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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Appellant by Mr. Ajay Bhagwani, CA Respondent by Mr T. James Singson, CIT-DR Date of Hearing 08/08/2023 Date of Pronouncement 11/10/2023 ORDER
PER YOGESH KUMAR U.S., JM:
This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals), XXXIII, New Delhi [“Ld. PCIT”, for short], dated 17/12/2012 for Assessment Year 2007-08.
2. Grounds taken in this appeal are as under: “1. That on the facts and circumstances of the case and in law, the CIT(A) erred in rejecting the appellant's contention that the assumption of jurisdiction by Assessing Officer for making assessment u/s 153C of the IT Act was bad on facts and in law, thereby rendering the assessment also as bad in law and vold ab- initio.
M/s Dynasty Construction (P) Ltd. vs. PCIT
That on the facts and circumstances of the case and in law, the CIT(A) erred in holding to quote, 'that seized documents definitely proved that interest is paid on PDC' in view of the fact:- i. that there is no specific reference of any seized material belonging to the appellant on the basis of which above finding was given, and ii. that no enquiries were made from any of the alleged recipients of the interest and none was confronted with relevant document(s).
2.1 That the finding of the CIT(A) is based on mere surmises and conjectures without proof and corroboration by independent evidence.
2.2 That without prejudice the CIT(A) erred in upholding the addition of interest for the period for which PDC's were extended.
2.3 That without prejudice the CIT(A) erred in not quantifying the addition and instead giving ambiguous directions to compute the interest after six months from the date of sale.
3. That on the facts and circumstances of the case and in law the CIT(A) erred in not accepting the appellant's contention that Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant.
3.1 That without prejudice the CIT(A) erred in upholding the disallowance of Additional Payments made to the recipients who were not the owners of land and to the payment made in cash.
3.2 That without prejudice the CIT(A) erred in not himself quantifying the addition to be made 4. That on the facts and circumstances of the case and in law the CIT(A) erred in upholding the disallowance u/s 40A(3) in respect of which no deduction was claimed by the appellant. 4.1 That even on merits the disallowance was not justified.
M/s Dynasty Construction (P) Ltd. vs. PCIT
That the orders passed by the Assessing Officer and Commissioner of Income Tax (Appeals)-3000, New Delhi are bad in law and void ab-initio 6. The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal.”
Brief facts of the case are that, the assessee engaged in the business of development of real estate and a Group Company of BPTP Ltd., the flagship company. A search u/s 132 of the Income Tax Act, 1961 (‘Act’ for short) was conducted on 15/11/2007 in the case of M/s BPTP Ltd. During the course of search certain incriminating documents were found and seized. On perusal of the search seized material it has been noticed that certain documents belonging to the assessee company, accordingly proceedings u/s 153C of the Act have been initiated against the assessee company by issuing notice u/s 153C read with Section 155A of the Act. The assessment order u/s 153A/153C of the Act came to be passed on 31/12/2019 against the assessee by making addition of Rs. 73,45, 909/- on account of income from undisclosed sources, Rs. 53,15,000/- on account of disallowance made u/s 37(1) of the Act of additional payment and also disallowed Rs. 65,000/- u/s 40A(3) of the Act.
Aggrieved by the assessment order dated 31/12/2009, the assessee preferred an appeal before the CIT(A), and the Ld. CIT(A) vide order dated 17/12/2012 deleted the following additions/disallowances:-
M/s Dynasty Construction (P) Ltd. vs. PCIT i) In respect of addition on account of interest paid on PDCs of Rs. 45,51,452/- ii) In respect of addition on account of disallowance as per explanation to Section 37(1) of additional payment of Rs.52,10,000/- out of total addition made of Rs.53, 15,000/-.
The CIT(A) has sustained/confirmed following additions/disallowances:- i) Addition on account of interest paid on PDCs of Rs.27,94,457/- ii) Disallowance u/s 40A(3) of Rs.65,000/-. iii) Addition on account of disallowance made as per explanation to Section 37(1) in respect of additional payment of Rs.1,05,000/-.
As against the deletion of the addition by the CIT(A) the Department filed an Appeal in which was dismissed by the Tribunal on 07/11/2019 due to low tax effect. Aggrieved by the order of the CIT(A) in sustaining the additions/disallowances the Assessee preferred the present Appeal on the grounds mentioned above.
5. In Ground No. 1, the assessee contended that the CIT(A) erred in rejecting the Assessee’s contention that the assumption of jurisdiction by Assessing Officer for making assessment u/s 153C of the Act was bad on facts and in law, thereby rendering the assessment also as bad in law and void ab- initio.
M/s Dynasty Construction (P) Ltd. vs. PCIT
The Ld. Counsel for the assessee submitted that the assessment was completed u/s 153C of the Act as no search was carried out on the assessee, the A.O. relied upon various seized documents found during the course of search on BPTP Group wherein none of the documents are said to be incriminating in nature and none of the documents relate/pertain to the assessee. The disallowance made as per Explanation 2 Section 37(1) on account of additional payment made to the farmers and the disallowance made u/s 40A(3) of the Act in assessment order passed u/s 153C of the Act do not have any nexus with any incriminating material seized/found during the course of search on BPTP. Further submitted that, both the additions/disallowance made on account of additional payment and cash payment made are not based on any incriminating seized document found during the course of search on BPTP Group. The Ld. Counsel for the assessee relied on the Judgment of the Hon’ble Jurisdiction High Court in the case of CIT Vs. Kabul Chawla 380 ITR 580 (Del) and submitted that the impugned order is deserves to be set aside.
Per contra, the Ld. Departmental Representative relied on the orders of the Lower Authorities and sought for dismissal of the Appeal.
We have heard both the parties and perused the material available on record. In the present case, the assessment u/s 153C of the Act was initiated after recording satisfaction on 26/08/2009 admittedly no assessment was M/s Dynasty Construction (P) Ltd. vs. PCIT pending as on 28/08/2009. As per the Revenue, the additions have been made based on the incriminating material seized during the search conducted u/s 132 of the Act in the Group Company of BPTP Ltd. The assessee has provided the details of seven documents seized during the search and also given the remarks on the documents which as under:-
Remarks Whether Sr.N Description of Docume o Seized document Incriminating nt at page no. 1 of Paper 29 Not Document does not Page 69, A-1, BO- I Incriminating belong to period under consideration 2 30 Not Document does not Page 70, A-1, BO- I Incriminating belong to period under consideration 3 33 Not Document relate to the Page 30,A-1, BO- 1 incriminating issue of Additional Payment made duly recorded in books. Not relate to year under consideration. 4 36 Not Document relate to the Page 32,A-1, BO- 1 incriminating issue of Additional Payment made duly recorded in books. Not relate to year under consideration. 5 Page 57,A-1,B0-1 38 Not Not incriminating incriminating document. Not relate to year under consideration. 6 53 Not Copies of cheque. Not Page 12, A-1,BO- 3 incriminating incriminating seized document 7 54 Not Copies of cheque. Not Page 13,A-1, BO- 3 incriminating incriminating seized document
On the contrary, on perusal of order of the CIT(A), regarding ‘Findings on seized material’, it is found that the Ld. CIT(A) has referred the seized
M/s Dynasty Construction (P) Ltd. vs. PCIT materials at page No. 7 to 14 of the order. Apart from the same, there is a specific finding of the CIT(A) that ‘the analysis of the seized documents reveals that the seized documents definitely proves that interest is paid on PDC’. The conclusion of the CIT(A) is reproduced as under:-
“Learned AR has been maintain all along that interest is not paid as all the receipts are only memorandum only. Analysis of these above seized document reveals that these seized documents definitely proves that interest is paid on PDCs. Various voucher in seized documents conclusively proves that the recipient has signed on voucher for receipt of the interest. Ld AR's contention that these are only working of interest claimed by seller for putting up before senior management does not appear to be convincing. In case of claim, the receiver will not sign the voucher as recipient. Amounts are specific and calculation is 15% per annum. Therefore, Ld AR without conceding that the interest is paid on PDCs has taken the stand that in none of the seized material, i.e. even in receipt seized, the interest is from date of issue of PDCs. Now issue arises whether interest on PDCs are paid from date of issue or for extension of PDCs. Documents discussed above where there is clear evidence of receipt of interest is for extension of period of PDCs. Ld AR's arguments that calculation of interest on PDCs has been considered while entering into agreements holds some logic. But when date of PDCs are extended, the recipient will definitely ask and settle for some additional compensation in form of interest. There is no evidence which proves that interest is paid from the date of sale to date of encashment of post dated cheques. However, there is concrete evidence in form of seized material to show that interest is paid and received Page 7 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT by seller on the extension of PDCs as discussed above while analyzing the seized document. Therefore, in my view where ever the dates of PDCs are extended interest is paid @ 15% per annum in cash out of Books of accounts. Which are evident from seized material. Therefore. interest on PDCs to the extent of extension period appears to quite reasonable and logical. Accordingly, interest on PDCs either as sale consideration or additional payment may be recomputed to the extent of extended period of PDCs by the A.O. and to that extent addition is confirmed. The above formulae will apply to all group companies under the management of BPTP i.e.( M/s BPTP and Associate companies) including the appellant company as evidence is found in respect of various companies of BPTP and some seized paper could not be related to specific company. Therefore, it is proper to apply this formula for all companies under the common management of BPTP Group, head by Shri Kabul Chawla. All these companies are closely linked. Some companies purchase land and transfer the same to M/s BPTP Ltd, or Countrywide Promoters (P) Ltd. for Housing or commercial projects are ultimately developed and sold by M/s BPTP Ltd and Countrywide Promoters Ltd. or in stray case by some other companies. Assessing Officer has applied the case of Eusuf Ali for applying interest on PDCs for all companies of BPTP Group for all Assessment Year under consideration. Ld AR has tried to differentiate the above cited case on facts. In my view, as interest payment on extension of period of PDCs are established on numerous seized documents. A trend is established for the group as the overall management is controlled by one person Sh.. Kabul Chawla and activities of all companies are interrelated.
M/s Dynasty Construction (P) Ltd. vs. PCIT
If it is not possible to work out the extension of PDCs in each case then A.O. is directed to recomputed interest on PDCs after six months from date of issue of PDCs i.e. date of sale, as six months is taken as reasonable period for giving PDC as per sale deed. This view is formed on the basis the statement of Sh. Chhotu Ram which says that normally PDCs are given for 8 to 10 months. Further Ld AR has also submitted few Sale Deed in respect of some of Seized record in the case of Ramvati Beero etc where the interest working is made after 9/ 15 months. Taking these facts into consideration. It would be proper to compute interest after 6 months from date of Sale on conservative side. Accordingly this ground is partly allowed.”
Since the addition made by the AO is based on the incriminating documents seized during the course of search carried out on BPTP on 15.11.2007 and the documents seized relates to the assessee company, the AO has rightly invoked the provisions of Section 153C of the Act. Thus, the judgments relied upon by the assessee of Hon’ble Delhi High Court in the case of Kabul Chawla 380 ITR 589, (Delhi) and others judgment are not applicable to the facts of the case. It is also found that in the order of the coordinate Bench in respect of other related companies relied by the Ld. AR, the Tribunal has specifically observed the finding of CIT(A) that the ‘assessment order also nowhere records any finding that any of the documents seized belong to the assessee’. However, in the present case, the ld CIT(A) has given a categorical finding that the seized material belonged to the assessee company which is incriminating nature, in the case in hand the additions have been made based
M/s Dynasty Construction (P) Ltd. vs. PCIT on the incriminating materials found during the search, therefore, the orders relied by the assessee are not applicable and we find no merit in Ground No. 1 of the Assessee, accordingly, Ground No. 1 of the Assessee is dismissed.
Ground No. 2, 2.1, 2.2. & 2.3 are regarding interest paid on post dated cheques. The Ld. A.O. made addition of Rs. 73,45,909/- regarding the interest paid on post dated cheques outside the books of accounts in cash. The Ld. CIT(A) deleted the addition of Rs. 45,51,452/- and confirmed the addition of Rs. 27, 94,457/-.
The Ld. Counsel for the Assessee submitted that the addition which has been confirmed by the CIT(A) is bad in law in the absence of any incriminating material having been seized in the course of the search which belongs to the Assessee and reiterated the submission made on Ground No. 1. The Ld. Counsel has not made any submission on the merit of the case.
Per contra, the Ld. Departmental Representative relied on the findings of the Lower Authorities
The Ld. CIT(A) while partly confirming the addition made by the A.O., gave elaborate findings on the seized materials and arrived at the conclusion in following manners:-
M/s Dynasty Construction (P) Ltd. vs. PCIT
“6.3 I have considered the findings of Assessing officers, written submission of Ld. AR on this issue. Copy of seized material on which A.O. has relied are part of Assessment order. The contents of seized material referred in Assessment Order are very relevant for deciding the issue. The details of contents and A.O. view and Ld AR's argument are as under:-
(i) First seized material on which A.O. has relied is Page 65 of Annexure A 12 party BO III seized from B-1/ A-5, Mohan Nagar Indl co-operative Estate, New Delhi. A.O. has stated that total amount of PDCs are Rs. 188 crores and mentioned that interest @ 15% is paid on PDCs Ld AR during appellate proceedings has stated that definitely this page contains details of PDCS which the company keeps record to manage funds availability for clearing the PDCs. Nowhere on this paper, there is a mention of interest paid on this amount. I have considered the A.O's finding and argument of Ld AR and contents of paper. I agree with Ld AR that no where the interest word or calculation is mentioned in this paper. Therefore, this paper does not correlate the payment of interest on PDCs.
(ii) Page no. 93 Annexure AI party BO1. (Annexed to Assessment order)
I have perused this paper. This page is computer printout having different column. Various columns of this page contains Name of the seller, the name of purchaser company i.e. Associate Group Company of BPTP Group namely STP, (Shalimar Town Planning Ltd) and JB(.............), area of land, cost of land, etc. Last column mentions calculation of one month interest (15% on PDC). Total such interest is calculated for Rs. 5,05,84,042. This paper shows that M/s Dynasty Construction (P) Ltd. vs. PCIT some calculation of this sheet at the rate of 15% interest. Ld AR emphasized that there is no payment mentioned to a particular person. Further, he argued that total interest calculated for one month for all the land mentioned is Rs. 5.05.84,042 and total sale consideration of entire land is mentioned in that amounts to Rs. 44.96.35.937. If one month interest is applied @ 15%. even on entire sale consideration, one month interest will not be even Rs. 20 lacs. Further, in this entire paper there is no mention of amount of PDCs, and rate of all land is written straight @ Rs. 1. 45. 00,000 per acre having 18 such land. Further, 15% and 75% of sale consideration is written two different column. Therefore, these paper does not support payment on interest on PDC amount. Ld AR argued that contents of paper was never examined in any statement either u/s 132(4) or 131 either by investigation Directorate or Assessing Officer. Therefore, at the best inference has to be drawn strictly on the contents of paper. 1 agree with the learned AR that there is no mention on payment of interest on PDCs. It is also fact that the amount of PDC itself on which interst is paid is not known. A.O. has concluded in Assessment Order on the basis of this paper that amount Rs. 33.72,26.953/- is due to farmers for land at Rardoii and interest on this sum is Rs. 5,05.84,042 @ 1 5% per annum. During appellate proceeding. Ld AR has argued that the column which contains the figure of Rs. 33,72,26,953. heading is “75%”. Nowhere, dues of farmer on PDC is written. Hence Id AR emphasized that this paper is only at the best estimate for including interest component in sale consideration. 1 have considered contents of this paper, finding of AO and argument of Ld Ar. As this paper does not contain any details of PDCs issued to seller to seller. Therefore, it cannot be concluded that interest of Rs. 5,05,84,042 was paid. In view of the A p p c-a i N o. 517/09-10 M/s Dynasty Construction (P) Ltd. vs. PCIT above, this paper only gives some suspicion that interest might be paid on the balance. 3rd seized paper relied in Assessment Order is Page 68,69 & (iii) 70 of Annexure A-l of party BO-1 (officer of BPTP Group, 16, Barakhamba Road, Cannaught place,' New Delhi. A.O. has mentioned that post dated cheques amounting to more than Rs. 109 crores were pending as per these seized paper. A.O. has correlated sale of land to various seized document and different persons as under:-
S. No. Name of the seller Area of Land Amt. of sale Amt of Reference of consideration additional seized material payment 1 Smt. Rajwati 5.56 acres Rs.2,25,75,000 Rs.13,43,750 Pg. 35 of Annexure1, Party BO1 2 Sh. Ramphal 0.93 acres Rs.51,21,875 Rs.51,21,875 Pg 30 3 Sh. Ratan Singh and 0.51 acres Rs.35,43,750 Rs. 4,46,425 Pg 32 Azad Kumar S. No. Interest received Reference of seized material for int. received 1 Rs. 55,000/- Pg. 28 of Annexure-A- 2, BO-III 2 Pg. 26 of Annexure-A- 2, BO-III During post search enquiry. Bank statement of five persons above namely Smt. Rajwati, Sh. Rampal, Sh. Rattan Singh and Azad Singh, Sh. Vijay pratap and Sh. Kartar Singh were obtained and cash deposit were found. A.O. has tried to establish that source of these cash deposit are interest on PDCs learned AR has argued that source of cash deposit in Bank Account of these persons can only be explained by them. None of them were examined or asked to explain their source. Ld AR further argued that Assessing Officer has not during assessment proceeding has given an opportunity or shown these Bank statement before being used against the appellant in Page 13 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT
Assessment Order. Therefore, linking of these cash deposit with assumption of interest on PDCs is only hypothesis of A. O. As far as interest receipt by seller, and mentioned in seized material, Ld. AR has denied the same as only claim of seller which was never paid. Those seized material which contains interest receipt by seller will be analysed in subsequent paragraph.
(iv) A.O. has relied on page no. 57 of Annexure Al of party BOI which contains details of cheques issued to various persons with date of presentation in Bank by many group companies. Total of such cheques has been shown at Rs. 8, 49, 74.625/- as against total actual outstanding of Rs. 2, 58, 26,312. Ld. AR argued that this seized paper has no relevance of interest on PDCs as A.O. has also not mentioned in the order. Therefore, on this ground he contended that also there is no relevance of this paper on this issue.
(v) Page No. 1, Annexure A-1, Party BO-III
This page is receipt of cash interest signed by seller of land namely, Ballu Alias Balram, Gyasi Ram and Chander singh and Chhotu Ram of Rs. 85.850, Rs. 3,43,500, Rs. 3,43,500 and Rs. 3,43,500 respectively duly signed by Balram, Chhotu Ram, Chander Singh and Gyasi Ram in lieu of extension of due date PDC for 3 months from 25.11.2006 to 25.02.2007. Earlier PDCs details are as under:
Rs. DATED Cheque No. Ballu Ram Rs. 2,89, 375 25.11.2006 194267 Gyasi Ram Rs.1,59,791 25.11.2006 883467 Chotu Ram Rs. 1,59,791 25.11.2006 883468 Chander Singh Rs.1,59,791 25.11.2006 883488
M/s Dynasty Construction (P) Ltd. vs. PCIT
The interest paid is of Rs. 11. 16.350/- A.O. has held that interest is paid for extending the post dated cheques by 3 months. Ld AR has reiterated the stand that it is only claim of seller and never paid. Ld AR's contention is not acceptable in view of notings in the seized material.
(vi) Page 28, Annexure A-3 party BO-3 This page contains 5 columns in respect of two group company namely Countrywide Promoters Pvt. Ltd. and Shalimar Town Planners Pvt, Ltd namely, date, party name, cheque no., amount and remark. In remark column words, 'interest amount is written in the case of Countrywide Promoters Pvt. Ltd. Without any amount.
(vii) Page 88, Annexure A1 Party 303
This page is debit voucher of cash payment of Rs. 13, 80,000/- duly signed by receiver. Ld AR explained it to be return of advance given by recipient Sh. Vijay Pratap. However, Since it is a signed voucher, it is apparently unaccounted cash payment.
(vili) Page no. 35, Annexure A-2, BO-3
It is debit voucher of cash payment of Rs. 5 lacs dt. 4.11.2007 with the signature of receipient. Ld AR explain that the paper was explained during assessment proceeding that it was debit not for Rs. 5 lacs for purchase of stamp and sent for approval. The same stand is reiterated during appellate proceeding. As this voucher contains receiver signature. Therefore, it is difficult to accept appellant's submission. Therefore, it is unacounted payment. A.O has treated as M/s Dynasty Construction (P) Ltd. vs. PCIT interest. However interest is not written on this paper. Therefore it is not related to interest. However, this payment has to be treated as unaccounted payment in the hands of payer u/s 69B. A.O. has to identify the payer company and assess the same u/s 69B.
(ix) Page no. 36, Annexure A-1, BO-3.
This page is also debit voucher for cash payment of Rs. 1,00,000 duly signed by the receiver with a remark 'interest paid to Ram Singh/ Nanak for Rs. 80,00,000/- for the month of November. It is pertinent to note that if we apply 15% per annum on Rs. 80,00,000/- it comes to Rs. 1,00,000. During appellate proceeding, L.d AR has reiterated that no payment of interest was made, it is only voucher for approval of senior management. Since on the voucher it is clearly mentioned as 'interest paid. The receiver has signed it. A.O. has correlated this interest payment to the purchase of land by M/s Super Belt (P) Ltd. Therefore, the explanation of appellant company is not acceptable as the receiver has signed, the voucher evidencing the payment of interest. Ld AR has explain that land was purchased in Countrywide (P) Ltd.
(x) Page 71. A-9, BO-3.
This paper is computer generated and having five column containing date, cheque no.. party name amount and date change It is interesting to note that the names are same as Page 36 discussed in just earlier paragraph i.e. Ram Singh and Nanak and the amount of cheque is Rs. 50 lacs and 30 lacs respectively (totaling to Rs. 80 lacs) and the remark is written as "interest paid below 'date change'. The Ld AR again reiterated the stand taken before the A.O. that M/s Dynasty Construction (P) Ltd. vs. PCIT there is no Land transaction of the company M/s Super Belts (P) Ltd. with Mr. Ram Singh and Nauah. This explanation is contrary to the explanation given in just earlier paragraph. Therefore, the interest payment is made on Rs. 80 lacs with the remark 'date change. It mean for extension of date of PDC, interest is paid.
(xi) Page 31, Annexure A-2 party BO-3. It is again a debit voucher dated 6.11.2007 for interest paid to Kishan Singh for 25,000 for November on account of Rs. 20,00,000/-. Again the interest is paid @ 15% per annum for one month. The voucher are duly signed by receiver. Ld. AR reiterated the stand taken before A.0. in the case of M/s Shalimar Town Planners (P) Ltd. the PDC was given to recipient no. interest was paid. The present voucher is in form of memorandum and no interest was paid. The explanation of the Ld AR is not acceptable. As this voucher contains the signature of recipient in cash and matches with 15% of interest rate for a month. The inference is obvious that interest was paid.
(xii) Page No. 36, annexure A-2, Party BO3 This is again a debit voucher of cash payment of Rs. 1,90,000 paid to one Sh. Sadanand. The Ld AR reiterated the stand taken before AO that Sadanand is consultant and the debit voucher is duly signed by receiver. Therefore, explanation of Id. AR cannot be accepted. However, there is no mention of interest paid' on this voucher.
(xiii) Page no. 37, Annexure A-2, Party BO-3 This page is again a debit voucher at 09.10.2007 with narration interest paid to Jaipal for Rs. 1,00,000 in cash duly signed by receiver with remark For October Ld. AR's argument that is is only memorandum or demand cannot be accepted. Page 17 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT
(xiv) Page 80. Annexure A-9 Party BO-3 It contains many jottings of cash receipt and payment. At serial no. 7 on this page, against interest paid to Ramvati & Veero is written for figure Rs. 14.33,000/-. The Ld. AR reiterated it to be only a memorandum.
(xv) Page no. 25, Annexure A-2 Party Bo-3 is again jotting of some cash receipt and payment at sr. no. 15, the narration is interest paid to Jaipal Rs. 10.00.000 for month of October, Ld. AR explained it be memorandum of some employee.
(xvi) Page no 27 of Annexure A2 of party BO-II. This page again contains jotting of some cash transaction. AT item no. 7, the narration is 'Kaptan (int)- 11,00,000. The Ld. AR again explained it to be memorandum of employee.
(xvii) Page No. 70, Annexure A1, Party BO-3 Interest = 4,00,00,000/- (Amt) Dhanvir, Ranvir 1-11-06 to 1-12-06 (I month)
Interest 5,00,000/- 50 lacs cheque cleared on 5-12-2006 Balance amount 3,50,00,000/- (2 months)
Interest = 8,75.000/- 25 lacs cheque cleared on 6-2-2007 Bal. Amt. 3, 25, 00,000/-(2months)
Interest = 8, 12,500/- Total Interest 5,00,000 8, 75.000 Page 18 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT
A.O. has correlated these transactions with Shalimar Town Planners (P) Ltd. and has stated that these interest paid of Rs. 21.87.500/- was unaccounted in Book of a/c's. Ld AR has reiterated its stand that it is only memorandum and no interest was paid. A perusal of this paper reveals that interest is paid on PDCs for few months, as the paper talks about clearing of cheque on extended time in this paper.
(xviii) Page 69, A-9 BO-III
This page contains date 2/10/2006. Party name Karan Singhy and Cheque No. 502749 and Amount Rs. 1,40,00,000/- and contains the remark 2 months PDC interest cheque. Ld AR reiterated that the said cheque was replaced to Sh. Karan Singhy by 3 chequs
Cheque no. Date Amount 172169 3.10.2006 40,00,000/- 219195 8.11.2006 20,00,000/- 219202 2.12.2006 80,00,000/-
Employee informed ITO for informing that the person is insisting for interest. The reply of Ld. AR is not convincing. Ld. AR further argued that there is no sale deed & No. PDCs. AO may verify the same
(xix) Page no.27, A-3, BO-3
This page contains party name as Rajveer and two amounts Rs. 2,00,00,000/- and Rs. 1,20,00,000. Last column is remand interest. Ld. AR has reiterated his stand that party is insisting of interest.
M/s Dynasty Construction (P) Ltd. vs. PCIT
(xx) Page 12,13,14&15, A-1, BO III
These pages contains copy of cheque issued by M/s Shalimar Town Planners (P) Ltd where dat of issue of Cheque has been extended.
(xxi) Page no. 29, Annexure A2, BO-III
This page again is debit voucher of interest paid to one Sh. Karan Singh for Rs. 25.000/- for the month of November in cash, duly signed by receiver on the amount Rs. 20,00,000. This again shows payment of interest @ 15% on Rs. 20.00.000 for one month Ld AR explained this paper that interest was a demand by seller of land but no payment was made in cash. The reply of Ld AR is not convincing.
(xxii) Page 53/ A-23/BO-III
The page contains receipt with full narration in Hindi duly signed by one Sh. Gaje Singh which states that he has entered in agreement to sale for land in Mauja Sihi sale for dt 7.6.2007 with M/s Green Valley Housing and Land Development (P) Ltd. He has received Rs. 1,22,47,482 vide cheque no. 275435 and Rs. 5.75.000 vide cheque no. 275440 both dated 31.10.2007. In lieu of extension of date of these two cheques by one month @ 15% on 29.10.2007. Further he writes that he has accepted the extension of date without any pressure. Ld AR reiterated the stand that the farmer has demanded the interest which was never paid. Ld. AR further reiterated that there is no such transaction in Green Valley Housing & Land Developers (P) Ltd. A.O. may verify the same. Further as per this receipt, it is for extension of period of some cheque & interest has been acknowledged by the receiver for extension of time.
M/s Dynasty Construction (P) Ltd. vs. PCIT
(xxiii) Page 55-56 of Annexure A-23, Party BO-III. It is an oath paper on Non Judicial stamp of Rs. 10 signed by Ramvati and Biro, daughters of late Harijivan stating that they have sold land at Khedikalan and Ramvati has received for Rs. 1.52,94,500 vide cheque no. 834868 and Rs. 4, 20,45,625 vide cheque no. 8348 72 both and dt. 12.10.2007. Biro has received Rs. 1,52,94,500 and Rs. 4.20,45.625 vide cheque no. 834869 and 839873 respectively both dt. 12.10.2007 from Shalimar Town Planners (P) Ltd. The date is extended and interest is receivable. However, no date of extension is mentioned and no interest amount is mentioned in this oath paper.”
It is observed that the Assessee has challenged the similar addition before the Tribunal in AY 2006-07 & 2008-09 in & 1826/Del/2013 wherein the Assessee has not pressed the said ground and the same has been dismissed by the Tribunal. Since, we have already upheld action of the A.O. in invoking the provisions of Section 153C of the Act, we find no merit in the submission of the Assessee. Further, considering the fact that the Ld. CIT(A) has elaborately considered the seized material and gave a factual finding which has not been controverted by the assessee even on merits, we find no error or infirmity in the order of CIT(A). Accordingly, the Ground No. 2, 2.1, 2.2. & 2.3 are dismissed.
Ground No. 3, 3.1, 3.2 – are regarding Disallowance of additional payment of Rs. 1,05,000/-. The A.O. disallowed Rs. 53,15,000/- u/s 37 of the Act on account of additional payment for purchase of land. The Ld. CIT(A) gave a direction to quantify the disallowance made by the A.O. and as per the Page 21 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT directions while giving appeal effect, the disallowance made of Rs. 52,10,000/- was deleted and balance disallowance of Rs. 1,05,000/- was confirmed.
The Ld. Counsel for the Assessee submitted that the assessee has not claimed the expenditure, the same cannot be disallowed. Further submitted that, similar disallowance was made in the case of M/s Westland developers Pvt. Ltd. (a group company) for the A.Y 2006-07 and was partly confirmed by the CIT(A), the Hon’ble Tribunal vide order dated 22.08.2014 in for the A.Y 2006-07 deleted the addition. The Ld. Counsel also brought to our notice that in the case of M/s Vasundhra Promoters Pvt. Ltd., Department has filed an appeal in ITA No. 211/2018 before the Jurisdictional High Court on the very same issue of addition made on account of disallowance of additional payment which was deleted by the Tribunal and the Jurisdictional High Court vide order dated 14/05/2018, not admitted the Appeal filed by the Revenue on the issue of disallowance of additional payment.
Therefore, sought for deletion of the sustained disallowance.
Heard. The Jurisdictional High Court in the case of Group Company of the Assessee i.e. M/s Vasundrha Promoters Pvt. Ltd. dismissed the Appeal filed by the Department in vide order dated 14/05/2018, held as under:-
"The second question of law urged is with respect to the payment of Rs.1,05,86,958/- made by the assessee to the farmer/owners of the agricultural land from whom the land was purchased. It is Page 22 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT contended by the Revenue that the ITAT ought not to have gone by the fact that the amount was routed from the books of account and included in the principle loss or that separate amount was used for that purpose. It was submitted that the amounts in fact constituted flagrant violation of law in as much as the provisions of the Stamp Act and other connected laws were sought to be evaded by the sale deed.
This Court is of the opinion that the broad interpretation of the Explanation to Section 37(1) of the Act given by the Revenue is in the circumstances of this case not well founded. The other submission is that the such amount has to be taken as falling within the mischief of the said provision, in our opinion, is an incorrect premise. It is not every alleged violation of law, but such violation as results in a penal consequence, determined by that law, which is attracted by Section 37(1). The other interpretation would confer jurisdiction on matters beyond the Income Tax Act. The revenue authorities do not have such powers. Revenue Authority argued that this is to decide what constitutes infraction of other provisions of law. No question of law arises, therefore, on this issue"
By respectfully following the ratio laid down by the Jurisdictional High Court in the case of Vasundhra Promoters Pvt. Ltd. (supra) and finding the parity, we allow the Ground No. 3, 3.1 & 3.2 and delete the addition.
The Ground No. 4 & 4.1 – are regarding Disallowance of Rs. 65,000/- u/s 40A(3) of the Act. The assessee had purchased land and made part payment of Rs. 65,000/- in cash. The development rights in land purchased
M/s Dynasty Construction (P) Ltd. vs. PCIT were assigned in favour of M/s Countrywide Promoters Pvt. Ltd. pursuant to Collaboration Agreement entered into with them. The assessee had received imbursement of all amounts paid related to transaction of purchase of land. It is the case of the Assessee that the amount paid on account of purchase of land was neither debited to profit and loss account nor claimed through computation of taxable income. Further submitted that the said issue of disallowance u/s 40A(3) of the Act. of cash payment made for purchase of land was decided in favour of the Assessee by the Tribunal in a Group Company of MBTP Groups i.e. M/s Westland Developers Pvt. Ltd. in ITA No. 1752/Del/2013. Relying on the same, sought for deletion of the disallowance.
Heard the parties and perused the material. The Co-ordinate Bench in the case of M/s Westland Developers Pvt. Ltd. vide order dated 22/08/2014 in held as under:-
“Accordingly on a consideration of the peculiar facts and circumstances of the case and the judgments relied upon considering the relevant provision of the Act namely Section 40A(3), we hold for the detailed reasons given hereinabove that Section 40A(3) of the Act has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed and the assessee has successfully demonstrated that the payment were re- imbursement made by CWPPL. Accordingly Ground No-4 is allowed.”
By respectfully following the ratio laid down by the Co-ordinate Bench in the case of M/s. Westland Developers Pvt. Ltd. (supra) and considering the fact that the Assessee has neither debited the amount of cost of land in P & L Page 24 of 25
M/s Dynasty Construction (P) Ltd. vs. PCIT account nor claimed any deduction in respect of cost of land through computation and finding the parity, we allow the Ground No. 4, & 4.1 by deleting the disallowance. 23. In the result, appeal of the Assessee is partly allowed. Order pronounced in open Court on 11th October, 2023