creditors shown by the assessee at Rs.1,46,40,000/- and treating the entire amount of FMV on purchase of land as unexplained expenditure?" 2. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition made by the AO u/s. 40A(3) of the Income-tax Act, 1961 by treating the entire amount of FMV as cash receipt viz. Rs.3,36,23,500/- to Rs.65,40,000/-." 3. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in allowing the assessee to file additional evidence before him as the evidence was not produced before the AO during the assessment proceedings." 4. "The order of Ld. CIT(A) is erroneous both in law and on fact." 5. "Any other ground that may be adduced at the time of hearing."

Also, the assessee firm is before us as a cross-objector for the year mentioned above, wherein it has supported the order passed by the CIT(Appeals) on the following grounds:

3 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 “1. On the facts and in the circumstances of the case, the ld. Commissioner of Income-tax (Appeals) is justified in deleting the addition of Rs.3,36,23,500/- made by the ld. Assessing Officer on account of unexplained expenditure u/s.69C of the Income Tax Act, 1961.

2. On the facts and in the circumstances of the case, the ld. Commissioner of Income-tax (Appeals) is justified in deleting the addition of Rs.2,70,83,500/- made by ld. Assessing Officer u/s.40A(3) of the Income Tax Act, 1961.

3. The order of the ld. Commissioner of Income tax (Appeals) is correct both in law and on fact.”

2. Succinctly stated, the assessee firm, which is engaged in the business of real estate, builder, and developer under the name and style of “M/s. Akriti Infrastructure,” had e-filed its return of income for A.Y.2014-15 on 17.11.2015, declaring an income of Rs.2,21,280/-. Subsequently, the case of the assessee firm was selected for scrutiny assessment u/s.143(2) of the Act.

3. As is discernible from the assessment order, the A.O had after, inter alia, making two-fold additions/disallowances, viz. (i) addition u/s.69C of the Act towards unexplained expenditure incurred by the assessee firm for making payments towards purchase consideration to the sellers of the plots/lands: Rs.3,36,23,500/- (sic); and (ii) disallowance of the payments made by the assessee for purchase of plots in cash, i.e., in contravention of the manner prescribed u/s. 40A(3) of the Act: Rs.3,36,23,500/- (sic), assessed the income of the assessee firm vide his order passed u/s.143(3) of the Act dated 31.12.2016 at Rs.6,74,68,280/-.

4 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

“RE: Purchase of plots/lands as stock-in-trade and not as fixed/capital assets: 4.1 As discussed above, the assessee firm is engaged in the business of real estate, builder s and developers vide colonizer license No.40 dated 29.06.2010. As far as the large investment in property (AIR) as compared to the total income is concerned, during the financial year 2013-14 relevant to A.Y.2014-15 the assessee has purchased residential plot/land from the following persons. The details of land purchased and payments thereof are as under :-

5 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

6 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

Out of the above two land transferred to fixed assets, stock in trade sundry creditors. 4.2 It is an admitted fact that the assessee is carrying business of real estate having colonizer license since 2010 and whatever land purchased during the year has to be considered as stock-in-trade and payments made are revenue expenditure. The copies of land Registered Deeds have been called for examined and place on record. On perusal of the of Registered Deeds, it is noted that in three cases namely Dipesh Kumar Jain/ Naman Kumar Jain, Dilip Kumar Jain/ Indira Devi Jain and Amit Agrawal, the mode of payments of purchase considerations were in cash totaling of Rs.65,40,000/-. In the first two case the assessee had adopted value as assed by the Sub- Registrar, Durg at Rs.25,20,000/- each and paid stamp duty accordingly. In the case of Shri Amit Agrawal the assessee has chosen purchase value of Rs.15,00,000/- instead of Rs.50,40,000/- assessed for stamp duty. Since the assessee has paid entire purchase consideration in cash, the provision of section 40A(3) of the Act is attracted. Keeping in view of the above facts and circumstances of the case, vide notice u/s 142(1) of the Act the assessee was asked to explain the cash payment over and above of Rs.20,000/- while purchase of land. 4.3 In turn, the assessee vide written submission dated 12.09.2016 stated that, "we would like to state that land belongings to Dipesh Kumar Jain/ Naman Kumar Jain, Dilip Kumar Jain/ Indira Devi Jain has purchased to the tune of Rs.50,40,000/- has been transferred to the fixed assets and no expenditure are claimed in the profit & loss account. Therefore, disallowances under section 40A(3) of the Act is does not applied." In the case of Shri Amit Agrawal it has been explained the although the payments of sales consideration mentioned as "paid in cash" in the Registered sale purchase Deed but in fact, was not paid so far as per the ledger. The amount of Rs.15,00,0001- is shown as payable in the sundry creditors as on 31.03.2014. The contention of the assessee on this score is not acceptable. As per sales Deed the seller has categorically accepted to have received sale consideration in cash before executing the sale Deeds from the purchaser, as mentioned at page No.4 of the sale Deed before the Registering Authority as well as in the presence of two witness who signed the sale Deed and there was nothing which remained to be received from the buyer (the assessee firm). 4.3 As far as the concept of transfer of above plots to the head "fixed assets" of Rs.50,40,000/- are concerned, it is not acceptable since the essence of purchase of the land were prima-facie for construction of multi storied flats for sale. The entire land purchases as per the table 10 para 4.1, S.No. 1 to 9, were part of the Khasra No.295 located at ward No.63, Pragati Nagar Risali, Bhilai and are closely inter

7 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 connected with each other, in fact, are contiguous part of the same piece of land. The Inspector of Income Tax of this Ward was directed to carry out inquiry about the construction activities carried on in the above plots. As per the Inspector's report, the assessee firm is carrying construction in the name of "Aakriti Residency" and the construction is in progress. Some photographs of the site were enclosed with the report. xxxxxxxx The reports and photographs of the construction site are placed on record after perusal. Keeping in view of the above facts, the concept of treating these lands as "'fixed assets" of Rs.50,40,000/- is not accepted. In the register documents the photos of land are shown as land under have been changed as explained that the entire land as shown at para 4.1 are treated as one piece on which construction is under going. In view of the above the following the following lands are treated as under:-

It is stock in trade. In the case of land purchase from Amit Agrawal, The assessee has picked up the bainama value of Rs.15,00,000/- instead of Rs,50,40,000/-. Since the subject land is attached to the above plots, for which assessee took full value assesses by the Registering Authority for charging Stamp Duty, the purchase consideration is deemed to be paid at Rs.50,40,000/- as paid in the above mentioned two plots. In this case, the assessee has paid registration charges without agitation in the matter of excessive stamp vale before Registering Authority. During the course of assessment proceedings, statement on oath of Shri Amit Agrawal has 8 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 been recorded on 17.10.2016. In the statement, he stated that he has not received sales consideration so far. On being questioned that what course of action has been taken in connection with payment of sale consideration, such as filling a case before Courts or complaint before the Police, he denied to do so. Therefore, it is presumed that he has already been received sale consideration in cash and is in complete ease about the transaction and besides he has handed over the possession and the some construction is going on. 4.4 The above lands are considered as 'fixed assets" in the books of the assessee which is not proper in view of the facts on record. The land purchased is according treated as stock in trade on record. These are the only three plots being taken to the fixed assets. These are all continuous with another six plots. Construction activities in full swing as per Inspector of Income Tax report. Land user assessee is real estate developers and there is apparent reason why these three plots are taken to fixed assets shown, construction is going on the same and it is practically used as stock in trade. However it is treated as land stock i.e stock in trade In this regard reliance is placed in the ratio of Sutlej Cotton Mills reported (1978) 1978 CTR 0155 (SC) : (1979) 116 ITR 0001. The land purchased accordingly treated as stock in trade. RE : Payment of purchase consideration of Plots/lands made by the assessee in cash and wrongly reported as payable outstanding: 5. Large increase in sundry creditors with respect to turnover as compared to preceding years:- Perusal of the balance sheet of audit report as on 31.03.2014, it is noted that the assessee has mentioned large sundry creditors of Rs.2,35,93,612/- as per the annexure "E". As per the annexure-"E" annexed with audit report as many as 30 sundry creditors were found to appearing in the annexure to balance sheet. In order to examine the facts, vide notice u/s 142(1) of the Act issued along with certain questionnaire, the assessee was required to furnish the confirmed ledger accounts of all sundry creditors along with complete address. In turn, the assessee vide written submission dated 24.08.2016 has explained that "there are sundry creditors outstanding to the tune of Rs.2,35,93,612/- as on 31.03.2014 which relate to amount payable on land purchase of Rs. 1,46,40,000/- and for civil work done at Rs.80,12,744/-. Ledger of the concerned parties is enclosed as required by you. We would like to state that amount is high due to the amount payable by us on account of purchase of land being made by us during the previous year 2013-14. Details of sundry creditors pertaining to lands are as under:-

9 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

5.1 As far as the sundry creditors appearing in balance sheet as on 31.03.2014 payable for land to the tune of Rs.1,46,40,000/- are concerned, the facts have been examined from the relevant details from the Registered Deed. As per the Registered Deed, as far as the payments are concerned, both purchased and sellers have categorically admitted to have made payments and received the 10 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 payments respectively, before the Registering Authority i.e Sub- Registrar, Durg. The payments made and payments received are also duly witnessed by two witnesses while executing the Registered Deed. Further, it is also affirmed by the seller that there is nothing which remains to be received from the purchaser. Keeping in view of the above facts, the assessee was asked to explain that since as per the Registered Deed full payments have been completed before execution of Registered then as to how these amount are shown as "payable" to the land seller and as "sundry creditors." in turn, the assessee has furnished ledger accounts of the creditors in support of the amount payable to them. On perusal of the copy of confirmation of accounts, it is noted that all confirmation of accounts are not found to mention the PAN and completed address of the seller. 5.2 The contention of the assessee is not acceptable. In the Registered Deed, registered in the Officer of Sub-Registrar Durg, the sellers have categorically admitted to have received the sums and affirmed the same that entire sales consideration have been received in cash or by cheque from the buyer and nothing remains to be received against alleged sales. The transactions made between the assessee and seller had duly been executed in the presence of two witnesses who signed in the indenture. The Deeds so executed are legal documents and the assessee cannot retract from his own sworn affirmation. In order to verify the status of cheque issued to the seller for payment of sales consideration, the relevant information have been called for under section 133(6) of the Act from the SBI Sector-1, Bhilai and Dena Bank, Bhilai. In the case of Dena Bank it is informed that the cheques issued by M/s Aakriti Infrastructure as on the reporting date i.e 05.10.2016 is unused in our online record i.e not presented for payments. Further it is informed that cheque issued are not passed with our branch. In the case of cheque issued of SBI, to Shri Guman Gir and Anil Kumar Dilwar has been cleared. The validity of cheques issued to seller subsists only for six month from the date of issue. During the validity period, these issued cheques were not presented by the respective sellers. Subsequently, the assessee has not issued fresh cheque in lieu of the invalid cheque. 5.3 In order to examine the facts, summons u/s 131 of the Act were issued on 04.09.2016 to all the sellers. In certain cases statement on oath have been recorded and placed on record except in the case of E.Murli. It is pertinent to mentioned here that in the case of Dilip Kumar Jain and Shri Dipesh Kumar Jain who sold plot to the tune of Rs.25,20,000/- each categorically admitted vide their statements u/s 131 of the Act dated 26.12.2016 to have received full and final payments in cash in course of registration of property and nothing remains to be received as per the conveyance Deed. However, on perusal of the balance sheet as on 31.03.2014 it is noted that the assessee has shown sundry creditor as payable amounting to 11 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

Rs.14,20,000/- against both the above named seller. As per the details of payments furnished by the assessee, the assessee has paid Rs. 11,00,000/- in cash out of Rs.25,20,000/- and balance of Rs.14,20,000/- shown as payable to them. In the case of Shri Gunman Gir who sold land at Dundera, Durg to the present assessee on 08.01.2014 to the tune of. Rs.11,00,000/-. As per the Deed, the payments have been paid by Dena Bank cheque No. 176493 dated 19.02.2013 of Rs. 3,90,000/- and SBI cheque No. 204258 dated 07- 01-2014 of Rs. 7,00,000/-. The balance of Rs.10,000/- was paid on 13.02.2013 in cash. The statement on oath of Shri Omar Gir recorded u/s 131 of the Act on 24.12.2016. In the statement he admitted that he sold land to the present assessee on 18.02.2013 to the tune of Rs.12,00,000/-. Out of the total sale consideration, Rs.4,00,000/- was received in cash and Rs. 8,00,000/- was received by cheque of Indian Bank and deposited in Bank of India Utai, Dist-Durg. Perusal of the balance sheet it is also noted that the assessee has shown to Guinan Gir as sundry creditor for Rs.4,00,000/- as on 31.03.2014 in spite of the payments been full and finally completed and as per the seller's statement on oath and the Deed. As it has been discussed, the book of accounts maintained by the assessee does not reflect true affairs of the business of the assessee. The relevant facts has been confronted to the assessee and show cause notice issued on 26.11.2016 that regarding the entire creditors for land appearing in the balance sheet as on 31 .03.20.14 why it should not be treated as bogus and added to the total income on the above facts and also relying facts of the payments details mentioned in the respective registered Deeds. It is also seen and appreciated from the table at page 7 that as per the list of sundry creditors no payments have been made to 5 parties at serial No. 6 to 10. Where as in the Registered sale deeds payments have been made. It is again reiterated that all these 5 plots at s. Noi.6 to 10 possession have been given by the seller to the assessee and on the same construction is being carried out the builder developer has been erecting the project. This act of human behavior on the pate part of 5 seller to hand over the possession of the land at cost of nil payments as reflected in the books of accounts of the assessee in immersing. Besides it is seen the figures as shown in sundry creditors are the same in the subsequent assessment years. The sate of passing this assessment order no Whets payments have been made to all these parties are reflected in the books of the assessee under the heading of sundry creditors. The concept of human probabilities has been discussed in detail by Hon'ble S supreme Court in the case of Sumati Dayal vs Commissioner Of Income-Tax, ... on 28 March, 1995 Equivalent citations: 1995 AIR 2109, 1995 SCC Supl. (2) 453. . Considering all these above aspects of the case the sundry creditors regarding the outstanding amount to be paid to the seller of the plots are treated as bogus liability. The assessee has not offered any coherent and plausible explanation for 12 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 creating bogus sundry creditors to the tune of Rs.1,46,40,000/-. The assessee has submitted that there are sundry creditors outstanding to the tune of Rs.2,35,93,612/- as on 31.03.2014. Ledger accounts of all the party is enclosed as required by you. We would like to state that amount is high due to the amount payable by us on account of purchase of land being made by us during the F.Y.2013-14. Hence out of total sundry creditors of Rs.2,35,93,618/- creditors pertain to land amount to Rs.1,46,40,000/- balance creditor are pertaining to the labour contractors and the suppliers of materials. Further he stated that although in the registry deeds respective payments have been paid in some case but in some cases due to insufficient fund could not paid which resulted the assessee has shown as sundry creditors.

6. However, on perusal of the Registered Deeds, it is noted that the assessee has registered some of the subject land/plot as per the bainama value instead of value assessed by the Registering Authority for charging Stamp Duty and purchase consideration paid accordingly has mentioned in these details. In the case of plot purchase made from Dipesh Kumar Jain, Naman Kumar Jain, Dilip Kumar Jain, Indira Devi Jain, the assessee has taken full value of consideration in both Bainama and market value of Rs.25,40,000/- and paid stamp duty thereon accordingly. The assessee has not raised any objection before the Registering Authority for higher charges of stamp duty. The remaining plots are also located at the same location and are inter connected with each other and also part of the same Khasra No.

transfer by an assessee a capital-asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. Accordingly, in the light of the above it is decided to adopt the vale as shown in Stamp vale Authority as the purchase consideration of the land are same amount in the toto for 10 plots as per the table at page No. 7 comes to Rs.3,36,23,500/- As against that as per ledger of the assessee only Rs.35,00,000/- has been paid. Hence it is safe to conclude that the balance amount of Rs.3,01,23500/-(3,36,23.500- 35,00,000/-) is considered as amount paid by the assessee, which are not accounted for in the books of accounts. it has already been established that the three plots taken to fixed assets in the balance sheet are nothing but stock in trade shown on these plots the amount of Rs. 50,40,000/- which has not explained by the assessee it treated as unexplained expenditure of the assessee. Accordingly, the above amount of Rs.3,01,23,500/- (3,36,23,500-35,00,000) is added to the total income of the assessee u/s 69C of the Act and on this point penalty u/s 271(1)(c) of the Act is initiated. RE : Purchase of plots/lands by the assessee as per the value adopted by the Stamp Valuation/Registering authority for payment of stamp duty and not as per the Benama/agreement value as was so claimed: 7. It is also seen that as per the above discussion that total value of the 10 plots have been considered at Rs.3,36,23,500/-. However, the assessee has alleged that purchased consideration in total as per the amount mentioned in registration sale deeds are of Rs.1,81,40,000/- out of the amount of Rs.1,81,40,000/- there are alleged payments by cheque amounting to Rs.1,15,90,000/- and the balance amount of Rs.65,50,000/- by cash. However, out of the cheques payments in toto of Rs.1,15,90,000/- it is latter found that lots of cheques were not in cashed and only few cheques presented. The cheques which re encashed in toto comes to Rs.16,90,000/-(Guman Gir Rs.10,90,000/- and Anil Dilwar Rs.6,00,000/-). The facts that the cheque were not presented or encashed gets further corroborated from the statement recorded in the case of Shri Khajanchi Lal Agrawal, Dunesh Bhatt and Anil Dilwar. Besides a finding has ready been given the figures shown in the sundry creditors are not reliable. This considering all these above facts, it is safe and reasonable to conclude that in the entire transaction of 10 plots only Rs.3,36,23,500/- has been paid by banking channel i.e by cheque

14 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 and that balance amount are paid by cash. Thus the total value of the plots of Rs.3,36,23,500/- as derived earlier the amounts said by cash comes to Rs.16,90,000/-. Since the entire amount of Rs.3,19,33,500/- (3,36,23,500-16,90,000) has been paid by cash and since each individual amount is more than Rs.20,000/-, this transactions in cash will attract the mischief of the legal provision u/s 40A(3) of the Act. Accordingly the amount of Rs.3,19,33,5000/- is added u/s. 40A(3) of the Act. Penalty u/s section 271(1)(c) of the Act initiated on this point.”

5. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals), who, after sustaining the addition/disallowance of Rs.65.40 lacs made by the A.O u/s. 40A(3) of the Act, viz. (i) purchase consideration in cash paid to S/shri Dipesh Kumar Jain and Naman Kumar Jain (Sr. No. 1): Rs.25.20 lacs; (ii) purchase consideration in cash paid to Shri Dilip Kumar Jain and Smt. and Smt. Indira Devi (Sr. No. 2): Rs.25.20 lacs; and (iii) purchase consideration in cash paid to Shri Amit Agrawal (Sr. No. 3): Rs.15 lacs, vacated the balance additions/disallowances made by the A.O u/s.69C and u/s. 40A(3) of the Act. The CIT(Appeals), while concluding as hereinabove, observed, viz. (i). the assessee firm had purchased the plots/lands as per the respective values disclosed in the registered sale deeds and not as per the segment value that was adopted by the stamp valuation /registering authority for payment of stamp duty; and (ii). the assessee firm had not discharged its outstanding liabilities towards the sellers as shown in its books of accounts and, thus, had not cleared the same by making cash payments as was observed by the A.O. Accordingly, the CIT(Appeals) based on his

15 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 deliberations above partly allowed the appeal of the assessee by observing as under:

“2.3 I have gone through the facts of the case and the submissions of the appellant. The issue in appeal is regarding payments made for purchases of land. Facts of the case are that assessee has made part purchases in cash and part in cheque. The AO has added Rs. 3,36,23,500/- u/s. 40A(3) of the Act and again he has added the same amount u/s. 69C of the Act. Whereas the actual transaction of Rs. 1,81,40,000/- has taken place in respect of lands the registry, value for the purpose of stamp valuation is Rs.3,36,23,500/-. The assessee has sundry creditors of Rs. 2,35,93,612/- in its books of accounts out of which an amount of Rs. 1,46,40,000/- relates to the land purchased as discussed in para 2.1. While in the registered deeds for purchase of land it has been mentioned that full amount has been paid to the respective sellers and the same have received full amount of consideration, however the assessee has shown part of the purchase price as unpaid and outstanding. As per the chart produced at page no. 9 of assessment order out of the total consideration of Rs. 1,81,40,000/- the assessee has shown Rs. 1,46,40,000/- as payable. The AO has made enquiries from sellers and many of the sellers have stated that they have received full payments, while others have stated to have received part payments or no payment as they have received cheques which have not been presented to banks. When the assessee has shown certain sellers as creditor to the reason that cheques have not been realized, and the sellers have confirmed this fact, the sundry creditors of Rs. 1,46,40,000/- (Rs 3,36,23,500/-as per AO) cannot be treated as bogus. The AO has treated the amount of Rs. 3,36,23,500/- as bogus which is total amount of market value of all the transactions. The AO cannot adopt this value as bogus since it is not the value at which the transactions had taken place. Disallowance u/s. 40A (3) of the Act can be made when the assessee had claimed expenses of this amount. Appellant has contended that if the expenditure had not been claimed it should not be disallowed. Assessee is a builder and purpose of buying land cannot be investment. Just because the assessee has shown the land in balance sheet, the nature of transaction does not become investment. Land is a raw material in case of the builder and he uses it alongwith other materials and labour to produce /manufacture plots or houses which are final product. Therefore the land purchased by the assessee is stock of raw material. The AO has relied on the decision of Hon'ble Supreme Court in the case of Sutlej Cotton Mills 1978 CTR 155/116 ITR 001.

16 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

On going through the statements of the sellers it is found that Amit Agrawal has stated that he has not received any amount from the assessee. He has signed on the deed as told by Shiv Sahu of the assessee company. Dilip Jain has stated that they have received Rs. 25,20,000/- in cash. Dinesh Jain has also stated having received Rs. 25,20,000/- in cash. All other persons have stated that they have received cheque which has not been presented to bank as per understanding with the buyer. The status of payment can be summarized as under-

Sr. Seller Total Amount Balance No. Transaction actually paid 1 Anil Dilwere 30,00,000 0 Unpresented cheque Rs.30 lakh 2 D Bhatt 30,00,000 0 Unpresented cheque Rs.30 lakh 3 Murli 30,00,000 0 Unpresented cheque Rs.30 lakh 4 Guman Gir 11,00,000 0 Unpresented cheque Rs.30 lakh 5 Khajanchi Lal 15,00,000 0 Unpresented cheque Rs.30 lakh 6 Dilip Jain 25,20,000 25,20,000 0 7 Dinesh Jain 25,20,000 25,20,000 0 8 Amit Agrawal 15,00,000 15,00,000 0 1,46,40,000/- 65,40,000

The case was referred to the AO for his remand report. The AO has not made any comment regarding ledger account of the creditors. He has simply stated that the documents furnished by the assessee are inadmissible. The AO has stated that all creditors said that they received all the payments. However on going through the statements of sellers the fact is revealed that only three creditors said so. In view of the above discussions the disallowance of Rs. 3,36,23,500/-u/s 69C is hereby deleted. The AO has adopted value as per the deeds Rs 3,36,23,500/- as the consideration paid by the assessee where as the assessee has paid Rs 1,81,40,000/-. While in the case of seller of a property section 50C comes into operation to deem that value as per registration authorities will be deemed to be the value of consideration, no such deeming provisions exist for buyer. If the appellant has paid a total of 17 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 Rs.1,81,40,000/- which is bayana value mentioned in the deed, this value has to be taken as the sale price. In the case of Sarjan Realities Ltd 40 taxman.com 398 Guj 2013 honourable Gujarat HC has dealt this issue and gave following decision- 5. The last surviving question pertains to addition of Rs.34,09,400/- made by the Assessing Officer on the basis of difference in valuation of the land by treating the same, as unexplained investment. The CIT (Appeals), however, deleted such additions. Upon further appeal before the Tribunal, the Tribunal confirmed the appellate order relying on the earlier decisions of the Tribunal on the issue. The Tribunal noted that the provisions of section 50C of the Act will apply to a seller only and not to a purchaser.

7. Clearly thus, section 50C of the Act by a deeming fiction substitutes the consideration received on sale of a capital asset by stamp duty valuation. Such deeming fiction, however, is applicable only in case of a seller for the purpose of section 48 of the Act.

8. In the circumstances, the Tribunal committed no error in confirming the view taken by the CIT (Appeals) that the Assessing Officer had wrongly applied the stamp duty valuation for the purpose of ascertaining the actual consideration expended by the seller of the land.

18 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

Also the creditors in respect of purchase of land are not found bogus. Therefore the addition u/s 69C is deleted.”

6. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. Also, the assessee firm is before us as a cross-objector.

Ground of appeal Amount mentioned in Amount rectified by Form 35 order u/s.154 (To be considered for this appeal before your Honour) Ground No.1: 3,36,23,500/- 3,01,23,500/- Disallowance u/s.69C Ground No.2: 3,36,23,500/- 3,19,33,500/- Disallowance u/s.40A(3)

19 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

9. Ostensibly, there are multi-facet observations of the A.O leading to the additions/disallowances in the present case, viz. (A). the observation of the A.O that sale consideration paid by the assessee firm in cash for the purchase of plots/lands to three parties stated at Sr. No.1 to 3, viz. (i) S/Shri Dipesh Kumar Jain and Naman Kumar Jain; (ii) Shri Dilip Kumar Jain and Smt. Indira Devi; and (iii) Shri Amit Agrawal aggregating to Rs.65.40 lacs was towards the purchase of stock-in-trade and not for acquiring any fixed /capital asset as was so claimed and shown in its books of account; (B). the assessee firm had purchased plots/lands from the parties mentioned above (Sr. No.3 to 10) not as per the bainama/agreement value but as per the segment rate that the Stamp Valuation Authority adopted for payment of stamp duty purpose; and (C). the assessee firm after purchasing the plots/lands at the stamp duty value/segment rate had paid the entire amount of purchase consideration to the sellers in cash and the amount shown as “payable” to them in its books of account was a bogus liability.

20 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

(A). ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT : RS. 3,01,23,500/- The A.O had made the addition of Rs.3,01,23,500/- (as per order u/s 143(3), dated 31.12.2016 r.w u/s 154, dated 04.04.2017) regarding the purchase of plots/lands from the parties mentioned above for two reasons: (i). that as the assessee firm had purchased plots from the parties stated at Sr. No.1 & 2 of the “chart” above, i.e., S/Shri Dipesh Kumar Jain and Naman Kumar Jain; and Shri Dilip Kumar Jain and Smt. Indira Devi vide registered sale deeds dated

21 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 27.03.2014 at Rs. 25.20 lac each, i.e., the value that was adopted by the stamp valuation/registering authority for payment of stamp duty; therefore, holding a conviction that the assessee would have similarly purchased the adjoining plots falling in the same khasra no. from the remaining sellers at the value adopted by the registering authority, the A.O made an addition towards unexplained expenditure incurred on the said count by the assessee firm u/s 69C of the Act: Rs.1,54,83,500/-; and (ii). the A.O further held a firm conviction that as the sellers had executed the registered sale deeds of the plots/lands in favor of the assessee firm, it would have paid the whole amount of sale consideration to them out of its undisclosed sources and had wrongly shown the same as outstanding/payable in its books of accounts made an addition on the said count u/s 69C of the Act: Rs.1,46,40,000/-. Accordingly, based on his deliberations above, the A.O. added Rs. 3,01,23,500/- [Rs. 1,54,83,500/- (+) Rs. 1,46,40,000/-] in the hands of the assessee firm.

(ii). Apropos the observation of the A.O that the assessee firm similar to the plots/lands which it had purchased at the segment value from the parties stated at Sr. No.1 & 2, i.e. S/Shri Dipesh Kumar Jain and Naman Kumar Jain; and Shri Dilip Kumar Jain and Smt. Indira Devi would have purchased the remaining plots forming part of the same khasra no. at the same price, i.e. at segment value; we find that on merits except for doubts or suspicion of the 22 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 A.O, nothing is available on record to substantiate the same. Elaborating on the reasons leading to the variance in the purchase consideration of the remaining plots, it was submitted by the Ld. AR that the same was because the remaining plots purchased by the assessee firm from parties mentioned at Sr. No. 3 to 9 suffered from locational disadvantages compared to those purchased from the parties at Sr. No.1 & 2. The Ld. AR submitted that the A.O. had grossly erred in failing to appreciate that the adjoining plots, unlike the plots/lands purchased by the assessee firm from parties at Sr. No. 1 & 2, had no independent access from any approach road. The Ld. A.R submitted that the A.O had grossly erred in summarily drawing adverse inferences regarding the purchase consideration for which the assessee firm had claimed to have purchased the plots/lands from parties at Sr. No. 3 to 10. The Ld. A.R drew our attention to the copy of Nazari Naksha enclosed along with the tabulated information regarding the sellers of each plot, Pages 88-89 of APB. Referring to the details above, it was submitted by the Ld. AR that four plots purchased by the assessee firm from the sellers, viz. Shri Amit Agrawal (Sr. No.3), Shri. Khajanchi Lal (Sr. No.4), Shri. Dinesh Bhatt (Sr. No.9) and Shri. E. Murli (Sr. No.5 & 6) were surrounded by other plots and did not have independent access from any approach road. Referring to the plot of Shri Dilip Jain (Sr. No. 2), it was brought to our notice that the same was connected with an approach road of 60 feet. As regards the plot of Shri Dipesh Jain (Sr. No.1),

23 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 it was submitted by the Ld. A.R that the same was adjacent to the plot of Shri Dilip Jain and both of the said persons were relatives. Carrying his contention further, it was averred by the ld. A.R that as the persons mentioned above, viz. S/sh. Dilip Jain and Dipesh Jain were relatives; therefore, the assessee firm negotiated jointly to purchase their respective plots. Referring to the remaining plots forming part of the same khasra no., i.e., those owned by parties at Sr. No. 3 to 9, it was submitted by the Ld. AR that as neither of the said plots were marketable individually, therefore, the assessee firm being placed advantageously was able to negotiate as per its terms with the sellers and had purchased their plots/lands at a comparatively lower price and pooled them into one lot. Elaborating further, it was submitted by the Ld. AR that as the sellers of the remaining plots with no independent access were not in a position to get a lucrative market price, they were constrained to sell their respective plots to the assessee firm at a reasonable price. Considering the facts above, it was averred by the Ld. AR that it was highly arbitrary for the A.O. to have inferred without any basis that the assessee firm had purchased all the plots/lands as per the segment rate that the Stamp Valuation Authority adopted for payment of stamp duty on transfer of the respective plots/lands. Apart from that, it was submitted by the Ld. AR that neither of the parties whose statements were recorded u/s.131 of the Act had ever stated that they had received any consideration over and above the transaction value as was 24 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 mentioned in the registered sale deeds. Rebutting the observation of the A.O that as per Section 50C of the Act, where the consideration received or accruing as a result of the transfer of a capital asset by an assessee, i.e., land or building or both, is less than the value adopted or assessed or assessable by any authority of the State Government (hereinafter referred to as a “Stamp Valuation Authority”) for payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable, for Section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer, the Ld A.R submitted that the deeming provisions of Sec. 50C applied to the sellers of the property and not to the purchaser party. To support his contention above, the Ld. A.R. relied on the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Commissioner of Income-tax, Faridabad Vs. Chandni Bhuchar (2010) 3223 ITR 510 (Punjab).

12.1. We have thoughtfully considered the aforesaid issue and find substance in the reasons advanced by the Ld. A.R. for purchasing the plots from the abovementioned parties at different prices/rates. As is discernible from the “Nazari Naksha” (supra), it transpires that plots/lands of S/shri Dilip Jain and Dipesh Jain (supra) enjoyed locational advantage compared to the remaining plots/lands. Reference to the Nazari Naksha reveals that the plots/lands owned by other sellers, viz. Shri Amit Agrawal (Sr. No.3), Shri. Khajanchi Lal

25 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 (Sr. No.4), Shri. Dinesh Bhatt (Sr. No.9) and Shri. E. Murli (Sr. No.5 & 6) were surrounded by other plots/land and had no independent access from any approach road. Considering the facts above, we find substance in the claim of the Ld. AR that there was no justification for the A.O. to have inferred that the assessee firm would have purchased all the plots mentioned above at a uniform price/rate from the abovementioned sellers. Also, we find substance in the claim of the Ld. A.R that as the plots mentioned above were not marketable individually, the assessee had the upper hand in negotiating with the sellers and purchasing the said plots/lands at a desired rate. Apart from that, the fact that neither of the parties mentioned above had in their respective statements recorded u/s.131 of the Act ever claimed/stated that they had received any amount over and above the sale consideration that was mentioned in the respective registered sale deeds further fortifies the veracity of the claim of the assessee of having purchased the said plots/lands as per consideration mentioned in the registered sale deeds. Be that as it may, in our view, in the absence of any material, there was no justification for the A.O. to have summarily inferred that the assessee firm had purchased all the plots/lands at a uniform price from the parties mentioned above.

12.2 Apropos the triggering of the provisions of Sec. 50C of the Act by the A.O, for concluding that the value adopted by the “Stamp Valuation Authority”

26 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 was to be taken as the consideration which the assessee would have paid for purchasing the plots/lands, we are unable to persuade ourselves to concur with the same. As stated by the Ld. A.R and, rightly so, the provisions of Sec. 50C of the Act would apply only to deem the total value of the “sale consideration” received or accruing as a result of transfer in the hands of the seller and in the absence of any legally acceptable evidence, valuation adopted for the purpose of section 50C would not represent actual consideration passed on to the seller. Our view above is supported by the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Commissioner of Income-tax, Faridabad Vs. Chandni Bhuchar (2010) 323 ITR 510 (Punjab), wherein it was held as under:

27 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 land under section 23 of the Land Acquisition Act, 1894. The burden of proof is always on the claimant to prove such a fact and in each case the prevailing market value as on the date of notification published in the State Gazette under section 4(1) of the Act has to be proved. The Tribunal also held that valuation done by any State Agency for the purpose of stamp duty would not ipso facto substitute the actual sale consideration as being passed on to the seller by the purchaser in the absence of any admissible evidence. The Assessing Officer is obliged to bring on record positive evidence supporting the price assessed by the State Government for the purpose of stamp duty. The view of the Tribunal is clear from para 7 of its order, which reads thus :— "From a plain reading of this provision, it emerges out that the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of land or building or both, shall for the purpose of section 48 be deemed to be the full value of the consideration received or accruing as a result of transfer. It nowhere provides that the valuation done by the State Government for the purpose of stamp duty etc., would ipso facto take place the actual consideration as being passed on to the seller by the purchaser in the absence of any other evidence. The Assessing Officer is required to bring positive evidence on record indicating the fact that assessee has paid anything more than the one disclosed in the purchase deed. The department has taken an argument in the grounds of appeal that Assessing Officer should be directed to make a reference to the Valuation Officer under section 142A of the Act. It also raised a plea that Assessing Officer has wrongly made a reference of section 50C while making the addition, in fact, the addition is made under section 69B on account of unexplained investment in the property. We have taken cognizance of both these arguments. It is the Assessing Officer who himself ought to have collected the evidence indicating the fact that assessee has paid more money than the one disclosed in the purchase deed. The ITAT while sitting in the second appeal is not supposed to give directions on the appeal of revenue that a reference to the Valuation Officer is to be made in order to substantiate the addition. The steps which Assessing Officer could have taken, if not taken then that lacuna cannot be filled up at the end of the ITAT. In the absence of any evidence exhibiting the fact that assessee has made unexplained investment in the house property, no addition can be justified. Learned Ist Appellate Authority has appreciated the facts and circumstances in right perspective. We do not find any error in the impugned order on this ground. Thus, the ground of appeal raised by the revenue is rejected."

3. Having heard the learned counsel, we are of the considered view that the view taken by the Tribunal while accepting the order of the CIT (Appeals) does not suffer from any legal infirmity.

28 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

4. The argument of the learned counsel for the revenue that the Tribunal should have asked the Assessing Officer to make a reference to the Valuation Officer under section 142A of the Act does not require any detailed consideration because CIT(A) had sent the evidence produced by the assessee to the Assessing Officer for his comments. He conducted an inquiry and asked the assessee-respondent to produce original bank statement. Then he sent a reply to the CIT(A) authenticating the whole transactions. Thereafter the CIT(A) and the Tribunal have accepted sale consideration depicted in sale deed as fact. The assessee-respondent has discharged the burden of proving the sale consideration as projected in the sale deed. Moreover, the learned counsel for the revenue has not been able to point out that the view taken by the Allahabad High Court in Raj Kumar Bimla Devi's case (supra) has been challenged before Hon'ble Supreme Court and the same has been rejected. The aforesaid view seems to have acceptance of the appellant. If that be so then the principle of consistency would require that the aforesaid view be followed as the correct view.

5. Accordingly, we are of the view that no question of law much less substantial question of law warranting admission of the appeal would arise for determination of this Court. Dismissed.”

Accordingly, finding no substance in the aforesaid allegation of the A.O., we concur with the view taken by the CIT(Appeals) that the addition of Rs.1,54,83,500/- that was made by him on the said count u/s.69C of the Act cannot be sustained. We, thus, in terms of our aforesaid observations, uphold the vacating of the addition of Rs. 1,54,83,500/- u/s 69C of the Act by the CIT(Appeals).

29 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 was of the view that the assessee firm would have made the payments towards sale consideration at the time of executing the registered sale deeds and had raised a bogus claim that the amount of Rs.1,46,40,000/- was outstanding/payable to the said parties. Holding a conviction that the assessee firm at the time of executing the registered sale deeds would have paid out of its unaccounted money the whole amount of sale consideration to the parties mentioned above, the A.O made an addition of the outstanding/payable amount of Rs.1,46,40,000/- u/s.69C of the Act.

13.1 On a perusal of the registered sale deeds, it transpires that the respective sellers, i.e., at Sr. No. 1 to 10, had therein stated to have received whole/part of the sale consideration at the time when the respective sale deeds were executed, as under:

Seller Name of the Location of Date of Details of Amount received party party plot registered payment (as per registered (at Sl. deed sale deeds) No.) 1. Dipesh Kumar Khasra 27.04.2014 Cash 25,20,000/- Jain/Naman No.295/2, Kumar Jain Ward-63, Pargati Nagar, Risali, Bhilai 2. Dilip Kumar Khasra 27.04.2014 Cash 25,20,000/- Jain/Indira Devi No.295/2, Jain, Apapura, Ward-63, Durg Pargati Nagar, Risali, Bhilai

30 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

Cheque 6. E. Murli Khasra 26.03.2014 Rs.15,00,000/- No.295/2, Ward-63, (i) Rs.7 lac- Cheque Pargati Nagar, No.421664 drawn Risali, Bhilai on Dena Bank, Branch-Power house, Bhilai (C.G.)

31 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

(ii) Rs.8 lac-Cheque No.421665 drawn on Dena Bank, Branch-Power house, Bhilai (C.G.) Anil Kumar Khasra 26.03.2014 Cheque Rs.15,00,000/- 7. Dilwar No.295/2, (i) Rs.6 lac-Cheque Ward-63, No.204296, drawn Pargati Nagar, on State Bank of Risali, Bhilai India, Sector-1, Bhilai (C.G.) (ii) Rs.9 lac-Cheque No.421661 drawn on Dena Bank, Branch-Power house, Bhilai (C.G.) Anil Kumar Khasra 26.03.2014 Cheque Rs.15,00,000/- 8. Dilwar No.295/2, (i) Rs.7 lac- Cheque Ward-63, No.421662 drawn Pargati Nagar, on Dena Bank, Risali, Bhilai Branch-Power house, Bhilai (C.G.) (ii) Rs.8 lac-Cheque No.421663 drawn on Dena Bank, Branch-Power house, Bhilai (C.G.) Shri Dinesh Khasra 26.03.2014 Cheque Rs.30,00,000/- 9. Bhatt No.295/2, (i) Rs.8 lac- Cheque Ward-63, No.421656 drawn Pargati Nagar, on Dena Bank, Risali, Bhilai Branch-Power house, Bhilai (C.G.) (ii) Rs.8 lac-Cheque No.421657 drawn on Dena Bank, Branch-Power house, Bhilai (C.G.)

32 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

(iii) Rs.8 lac - Cheque No.421658 drawn on Dena Bank, Branch- Power house, Bhilai (C.G.) (ii) Rs.6 lac-Cheque No.421659 drawn on Dena Bank, Branch-Power house, Bhilai (C.G.) Guman Gir Village 08.01.2014 Cheque Rs.11,00,000/- 10. Dundera Durg Dundera Durg (i) Rs.3.90 lac- Cheque no.176493, Dena Bank, Branch: Power house, Bhilai (C.G.) (ii) Rs.7 lac-cheque No.204258, drawn on State Bank of India, Sector-1, Bhilai dated 07.01.2014 Cash Rs.10,000/- (cash received on 19.02.2013).

13.2 Ostensibly, a perusal of the registered sale deeds reveals that all the sellers above of the plots/lands had claimed to have received the whole amount of sale consideration at the time the respective sale deeds were executed and had categorically stated that no balance amount was receivable by them. On the contrary, the assessee firm had in its “balance sheet” for the year under consideration, i.e., for the year ending 31.03.2014, shown

33 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 part/whole of the amount of the sale consideration as outstanding/payable to the sellers mentioned above under the head “Sundry creditors,” as under:

Sr. No. Name and address of seller Balance outstanding as on 31.03.2014 1. Dipesh Kumar Jain/Naman Kumar Jain 14,20,000 2. Dilip Kumar Jain/Indira Devi Jain, Apapura, 14,20,000 Durg 3. Amit Agrawal, Shop No.91, Risali, Bhilai 15,00,000 4. Khajanchi Lal Garg, General Stores, BSP, 15,00,000 Bhilai 5. E. Murli, Qr No.9B, Street 10, Sector-1, Bhilai 15,00,000 6. E. Murli, Qr No.9B, Street 10, Sector-1, Bhilai 15,00,000 7. Anil Kumar Dilwar, Qr No.10C, Street1, 12,00,000 Sector-1, Bhilai 8. Anil Kumar Dilwar, Qr No.10C, Street1, 12,00,000 Sector-1, Bhilai 9. Dinesh Bhatt, Takia Para, Durg 30,00,000 10. Guman Gir, Dundera, Durg 4,00,000 13.3 Controversy concerning the issue above lies in a narrow compass, i.e., as to whether or not the A.O had rightly observed that the assessee firm had, out of its unaccounted money, paid the whole amount of sale consideration in cash to the sellers mentioned above at the time the respective sale deeds were executed, and had wrongly projected the same as outstanding towards them in its balance sheet?

34 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 13.4 On a perusal of the registered sale deeds, it transpires that though the sale consideration is stated to have been paid to the parties mentioned above vide cheques, but strangely, the said cheques were never presented by the said parties for payment through their respective banks. The A.O, to verify the authenticity of the abovementioned claim of the assessee firm, had called for information u/s.133(6) of the Act from the respective banks whose cheques were stated to have been issued by the assessee firm, viz. (i). State Bank of India, Branch: Sector-1 and (ii). Dena Bank, Branch: Power House, Bhilai (C.G). On the one hand, Dena Bank, Branch: Bhilai had intimated that as per their online records, cheques that the assessee firm had issued were not presented for payment till 05.10.2016; while on the other hand, State Bank of India, Branch: Sector-1, Bhilai had confirmed that the cheques which the assessee firm had issued to Shri Guman Gir (Sr. No.10) and Anil Kumar Dilwar (Sr. No.7 & 8) of Rs.10.90 lacs and Rs.6 lacs respectively, had been cleared.

13.5. As is discernible from the orders of the lower authorities, the assessee firm, despite having purchased the plots/lands from the parties above at Sr. No.1 to 10 during the F.Y.2013-14, had though, after taking possession, exploited the same for construction of its residential project, viz. “Akriti Residency,” but had claimed that cheques amounting to Rs. 1,46,40,000/-

35 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 (supra) issued to the sellers above were outstanding as of 31.03.2014. The claim above of the assessee firm did not inspire much confidence. It raised serious doubts about the authenticity of the assessee’s claim the mind of the A.O. Considering the facts above, the A.O, being guided by the principle of preponderance of human probabilities, had concluded that the assessee firm had made cash payments to the sellers out of its unaccounted sources and had wrongly projected the same as outstanding in its books of accounts. Although the respective sellers, in their statements which the A.O recorded in the course of the assessment proceedings, Pages 61 to 87 of APB, had confirmed that they had to date not received the amount of sale consideration from the assessee firm, and also the assessee firm had stated to have discharged its outstanding liability towards the sellers above over the period 02.03.2017 to 30.03.2017, but we cannot remain oblivion of the fact that in light of the attending circumstances, the statements of the parties above do not inspire any confidence and appear to be tutored for supporting the window dressing of the claim projected in the books of account of the assessee firm. In so far, the subsequent payments made by the assessee firm to the sellers above, i.e., after the culmination of the assessment proceedings are concerned; we are of a firm conviction that the same have been made only with a purpose and intent to give a color of authenticity to the aforesaid claim as had been projected by the assessee firm in its “balance sheet.” At the 36 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 same time, we cannot lose sight of the settled position of law that a doubt or suspicion, however strong, cannot be allowed to take the place of evidence.

13.6 In the backdrop of our observations above, we shall herein refer to certain peculiar facts emerging from the statements of the seller parties that were recorded by the A.O u/s.131 of the Act. We may herein observe that in certain instances, statements of the sellers mentioned above recorded by the A.O in the course of the assessment proceedings are found to militate against the facts as can be gathered from the registered sale deeds to which the said sellers were parties, as under:

(A) S/shri Dipesh Kumar Jain and Naman Kumar Jain (Sr. No.1)

(i). Statement of Shri Dipesh Kumar Jain was recorded by the A.O. during assessment proceedings u/s.131 of the Act on 26.12.2016, Pages 61 to 64 of APB. On being queried about the sale transaction, it was stated by Shri Dipesh Kumar Jain that he received the entire amount of sale consideration of Rs.25.20 lacs in cash at the time of execution of the registered sale deed, i.e., on 27.04.2014.

(ii). Contrary to the facts as deposed by Shri Dipesh Kumar Jain (supra) in his statement mentioned above, i.e. the entire amount of sale consideration of Rs.25.20 lacs was received by him from the assessee firm, we find that the 37 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 assessee firm had stated that out of the sale consideration of Rs.25.20 lacs, an amount of Rs.11 lacs was paid at the time when the sale deed was executed, and the balance amount of Rs.14.20 lacs was outstanding as a liability against the aforesaid seller under the head “sundry creditors”.

(B). Shri Dilip Kumar Jain and Smt. Indira Devi Jain (Sr. No.2) :

(i). Statement of Shri Dilip Kumar Jain (supra) was recorded by the A.O in the course of assessment proceedings u/s.131 of the Act on 26.12.2016, Pages 65 to 66 of APB. On being queried about the sale transaction, it was stated by Shri Dipesh Kumar Jain (supra) that he received the entire amount of sale consideration of Rs.25.20 lacs in cash at the time the registered sale deed was executed, i.e., on 27.04.2014.

(ii). Contrary to the facts as deposed by Shri Dilip Kumar Jain (supra), i.e., the entire amount of sale consideration of Rs.25.20 lacs was received by him from the assessee firm, we find that the assessee firm had stated that out of the sale consideration of Rs.25.20 lacs, an amount of Rs.11 lacs was paid at the time the sale deed was executed while for the balance amount of Rs.14.20 lacs was outstanding as a liability against the name of the aforesaid seller under the head “sundry creditors”

(C). Shri Amit Agrawal (Sr. No.3) :

38 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 (i). Statement of Shri Amit Agrawal was recorded by the A.O. during assessment proceedings u/s.131 of the Act on 17.10.2016. On being queried about the sale consideration, he stated that the entire amount of sale consideration of Rs.15 lacs had yet not been received by him from the assessee firm.

(ii). On a perusal of the records, it transpires that as per the books of accounts of the assessee firm, the whole amount of sale consideration of Rs.15 lacs was outstanding towards the seller above, viz. Shri Amit Agrawal on 31.03.2014.

(iii). As is discernible from the registered sale deed, Pages 23-26 of APB, it transpires that the seller mentioned above had received the entire amount of sale consideration of Rs.15 lac in cash from the assessee firm in the presence of witnesses and no balance amount was receivable by him.

(D). Khanjachi Lal Garg (Sr. No.4) :

(i). Statement of Shri Khanjachi Lal Garg (supra) was recorded by the A.O during assessment proceedings u/s.131 of the Act on 17.10.2016, Page 74- 78 of APB. On being queried about the sale consideration of Rs. 15 lac (supra), which, as per the registered sale deed, was stated to have been paid to him vide two cheques drawn on Dena Bank, Branch: Power House, Bhilai

39 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 viz. (i). Cheque No.421668: Rs.8 lacs; and (ii) Cheque No.421669: Rs.7 lacs, it was stated by him that though it was mentioned in the sale deed about the payment having been made to him vide the cheques above, but the fact was that the assessee firm had not made any such payments through cheque to him. Carrying his statement further, it was stated by him that instead of the sale consideration, he received a cheque of Rs.20 lacs drawn on Bank of India from one Shri Suresh Babe, which, however, as per the latter’s direction was not presented by him for payment. Also, the person mentioned above, viz. Shri Khajanachi Lal Garg (supra) had provided a photocopy of the cheque of Rs.20 lac (supra), which we find is drawn on UCO Bank (not drawn on Bank of India as was stated by him). It was further stated by Shri Khajanchi Lal Garg (supra) that he was neither in receipt of sale consideration from the assessee firm nor had presented the aforesaid cheque for payment in the bank.

(ii). On a perusal of the records, it transpires that the assessee firm had in its books of account shown the entire amount of sale consideration of Rs.15 lac as outstanding/payable to Shri. Khajanchi Lal Garg (supra) on 31.03.2014.

(E). E. Murli ( Sr. No.5 & 6) :

(i). Statement of the party mentioned above, viz. E. Murli was not recorded by the A.O. in the course of the assessment proceedings.

40 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 (F). Shri Anil Kumar Dilwar (Sr. No. 7 & 8) :

(i) Statement of the party above, viz. Shri Anil Kumar Dilwar was recorded by the A.O. in the course of the assessment proceedings u/s. 131 of the Act on 17.10.2016. On being queried about the transaction under consideration, he stated that he had sold plots/lands vide two sale deeds dated 26.03.2014 for Rs. 15 lacs each to the assessee firm. Elaborating further, he stated that he received the sale consideration from the assessee firm vide four cheques of Rs. 6 lacs, Rs.9 lacs, Rs.7 lacs, and Rs.8 lacs. He further stated that though he had received the aforesaid sale consideration of Rs.30 lacs (supra) vide cheques but as per the direction of the purchasers, i.e., the assessee firm, he had not deposited the said cheques in his bank account. Explaining the reasons for not presenting the said cheques for payment, it was submitted by him that he was informed by the seller that there were insufficient funds available in its bank account. Further, it was stated by him that he had not, till date received any payment from the assessee firm.

(ii). Contrary to the facts stated by the person mentioned above, viz. Shri Anil Kumar Dilwar, the A.O. observes it in the body of the assessment order, i.e., Page 10, Para 5.2, that State Bank of India, Branch: Sector-1, Bhilai in pursuance to the notice issued by the A.O u/s. 133(6) of the Act had, inter alia, reported that cheques issued by Shri Anil Kumar Dilwar had been cleared.

41 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 (G). Shri Dinesh Bhat (Sr. No.9) :

(i). Statement of Shri Dinesh Bhat was recorded by the A.O. during assessment proceedings u/s.131 of the Act on 24.12.2016. He stated that he had sold plots/lands for a consideration of Rs.30 lac to the assessee firm. On being queried about the sale consideration, he stated that the same was received through cheques drawn on Dena Bank, Branch: Power House, Bhilai, which, however, had not been presented by him for payment to date. On being further queried why the cheques were not presented for payment, he stated that the same was done due to mutual consent with the purchaser, i.e., the assessee firm. Further, on being queried as to whether, due to non-receipt of the sale consideration from the assessee firm, any legal action was initiated, he answered in negative.

(H). Guman Gir (Sr. No.10)

(i). Statement of the person mentioned above was recorded on 24.12.2016 by the A.O. during assessment proceedings u/s.131 of the Act. He stated that he had sold his land for a consideration of Rs.12 lacs to the assessee firm. On being queried about the sale consideration, it was stated by him that the same was received in two parts viz. (i) cash: Rs. 4 lacs; and (ii) cheque drawn on Bank of India/Indian Bank, Branch: Utai: Rs.8 lacs. On further being queried whether he had presented the cheques for payment, he answered in 42 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 affirmative. He stated that he had opened his bank account with Bank of India on 19.02.2013 only to realize the sale consideration from the assessee firm.

(ii). Ostensibly, the A.O in the body of the assessment order (Page 10, Para 5.2) had observed that as per the information received u/s.133(6) of the Act from State Bank of India, Branch: Sector 1, Bhilai, the cheque issued to Shri Guman Gir had been cleared. At this stage, we may herein observe that though as per the registered sale deed executed by Shri Guman Gir in favor of the assessee firm on 08.01.2014, the land in question was sold by him for a consideration of Rs.11 lacs, and he received the sale consideration vide cheques/cash, viz. (i) Cheque No.176493 drawn on Dena Bank, Branch: Power house, Bhilai dated 19.02.2013 : Rs.3,90,000/-; (ii) Cheque No.204258 drawn on State Bank of India, Sector-1, Bhilai dated 07.01.2014 : Rs. 7 lacs and (iii) Cash receipt (on 19.02.2013): Rs.10,000/-, but he had in his statement recorded u/s.131 of the Act dated 24.12.2016 stated that he had sold the plots/land for a consideration of Rs.12 lacs, viz. (i) cash: Rs. 4 lacs; and (ii) cheque drawn on Bank of India/ Indian Bank, Branch: Utai : Rs.8 lacs. Not only the sale consideration as disclosed in the registered sale deed is inconsistent with that claimed by the seller mentioned above, but also the outstanding liability of Rs.4 lacs on 31.03.2014 as per the books of account of the assessee firm is not found to conform with the same.

43 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

44 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 Cheque No.421668 : Rs.8 lacs; and (ii) Cheque No.421669 : Rs.7 lacs, had stated that though it was mentioned in the sale deed that the payment was made to him vide the cheques mentioned above but the fact remained that the assessee firm had not made any such payments through the said cheques to him. Rather, he had claimed to have received a cheque of Rs.20 lacs (as against sale consideration of Rs.15 lacs) from one Shri Suresh Babe, which, however, had not been presented by him till date. The discrepancies in the facts stated by the seller mentioned above, viz Shri. Khajanchi Lal, as against those claimed by the assessee firm in its books of account, further strengthens our conviction that the assessee firm had in its “balance sheet” on 31.03.2014 projected a bogus claim as regards the payments outstanding/payable towards the sellers of the plots/lands.

45 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 assessee firm, to withhold their sale consideration for three years (approx.) and neither demanded the same nor took any legal action against it for recovery of the same. The conduct of the sellers as had been canvassed before us militates against the principle of preponderance of human probabilities, i.e. neither of the sellers would have presented the cheques issued to them towards sale consideration of the plots/lands by the assessee firm for payment through their banks. Although we cannot remain oblivion of the fact that neither of the parties mentioned above had acknowledged receipt of sale consideration in their respective statements recorded u/s 131 of the Act during the assessment proceedings, but in the totality of the facts involved in the present case, we concur with the A.O who had pressed into service the doctrine of substance over the form; and being well guided by the principle of preponderance of human probabilities, which the Hon’ble Supreme Court had also emphasized in the case of Sumati Dayal Vs. CIT, 214 ITR 801 (SC), had rightly observed that the assessee firm during the year under consideration itself, i.e. at the time of executing the sale deeds, had paid to the sellers of the lands/plots the entire amount of sale consideration out of its unaccounted income. Contradictions in the assessee’s claim as projected in its “balance sheet” dated 31.03.2014, i.e. whole/part of the sale consideration was outstanding/payable to the sellers of the plots, vis-à-vis the facts stated by them in the registered sale deeds, as well as statements recorded u/s 131

46 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 of the Act (in some cases), therein clearly reveals the window dressing of the facts as regards the payment of sale consideration as projected by the assessee firm its books of accounts. As observed by us hereinabove, though the respective sellers in their statements, which were recorded by the A.O in the course of the assessment proceedings, Pages 61 to 87 of APB, had confirmed that they to date had not received the amount of sale consideration from the assessee firm; and also the assessee firm had stated to have discharged its outstanding liability towards the sellers mentioned above during the period 02.03.2017 to 30.03.2017, but we cannot remain oblivion of the fact that in light of the attending circumstances, the statements of the parties above does not inspire any confidence and are found to be tutored, while for the fact remains that the aforesaid payments made by the assessee over the period 02.03.2017 to 30.03.2017, i.e much after the culmination of the assessment for the year under consideration is merely an eye wash and nothing short of window dressing of the books of accounts of the assessee firm in its attempt to give a color of genuineness to the transactions under consideration. In our considered view, the A.O in the totality of the facts as were there before him, had rightly concluded that the assessee firm had paid in cash the entire amount of sale consideration to the sellers of the plots/lands and had raised a bogus claim by projecting whole/part of sale consideration as outstanding/payable to them in its “balance sheet” on 31.03.2014.

47 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

48 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 We, thus, in terms of our observations above, uphold the view taken by the A.O in so far the disallowance u/s.69C of the Act of Rs.86,10,000/- (out of Rs. 1,46,40,000/-) made by him, i.e. [Rs. 1,46,40,000/- (-) Rs. 43,40,000/- (-) Rs. 16,90,000/-] . Accordingly, the order of the CIT(Appeals) is modified in terms of our observations above and addition u/s 69C of the Act of Rs. 86,10,000/- (out of addition of Rs. 3,01,23,500/- made by the A.O as per his order u/s 143(3), dated 31.12.2016 r.w u/s 154, dated 04.04.2017) is sustained. The Ground of appeal No. 1 raised by the revenue is partly allowed in terms of our observations above.

17. We shall now deal with the addition/disallowance u/s 40A(3) of Rs. 3,19,33,500/- (as rectified by A.O vide order u/s 154 of the Act, dated 04.04.2017). Before proceeding any further, we may herein observe that the addition/disallowance u/s 40A(3) of the Act is based on the view taken by the A.O that the assessee had made cash purchases of plots/land from all the sellers, i.e., parties at Sr. No. 1 to 10 at the value adopted by the stamp valuation authority for payment of stamp duty, i.e., aggregating to Rs. 3,36,23,500/-. After that, observing that as per the information shared by State Bank of India, Branch: Sector-1, Bhilai - in reply to notice u/s 133(6) issued by the A.O, part of the sale consideration was paid to the two sellers (out of ten sellers) vide cheques, i.e aggregating

49 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 to Rs. 16,90,000/-, viz. (i). payment made to Shri. Anil Kumar Dilwar (Sr. No. 7 & 8): Rs. 6 lac; and (ii). payment made to Shri. Guman Gir (Sr. No. 10): Rs. 10.90 lac, the A.O, vide his order u/s 143(3), dated 31.12.2016 r.w u/s 154, dated 04.04.2017 made an addition/disallowance u/s 40A(3) of the Act of Rs. 3,19,33,500/- [Rs. 3,36,23,500/- (-) Rs. 16,90,000/-].

50 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 firm to the sellers but shown as a bogus liability that was outstanding/payable to the sellers in its books of account: Rs. 86,10,000/-.

51 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 probabilities/doctrine of substance over form, the assessee had discharged its outstanding liabilities towards the sellers by making cash payments to them, but are unable to persuade ourselves to subscribe to a separate addition/disallowance of the same amount made by the A.O on the said count u/s. 40A(3) of the Act. As the addition towards payment made by the assessee firm out of its unaccounted income to the sellers of the plots/land of Rs. 86,10,000/- had been sustained by us u/s.69C of the Act, therefore, we find substance in the contention of the Ld. AR that a separate addition/disallowance of the said amount u/s.40A(3) of the Act would result in a double addition. To sum up, having held the expenditure incurred by the assessee firm towards cash payment of the purchase consideration of the plots/land (as shown as outstanding/payable by the assessee firm in its “balance sheet”) as having been sourced out of its unexplained sources, and, thus, its deemed income u/s 69C of the Act, therefore, after doing so there was no justification for the A.O to have separately made any addition/disallowance of the said amount u/s 40A(3) of the Act. Be that as it may, we are unable to persuade ourselves to subscribe to the separate addition/disallowance of cash payments which the assessee firm, as per our observations above, would have made to the seller parties out if its unaccounted income made by the A.O u/s.40A(3) of the Act.

52 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020

22. We, thus, in terms of our aforesaid observations, uphold the order of the CIT(Appeals) who had out if the addition/disallowance u/s 40A(3) of Rs. 3,19,33,500/-(supra) made by the A.O, therein vacated an addition /disallowance of Rs. 2,53,93,500/- [Rs. 3,19,33,500 (-) Rs. 65,40,000/-].

53 The Income Tax Officer-1(3), Bhilai Vs. M/s. Akriti Infrastructure CO No.04/RPR/2020 26. As the cross-objection filed by the assessee firm is merely supportive, the same in terms of our observations above being rendered as academic is accordingly dismissed.

Order pronounced in open court on 20th day of September, 2023.