TMI Blog2018 (3) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 of the I.T. Act. - According to Section 68 of the I.T. Act, assessee has to prove only the source of the credit. In this case, it is not an ordinary credit, but, assessee has received advance against sale of the property. Therefore, the explanation of assessee should not have been doubted by the A.O - No additions - Decided against the revenue. - ITA.No.369/Del./2015 - - - Dated:- 23-3-2018 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Revenue : Ms. Shefali Swaroop, CIT-D.R. For The Assessee : Shri Ashwani Kumar, Advocate ORDER PER BHAVNESH SAINI, J.M. This appeal by Revenue has been directed against the order of the Ld. CIT(A)-XVI, Delhi, dated 31st October, 2014, for the A.Y. 2010-2011, challenging the deletion of addition of ₹ 67,50,00,000/- under section 68 of the I.T. Act, 1961. 2. The brief facts of the case are that from perusal of the balance sheet, the A.O. noticed that assessee has shown M/s. Unitech Ltd., as fresh sundry creditor of ₹ 67.50 crores under the head Current Liabilities . The assessee was asked to furnish details of sales/purchases or any other type of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee-company had received a sum of ₹ 67.50 crores from M/s. Unitech Ltd., as advance for sale of the property in Maharashtra which were duly evidenced by Agreement to Sell Dated 12th March, 2010 which were adduced into writing on terms and conditions of the said arrangement and fact of receiving of part of consideration of 50% against the aggregate sale consideration of ₹ 135 crores. Subsequently, with a view to guard against any significant movement in the market rate of the land and to safeguard the interests of both the parties, it was decided to execute the same on a Non-Judicial Stamp Paper, which incorporate fully and completely all the items of the Agreement entered into on 12th March, 2010. For this purpose, an Agreement to Sell on Non- Judicial Stamp Paper was executed in the year 2012, which was copy of the Original Agreement Dated 12th March, 2010, on which, Original Date is 12th March, 2010 was inadvertently mentioned. The error of not amending the date of original agreement and not making mention of the original agreement dated 12th March, 2010, was the result of clerical error compounded by the vagaries of Information Technology and not any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id on different dates from the assessee s bank account starting from 26th March, 2013 to 30th March, 2013. The details of the same were filed and noted in the impugned order. 4. Ld. CIT(A) considering the material on record in the light of findings of the A.O. and submissions of the assessee deleted the entire addition. His findings in paras 4.1.1 to 4.1.7 are reproduced as under : 4.1.1. I have carefully considered the submissions of the A/R of the appellant company, the facts of the case as well as the findings of the A.O. In ground no. 1 of appeal the appellant has taken the plea that AO was not justified to disallow/add back a sum of ₹ 67.50 crore received by the Appellant Company from M/s Unitech Limited under section 68 of the Income Tax Act, 1961. The brief facts of the case are that the assessee has shown M/s Unitech ltd. (UL) as fresh sundry creditor of ₹ 67.50 crores under the head current liabilities. In response to the query raised by the AO in this regard, AR of the assessee has filed confirmation of the same from M/s Unitech ltd. along with its bank account statement and acknowledgement of filing ITR. From the confirmation filed it is evident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amp paper used for the agreement to sell dt. 12.03.2010 AO caused necessary investigations with the office of Delhi Treasury, Tis Hazari Court Delhi. From the investigation it emerged that the stamp paper S739345 used by the assessee for execution of agreement to sell was issued to Mrs. Veena Malhotra, License no. 374 and not to Shri Sandeep Kumar, License no. 584 printed on the copy of stamp paper used for execution of agreement to sell. It w as also confirmed by Mrs. Yeena Malhotra that the stamp paper was issued to her by Delhi Treasury on 22.03.2012, which was misplaced by her and misused by someone else. With regard to the license no. printed as 584 on the back side of the stamp paper, the office of Collector of Stamps (Hqrs.) Delhi confirmed that the license no. 584 had been allotted to Shri Lalit Kumar Sharma and not to Shri Sandeep Kumar as printed on the back side of the stamp paper. Shri Lalit Kumar Sharma also informed that someone else has misused his license number on the stamp paper bearing number S739345 as the said stamp paper was neither issued to him by Delhi Treasury nor he issued the same to M/s Unitech ltd. on 03.03.2010. AO also recorded the statements u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reputed company viz. M/s Unitech Ltd. The AR also submitted that to prove the genuineness of the transactions and the credit worthiness of the parties from whom the amount was received, the following documents were already filed viz.:- 1. Confirmations 2. Copy of bank accounts 3. Copy of acknowledgment for filing ITR 4. Copy of balance sheet of M/s. Unitech Ltd., The reply of the assessee company is rejected by the AO on the ground that the assessee has failed to explain how they signed and executed the agreement to sell on 12.03.2010 on the stamp paper which was issued by Delhi Treasury, Delhi on 22.03.2012 i.e. 2 years after the date of execution. The date of issue on the back side of the stamp paper has been printed as 03.03.2010 which has also been proved false and fabricated in view of the report from Delhi Treasury that the stamp paper was issued to Mrs. Yeena Malhotra on 22.03.2012. This was also confirmed by Mrs. Veena Malhotra who also submitted that the stamp papers was misplaced and someone else had misutilised the same. AO also observed that the genuineness of the transaction was never found reliable. The assessee company at first had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to explain the genuineness of the transaction of cash credit of ₹ 67.50 crores. AO observed that the amount of ₹ 67.50 crores received by the assessee company has been transferred to three non working companies of the Bhushan Group i.e. M/s SRN Minerals Mining Pvt. Ltd., M/s Robust Transportation Pvt. Ltd. and M/s Bhushan Exports Pvt. Ltd. and later on transferred to M/s Bhushan Steel ltd., the ultimate user of the accommodation entry. Therefore, AO held that there was no agreement between the assessee company and M/s Unitech ltd. as on 10.03.2010 against which an advance of ₹ 67.50 crores was received. It is a colourable device of the assessee company to generate income from undisclosed sources though the accommodation entry taken from M/s Unitech ltd. The agreement to sell is nothing but the afterthought story. AO, therefore, held that the explanation offered by the assessee about the genuineness of the transaction of cash credits is not satisfactory. As such the cash credits of ₹ 67.50 crores is added by the AO as income from other source u/s 68 of the I.T. Act. 4.1.2. There is no dispute that the Appellant Company was and is the legal and bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the parties from whom the moneys were received the appellant during the course of assessment proceedings duly filed confirmations, copy of bank accounts statements, copy of acknowledgement for filing ITR return and copy of balance sheet of M/s Unitech ltd. From the bank account statements of M/s Unitech ltd. and the appellant company all the above transactions are duly verifiable. Further in response to requisition u/s 133(6) issued by the AO to M/s Unitech Ltd., Shri Kaushal Nagpal AR and DGM (Finance) of M/s Unitech ltd. who is also one of the witness of the agreement to sale attended the assessment proceedings and confirmed that M/s Unitech ltd. has paid the sum of ₹ 67.50 crores as advance for purchase of lands and that it has to pay balance consideration of ₹ 67.50 crores for purchase and registration of land parcel but due to shortage of funds it is unable to pay the balance amount and, therefore, amount is still outstanding. It is not the case of the AO that M/s Unitech ltd. is not existing. It is also not the case that M/s Unitech ltd. has no credit worthiness. The transaction are also duly disclosed in the regular books of accounts of both the parties i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against land, is not sustainable. Because it is an established legal principle that mere nomenclature under which the liability is shown in the books of accounts do not change the nature of transaction. The liabilities appearing in the books of the appellant company as on 31.03.2010 and the debt payable to M/s Unitech Ltd. has been acknowledged by the assessee company as existing as on 31.03.2010. The said advance is also appearing in the books of M/s Unitech ltd. as confirmed by M/s Unitech ltd. and corresponding balance sheet was also filed in this regard. 4.1.6. The view of the AO that the agreement to sale is a colorable device to provide accommodation entry to benefit Bhushan Steel ltd., is nothing but based on suspicion, conjectures and surmises. In this regard reference may be made to the observations of Hon ble Supreme Court in the case of Union of India vs Azadi Bachao Andolan [(2003) 132 Taxmann 373 (SC)] wherein Hon ble Court while further expounding on their earlier judgement in the case of McDowell Co have made the following pertinent topical observations :- ( i) We may in this connection usefully refer to the judgement of the Madras High Court in M.V Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 and 30.03.2013 is also verifiable from the corresponding bank statement of the appellant company. AO may also verify the same from the corresponding bank statement. However, I am of the opinion that for the irregularities observed by the AO in respect of the non judicial stamp paper, the appellant is liable for action under the provision of Indian Stamp Act and AO may proceed against the appellant under the relevant provision Indian Stamp Act before the appropriate authority. In view of the above since the genuineness of the transaction is proved from the bank account statements and existence and creditworthiness of M/s Unitech ltd. are also proved, therefore, the addition made by the AO u/s 68 treating the said advance as income from other source is not sustainable. The appeal is allowed in this in this ground. 5. The Ld. D.R. relied upon the order of the A.O. 6. The Learned Counsel for the Assessee, on the other hand, reiterated the submissions made before the authorities below and also filed copy of the balance sheet of M/s. Unitech Ltd., and pointed-out page-79 of the balance sheet to show that in their case loan and advance are of ₹ 1729,97,37,070/-. He h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by books of account of both the assessee and the tenant and by the lease agreement, wherever such lease agreement exists. Held accordingly, that the Tribunal was justified in holding that in respect of deposit against tenancy, the assessee was only required to prove the identity of the depositors and that the deposits were made by tenants. 7.1. The Hon ble Gauhati High Court in the case of CIT vs. Nemi Chand Kothari vs. CIT Another (2003) 264 ITR 254 (Gau.) held as under : Held (i) that the assessee had established the identity of the creditors. The assessee had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors which was not in dispute. Once assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. The failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, that it had also proved the capacity of the creditors by showing that the amounts were received by the assessee business transaction account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source. Thus taking into consideration the totality or the facts and circumstances of the case, and, in particular the fact that the Assessing Officer had not disallowed the interest claimed/paid in relation to these credits in the assessment year under consideration or even in the subsequent years, and tax had been deducted at source out of the interest paid/credited to the creditors, the Tribunal held that the Departmental authorities were not justified in making the addition of ₹ 12,85,000. On appeal to the High Court : Held, that considering the facts and circumstances of the case narrated by the Tribunal and the law explained by it, the appeal was liable to be dismissed. 7.2.1. The Hon ble Supreme Court had dismissed the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial Stamp Paper in the year 2012, on which, inadvertently the date of Original Agreement was mentioned. This has created a doubt in the mind of the A.O. to reject the explanation of the assessee. The A.O. recorded the statement of Stamp Vendor etc., in order to arrive at the finding of fact against the assessee. However, the A.O. has forgot to note that the entire amount was received in 04 instalments through RTGS, through banking channel, in March, 2010. If the stamp paper was purchased later on in March, 2012, such entries in the bank account of the assessee could not have been recorded in March, 2010. Therefore, on mere purchase of the stamp paper or recording Agreement to Sell in March, 2012, is of no consequence. Further, assessee need not to resort to any irregularity or illegality because law permits that even oral agreement could have been entered into, which, itself is sufficient to believe the explanation of assessee. The assessee, apart from that the creditor directly confirmed the transaction with the assessee, in response to notice under section 133(6) of the I.T. Act, filed confirmation of the creditor, their affidavits, their ITR and balance sheet, which proved th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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