TMI Blog2020 (1) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee, which requires to be shown in the books of accounts. The ld.AO has simply assumed certain facts, and assumed existence of unexplained asset which requires to be added under section 69 of the Act. After considering elaborate finding of the ld.CIT(A) on this issue, we do not find any hesitation in concurring with finding of the ld.CIT(A). Therefore, we do not find any merit in this appeal. - Decided against revenue. - ITA No. 1261/Ahd/2016 - - - Dated:- 9-1-2020 - Shri Rajpal Yadav, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri Umaid Singh Bhati, AR For the Revenue : Shri Deelip Kumar, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER : Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-2, Ahmedabad dated 19.2.2016 passed for the Asstt.Year 2012-13. 2. Revenue has taken four grounds of appeal, but its grievance revolves around a single issue viz. the ld.CIT(A) has erred in deleting the addition of ₹ 3,41,29,844/- made by the AO with aid of section 69 of the Income Tax Act on account of unexplained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential and commercial buildings etc and this fact has been admitted by the Assessing Officer in the body of the assessment order itself. The appellant was approached by Shri Dilipbhai Purshotambhai Suthar who was very well known the directors and promoters of appellant to develop a land located at Khoraj jointly with the appellant and had shown interest maximum upto invest upto ₹ 30,00,000/- (Rupees Thirty Lacs only) provided profits earned in the property jointly developed are shared between him and the appellant in the ratio of 10:90 and with a rider that he will not bear any loss occurred in the project. In the event of non implementation of joint venture project, he was entitled to get compensation equivalent to 100% of amount invested by him as damages on and above the amount actually invested by him. The owner of land located at Khoraj which was proposed to be jointly developed was not completely known to the appellant's but was better known to Shri Dilipbhai Purshotambhai Suthar only and therefore, the appellant agreed to enter into land deal but with an understanding that initial investment of ₹ 30 lacs as agreed would be made by him and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement. The cheques so issued were to be cleared only upon handing over the vacant and peaceful possession of land. Under these circumstances purchase deed was executed on 07/12/2011 in favour of the appellant by Shri Shivabhai Popatbhai Gohil wherein M/s Shubham Granite Ltd acted as confirming party. Copy of purchase deed so executed is appearing at Pages 9 to 25 of Paper Book. 3. Though it was stated in the purchase deed that land is clear in all respect and vacant but when appellant visited land it was noticed that the land is in possession of maldharies and though it is non agricultural land in revenue records but it is used for agricultural operations by Maldharies. The appellant under these circumstances had no option but to not to permit Shri Shivabhai Popatbhai Gohil and M/s Shubham Granite Ltd to encash the cheques to issued till the land is handed over vacant and with clear possession to the appellant and Shri Dilipbhai Purshotambhai Suthar. The cheques so issued were therefore, not allowed to be encashed and became time barred as both the persons were not able to hand over vacant and clear possession of land. Copies of Form No. 7 12 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any Court of Law or Arbitral Tribunal. The agreed amount of liquidated damages were to be paid by the appellant to M/s Tvisha Tradelink Consultancy LLP within 18 months from the date of settlement agreement failing which Tvisha was entitle to interest @ 36% p.a. till the amount is actually realised. Copy of settlement agreement dated 18/05/2013 is appearing at Pages 35 to 38 of Paper Book. 6. Thereafter, appellant sold part of the land to Shri Sagar Mukeshbhai Sheth on 22/07/2013 for a consideration of ₹ 1,91,00,0007- (Rupees One Crore Ninety One Lacs only) without informing or taking into confidence any of the parties involved in the land deal except Shri Dilipbhai Purshotambhai Suthar as there were no disputes to share the income with him as per agreement entered into with him. Copy of sale deed is appearing at Pages 39 to 66 of paper book. 7. Thereafter, appellant together with other group company M/s Shaan Leisure Ltd entered into joint development agreement with Pacifica (Ahmedabad Project) Developers P Ltd on 18/12/2014 to develop the balance area of land. The appellant was to get 6.07% of the sales revenue of the dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed that the appellant will be entitle to further extension of 6 months and during this period Tvisha will not approach any Court of Law or Arbitral Tribunal in the matter with regard to the quantum of compensation. Thus, all this disputes came to end in this manner in relation to the land acquired in joint venture with Shri Dilipbhai Purshotambhai Suthar at Khoraj. Copies of relevant documents are appearing at Page 127 to 130 of Paper book. 9. The original land owner Shri Shivabhai Popatbhai Gohil came to know about disposal of land by the appellant through joint development agreement in the month January, 2015 and therefore, approached the appellant to pay balance amount of ₹ 35,00,OOO/- originally agreed. The appellant though kept on promising him to make said payment but when no such payment was made Shri Shivabhai Popatbhai Gohil filed a suit for recovery of his dues or in alternate to cancel the sale deed executed by him in favour of the appellant. With the intervention of the Court a settlement was arrived at between both the parties on 16/02/2015 whereby appellant was required to make payment of ₹ 40 lacs on and above the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash at the time of execution of the deed and balance was paid by way of cheques of ₹ 35 lakhs in the name of original land owner Shri Shivabhai Gohil. In the aforesaid sale deed, M/s.Shubham Granite Pvt. Ltd. was a confirming party to whom the cheques of ₹ 2,82,00,000/- were also paid. The cheques were issued from the bank account of the appellant to both i.e. the original land owner as well as to the confirming party. On the basis of the sale deed, the name in the revenue records in extract of 7I 12 were also changed and the land was entered into appellant's name. Thus the AO was of the view that the appellant company had become the owner of the said property. 2.5 Before the AO, the appellant claimed that it has entered into a joint venture agreement with Shri Dilip Suthar for making part investment by him and in support the copy of the JV agreement dtd. 15.4.2011 was also submitted to the AO. As per the para-F-2 of the said agreement Shri Dilip Suthar was required to make payment of an amount of ₹ 5 lakhs to original land owner namely; Shri Shivabhai Gohel. The AO has objected that as per the sale deed dtd. 7.12.2011 this cash payment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 22/01/2015 is reproduced as under:- 4. Thereafter, one Dilip Suthar introduced the plaintiff to the defendant and after some negotiations, the plaintiff agreed to sell the suit property to the defendant through Dilip Suthar. That the said Shubham Granite Ltd. stood as confirming party to the sale deed executed between the plaintiff and the defendant. The plaintiff states that after negotiaitions, the registered sale deed was executed by the plaintiff in favour of the defendant. The plaintiff states that vide registered sale deed dated 07/12/2011 bearing registration No. 13973, the plaintiff demised the suit property to the defendant for total consideration of ₹ 3,22,00,000/-. The plaintiff states that it was agreed that the defendant will pay ₹ 40,00,000/- towards consideration to the plaintiff and ₹ 2,82,00,000/- to the confirming party. The plaintiff states that the plaintiff had received only ₹ 5,00,000/- from the defendant. Despite repeated reminders the defendant had not paid ₹ 35,00,000/- to the plaintiff till date. 5. The plaintiff states that the defendant had taken the possession of the suit property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er when on 10/01/2015, the plaintiff demanded the balance consideration amount, the defendant did not pay any heed to the plaintiff and thereafter when the plaintiff came to know that the defendant is likely to demise the suit property illegally within few days and thereafter. 17. The suit has valued at ₹ 35,00,000/- for the purpose of jurisdiction and court Fees, and court fee of ₹ 43,450/- has been affixed on the plaint. Thereafter the settlement between the original land holder and Shri Gohil took place and they filed the agreement of settlement dtd. 16.2.2015 duly notarized according to which the appellant had to pay ₹ 40 lakhs over and above ₹ 5 lakhs already paid at the time of execution of sale deed without any further payment in this regard. The relevant clauses of the agreement for settlement dated 16/02/2015 are reproduced as under for ready reference. WHEREAS as per the terms and conditions of the said Sale Deed, the cost of the land was fixed at ₹ 3.22 crores and the Second Party has paid the First Party an amount of ₹ 5 Lakhs. In addition to the same, the Second Party also issued C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 40 lakhs paid by the Second Party as stated herein above, no further amount is payable by the Second Party towards the cost of the land including any amounts which may be claimed by the Confirming Party and in case the Confirming Party claims an such amounts, the same shall be settled solely by the First Party at its own costs and consequences. 7. That the First Party hereby absolves and indemnifies the Second Party from any such payments as may be claimed by the Confirming Party i.e. M/s. Shubham Granites Ltd. by virtue of the Sale Deed dated 07112/2011 bearing registration no.l3973. 9. The parties hereto declare that with the execution of this agreement all claims against each other stand settled and resolved fully and finally and that the parties shall cooperate with each other fully and in true spirit for complying with this Agreement. It is agreed that upon execution of this agreement the first party shall forthwith withdraw the above referred civil suit. It is agreed that the original above referred sale deed will remain valid. 2.7 On filing of this agreement of settlement, the Hon'ble 5th Additional Senior C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of the land without any further payment to anyone by taking the possession of the land. All these documents were available before the AO in the assessment proceeding and the same have not been controverted. 2.8 Now AO has made the observation that as per para-5 on page-4 and 5 of the agreement dtd. 16.2.2015 an amount of ₹ 50 lakhs was to be paid to Shri Gohil although in the subsequent para No.6 on page-5 the amount which was to be paid was repeated at ₹ 40 lakhs. Thus, the AO doubted the authenticity of the agreement because of the difference in the amounts. 2.9 Before the final settlement agreement dtd. 16.2.2015 the part of the property in question was sold by the appellant vide deed dtd. 22.7.2013 for a consideration of ₹ 1.91 crores on the basis of the sale deed already executed in its favour and balance land was shown under the head of fixed assets in its audited accounts for F.Y. 2013-14. Thereafter the appellant has also entered into an agreement dtd. 18.12.2014 for joint development of balance land with M/s. Pacifica (Ahmedabad Project) Developers Pvt. Ltd. So AO doubted the transaction and the agreement to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of ₹ 5 lakhs and the registration charges of ₹ 19,29,844/- the necessary action in that case could have been taken in the case of Shri Dilip Suthar but not in the hands of the appellant. It is worth to note that Shri Dilip Suthar has been regularly filing its return of income having PAN No. CCRPS 8918 Q. 2.11 Further with regard to the aforesaid cheque payments, the cheques have not been encashed from the bank account of the appellant as the possession over the land has not been handed over to the appellant. Thus the sale deed dated 07/12/2011 was not came into force. It was submitted that the purchase deed was agreed to be registered in the name of the appellant only for the purpose of better facilitation of approval of lay out plans and to make payment of development charges which were to be made by the appellant only. It did not mean to transfer the rights over the land as the possession was in fact in dispute. The AO has not brought anything on record establishing that the cheques of the aforesaid amounts have been encashed from its bank account or any other payments in lieu of such payments have been made to Shri Gohil or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aceful possession of the land which did not materialized in the year under consideration. Non- clearance of the cheques from the bank account of the appellant itself proves non-payment by the appellant obviously due to litigation and non- handing over of the peaceful possession over the land to the appellant. Even after a lapse of 6 months period from the date of issue of cheques, the cheques itself becomes time barred and subsequently no payments are cleared by the bank. Even as per the copy of extract of 7/12 on the basis of the sale deed name of the appellant has been entered in the revenue record but this land was being utilized upto F.Y. 2013-14 for agricultural operations obviously by the original land owners or the possession holders. 2.13 It has been held by the Hon 'ble Supreme Court in the case of Dhakeshwari Cotton Mills Vs. CIT 26 ITR 775 that addition made merely on suspicion how so ever strong it may be cannot be sustained. Further it has been held that the addition made by the AO without making requisite inquiry from witnesses cannot be sustained as has been held in the case of Nathuram Premchand Vs. CIT 49 ITR 569. The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if some explanation was given, it was not to the satisfaction of the AO. In this situation, the value of such investment may be deemed as income of the assessee of such financial year. 8. There is no doubt that the assessee is maintaining books of accounts, which are audited also. In the submissions (extracted supra), assessee has explained that there was no investment as construed by the AO. On an analysis of the submissions, as well as finding of the AO, it emerges out that basically, the AO has assumed existence of the investment on the basis of mercantile system of accounting only. He did not dispute the terms and conditions for project agreement in a way, but was of the view that even if these terms and conditions are there, then also the assessee should have shown investment on asset side, and disputed amount on liability side in the balance sheet. He also highlighted circumstances for disbelieving the dispute between the vendee and vendors, and other joint venture partners, and alleged settlement in 2015. The ld.CIT(A) did not concur with the AO s conclusion and reversed the finding. 9. We have duly considered submissions of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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