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2016 (10) TMI 927 - ITAT KOLKATA

2016 (10) TMI 927 - ITAT KOLKATA - TMI - Addition u/s 68 - AO has made the addition u/s 68 crores as undisclosed cash credit in the hands of assessee on the ground that assessee has made the sale of the impugned property without recording the same in its books of account - CIT(A) deleted the addition made by AO by observing that assessee in the instant case was a confirming party and it has not made any sale - Held that:- The assessee initially advanced the money to MAESL which was returned back .....

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in the present case. Similarly, from the details submitted by assessee, we find that assessee has given advanced money for the purchase of impugned property and same money was returned. In this point, Ld. DR has not brought anything on record to the finding of Ld. CIT(A). We also find that AO before making such addition on the basis of ITS information from the office of Sub Registrar should have issued a notice u/s. 133(6) of the Act. The AO has not exercised his power u/s. 133(6) of the Act. In .....

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in assessees business. Therefore, the interest expenditure incurred on the borrowed fund utilized for the purpose of investment cannot be allowed as deduction. However, Ld. CIT(A) deleted the addition made by AO by observing that assessee has treated the same as stock-in-trade in its books of account. Now the issue before us arise so as to whether the interest expenditure is business expenditure or part of investment. From the facts, we find that the activities for the property business are dul .....

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oes of assessee to decide whether it is capital asset or stock-in-trade. - ITA No. 1074/Kol/2012 - Dated:- 21-10-2016 - Shri Waseem Ahmed, Accountant Member And Shri K. Narsimha Chary, Judicial Member By Appellant : Shri Niraj Kumar, CIT-DR By Respondent : Shri Nageswar Rao, Advocate ORDER Per Waseem Ahmed, Accountant Member : - This appeal by the Revenue is against the order of Commissioner of Income Tax (Appeals)-IV, Kolkata dated 18.05.2012. Assessment was framed by JCIT(OSD) sCircle-4, Kolka .....

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ation has filed its return of income showing loss of ₹ 99,72,509/- comprising of loss under the head business and profession . Subsequently the case was selected under scrutiny through CASS module. Accordingly notices u/s 143(2) & 142(1) of the Act were issued to the assessee. 3. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition of ₹ 68,03,07,175/- on account of sale of property. For this, Revenue has raised following effective ground: .....

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which was registered at Vadodara Sub-Registrar office. From the same details of ITS, it was found that assessee has sold the property on 21.10.2008 for a sum of ₹ 68,03,07,175/- which was also registered in Vadodara, Sub-Registrar office. The Assessing Officer, during the course of assessment proceedings found that details for the sale of property has not been shown in its books of account. On question by AO about the non disclosure of sale of property in the books of account, the assessee .....

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or the sale of property on 21.10.2008 was made by assessee on that date, the property was sold by M/s Ambala Sarabhai Enterprises Ltd. (MASEL for short) of Vadodara to third party based in Pune. The assessee and its partners MNI were acting only as confirming party in the aforesaid transactions of such sale of the impugned property. Therefore such impugned transaction was not reflecting in assessee s books of account. The assessee in support of its claim has submitted the copy of sale deed for t .....

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e has not shown any purchase of the impugned property in its books of account. In the instant case, the name of MASEL was appearing in the registered sale deed dated 21.10.2008 as the seller to the parties based in Pune. Considering this Ld. CIT(A) called for remand report from AO which stand as under:- 1) From the transaction of sale of the impugned property, the names of the following persons are appearing in the list of vendors. a) Ambalal Sarabhai Enterprises Ltd. 28.73 crores b) M/s Neptune .....

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the purchase of impugned property as per the MoU. The assessee was to make the payment of Rs. 68.03 crores to MASEL. Out of the said sum, assessee along with its associates has made the payment of ₹ 39.30 crores. As per assessee, a sum of ₹ 8.05 crores was paid by it and balance of ₹ 30.08 crores was by MNI. From the above, AO submitted that there was a complete denial from the side of assessee for having transactions for sale of impugned property. Now from the above, MoU it i .....

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All the necessary transactions for the payment made to MASEL have been duly disclosed in its respective books of account. Actually the sale was made by MASEL to the party based in Pune. Ld. CIT(A), accordingly, deleted the addition made by AO by observing as under:- 10. I have carefully considered the observations of the Assessing Officer and submissions of the appellant. The Assessing Officer received information through ITS on 06.09.2011. In the ITS details the name of the assessee company app .....

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f property of ₹ 68 crores. The perusal of the documents submitted by the appellant shows that in the sale deed dated 21.09.2008 (Annexure-'D' of appeal papers) the appellant and M/s. Neptune are confirmatory parties to the sale of a property between M/s. Ambalal Sarabhai Enterprises Ltd., and M/s. Sri Rasiklal Manikchand Dhariwal for a consideration of ₹ 68,03,07,175/- executed on 22.10.2008. The appellant and M/s. Neptune Infrastructures are not parties as seller but only as .....

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completed after scrutiny u/s 143(3). However, the appellant and M/s Neptune Infrastructure agreed to relinquish their rights on the condition that the appellant and M/s. Neptune Infrastructure will receive ₹ 39.03 crores from the vendor i.e. M/s. ASCL, which was agreed upon by the seller and resulting thereby both the appellant as well as M/s. Neptune Infrastructure became confirming parties. The appellant has submitted that the information in ITS as seller is wrong and incorrect. 11. The .....

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ispute on the same. Therefore, information in the ITS was wrong and incorrect by disclosing the sale of such property by the appellant and M/s. Neptune Infrastructure. It is held that the appellant is only a confirmatory party to the sale of said property and not a seller. The amount of ₹ 39.03 crores received as confirmatory party being the old advance given for purchase of said property has been duly accounted for in the books of accounts. Therefore, the addition of ₹ 68,03,07,175/ .....

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tion arise that why the assessee will be a confirming party a transactions between MAESL vs. Pune based party. He vehemently relied on the order of AO. On the other hand, Ld. AR before us filed paper book which is running pages from 1 to 289 and submitted that assessee along with MNI were wishing to buy the impugned property from MAESL but same was cancelled on a later date. To buy a property, a sum of ₹ 39.30 crores was advanced by assessee along with MNI to MAESL, but the MOU got cancell .....

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ey returned to assessee and its associates have been disclosed in the aforesaid deed of conveyance. Ld. AR further submitted that the necessary details were placed before AO as the assessee is based in West Bengal and the details was to be collected from the sub registry office of Vadodara. Therefore, there was a delay in collecting the desired report. Ld. AR further submitted that AO was empowered u/s 133(6) of the Act to collect the report from the office of sub registrar to ascertain actual t .....

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r of Ld. CIT(A). 7. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that AO has made the addition of Rs. 68 crores as undisclosed cash credit in the hands of assessee on the ground that assessee has made the sale of the impugned property without recording the same in its books of account. We find that assessee collected the details for the sale of impugned property on the basis of ITS received from Sub Regi .....

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re attracted only in a case where any credit entry found in the books of account of assessee which is not explained by assessee. In the instant case, no such entry was detected by AO. In our considered view, the provisions of Sec. 68 are not applicable in the present case. Similarly, from the details submitted by assessee, we find that assessee has given advanced money for the purchase of impugned property and same money was returned. In this point, Ld. DR has not brought anything on record to t .....

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dition made by AO u/s 36(1)(iii) of the Act. For this, Revenue has raised the following ground:- 2. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting ₹ 2,47,91,689/- without considering the fact that the assessee admittedly deals in the business of trading in shares & securities and is not in the business of dealing in property transaction and also without considering the provision of Sec.36(1)(iii). 9. The assessee has purchased the impugned property .....

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ion by AO why the impugned property has been shown as stock-in-trade, assessee offered no explanation. Accordingly, Assessing Officer considering the size and magnitude of the property was of the opinion that it should have been reflected as investment . The AO further observed that assessee has not claimed depreciation on the said impugned property because it has not been put to use in the year under consideration. Considering the same, AO was of the opinion that the interest amount should have .....

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erefore, the impugned property was purchased with a sole intention of carrying the business of real estate and same was shown as closing stock in its books of account. The assessee further submitted that it has earned business income of ₹ 40,500/- by way of storage charges and same was shown in its books of account under the head business and profession . Accordingly, Ld. CIT(A) deleted the addition made by AO by observing as under:- 15. I have carefully considered the observations of the .....

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has entered into the transaction of purchase of such huge plot of land and funded the same principally out of borrowed money. This purchase appears in the books of appellant at the end of the year as Closing Stock. The appellant s intention of dealing in such large piece of land by way of business venture has been clearly spelt out by the appellant. The Assessing Officer observed that the appellant is doing the business of trading in shares and securities while this property has been disclosed a .....

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al estate business also. The appellant has also submitted that it has used its borrowed fund for the same and it has been showing it as stock in trade till date. The appellant had also earned income of ₹ 40,500/- by way of storage charges and the same has been accounted as his business income in the books of A/c. which has been accepted by the Assessing Officer during the assessment proceedings. The appellant has claimed deduction in response of interest of borrowed capital taken as loan f .....

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n trade. Therefore, the appellant is fully entitled to treat it as stock in trade. Once the property is considered as stock in trade, the appellant is entitled for claiming of expenses incurred as interest in Profit & Loss Account. The said interest expenditure amounting to ₹ 2,47,91,6889/- is held to be allowable u/s 36(1)(iii). In view of this, the addition made by the Assessing Officer amounting to ₹ 2,47,91,689/- is hereby deleted. These grounds of appeal are allowed. Being a .....

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copy of its Memorandum & Articles of Association and drew our attention to its clause (iv) which reads as under:- 4. To carry on the business as dealers, owners and investors in land, building, factories for which purpose to acquire and purchase, take on lease, tenancy or n exchange, hire or by other means obtain ownership and/or options over any freehold or other property for the said estate or interest thereof any rights, privileges or easements over or in respect of any property, land or .....

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es, flats, rooms, floors, huts or other accommodation and let or dispose of the same on instalment basis, hire purchase basis or by outright sale whether by private treaty or by auction or in Assessment Year other mode of disposition all or any integral part thereof. Ld. AR further submitted that assessee has shown its business income of ₹ 40,500/- during the year under consideration and the same has been accepted by AO. Therefore interest expenditure has been incurred by assessee for the .....

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