TMI Blog2018 (5) TMI 1949X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is dismissed Addition u/s 40A(3) - assessee company has made payment of ₹ 1,00,000/- in cash to various farmers from whom land has been purchased - HELD THAT:- It may be stated that terms of collaboration agreement has not be overridden by A. O.. He has only analyzed the terms of the agreement, and by analyzing the term of agreement, he has given the finding that appellant is in the business of acquiring land and its development through CWPPL and therefore, payment made to farmer/seller of land is an expenditure in applicant's hand. Accordingly Section 40A (3) is applicable. After considering entire facts and circumstances of the case, uphold the addition made by Assessing Officer - ITA No.6637/Del/2014, ITA No.6818/Del/2014 - - - Dated:- 18-5-2018 - Shri R. K. Panda, Accountant Member And Smt. Beena A. Pillai, Judicial Member Assessee by : Shri Piyush Kaushik, Adv. Department by: Smt. Meeta Singh, CIT-DR ORDER R. K. Panda, These are cross-appeals. The first one is filed by the assessee and the second one filed by the Revenue and are directed against the order dated 05.08.2014 of CIT(A)- X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of findings of search in BPTP group of cases conducted on 15.11.2007 that BPTP group is engaged in payment of unaccounted interest on post dated cheques given for acquisition of land. I have heard many appeals in BPTP group of cases. On this issue my findings after considering the evidential value of seized documents as a result of search was that the BPTP group of companies are paying unaccounted interest payment on post dated cheques wherever the same get extended for the period of extension if such period of extension cannot be ascertained then unaccounted interest payment on PDCs should be computed after six month from date of conveyance deed. Such findings in the case M/s Business Park Promoters (P) Ltd. being one of BPTP group of companies A.Y. 2006-07 in ITA no 521/09-10/309 dt.24.12.2012 is reproduced as under:- Learned AR has been maintaining 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 vouchers in seized documents conclusively proves that the recipient has signed on voucher for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness Park Promoter Pvt. Ltd (Appeal No.521/2009-10/309 dated 24.12.2012) for the AY 2006-07 is as under:- I have considered the assessment order, argument of Ld. AR. To decide the issue of disallowability u/s 40A (3) pointed out by learned AR, It is proper to examine the terms of collaboration agreement and facts of the case. The appellant purchases the land from various farmers/ land owners in its own name by entering into sale deed. Registration is done in the name of appellant. The payment is made by appellant. As per the collaboration Agreement, the appellant company would acquire the land and transfer 100% of its development right to M/s CWPPL. The appellant company is shown as owner of the land. In lieu of transferring the development right, the appellant company gets cost of land plus ₹ 35,000 per acre for CWPPL. This being the case, what is transferred is the development right, the ownership remains with appellant. Therefore, it is difficult to accept the Ld AR's contention that the cost of land is reimbursed by CWPPL. If the land would have been sold to CWPPL, view might have been that the appellant is only working as an agent of CWPPL and expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal is hereby dismissed. As the facts circumstances are similar and the argument of Ld. AR is also on same line, following my own above decision, I hereby confirm the addition made. This ground of appeal is dismissed. 7. Aggrieved with such order of the ld. CIT(A), the assessee as well as the Revenue are in appeal before the Tribunal by raising the following grounds. ITA No.6637/Del/2014 (By Assessee) : 1. That the order passed by the Assessing Officer and Commissioner of Income Tax (Appeals)-XXXIII, New Delhi are bad in law and void abinitio. 2. That on the facts and circumstances of the case and in law the CIT(A) has erred in holding that wherever the date of PDCs are extended, interest is to be taken to have been paid @ 15% p.a in cash outside the books of account and is to be treated as undisclosed income. 2.1 That the CIT(A) erred in utilizing the material seized in the course of search on BPTP group of cases (excluding appellant) on 15.11.2007 which neither belong to the appellant nor relate to period under consideration. 2.2 That the CIT(A) erred in utilizing the aforesaid seized material in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,98,851/- and deleted the balance addition. 12. He further submitted that the Assessing Officer in the assessment order has referred only to the material seized during the search on 15.11.2007 whereas the assessee company was incorporated on 30.12.2009, a fact submitted before the Assessing Officer and the ld. CIT(A) and not controverted by the Revenue. Therefore, when the assessee company was not even in existence, the seized material found in the course of first search has absolutely no co-relation with the assessee company. Referring to the seized material found during the course of search, he submitted that these documents do not belong to or relate to the assessee and none of the documents relate to the impugned assessment year. Therefore, when these seized documents have no relation whatsoever with the assessee company and even during the second search, no adverse material of any sort pertaining to the assessee company was recovered giving any indication i.e. assessee company is paying interest on the PDCs beyond six months from the date of sale deed out of the books of account, no addition could have been made. Therefore, the order of the ld. CIT(A) sustaining an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly brought out the business module followed by the assessee wherein the assessee used to pay interest on PDCs in cash to the vendors of the land on monthly basis at the rate of 1.25% per month. He accordingly submitted that the order of the ld. CIT(A) giving partial relief to the assessee by reversed and that of the Assessing Officer be restored. 17. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of material found during the course of search conducted on BPTP group of cases on 15.11.2007 formed the opinion that the assessee is making payment of interest on PDCs for which he made addition @ 1.25% per month on PDCs from the date of sale deed till the encashment of PDCs on the premises that the interest must have been paid out of the books. He accordingly made addition of ₹ 38,05,534/-. While doing so, the Assessing Officer followed the decision in the case of M/s Business Park Promoters Pvt. Ltd. for assessment year 2006-07. While ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to work out the extension of PDCs in each case, then the A.O. is directed to recomputed interest on PDCs after six months from the date of issue of the PDCs. Therefore, the ground of appeal of the Revenue that the CIT(A) deleted the addition of ₹ 5,06,625/- made by the A.O. on account of interest on PDCs is factually incorrect and contrary to the order of the CIT(A). The CIT(A) directed to recalculate the interest on PDCs and there was a sound logic for such direction. His direction is based on material found and seized at the time of search. In view of the above, we do not find any justification to interfere with the order of ld.CIT(A) in this regard and accordingly, we reject ground no.1 of the revenue's appeal. 8. In view of the Co-Ordinate Bench order of the Tribunal in the group concern of the assessee in the case of M/s IAG Promoters and Developers Pvt. Ltd. (supra), we hold that the CIT(A)'s order is correct and no interference is called for. It is ordered accordingly. 19. We further find the Tribunal in the case of M/s IAG Promoters and Developers Pvt. Ltd. vide ITA No.1674/Del/2013 and ITA No.1765/Del/2013 order dated 31.10.2014 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and sustained by the ld. CIT(A) has been deleted. Since in the instant case also when the assessee has not claimed any such expenditure in the Profit Loss Account nor debited such amount to the Profit Loss Account, therefore, no addition is called for. 23. The ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the ld. CIT(A) and submitted that since the assessee has violated the provisions of section 40A(3), therefore, ld. CIT(A) was rightly justified in sustaining the addition made by the Assessing Officer. 24. After hearing both the sides, we find identical issue had come up before the Tribunal in the case of M/s Countrywide Promoters Pvt. Ltd. (supra), a sister concern of the assessee. The Tribunal following the decision of the Co-ordinate Bench of the Tribunal in the case of M/s Westland Developers Pvt. Ltd. vide ITA No.1752/Del/2013 order dated 22.08.2014 for the assessment year 2006-07 deleted the addition made by the Assessing Officer and sustained by the ld. CIT(A) u/s 40A(3) of the I.T. Act. The relevant observation of the Tribunal from para 10.4 onwards reads as under :- 10.4 We have considered sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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