TMI Blog2018 (9) TMI 1552X X X X Extracts X X X X X X X X Extracts X X X X ..... d as per observations in the order by giving reasonable opportunity of being heard to the assessee. The AO shall made all efforts to enquire from all concern parties about the facts of execution of MOU for M/s Meghatech Realtors P. Ltd. and shall pass the reasoned order. Deemed dividend addition u/s 2(22)(e) - Held that:- CIT(A) following his order dated 31.03.2017 for AY 2013-14 and 2014-15 accepted the plea of the assessee and directed the AO to make addition u/s 2(22)(e) i.e. addition made are restricted to the extent of accumulated profits. Ld. Counsel for the assessee referred to the remand report filed by the AO before Ld. CIT(A), PB 250 i.e. on 31.03.2012, the accumulated profit in case of M/s Dream Green Land Realtors P. Ltd. and M/s Rosemary Properties P. Ltd. were ₹ 4,26,330/- and ₹ 2,41,280/-. As further submitted that the order of Ld. CIT(A) need to be modified as accumulated profit taxed as deemed dividend in earlier year need to be excluded i.e. in the case of Dream Green Land Realtors P. Ltd. for AY 2008-09 was ₹ 2,871/- and in case of M/s Rosemary Properties Ltd. in AY 2009- 10 it was ₹ 86,111/-. We, accordingly, direct the AO to take into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e P. Ltd., assessee had entered into Memorandum of Understanding (MOU) with M/s Meghatech Realtors Pvt. Ltd. and received ₹ 10 crores in cash for purchasing land in Harchandpur. The assessee was confronted with the documents in his statement recorded u/s 132(4) of the Act in which he has said to have received ₹ 10 crores from M/s Meghatech Realtors P. Ltd. This amount was subsequently paid to Smt. Saroj Sharma and others for purchase of land at Harchandpur. It was stated by assessee that he was acting on behalf of M/s Meghatech Realtors Pvt. Ltd. 3.1 During the search on 17.09.2013, document annexurised as page no. 41-45 of Annexure A-11 Party TO2 related to investment on properties by Sh. Devender Kumar in Harchandpur was also found and seized from the office premises of the assessee and M/s CDR Estate P. Ltd. During the course of post search Investigation Sh. Devender Kumar was summoned u/s 131 of the Act to examine and verify the documents seized. Sh. Devender Kumar in his statement recorded u/s 131 of the Act has stated that he has received ₹ 20 crores in cash from M/s Newage Infrabuilders P. Ltd. This amount was given to him by M/s Newage Infrabuilders P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving ₹ 10 crores and ₹ 20 crores to assessee and Sh. Devender Kumar out of shareholder s money. On 09.01.2013 same letters have been again received from Directors of both the companies admitting of giving cash of ₹ 10 crores and 20 crores to the assessee and Devender Kumar out of shareholder s money from the address D-111, South Ganesh Nagar, Mandawali, New Delhi. The Inspector reported that no such person was found at the aforesaid address. 4.2 During assessment proceedings, notices u/s 153A read with section 153C of the Act were issued to both the companies, however, both the notices returned back to the AO with the remarks no such firm exists . Inspectors of the Circle were deputed, however, they have reported that no such entity existed at the given address. 5. In order to verify the details of the Directors of both the companies, notice u/s 133(6) of the Act was sent to Axis Bank, New Delhi, where both the companies had their bank accounts for furnishing of account opening form and account statement for the period from 01.04.2009 to 31.03.2015. The Bank submitted the required details from which it was found from account opening form, name and addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the cash was never handed over to him. He has also stated that he is not aware of company M/s Newage Infrabuilders Pvt. Ltd. It was written in English, whereas he can barely understand English. He was just a signing authority only on the direction of the assessee in lieu of commission income. 5.4 The AO issued show-cause notice to the assessee on 18.03.2016 mentioning all the above facts and asked for the explanation of the assessee regarding both the MOU and show10 caused as to why the cash amount involved in the transaction of ₹ 20 crores and 10 crores should not be added to the income of the assessee. The assessee filed a reply before the AO in which the assessee again reiterated that MOU of ₹ 20 crores is between Sh. Devender Kumar and M/s Newage Infrabuilders Pvt. Ltd. which does not belong to the assessee. It is independent deal between them and Smt. Saroj Sharma and others. Statement given before AO on 11.03.2016 is completely contradictory as submitted in the statement before ADIT at the time of appraisal proceedings on oath in which he has already explained that it is an independent transaction. Even in the complaint filed with Police Department and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ie Estates Pvt. Ltd. The assessee explained that the said advances were received for purchase of land for the company and section 2(22)(e) of the Act does not include any advance or loan made in the ordinary course of business. However, the assessee did not submit any audited books of account of the above mentioned companies before AO in order to verify the accumulated profit of the said companies. The AO, therefore, directed that as to why the above amount received should not be treated as deemed dividend in the hands of the assessee because assessee was beneficial owner of the shares of the above companies for the assessment year in question. The AO noted that assessee has not filed any evidence in support of the above claim for taking advance for business purposes. Therefore, it was considered as deemed dividend. The assessee also did not produce audited books of accounts of the above mentioned companies in order to verify the accumulated profits, the entire quantum of advances received by the assessee during the year from the above mentioned companies were therefore, added to the income of the assessee. The AO accordingly made an addition of ₹ 2,22,93,639/-. 8. Both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal. Ld. Counsel for the assessee did not press ground no. 1 3 of the appeal, the same are dismissed as not pressed. 10. On the remaining grounds, the assessee challenged the order of the Ld. CIT(A) in confirming the addition of ₹ 30 crores u/s 68 of the I.T. Act and addition of ₹ 2,22,93,369/- made u/s 2(22)(e) of the Act. 11. Ld. Counsel for the assessee reiterated the submissions made before authorities below and referred to various notices issued by the AO and reply filed by the assessee and documents on record along with statement of the assessee, Sh. K.V. Jain and Sh. Devender Kumar recorded time to time. He has also submitted that PB 166, the letter of the assessee dated 12.10.2016 along with affidavit of Sh. Devender Kumar retracting from the statement made before AO. PB 180 is affidavit of Sh. K.V. Jain and PB 184 is complaint made to Commissioner of Police, Gurgaon. PB 349 is Civil Suit filed by Sh. Devender Kumar against Smt. Saroj Sharma and others. PB 294 is assessment order of Sh. Devender Kumar u/s 153A read with section 153C of the Act. He has submitted that presumption u/s 292C of the Act is that the document is correct. The document rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummons upon both the companies because some were not available at the given address. Sh. K.V. Jain who facilitated the above MOU s expressed his inability to get the summons served on both the companies. The assessee did not produce Directors of both the companies. The notices u/s 153A read with section 153C were issued to both the companies which returned un-served. Sh. Devender Kumar made a statement against the assessee that he signed the MOU on the direction of the assessee. Ld. DR, therefore, submitted that assessee failed to prove the identity and creditworthiness of the creditors and genuineness of the transaction in the matter. Ld. DR relied upon several decisions in support of his contention including judgment of Bombay High Court in the case of Konark Structural Engineering P. Ltd. vs. DCIT 90 taxmann.com 56, judgment of Calcutta High Court in the case of DRB Exports P. Ltd. vs. CIT 93 taxmann.com 490, judgment of Allahabad High Court in the case of Prem Casting P. Ltd. vs. CIT 88 taxmann.com 189, judgment of Delhi High Court in the cases of CIT vs. MAF Academy P. Ltd. 361 ITR 258, CIT vs. Navodhya Castle P. Ltd. 367 ITR 306 and CIT vs. N.R. Portfolio P. Ltd. 263 CTR 456. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores from Sh. Devender Kumar. Smt. Saroj Sharma and others have also executed receipt of ₹ 10 crores in favour of the purchaser Sh. Devender Kumar vide separate receipt dated 17.12.2011, copy of which is filed at page 100 of the PB. The assessee is not party to the aforesaid MOU, agreement to sell or the receipt. Even assessee is not witness to the MOU, agreement to sell or the receipt. Assessee thus, has not even remotely connected with the seized document found from possession of the assessee during the course of search. PB 146 is statement of Sh. Devender Kumar recorded on 18.10.2013 by ADIT (Inv.). In this statement the investigation wing has confronted Sh. Devender Kumar of the aforesaid document seized during the course of search from possession of assessee which includes agreements to sell executed with Smt. Saroj Sharma and others and explanation of Sh. Devender Kumar was called upon. Sh. Devender Kumar on such question has explained that he has purchased land at Harchandpur from Smt. Saroj Sharma and others for a sum of ₹ 15,50,000/- per acre in which he was a commission agent on behalf of M/s Newage Infrabuilders P. Ltd. He has stated in his statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee has also entered into an agreement to sell for some other portion of the property with Smt. Saroj Sharma and others and assessee was also cheated by them, therefore, he along with assessee have filed a case in the court against Smt. Saroj Sharma and others and due to this reason only the aforesaid documents were found during the course of search from the office premises of the assessee. In his statement Sh. Devender Kumar did not make any allegation, if money was paid by the assessee on his behalf. PB 110 is a letter dated 06.04.2012 filed by Sh. Devender Kumar to Sub-Registrar, Sohna in which he has explained that he has entered into an agreement to sell with Smt. Saroj Sharma and others for purchase of land at Harchandpur, Gurgaon and she has executed a sale deed of some portion in favour of others. Sh. Devender Kumar, therefore, requested Sub-Registrar not to register any sale deed in future. PB 116 is complaint made by Sh. Devender Kumar against Smt. Saroj Sharma and others dated 04.06.2012 to the Deputy Commissioner of Police, New Delhi for cheating and criminal breach of trust which is supported by the agreement to sell and receipt. PB 187 is also complaint lodg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uth of Sh. Devender Kumar so as to he may contradict his earlier statement recorded by the investigation wing. No question was put to him as to why the documents were prepared in his name, if he was not party to be agreement to sell or MOU. The entire material on record clearly support the statement of Sh. Devender Kumar recorded by the investigation wing on 18.10.2013. The statement of Sh. Devender Kumar recorded by AO on 11.03.2016 is not corroborated by any evidence or material on record. Thus, there was no justification for the AO or CIT(A) to rely upon subsequent statement of Sh. Devender Kumar dated 11.03.2016. It may also be noted here that the assessee filed letter dated 12.10.2016 before Ld. CIT(A) supported by affidavit of Sh. Devender Kumar (PB 166-176) in which he has affirmed his statement made to the investigation wing on 18.10.2013. It is also stated in the affidavit that subsequently notice u/s 153C dated 08.02.2016 was issued to him by Ms. Preeti Singh, ACIT, Central Circle-26, New Delhi and she told him that huge liability to the extent of ₹ 20 crores would fall on him, if he strict to his original statement made before investigation wing on 18.10.2013. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of MOU dated 14.12.2011 (PB 105) which is recovered during the course of search. This MOU is executed between assessee and M/s Meghatech Realtors Pvt. Ltd. According to this MOU assessee was responsible to acquire the land at Village Harchandpur, Gurgaon from Smt. Saroj Sharma and others and shall transfer the same to M/s Meghatech Realtors Pvt. Ltd. in consideration to this MOU. M/s Meghatech Realtors P. Ltd. paid ₹ 10 crores to the assessee. This MOU is attested by Notary Public and also attested by the witness. As per the agreement assessee has paid the same amount of ₹ 10 crores to Smt. Saroj Sharma on behalf of M/s Meghatech Realtors P. Ltd. Both MOU and agreement are filed at PB 105 and PB 338. Since presumption is rebuttable, therefore, the case is to be examined on the basis of material on record. The assessee in his initial statement recorded by investigation wing dated 17.09.2013 (PB 276) has explained that he has received ₹ 10 crores from M/s Meghatech Realtors P. Ltd. for purchase of the land through Sh. J.K. Jain. The assessee similarly filed complaint to the police against Smt. Saroj Sharma and others and also filed letter to the Sub-Registrar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue to the file of AO with direction to re-decide this issue in accordance with law and as per observations in the order by giving reasonable opportunity of being heard to the assessee. The AO shall made all efforts to enquire from all concern parties about the facts of execution of MOU for M/s Meghatech Realtors P. Ltd. and shall pass the reasoned order. 16. In the result, this ground of appeal of assessee is allowed for statistical purposes. 17. As regards, the addition on account of deemed dividend, the assessee pleaded that advance was received for purchase of land for the company in ordinary course of business. However, during the course of arguments Ld. Counsel for the assessee has not been able to refer to any evidence to support such contention. Therefore, this point was rightly rejected by the authorities below. However, Ld. Counsel for the assessee submitted that addition for deemed dividend could be made to the extent of accumulated profits of the lender company. The Ld. CIT(A) following his order dated 31.03.2017 for AY 2013-14 and 2014-15 accepted the plea of the assessee and directed the AO to make addition u/s 2(22)(e) i.e. addition made are restricted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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