Income Tax Appellate Tribunal - Delhi
M/S Seh Realtors Pvt. Ltd.,, New Delhi vs Acit, New Delhi on 20 April, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHIBENCH 'G', NEW DELHI
Before Sh. Saktijit Dey, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
ITA No. 309/Del/2017 : Asstt. Year: 2007-08
ITA No. 310/Del/2017 : Asstt. Year: 2008-09
ITA No. 311/Del/2017 : Asstt. Year: 2009-10
ITA No. 312/Del/2017 : Asstt. Year: 2010-11
ITA No. 313/Del/2017 : Asstt. Year: 2011-12
ITA No. 314/Del/2017 : Asstt. Year: 2012-13
ACIT, Vs. Span India Pvt. Ltd.,
Central Circle-8, 220, Okhla Indl. Estate, Phase-III,
New Delhi New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACS0079A
CO No. 11/Del/2022 : Asstt. Year: 2007-08
CO No. 12/Del/2022 : Asstt. Year: 2008-09
CO No. 13/Del/2022 : Asstt. Year: 2009-10
CO No. 14/Del/2022 : Asstt. Year: 2010-11
CO No. 15/Del/2022 : Asstt. Year: 2011-12
CO No. 16/Del/2022 : Asstt. Year: 2012-13
Span India Pvt. Ltd., Vs. ACIT,
220, Okhla Indl. Estate, Phase-III, Central Circle-8,
New Delhi New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACS0079A
Assessee by : Sh. M. P. Rastogi, Adv. &
Sh. Deepak Malik, Adv.
Revenue by : Sh. H. K. Choudhary, CIT DR
2 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017
CO No. 64/Del/2020
CO Nos. 4 to 8, 11 to 16/Del/2022
ITA No. 788/Del/2017 : Asstt. Year: 2007-08
ITA No. 789/Del/2017 : Asstt. Year: 2008-09
ITA No. 790/Del/2017 : Asstt. Year: 2009-10
ITA No. 791/Del/2017 : Asstt. Year: 2010-11
ITA No. 792/Del/2017 : Asstt. Year: 2011-12
ACIT, Vs. M/s SEH Realtors Pvt. Ltd.,
Central Circle-8, F-88, Okhla Industrial Area,
New Delhi Phase-1, New Delhi-110020
(APPELLANT) (RESPONDENT)
PAN No. AAGCS7537M
CO No. 4/Del/2022 : Asstt. Year: 2007-08
CO No. 5/Del/2022 : Asstt. Year: 2008-09
CO No. 6/Del/2022 : Asstt. Year: 2009-10
CO No. 7/Del/2022 : Asstt. Year: 2010-11
CO No. 8/Del/2022 : Asstt. Year: 2011-12
M/s SEH Realtors Pvt. Ltd., Vs. ACIT,
F-88, Okhla Industrial Area, Central Circle-8,
Phase-1, New Delhi-110020 New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAGCS7537M
Assessee by : Sh. M. P. Rastogi, Adv. &
Sh. Deepak Malik, Adv.
Revenue by : Sh. H. K. Choudhary, CIT DR
ITA No. 2686/Del/2017 : Asstt. Year: 2007-08
ITA No. 2687/Del/2017 : Asstt. Year: 2008-09
ITA No. 2688/Del/2017 : Asstt. Year: 2009-10
ITA No. 2689/Del/2017 : Asstt. Year: 2010-11
ITA No. 2690/Del/2017 : Asstt. Year: 2011-12
ITA No. 2691/Del/2017 : Asstt. Year: 2012-13
ITA No. 2692/Del/2017 : Asstt. Year: 2013-14
ACIT, Vs. M/s U. K. Paints India Pvt. Ltd.,
Central Circle-8, 19, DDA Commercial Complex,
New Delhi Kailash Colony Ext., Zamrudpur,
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACU0057C
3 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017
CO No. 64/Del/2020
CO Nos. 4 to 8, 11 to 16/Del/2022
ITA No. 2376/Del/2017 : Asstt. Year: 2007-08
ITA No. 2377/Del/2017 : Asstt. Year: 2008-09
ITA No. 2378/Del/2017 : Asstt. Year: 2009-10
ITA No. 2379/Del/2017 : Asstt. Year: 2010-11
ITA No. 2380/Del/2017 : Asstt. Year: 2011-12
ITA No. 2381/Del/2017 : Asstt. Year: 2012-13
ITA No. 2382/Del/2017 : Asstt. Year: 2013-14
M/s U. K. Paints India Pvt. Ltd., Vs. ACIT,
19, DDA Commercial Complex, Central Circle-8,
Kailash Colony Ext., Zamrudpur, New Delhi
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACU0057C
Assessee by : Sh. Pradeep Dinodia, CA &
Sh. R. K. Kapoor, Adv.
Revenue by : Sh. H. K. Choudhary, CIT DR
ITA No. 3588/Del/2017 : Asstt. Year: 2010-11
ACIT, Vs. M/s Scorpio Research & Consultants
Central Circle-8, Pvt. Ltd., 19, DDA Commercial
New Delhi Complex, Kailash Colony Ext.,
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AABCS4720K
CO No. 64/Del/2020 : Asstt. Year: 2010-11
M/s Scorpio Research & Consultants Vs. ACIT,
Pvt. Ltd., 19, DDA Commercial Central Circle-8,
Complex, Kailash Colony Ext., New Delhi
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AABCS4720K
Assessee by : Sh. Pradeep Dinodia, CA &
Sh. R. K. Kapoor, Adv.
Revenue by : Sh. H. K. Choudhary, CIT DR
4 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017
CO No. 64/Del/2020
CO Nos. 4 to 8, 11 to 16/Del/2022
ITA No. 3591/Del/2017 : Asstt. Year: 2006-07
ITA No. 3592/Del/2017 : Asstt. Year: 2007-08
ITA No. 3593/Del/2017 : Asstt. Year: 2008-09
ITA No. 3594/Del/2017 : Asstt. Year: 2009-10
ITA No. 3595/Del/2017 : Asstt. Year: 2010-11
ITA No. 3596/Del/2017 : Asstt. Year: 2011-12
ITA No. 3597/Del/2017 : Asstt. Year: 2012-13
ITA No. 3598/Del/2017 : Asstt. Year: 2013-14
ACIT, Vs. M/s Vatika Ltd.,
Central Circle-8, 621-A, Devika Towers,
New Delhi 6, Nehru Place,
New Delhi-110019
(APPELLANT) (RESPONDENT)
PAN No. AMHPB6460A
ITA No. 3705/Del/2017 : Asstt. Year: 2006-07
ITA No. 3706/Del/2017 : Asstt. Year: 2007-08
ITA No. 3707/Del/2017 : Asstt. Year: 2008-09
ITA No. 3708/Del/2017 : Asstt. Year: 2009-10
ITA No. 3709/Del/2017 : Asstt. Year: 2010-11
ITA No. 3710/Del/2017 : Asstt. Year: 2011-12
ITA No. 3711/Del/2017 : Asstt. Year: 2012-13
ITA No. 3712/Del/2017 : Asstt. Year: 2013-14
M/s Vatika Ltd., Vs. ACIT,
621-A, Devika Towers, Central Circle-8,
6, Nehru Place, New Delhi
New Delhi-110019
(APPELLANT) (RESPONDENT)
PAN No. AMHPB6460A
Assessee by : Sh. C. S. Aggarwal, Sr. Adv.
Revenue by : Sh. H. K. Choudhary, CIT DR
Date of Hearing: 20.01.2023 Date of Pronouncement: 20.04.2023
5 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017
CO No. 64/Del/2020
CO Nos. 4 to 8, 11 to 16/Del/2022
ORDER
The present appeals and Cross Objections have been filed by assessees and the Revenue against separate orders of ld. CIT(A)-24, New Delhi. The appeals deal with unaccounted interest payment by M/s Vatika Ltd. to M/s UK Paints, M/s Span India Pvt. Ltd., M/s SEH Realtors Pvt. Ltd. and M/s Scorpio Research & Consultants Pvt. Ltd. in case of Jaipur Project and NH8 Project. In addition, the other issues pertains to cash receipts, addition u/s 69A on account of cash received on booking of plots by M/s Vatika Ltd.
2. A search & survey operation was conducted by Investigation Wing in the case of Sh. K.S. Dhingra, Sh. G.S. Dhingra & others on 16.09.2011. On the basis of the seized documents, the revenue alleged that the assessee, M/s Vatika Ltd. has entered into a loan agreement with group entities of Dhingra group, Shahi Exports group and Span India group which has been camouflaged as sale-purchase of property transaction. A search and seizure u/s 132 and survey action u/s 133A were carried out on the premises of Vatika Group on 16.01.2013. During the search and survey operation, various incriminating documents pertaining to Vatika Group were alleged to have been found and seized.
3. The case of the assessee company was re-opened u/s 147/148 of the Income Tax Act, 1961 for the assessment year 2006-07 after recording of the reasons for reopening of assessment. Notice u/s 148 of the Income Tax Act, 1961 was issued to the assessee on 28.03.2013 after getting the prior 6 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 approval of Commissioner of Income Tax, Central-I, New Delhi vide office letter F. No. CIT(C)-1/2012-13/2316 dated 28.03.2013. In response to the notice u/s 148 of the Income Tax Act, 1961, the assessee company had filed a copy of its return of income for the assessment year 2006-07 on 08.04.2013. The assessee company had declared its total income of Rs.34,15,23,969/- for the assessment year 2006-07. In the present case, assessment was completed u/s 143(3) of the Income Tax Act, 1961 on 31.12.2008. The total income of the assessee company was assessed at Rs.34,70,03,060/- against the returned total income of Rs.34,15,23,969/-.
4. The documents pertain to loan transactions between the assessee and four lenders group and related to two projects namely, NH8 Deal and Jaipur Project.
5. During the F.Y. 2005-06 the four lenders group viz. Shahi Exports group, Span India group, Dhingra group, Harman Singh Dhingra group together with Smt. Heminder Kumari entered into a finance deal with Vatika Ltd. Each member of the consortium vide their companies entered into various separate Loan agreements with Vatika group in 2005/2006 in the following manner:
Lender Borrower Date of Pages No. Annexure No. Seized/impounded execution from premises U.K. Paints Vatika 13.09.2005 (1) 48 to 142 (1) A43 (2)A4 (1) Vatika Triangle India Pvt. Landbase Pvt. (2) 11 to 5 (2) 19, DDA Ltd. Ltd. Commercial Complex, Zamrudpur, Kailash Colony, New Delhi on 16.09.2011 Sohan Singh Vatika 31.03.2006 125 to 116 A41 Vatika Triangle, sushant Dhingra Landbase Pvt. Lok 1, M.G. Road, (HUF) Ltd. Gurgaon 7 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 U.K. Paints Vatika 31.03.2006 ( 1 ) 1 0 7 t o 9 9 (1) A41 (1 & 2) Vatika Triangle, India Pvt. Landbase Pvt. ( 2 ) 1 5 8 t o 1 4 9 (2) A43 sushant Lok 1, M.G. Ltd. Ltd., Buzz (3)48 to 10 (3) A4 Road, Gurgaon.
Estates Pvt. (3) 19 DDA Commercial
Ltd. Complex, Zamrudpur,
Kailash Colony, New
Delhi
Dhingra Vatika 31.03.2006 55 to 46 A41 Vatika Triangle, sushant
Group Landbase Pvt. Lok 1, M.G. Road,
(Heminder Ltd., Wonder Gurgaon
Kumari & Developers Pvt.
Herman Ltd.
Singh)
Span India Vatika 31.03.2006 35 to 30 A41 Vatika Triangle, sushant
Pvt. Ltd. Landbase Pvt. Lok 1, M.G. Road,
Ltd., Buzz Gurgaon
Estates Pvt.
Ltd.
6. The salient feature of all the agreements is as under:
• The guarantor guarantees the repayment of the loan amount by the borrower under the terms of loan agreement.
• In the event of default of the borrower the guarantor guarantees the payment of loan and interest.
• The guarantor has furnished collateral security of immovable property towards guarantee.
• The lender and Sh. Anil Bhalla (promoter of the borrower group) then entered into personal guarantee agreement to secure the right of the lender and the obligations of the borrower assumed under the above mentioned loan agreement in the following manner.
• The guarantee is stipulated to be continuing guarantee which is enforceable even in case of death of the guarantor.
8 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 • The lender and the borrower then entered into an amendatory loan cum purchase agreement with the fallowing terms.
• The period of loan is extended upto 31.12.2006 as mentioned above.
• The rate of interest to be charged is fixed @24% p.a. for the entire period of the loan, o New PDCs for loan and interest amounts have been given by the borrowers.
• A unilateral right has been given to the lender to opt for the purchase of residential plots.
• The above right to land in lieu of principal and accrued interest amounts has to be exercised in writing by the lender.
• In case the lender opts for land in lieu of principal and accrued interest amounts, the agreement will be deemed to be an agreement for sale and purchase of residential plots. In such a scenario the loan amount along with accrued interest thereon has to be adjusted towards the sale consideration.
• In case the borrower fails to obtain necessary permissions from the state authorities or the lender does not opt for purchase of plots, the amendatory loan cum purchase agreement will automatically extend upto 30.06.2007.
9 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 • As per clause 12 the borrower is under an obligation to buy-back the plots opted by the lender to purchase, at the sole option of the lender. The repurchase price has not been fixed and is to be paid by the borrower at the prevailing market rate.
• As per clause 13, the lender need not pay transfer charge on first transfer of the plots opted to be purchase by the lender.
7. During the Income Tax proceedings, the AO relied upon the statement of Sh. Navin Choudhary, CFO recorded on 16.01.2013 who confirmed that since the buyers are putting money into the project they have advantageous position of buy back clause mentioned in the agreement and the buy-back price was not determined as charging of interest @ 24% clause was available in the agreement. Based on this statement, the AO held that the prime intention of the lender in the above mentioned deal was to get the loan alongwith committed amount of interest, instead of plots.
8. Further, the Lender and the borrower group concerns entered into guarantee agreements dated 31.03.2006 to secure the rights of the lender and the obligations of the borrower assumed under the above mentioned amendatory loan cum purchase agreement. The salient features of the guarantee agreements are as under:
• The guarantor guarantees the due perfo rmance of various obligations o f the borrowe r (Vatika Ltd.) to the lender unde r 10 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 the loan agreement and the amendato ry lo an cum purchase agreement.
• In the eve nt of default of the borro wer the guarantor guarantees the payment o f loan and inte rest. • The guarantor has furnished co llateral security of immovable prope rty towards guarantee.
9. Later, another agreement has been made on 31.12.2006 extending the loan-cum-purchase agreement. As per this agreement, the date of repayment of loan along with interest is, extended upto 30.06.2007 and post dated cheques for principal as well as interest amount have been replaced with fresh post dated cheques by the borrower. As per the seized material, all the lenders have extended their repayment period and agreements to that extent have been entered. Further, the date of repayment of loan along with interest is extended upto 30.06.2007 and then upto 31.12.2007. Similarly, the right of the lender to re-sell and the obligation of the borrower to re- purchase the above land which may be acquired by the lender is also extended upto 31.12.2008.
10. From the above events and based on the various agreements seized, the revenue concluded that the NH8 deal was closed in the month of April 2011 by means of re-purchase of plots 'sold' by Vatika group to the consortium and the assessee recorded the purchase of 39206 plots in the books of Vatika Ltd. in the respective years including F.Y. 2010-11. The revenue alleged that this deal has actually nothing to do with the allotment of plots, the real motive of the deal is the loan 11 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 and interest on it, which has been paid and received in a manner camouflaged as sale- purchase of property transaction.
11. The revenue has also relied on the statement of Sh. Navin Choudhary wherein he has admitted that the Jaipur deal was actually a loan transaction which was shown as sale-purchase of property transaction due to the fact that the lender got allotment of plots and NH8 deal, even the plots have not been allotted as per the agreement and hence held that this is a coloured transaction to evade payment of tax at higher rate. The revenue based on a letter dated 12.04.2010 from Vatika Ltd. addressed to Sohan Singh Dhingra (HUF), wherein it has been informed that Sohan Singh Dhingra HUF is being allotted 3410 sq. yards in the residential colony 'Vatika India Next' Gurgaon Haryana held that since in this letter reference has also been made to the original Loan cum Purchase agreement executed on 13.09.2005 between the parties, agreements for sale between the lenders was nothing but the repayment of loan along with interest being done by Vatika Ltd. in the guise of 'buy-back'. The revenue held that this 'buy-back' has been done by Vatika Ltd. group was just to conceal the real nature of the transaction that is "repayment of loan along with interest".
12. With regard to NH8 deal, the revenue relied on the E-mail dated 19.07.2008 from Sh. Anupam Nagalia to Sh. Ravi Chand which show that the NH8 deal between Vatika group and the consortium is regarded as loan/ICD by the Vatika group. The details of the loans, guarantors and the mortgage is as under:
12 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 S. No. Name of the Party Amount (Rs. Crs) Guarantee Land mortgage(Acres) 1 U K Paints 5.50 Buzz Estates 5.74 2 S E H Realtors 10.00 Wonder 11.20 Developers 3 Span India 5.50 Buzz Estate 6.04 4 Sohan Dhingra 2.00 Wonder 2.86 Developers 23.00 25.84
13. The details of sale consideration by the lenders is as under:
'Intending Total Sale Agreed date for Rate per Area (sq. Area where Seller consideration payment of the sq. Yards yards) located (Amount) entire sales (Amount) consideration Span India 15,00,00,000/- 31.05.2011 16000/- 9375 Vatika India Next, Pvt. Ltd. Gurgaon U.K. Paints 15,00,00,000/- 31.05.2011 16000/- 9375 Vatika India Next, India Pvt. Ltd Gurgaon Sohan Singh 5,45,60,000/- 31.05.2011 16000/- 3410 Vatika India Next, Dhingra(HUF) Gurgaon SEH Realtors 27,27,20,000/- 31.05.2011 16000/- 17045 Vatika India Next, Pvt. Ltd. Gurgaon
14. Following fund flow shows the flow of funds to the lenders from the borrower Vatika Ltd. through other concerns of the Vatika group:
DATE OF AMOUNT RECEIVING PAYING ULTIMATE SOURCE RECEIPT COMPANY COMPANY DATE AMOUNT PAYING LINCOLN COMPANY 04.02.2011 9,09,12,000 SEH LINCOLN 03.02.2011 9,09,12,000 Vatika Ltd. 07.02.2011 9,09,12,000 SEH LINCOLN 07.02.2011 9,09,12,000 Vatika Ltd. 09.02.2011 9,09,12,000 SEH LINCOLN 09.02.2011 9,09,12,000 Vatika Ltd. 14.02.2011 7,50,00,000 UKPI LINCOLN 14.02.2011 7,50,00,000 Vatika Ltd. 21.02.2011 7,25,00,000 UKPI LINCOLN 21.02.2011 7,25,00,000 Vatika Ltd. 24.02.2011 7,50,00,000 SPAN INDIA LINCOLN 24.02.2011 10,50,00,000 Vatika Ltd. 24.02.2011 3,00,00,000 UKPI LINCOLN 08.03.2011 2,40,60,000 SOHAN SINGH LINCOLN 08.03.2011 9,66,00,000 Vatika Ltd. 28.04.2011 25,00,000 SOHAN SINGH LINCOLN 01.04.2011 15,00,000 Vatika Ltd. 28.04.2011 5,00,000 SOHAN SINGH LINCOLN 31.05.2011 1,00,00,000 UKPI LINCOLN 31.05.2011 1,10,00,000 Vatika Ltd. 02.06.2011 1,50,00,000 SOHAN SINGH LINCOLN 02.06.2011 1,50,00,000 Vatika Ltd. 06.06.2011 1,00,00,000 SPAN INDIA LINCOLN 06.06.2011 1,00,00,000 13 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 08.06.2011 1,00,00,000 SPAN INDIA LINCOLN 08.06.2011 1,00,00,000 Vatika Ltd.
10.06.2011 1,00,00,000 SPAN INDIA LINCOLN 10.06.2011 1,00,00,000
14.06.2011 1,00,00,000 SPAN INDIA LINCOLN 14.06.2011 1,00,00,000
15.06.2011 1,00,00,000 SPAN INDIA LINCOLN 15.06.2011 1,00,00,000
Total 62,72,96,000 69,93,36,000
15. From the above fund flow, revenue inferred that the funds deficit Vatika Ltd. provided requisite funds to M/s Lincoln Developers Pvt. Ltd. to 'purchase plots' form the Consortium. It was held that this establishes that this transaction is a colourable device adopted by the parties to camouflage the nature of the transaction as well as suppress the actual amounts paid/ received by citing market situation for reduced price.
16. To conclude, the revenue held that the interest expenditure incurred by the assessee in NH8 deal of Rs.3.42 Cr.
be treated as unaccounted expenditure. The calculation given by the revenue is as under:
Principal amounts lent to Vatika Ltd. and computation of unaccounted interest paid:
S.No. Lender Date of loan Total Total amount Amount of unaccounted amount lent payable as on interest expenditure by to Vatika 31.3.2006 @ Vatika group and Ltd. on 24% p.a. unaccounted interest 13.09.2005 interest income of the lender for @24% p.a compounded F.Y. 2005-06 relevant to interest quarterly A. Y. 2006-07
1. U.K. Paints 13.09.2005 co5m5p0o0u 0n0d 00e /d- 62529417/- 7529417/-
(India) Pvt. Ltd.
2. SEH Realtors Pvt. 13.09.2005 100000000/- 113689850/- 13689850/-
Ltd.
3. Span India Pvt. 13.09.2005 55000000/- 62529417/- 7529417/-
Ltd.
4. Sohan Singh 13.09.2005 20000000/- 22737970/- 2737970/-
Dhingra (HUF)
5. Heminder Kumari 13.09.2005 20000000/- 22737970/- 2737970/-
Total 250000000/ 34224625/-
-
14 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Jaipur Deal
17. During the F.Y. 2005-06 the four lenders group viz. Shahi Exports group, Span India group, Dhingra group, Harman Singh Dhingra group together entered into another finance deal with Vatika Ltd.
18. In this deal Rs.50 crores was advanced by the lender parties to Vatika Landbase Pvt. Ltd. in the F.Y. 2005-06 in the following manner:
S. No. Name off the Company/Group Amount
1 U.K. Paints Pvt. Ltd. (Dhingra group) 13,00,00,000/ -
2 SEH Realtors Pvt. Ltd. (Shahi Exports group) 20,00,00,000/ -
3 Advantage Fashions Pvt. Ltd. (Span India group) 15,00,00,000/ -
4 Uttam Enterprises Pvt. Ltd. (Harman Singh Dhingra 2,00,00,000/ -
TOTAL 50,00,00,000
19. The above parties executed 'agreements for sale' in which specific right was granted to the 'buyer(s)' that the 'plots' under sale may be re-sold by them to the 'seller' at a predetermined sales consideration. The agreements have been entered on 19.05.2005, 22.06.2005 and 11.06.2005
20. The above 'buyers paid following further amounts to Vatika Ltd. under the deal which is as under:
SI No Name of the Company/Group Date of Amount Payment 1 U.K. Paints Pvt. Ltd. (Dhingra group) 25.04.2006 58,86,100/- 2 SEH Realtors Pvt. Ltd. (Shahi Exports group) 25.04.2006 85,82,900/- 3 Advantage Fashions Pvt. Ltd. (Span India group) 25.04.2006 37,72,300/- 4 Uttam Enterprises Pvt. Ltd. (Harman Singh 25.04.2006 4,35,700/-
Dhingra TOTAL 1,86,77,000/-
21. Salient features of the agreement is as under:
15 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 'Buyer' 'Sale Sale price per Date of re-sale to Re-sale price consideration' sq. yards Vatika group agreed per sq. (Amount ) (Amount) yards( ) SEH Realtors Pvt. 50,00,00,000/- 3400/- Within two years period 5100/-per sq. yards Ltd. (out of this 1.01 from the date of this crores has agreement/MoU beenpaid by the buyer) U.K. Paints India 15,00,00,000/ - 3400/- Within two years period 5100/-per sq. yards Pvt. Ltd. from the date of this agreement/ MoU Adbantage 13,00,00,000/- 3400/- Within two years period 5100/-per sq. yards Fashions Pvt. Ltd. from the date of this agreement/ MoU • Sanskar Buildtech Pvt. Ltd. , Nakshatra Buildcon Pvt. Ltd.
are the confirming parties • Land under the so-called 'sale' was not identified and measured. (Refer paras under the pareamble part "Whereas" and clause d & e of the agreement).
• Residential Plots agreed to be sold and purchased have not been developed as on date and even the requisite permission to develop and sell the plots have not been taken by the seller or the confirming parties. • The price for the land was taken to be @ 3400 per sq. yards.
• The above rate of 3400 per sq. yard is stated to be escalation free and inclusive of external development charges, internal development charges and. the license fees.
• An option as given to the 'buyer' (lender group concern) to re-sell the 'plots/land to the 'seller' (Vatika group concern) at a predetermined price.
• The lender could sue the borrower for specific performance for its obligation to buy-back.
• The date for 're-sell' was kept within two years of 'sale' 16 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 • The 're-purchase' price was predetermined @ 5100/- per sq. yards.
• Corporate guarantees in the form of Collateral securities were given by the concerns of Vatika group to the concerns of Lender groups especially for the obligation of "buy- back".
• In the event the price of residential plots increases beyond 150% of the rate of Rs. 3400/- per sq. Yards. i.e. Rs. 5100/-parties hereby agree and confirm that purchase shall have all the rights to sell alienate and dispose off the residential plots as per its own free will.
22. The revenue held that the conditions of assured returns secured with personal guarantee, corporate guarantees, PDCs signify that the agreements are meant for earning of interest only. Further, the sale price of Rs.3400 and resale price Rs.5100/- within a two years period is only a device to camouflage of real nature of the loan transaction.
23. The revenue extracted list of ICDs given by U.K. Paints India Pvt. Ltd. which are as under:
S. Name of Amount (Rs.) Period Agmt. Remarks No. party copy Available 1 Mera Baba 2.33 Cr. 27.04.2009 26.10.2009 Yes No Renewal as Realty advised by Naveen Sir (otherwise Mr. Parmeshwaran to follow up) 2 Aerotel 15 Lacs 01.01.2010 30.06.2010 Yes Mr. K. S. Nair to Communication provide the letter from the party 17 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 3 ORRIS 20.33 Cr 01.12.2008 30.11.2009 Yes No renewal as Infrastructure advised by 20.33 Cr. Naveen Sir-----
4 Vatika Ltd. Amendatory Yes Decision for
(Residential Loan cum extn. To be
Plot (NH-8) Purachase taken
9375 sq. Agreement valid
Yards) upto 30th June
2010
5 Gurpal singh 1,00,00,000.00 01.07.2010 30.09.2010 Yes Sent for
signature
through Mr. K.
S. Nair
6 Vatika Ltd. 43,00,00,000.00 23.06.2010 Yes Mr.
(Jaipur) Parmeshwaran
handling (Agmt.
draft sent to
party by Mr. B.
Parmeshwaran)
7 ORRIS 4,00,00,000.00 29.05.2010 31.07.2010 yes Due for renewal
Infrastructure
24. The revenue held that from the above document it can be seen that amount of Rs.43 Crores due from Vatika Ltd. as on 23.06.2010 has been categorized as ICD by the Dhingra group.
It was further held that this Rs.43 Crores due from Vatika is in respect to Jaipur deal which clearly shows that this is accrued amount from Rs.13 Crores advanced by U.K. Paints India Pvt. Ltd. to Vatika Landbase Pvt. Ltd. The revenue held that this corroborates the finding that the amount advanced by Dhingra group to Vatika group were loan and that the plots agreed to be sold under the ostensible agreement for sale, were mere security for this loan. The revenue also relied on the statement of Sh. Navin Choudhary, CFO of the Dhingra Group that the amount advanced to M/s Vatika Ltd. is a loan.
25. Based on the seized material, the loan agreements, Jaipur plots buy-back deal, the revenue held that there has been 18 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 suppression of amounts and camouflaging of the transactions. For the sake of ready reference, the relevant part of the Assessment Order is reproduced as under:
"Anothe r document has been se ize d from V atika Triangle during the course of se arch on 16.01.2013. This document page No. 79 to Annexure A12 (seized from Vatika Triangle , Sushant Lok-I , M.G. Road, Gurgao n) Copy of this document is place d as page 457 Annexure-II Part C. F rom this document it can be seen that this is a note date d 28.10.2010 prepared by Sh. Manmohan Mehra/ Sh. Anupam N ag alia for the pe rusal o f Sh. Gautam Bhalla. The heading of this document ' Jaipur plo ts buy back de al' clearly shows that the note is re garding the buyback de al for J aipur plots between the lende r groups concerns and Vatika group. Further as per the note the agreement for sale ente red by the lender gro ups with ESPO Develo pers Pvt. Ltd. has been ente red into to perform the obligation of Vatika Ltd. to ' buy back' the plo ts at Vatika info te ch City J aipur. Further, the agree ments and the letter are ye t to be signe d by Sh. Gautam Bhalla as on date o f the note. I t further states that the agreement and le tter have finalize d afte r se veral discussio ns with 'them' (apparently re ferring to the persons from lenders 'side).
From this note it is clear that:
Suppression of amounts:
The agreements for the buyback are pending to be signe d by the parties as on date i.e . 28.10.2010. This sho ws the de al was no t ye t closed as o n 28.10.2010. There fore the email date d 24.05.2010 containing the excel sheet showing the liability of V atika gro up to pay more than 176 cro res to the lende r gro ups, re flects the subsisting unde rstanding be tween the parties which has been suppressed in the agreements made by them.19 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Camouflaging of transaction The agreements and letter have been finalize d after se veral discussions with the lender groups. This co rro borates the earlier email date d 13.10.2010 o f S h. Bala Parmeshwaran to Sh. Manmohan Mehra. I n this e mail as discussio n at pages 48&49 ante Sh. Bala Parmeshwaran had suggeste d that the agreements between the lende r and ES PO should be drafted in a manner sho wing the slow down and the market situation fo r reduced prices.
These documentary and oral cle arly establish that the le nders alongwith Vatika, the bo rrowe r have deliberate ly shown less conside ratio n as payable and the agreements have been designed by them in a manner which co nceals the true nature of the transaction.
Regarding the above Jaipur De al statement of Sh. Harish Ahuja (Shahi Exports group) was also re corded on o ath o n 16.01.2013. relevant e xcerpt o f his statement is repro duce d below: -
"Q. 2 Did yo u (or your gro up) ente r into any deal with M/s Vatika Group regarding land at Vatika Infotech City J aipur? If yes, please produce a copy of all such agreements/adde ndums to these agreements and also any communicatio ns e xchanged between these groups regarding these transactions.
Ans. Yes, we have entered in agreements for land at M/s Vatika Infotech City, J aipur. We will pro vide the copies of the same in two days. S imilar agre ements were ente red with M/s Span group and M/s Dhingra gro up with Vatika group.
Q.3 Ple ase describe the J aipur de al e nte red into between S hahi Group & Vatika group.20 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Ans. T he agreeme nt to purchase land was ente red into May 2005, valuing Rs. 20 Crores. On April 2006 we paid Rs.85 lacs (approx.)(fo r PLC charges. On April 2010, we sold the same land to M/s Vatika on May 2010 for a total co nside ration of Rs.29,99,82,000/- (Rs. Twenty nine Crores, ninety nine lacs & Eighty two thousand).
Q.7 Ple ase explain (point-wise) what are the similarities between agreements ente red into by M/s S hahi Expo rts group, Span India group and Dhingra group as mentio ned by yo u in response to question no . 2 Ans. The agreement entered with Vatika for similar land, similar location and sam e kind sho uld be similar purchase price and sale price .
Q. 33 As pe r the 1st agreement to sell be tween M/s S E H Realto rs Pvt. Ltd. and V atika Realto rs Pvt. Ltd. and V atika Landbase Pvt. Ltd. entere d in 2005 regarding sale and buy I back o f land at Vatika Infotech city Jaipur, the seller was unde r an obligation to buy back land from the buyer. F urther, agree ment in 2007 and 2009 extende d the date o f repurchase o f land by the selle r. Explain why "Buy- back"
was such an esse ntial aspect/ part of this Jaipur deal betwee n the parties.
Ans. The develo pe r ge nerally assure s a minimum return, when the y may not have many buye r of the ir project. S ince we were no t sure about the Jaipur market, we agree d to invest with the "Buy-back"
clause ."
From the above statement of Sh. Harish Ahuja it is cle ar that:
21 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 They enter into similar deals together with Span India group and Dhingra gro up.
That the deve lope r (Vatika Ltd.) assured a 'minimum return' which is tantamount to inte rest on the amounts advance d by them.
Further the re is other e vidence in the matte r, which establish beyond any doubt that the above deal was actually a loan deal which was camouflage d as sale-purchase of pro perty transaction by the parties concerne d:
A document extracted from Annexure A-66 (hard disc) seized from Vatika Triangle, Sushant Lok-I, M.G. Ro ad, Gurgaon during the course of se arch on 16.012013. N avigation path for extraction is H Drive:\Use r Le ft A DC & System Backup\le gal\Vive k Mishra\V ivek\I ndra Madam fo lde r\Shahi Group.xls.
It can be seen from the abo ve document that the 'Shahi Gro up' (Shahi Expo rts group, Span India group, Dhingra group and Harman Singh Dhingra group) have bee n referre d to as "Le nder\ Purchaser' which shows that the essential nature of the transactio n 'Jaipur' deal's loan transaction. F urther corroborating the fact is the co lumn of 'Rate o f inte re st (if refundable)' made above , which snow that 25% a interest is payable by V atika group to these groups on the advances made by them. This go es on the prove that the real unde rstanding be tween the parties is the giving and taking of loan and its repayment alo ng with inte rest @25%p.a. "Anothe r fact which is known from the abo ve document is that the original agreement signed between Vatika Landbase Ltd. and S E H Realto rs Pvt. Ltd. was for 50 cro res but it was then modified for 20 crores.22 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Then there is anothe r document which co rro borates the above evide nce and also establish that his deal was actually loan take n by Vatika group from the Consortium at a particular rate of inte rest. This document has been extracte d from Anne xure A- 56 ( hard disc) seized during the course o f se arch at Vatika Triangle , Sushant Lok-I, M G Road, Gurgaon on 16.01.2013. The navigation path for its extraction is Drive\Vatika Landbase\Audit 2007- 08\Scanne d ICDs Agreement 01.04.07 to 31.03.08xls.
From the he ading of the abo ve exce l sheet which reads "Summary o f inte r Corporate De posits for Jaipur Project" it is amply clear that the table on the abo ve document is regarding loan raised by Vatika Ltd. for the Jaipur Proj ect. When the table on this document is pe ruse d it is clear that this document is regarding the lo an taken by Vatika Ltd. totaling 50 cro re s from the lende r parties for its Jaipur Project during the F .Y. 200506@25% pa interest. He re it is noteworthy that:
All the details in columns "Name of the Lender" "Date of execution o f documents", "Amount", "De tails o f collateral security pro vided ( if any) ", "Date of expiry o f agreeme nts", "collateral security" match exactly with the terms of the J aipur deal as discusse d abo ve. This clearly shows that this document is abo ve the Jaipur deal be tween Vatika and the lender parties.
The heading o f this table mentioning the advance amounts totaling to 50 Cro res from the lenders is stated to be inte r Corporate De posit (which means loans raised by a company from anothe r company) .
The companie s of the Conso rtium are re ferred to as "Le nde r"
(Column 2 of the above table .23 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Rate o f interest has also been mentione d, which corroborates that the amounts advanced by these companies to Vatika Ltd. is loan at a particular rate o f interest.
Rate of interest has been mentioned at 25% p.a without the conditio n "if refundable' as mentione d in the document table discussed abo ve at page no 127.
Last but no t the le ast that the above transaction was camouflaged by using colo rable de vices is again pro ved from the fund flo w of ESPO Develo pers Pvt. Ltd. Paper wo rk was done by the parties. To show that due to 'cash crunch' or 'non- availability of funds' with Vatika Ltd. the transaction was do ne at a reduce price and that through another conce rn ESPO De velo pers Pvt. Ltd. Ho weve r careful perusal of the fund flow o f ESPO De velo pers Pvt. Ltd. sho ws that the funds for this 'buy back' were actually given by Vatika Ltd. only. The so calle d 'purchase' was sho wn thro ugh ESPO De velo pers Pvt. Ltd. just to laye r the transaction and be tter camouflage the transaction.
From the ledger it can be seen that an amount o f Rs.11,27,86,417/- was transferred by ESPO to M/s S E H Realtors Pvt. Ltd. (which is payment for ' repurchase' of Jaipur 'plots') on 19.05.2010. On the same day an amount of Rs.11,28,00,000/- was received in its boo ks from M/s Famous Dwellers Pvt. Ltd. Now perusal of bo oks of Famous Dwellers Pvt. ltd. reveals that this amount of Rs.11,28,00,000/- was receive d in its boo ks from M/s Vatika Ltd. on the same day. It can be seen that M/s Vatika Ltd. is the actual source of 'buyback' done through ES PO Deve lope rs Pvt. Ltd. This really corrobo rates the finding that the above paper wo rk is a mere sham and has been done to camouflage the transaction and suppress the real amounts invo lve d in the de al.24 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Following fund flo w shows the flow of funds to the le nders from the borro wer Vatika Ltd. through othe r concern of the Vatika group:
Date of Amount (Rs.) Receiving Paying Immediate Ultimate PAYING DATE AMOUNT PAYING Receipt Company Company Source Date Source COMPANY (RS.) COMPANY AMOUNT 19.05.2010 11,27,86,417 SEH ESPO 19.05.2010 11,28,00,000 FAMOUS 19.05.2010 11,28,00,000 VATIKA DWELLERS LTD.
11.06.2010 8,31,53,221 ADVANTAGE VINCENT 11.06.2010 8,32,00,000 VATIKA LTD.
17.06.2010 6,42,81,361 SEH ESPO 17.06.2010 6,40,00,000 ASPIRE 17.06.2010 6,40,00,000 VATIKA LTD.
23.06.2010 7,34,77,554 UKPI ESPO 23.06.2010 7,35,00,000 ASPIRE 23.06.2010 7,35,00,000 VATIKA LTD.
24.06.2010 1,10,50,101 UTTAM ESPO 23.06.2010 1,10,00,000 ASPIRE 23.06.2010 1,10,00,000 VATIKA LTD.
10.07.2010 9,13,54,635 ADVANTAGE ESPO 08.07.2010 9,15,00,000 ASPIRE 8.07.2010 3,15,00,000 VATIKA LTD.
19.07.2010 12,16,85,729 SEH ESPO 17.07.2010 12,20,00,000 ASPIRE 08.07.2010 6,00,00,000 VATIKA LTD.
23.07.2010 1,21,39,974 UTTAM ESPO 23.07.2010 9,00,00,000 ASPIRE 16.07.2010 12.20,00,000 VATIKA LTD.
23.07.2010 8,07,24,655 UKPI ESPO 23.07.2010 9,00,00,000 VATIKA LTD.
08.09.2010 12,28,493 SEH ESPO 08.09.2010 9,97,00,000 ASPIRE 08.09.2010 5,05,04,144 ADVANTAGE ESPO 07.09.2010 9,97,00,000 VATIKA LTD.
08.09.2010 4,12,29,791 UKPI ESPO 08.09.2010 66,95,925 UTTAM ESPO TOTAL 75,03,12,000 66,45,00,000 74,77,00,000 NOTE:
SEH -SEH Re altors Pvt. Ltd.
ADVANTAGE - Advantage F ashions Pvt. Ltd.
UKPI- U.K . Paints India Pvt. Ltd.
UTTAM-Uttam Enterprises Pvt. Ltd.
ESPO- ES PO De velopers Pvt. Ltd.
VINCENT-Vincent Builders and De velopers Pvt. Ltd. FAMOUS-Famous Dwelle rs Pvt. Ltd.
ASPIRE-Aspire Pro moters Pvt. Ltd.
VATIKA- Vatika Ltd.
It is abundantly clear from the abo ve fund flo w that out of Rs.75,03,12,000/ - paid by ES PO and Vince nt to the Conso rtium more than 99% of the fund was provide d/sourced from Vatika Ltd. only. I t is the refo re amply clear that the so called cash/fund de ficit Vatika Ltd only provide d requisite funds to M/s ES PO Develope rs Pvt. Ltd. and M/s Vincent Builders and Develo pers Pvt. Ltd. to purchase 25 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 the plo ts from the Conso rtium. I t is thus e stablished that this transactio ns is thus a colo urable device adopted by the parties to camouflage the nature of the transaction as we ll as suppress the actual amounts paid/ received by citing marke t situation for reduced price .
During the course of assessment proceedings, the agreements entere d into by the lende r groups with M/s Vatika Ltd were called for. The pe rusal o f the agreements shows that all the parties o f the lende r group - M/s SEH Realto rs Pvt. Ltd., M/s Advantage Fashio ns Pvt. Ltd., M/s UK Paints Pvt. Ltd. and M/s Uttam Enterprise s Pvt. ltd have entere d into identical agreements with Ms Vatika Ltd. It is pertinent to mention that ne ithe r any plo t buye rs agreement has been entere d into by M/s SEH Realtors Pvt. Ltd., M /s Advantage Fashio ns Pvt. Ltd., M/s UK Paints Pvt. Ltd., M/s Uttam Enterprises Pvt. ltd with M/s Vatika Ltd no r the possession of the pro perty has been hande d over before the plots were sold to M/s Vatika Group. Further, the perusal of financial statements of M/s SEH Realto rs Pvt. Ltd., M/s Advantage Fashions Pvt. Ltd., M/s UK Paints Pvt. Ltd. reveals that the advance has been shown as advance against purchase o f prope rty. This shows that no pro perty has been acquire d so the question o f capital gains on the sale o f property does not arise .
From the abo ve discussion, it is clear that the transactio n was actually a financing/loan arrangement which was camouflaged as sale/purchase transaction to pay tax at lowe r rates.
CONCLUSION:
From the documentary and o ral evidence discusse d above it is clearly established and co rrobo rated that:26 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Shahi Exports gro up, Dhingra group, Span India group and Harman Singh Dhingra Group advance d the following loan amounts to M/s Vatika Landbase Pvt. Ltd. (Vatika Ltd.) in the F .Y.2005-06.
S. No . N am e o f t he co m p a ny A m o un t ( Rs . )
1 U . K . Pain t s In d ia P vt . Lt d . 1 3, 0 0 ,0 0 ,0 0 0
2 S E H R e alt o r s P vt . Lt d . 2 0, 0 0 ,0 0 ,0 0 0
3 A d va n t ag e F a sh i on s P vt .L t d . 1 5, 0 0 ,0 0 ,0 0 0
4 U t t a m En t e r p r is e s P vt . Lt d . 2,0 0, 0 0 ,0 0 0
T O T AL 50 ,0 0, 00 ,0 0 0
The above ' buye rs paid fo llowing furthe r amounts to Vatika Ltd. unde r the deal:
S. No. Name of the company Date of Amount (Rs.) payment 1 U. K. Paints India Pvt. Ltd. 25.04.2006 58,86,100 2 S E H Realtors Pvt. Ltd. 25.04.2006 85,82,900 3 Advantage Fashions Pvt. Ltd. 25.04.2006 37,72,300 4 Uttam Enterprises Pvt. Ltd. 25.04.2006 4,35,700 TOTAL 1,86,77, 000/-
The abo ve transaction was howeve r camouflage d as sale-purchase of prope rty transaction wherein the le nders sho w the loans given by them as 'advance to purchase of property' and the borro wer shown the transactio ns as sale o f pro perty.
The abo ve said lo an along with inte rest was re paid in the F.Y .2010- 11 when the lenders and borrower declared to have receive d / paid the ' re-purchase' consideration. T he fo llo wing was the re payment (conside ring the installment payment plan) as evidence d above:
S. No . N am e o f t he co m p a ny A m o un t ( Rs . )
1 S E H R e alt o r s P vt . Lt d . 7 1, 0 8 ,3 2 ,5 3 0 . 5 9
2 A d va n t ag e F a sh i on s P vt . Lt d . 5 2, 3 9 ,6 0 ,9 7 5 . 4 6
3 U . K . Pain t s In d ia P vt . Lt d . 4 6, 2 9 ,9 3 ,1 3 9 . 7 1
4 U t t a m En t e r p r is e s P vt . Lt d . 6,9 6, 2 8 ,3 5 1 .4 8
T O T AL 1, 76 ,7 4, 14 ,9 9 7. 24
27 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Therefo re the follo wing inte rest inco me accrue d to the lende rs:
S. Lender Loan Advanced Total Amount Interest income No. (Rs.) received back (in (Rs.) Rs.) 1 SEH Realtors Pvt. Ltd. 20,85,82,900 71,08,32,530.59 50,22,49,630.59 2 Advantage Fashions Pvt. Ltd. 15,37,72,300 52,39,60,975.46 37,01,88,675.46 3 U. K. Paints India Pvt. Ltd. 13,58,86,100 46,29,93,139.71 32,71,07,039.71 4 Uttam Enterprises Pvt. Ltd. 2,04,35,700 6,96,28,351.48 4,91,92,651.48 51,86,77,000 1,76,74,14,997.25 124,87,37,997.25 Therefo re total inte rest payout fo r Vatika Ltd. is Rs.124,87,37,997.25 during above F. Ys.
The lende rs as we ll as borrowe r suppresse d the actually amount o f inte rest payable by the borrower and rece ivable by the lender upo n repayment. Fo llo wing are the amount o f suppression :
S. Name of the Total amount Total Sales Undisclosed NO. company receivable from consideration as expenditure by Vatika Vatika Group declared in the return of Group and undisclosed (A) income for the A.Y.2011- income of the Lender
12 (B) Company [C=A-B] 1 SEH Realtors Pvt. 71,08,32,530.59 29,99,82,000 41,08,50,530.59 Ltd.
2 Advantage 52,39,60,975.46 22,50,12,000 29,89,48,975.46 Fashions Pvt. Ltd.
3 U. K. Paints India 46,29,93,139.71 19,54,32,000 26,75,61,139.71 Pvt. Ltd.
4 Uttam Enterprises 6,96,28,351.48 2,98,86,000 3,97,42,351.00 Pvt. Ltd.
TOTAL 1,76,74,14,997.25 75,03,12,000 101,71,02,996.76 In vie w of the above, the to tal interest expenditure liability o f M/s Vatika Ltd. in Jaipur deal during the Financial 2005- 06 comes to Rs. 19.38 cro res.
It is there fore clear that the asse ssee has not fully disclosed its inte rest expenditure in its books of accounts. An amo unt of Rs.22.80 crore (Rs.3.42 cro re + Rs.19.38 cro re) has been incurred by the M/s Vatika Ltd. as interest e xpenditure in these two deals during the financial ye ar 2005-06 rele vant to A ssessment Year 2006- 07from o ut of books and thus remains unaccounted."
28 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
26. Thus holding the AO treated an amount of Rs.22.80 Cr. as "Unaccounted Interest Expenditure".
27. Aggrieved the assessee filed appeal before the ld. CIT(A).
28. The adjudication of the ld. CIT(A) on the issue of NH8 deal and Jaipur deal is as under:
NH8 Transactions
29. The ld. CIT(A) considered the material details of the search conducted u/s 132 and survey executed u/s 133A and the seized/impounded material pertaining to U.K. Paints/Dhingra group, Shahi Group, Span Group and Vatika group and others. The ld. CIT(A) referred to the seized material, loan agreements, the extension of loan agreements, agreements with the guarantors, loan-cum-purchase agreements and material pertaining to buy-back agreements.
30. Before the ld. CIT(A), the assessee mainly argued that the AO did not dispute the advances received and the same has been reflected as advances against sale. It was argued that the AO misconstrued the agreements as agreements of loan.
31. Having heard the arguments, the ld. CIT(A) narrowed down to the issue:
Whether, in totality, the agreements between the appellant and lenders constitute a loan agreement, which has been given the colour of a purchase and sale transaction or not? Whether the seized documents, being the agreements entered into by the lenders with Vatika Ltd. and Lincoln 29 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Developers can be said to be incriminating materials discovered during the search or not?
32. The ld. CIT(A) on facts, has not disputed that the loan agreement with the five lenders was entered in the months May/June 2005 for a total loan amount of Rs.25 Cr. The ld. CIT(A) compiled the key features of all the agreements in a chronological order.
"(i) It is entere d into between Vatika Ltd. as the "Bo rrower", the "Lender", and Mark Buildtech P. Ltd & Omkareshwar Properties P. Ltd as "Confirming Parties". The "Confirming Parties" (which are wholly owned by the Vatika Group) are owners of certain tracts of land near NH-8 at Gurgaon, and have give n the "Borrower" the rights to develo p, sell and market the reside ntial/commercial plots and flats on the said land in the name of "Vatika City".
(ii) The borro wer was in the proce ss of securing requisite sanctions fo r development of the land, which were expecte d to be receive d within 3 months.
(iii) Vatika Ltd. nee ds a loan to execute a project. Acco rdingly, the lende r and Vatika Ltd. have entered into a "loan agreement" for various sums fo r a period of o ne ye ar, with interest @100% p.a., as a mode o f short-te rm finance.
(iv) In the event that the Borro wer ( Vatika Ltd.) is no t able to obtain the requisite permissions by 14.02.2016, the loan would be repaid forthwith, along with inte rest @18% p.a. for the pe rio d 15.09.2005 to 14.02.2006.
(v) However, in case the said loan amount, along with inte rest @18% is no t paid back by 14.02.2006, it would be assumed that the 30 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 borro wer intends to avail of the loan for the full perio d of 5 months @100% interest.
(vi) The Borrower confirms that its Board of Directors has sanctione d this agreement.
(vii) To secure the re payment, the Borrower has handed over Post Date d Cheques (PDCs) to each lender towards repaym ent of principal and also PDCs towards inte rest computed @100%, with an assurance to ho nor the same .
(viii) To further secure the loan, the Borro wer has handed ove r a Promisso ry No te also . Moreo ver, vide a se parate "Guarantee agreement", ce rtain othe r pro pertie s belonging to Mark Buildtech P. Ltd. (the "confirming party") we re also set out as collateral security for ensuring perfo rmance by the Bo rrower.
(ix) A ny subsequent agree ment/unde rstanding on the variation/modification/ amendment to the loan agree ment shall be only by way o f a written document, which shall form part o f this Loan agreement.
4.3.2.12 Subsequently, on 31.03.2006, the Borro wer and the Lende r entere d into another agree ment in pursuance of the Loan agreement. The agreement was calle d a "Amendatory loan-cum- purchase agreement", which carried the following provisions:
(i) The requisite development pe rmissions having not been receive d o n time by the Borrower, the parties agreed to e xtend the date of re payment of lo an to 31.12.2006.
(ii) The rate of interest fo r the pe riod upto 31.12.2006 was revise d to 24% p.a. compounded quarterly, w.r.e .f. the date of original loan agree ment.31 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
(iii) The existing PDCs were re placed by fresh PDCs. The new inte rest PDCs dt.31.12.2006 for inte rest component was for a sum of inte rest @24% p.a.
(iv) At any time befo re 31.12.2006, the Lende r had an absolute , unqualified and unilate ral right to "opt fo r purchase " of residential plots in Vatika City, in lieu fo r repayment of the loan. In that e vent, the lender shall be allotted reside ntial plo ts in Vatika City.
(v) In case the Lende r "o pts fo r purchase", the same shall be exercised only in writing, and in that event, the "Amendatory loan- cum-purchase agreement" shall be deemed to be an agreement to sell and purchase of the plo ts and the loan amount and accrue d inte rest thereon shall be adjusted to wards the Sale co nside ration.
(vi) In case the Lender does not opt to exercise its optio n to repurchase, the amendato ry lo an-cum-purchase agre ement shall be extended to 30.06.2007, on the same conditions. In that case , the PDCs for principal and inte rest shall be replaced with the appropriate amounts and date s.
(vii) In case the lende r opts fo r purchase, then the to tal area to be allo tte d to each lende r was define d. No othe r payments towards Develo pment charges, lice nce fee e tc shall be payable. Howe ver, if the Lende r o pts fo r extra plo ts in preferential locatio ns, it has to pay prefe rential location charge s at the then applicable rates.
(viii) In the case o f allotment of plo ts, the Bo rrowe r shall, at the optio n of the Lender, purchase back the plots at the then pre vailing market rates.
4.3.2.13 Subsequently, vide a series of successive "Exte nsion agreement(s) to the Mandatory Loan-cum-Purchase agreement date d 31.3.2006", the tenure o f the Loan was repe ate dly extended o n the 32 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 same terms and conditio ns as the agreement date d 31.3.2006 and fresh PDCs fo r the principal and inte rest we re submitted by the Borrowe r in lieu of the existing PDCs.
4.3.2.14 The lende rs finally e xercised the ir option to purchase, and we re allo tte d the agreed plot area. For example UK Paints P. Ltd., one o f the lenders was allotte d an area o f 9375 sq yards vide lette r o f Vatika Ltd. dated 12.04.2010 (i.e., A .Y. 2011-12), and the individual plots were allotted vide allotment letters dated 27.08.2010.
4.3.2.15 Subsequently, the lende rs ente red into an Agreement to Sell in the AY 2011- 12 with another company of the Vatika Group, viz., Lincoln De velopers P. Ltd., fo r sale of the allotted plo ts at a registere d sale co nside ration of Rs. 16,000/- per square yard. The plots were ne ver registe red in the name of the lenders at any po int of time."
33. The ld. CIT(A) held that, " base d on the recitals that the original agreements of May/June 2005 were undisputedly pure lo an agre ements. I t was calle d a "Lo an Agreement". The parties are called Lenders and Borrowe rs. Of course , the nomenclature is not de terminative of the nature of an agreement. But the recital also show clearly that the amount was meant to be a lo an agreement only, initially on interest of 100% p.a., which was later revised by mutual agreement to 24% p.a. (compounde d quarterly) . There is no indicatio n therein of any purchase o f the land. Thus the agreement was a lo an transaction simpliciter."
34. The relevant portion of the order of the ld. CIT(A) is as under:
33 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 "4.3.2.17 The Loan agreement was subjected to an amendment o n 31.03.2006. The crucial issue that requires examination is whethe r, as a result of this amendment, the nature of the transactio n changed to a purchase agreement. The main clauses o f this agreement have been discussed above at para 4.3.2.10 abo ve. It can be seen at para number 1, at page 3 of this amendato ry agreement dt. 31.3.2006 itself that the original agreeme nt is amende d to exte nd the perio dicity of the loan to 31.12.2006. Even the rate of interest has been specifically revise d to 24% pa (compounded quarterly) . This clearly shows that the nature of the transaction continues to be a loan transaction. Of co urse , an additional amendatory clause has been inse rte d that the Lender has now been given a right to opt fo r purchase o f plots. But is no teworthy that the new right only pro vides an option to purchase at a future date, and by itself does not bring about a co nversio n from a loan agreement to a purchase agreement.
The Amendato ry agreement specifically states that as and when the Lende r opts fo r purchase , the same shall be separately communicate d in writing, and the sale consideratio n shall be adjusted accordingly with the principal and accrue d interest. In fact, the Amendatory agreement date d 31.03.2006 specifically states at para 4.2 that "if the lende r opts fo r purchase ", then the total area to be allotte d to the Lender would be 9375 sq yards, thus establishing beyond doubt that the lende r has not exercised the option to purchase . Moreover, the recitals at para 4.2 of the Amendatory agreement pro vide that in case the Lender does no t exercise the optio n to purchase , the lo an shall be exte nded fo r a furthe r pe rio d as specifie d in the e xtension agreeme nts. Thus the fact that the loan has bee n extende d repe ate dly, pro ves in each e xtension agreement, that the Lende r had not exe rcised its optio n to co nvert the loan transactio n to a purchase transactio n. Also, the subseque nt Exte nsio n agreem ents o nly change the date o f tenure of the loan and 34 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 the amount of the PDCs. All other conditio ns of the Amendatory agreement continue in the Extensio n agreements.
It is only in the A.Y. 2011-12 that the plots have been allo tte d, unequivocally sho wing that the nature of the agreement continue d as a loan transaction till the A.Y . 2010-11. It is only in the AY 2011- 12, upon the exercise of optio n to purchase by the lender and plot allo tment thereafter, that the agre ement has stoo d converted to a purchase agreement. It is pe rtinent to no te that the Amendato ry agreement does not pro vide that opting for purchase will have retrospective effect; rather, the principal and accrued inte rest @24% p.a. (compounded quarterly) o n the date o f e xercising of option will be adjusted towards the sale consideration as agreed. I am therefore of the firm vie w that the original lo an amounts continued as a lo an amount till the A.Y. 2010- 11, and interest @ 24% p.a.(compounde d quarte rly) accrue d in the hands of the lenders till (and including) the A.Y. 2010-11, as per terms o f agreement, the lo an amount plus accrue d inte rest thereon was to be adjusted towards consideratio n payable.
4.3.2.18 I , the refo re, agree with the conclusio ns of the A.O. that the transactio n was a loan simpliciter till the date o f allo tment of plots, when admittedly the appellant gave constructive delive ry o f the plots (upon the le nde r exercising its right to purchase), and that this conclusion could be drawn only upo n examination of the agreements unearthe d during the Search and S eizure actio n. I t is pertine nt to note that the appellant, vide its letter to the A .O. dated 24.03.2015 (at para 5 the rein), also admits that as a result of search conducted on the appellant on 16.01.2013, several agreements/dee ds in respect o f "sale and purchase" of land by UK Plants, Shahi group and Span group we re found and seize d from the appellant's premises. Accordingly, the additio n is base d on materials unearthed during the 35 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 search action o n basis o f which the assessment procee dings u/s 153A have been completed. Of co urse , the appe llant also submits that various extension agreements, guarantee agreements etc entered into by the appellant subse quent to the main loan agreement have been mentio ned in the assessment o rder, but no t confronted to it. To my mind, even if this claim were to be true , this is an irre levant conside ratio n. The seized lo an agreements constitute the primary evide nce on basis of which the additio ns have emanated. The other documents mentio ned by the A.O., are only supporting documents of the main evidence entere d into co nsequentially, and no conclusio n has been drawn by the A.O. sole ly on basis of these supporting documents, to the exclusio n of the seized initial lo an agreements. In any case , all these documents belo ng to the appe llant in the first place , it be ing one of the parties to the transaction represe nted in the agreement. T he appellant cannot claim that it was in the dark about these documents. F inally, e ach of these documents have bee n submitted by the appe llant itself during appe llate pro ceedings and it has been heard in detail. T here fore , this claim has to be rejecte d.
4.3.2.19 The A.O. has also considered the transaction with SEH Realto rs P. Ltd., o n the same footing as that o f the appellant with UK Paints P. Ltd. Span India P. Ltd. and SS Dhingra ( HUF). It is no ticed that the A.O. has noted in the assessment Orde r that four partie s viz., Sohan Singh Dhingra (HUF), UK Paints Pvt. Ltd., Heminder Kumari and SEH Realto rs P Ltd. have ente red into a transaction with Vatika Landbase Pvt. Ltd. through separate loan agreements. Even the dates of agre ements are differe nt. The A .O. has also mentio ned in the assessment Order that these four parties have entere d into separate , but identical agreements with Vatika. In fact, a reading o f the assessment Orders in the case of the appellant, Span I ndia, UK Paints P. Ltd, SEH Realtors P. Ltd. and Sohan Singh Dhingra (HUF) , to the extent that it re lates to the Gurgaon deal, shows that the A .O. 36 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 has emplo yed an identical description o f the agree ment betwee n each of these four parties with Vatika, and has arrive d at an identical conclusio n in each case. However, after go ing thro ugh the agreements entered into by SEH Realto rs P. Ltd. with Vatika, I find that the descriptio n of the agreement by the A .O. for the transaction with SEH Realtors P Ltd is completely different from the recitals of actual document e ntere d into by the appe llant with the other parties. This is a very crucial issue , as it is the content o f the agreement entere d into between two parties that would thro w light on the actual nature of the transactio n intende d be tween them. It would appe ar that the A.O. has relied upon the contract between UK Paints P. Ltd and Vatika, instead of the contract betwee n SEH Realtors P Ltd. and V atika. Be that is it may, it is then the duty o f the CIT(A) to make up fo r the deficiencie s in the assessment Order; in this case , to analyze the agreements between SEH Realto rs P Ltd. and Vatika, and to see whe ther the seized material/statements relied upo n by the A.O. provide a vie w in line with the co nclusions drawn by the A.O. 4.3.2.20 In the appellant's case , it is seen that it e ntere d into an agreement with S HE Realto rs P Ltd. o n 12.08.2005. This date is differe nt from the dates o f agreements entered into by the othe r parties with Vatika. The ke y features o f this agre ement are as follows:
(i) The first agreement betwee n the parties dated 12.08.2005 is calle d a "LOAN-CUM-PURCHASE AGREEMENT". It is entere d into between Vatika as the "Seller", SEH Realto rs P Ltd. as the "Purchaser" and Mark Buildtech P. Ltd & Onkare shwar Prope rties P. Ltd as "Confirming Parties". The "Confirming Parties" ( which are wholly owne d by the Vatika Group) are owners of ce rtain tracts of land ne ar NH- 8 at Gurgaon, and have give n the "se ller" e xclusive 37 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 rights to deve lop, sell and market the residential/co mmercial plo ts and flats o n the said land in the nam e of "Vatika City", Gurgaon.
(ii) Detailed de velopment plans fo r the project have been submitted for securing of sanctions, and that the requisite sanctio ns were e xpected to be rece ive d within 3- 4 months.
(iii) Director, Town and Country Planning has determined the entitlement of fully develo ped land. These plo ts would be the exclusive right and privilege of the purchase r.
(iv) The "Seller" and the "Co nfirming Parties" we re in need of finances o f Rs.10 crores till 11.01.2006 to implement the project, and SEH Realto rs P Ltd. has agree d to extend the amount with an optio n to purchase the said plots from the Se llers/Confirming Parties. The agre ement provides that in the event of any de lay in project implementatio n, SEH Realto rs P Ltd. has an unfettere d right to recall the am ount with inte rest @18% p.a. or to extend the perio dicity o f the loan beyond 11.01.2006.
(v) The conside ratio n paid by SEH Realtors P Ltd. excludes external de velopm ent charges, inte rnal deve lopment charges and the 6% deve lopment fee payable by the purchase r. The Seller undertakes that the co nstruction drawings and designs of the propose d plots must conform to the laws and bye-laws of HUDA, and that the project area is fre e of all kinds of encumbrances.
(vi) There are two components o f the agreement:
a. LOAN AGREEMENT Loan amount Rs. 10,00,00,000/-, bearing inte rest @18% p.a. fo r a pe rio d o f 5 months from 12.08.2005 to 11.01.2006. To secure the lo an, Vatika has provided post- date d cheques (PDCs) of Rs. 10,58,17,000/- (ne t o f TDS on 38 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 inte rest) . Demand Promissory Notes were also provide d to secure the payme nt o f the lo an with interest, and b. PURCHASE AGREEMENT : The sum of Rs. 10,00,00,000/- so give n by SEH Realto rs P. Ltd. has been paid as sale conside ratio n fo r the sale of commercial / housing / reside ntial/institutional/medical/ente rtainment plo ts being fully develo ped 4% of 193.6 sq. yds. o f commercial plots, 20% of 968 s.yds of ho using plo ts and 31% of 1500.40 sq. Yds. of reside ntial plo ts exclusively to the appellant. It was agreed that the "seller" (the appellant) will grant, se ll, transfer and convey these plots to the "purchase r" (SEH Realtors P Ltd.) no t late r that 11.08.2006. The Se ller explicitly agreed that any reductio n of the agreed area will constitute bre ach of contract.
However, in the event o f large r availability of de veloped land afte r comple tion o f deve lopment, SEH Realto rs P Ltd. unde rtook to pay additional sale co nsideration on a pro-rata basis.
c. The Seller ( appellant) undertook to purchase back the plo ts, at the option o f the purchase r, within a period o f two years from the date of the agreement, at the prevailing market rates. In case the Seller fails to discharge this obligation, the purchaser (SEH Realtors P. Ltd.) had the right to seek specific perfo rmance of the same.
d. In the event o f the Purchaser selling the plots to any third party, no transfer charges will be payable by SEH Realto rs P Ltd. / the third party to the appellant.
e. In consideratio n o f the payment made by S EH Realto rs P. Ltd., the seller and the Confirming partie s deposited all the deeds, documents, agre ements, conveyance, mutual records etc evide ncing the title of the land with the appellant.
39 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 f. In addition, the S eller o ffe red as co llateral security, a different tract of land admeasuring 11.43 acres having market value o f Rs. 10,00,00,000/ - to securitize the sum of Rs. 10,00,00,000/-. The collateral security so pro vided in listed at Schedule -1 to this agreement ( as seen in the Schedule- 1, actually two tracts admeasuring a total o f 12 acres, 2 kanal and 17 maria of land , equivalent to 12.35 acres, belonging to Mark Buildtech was place d as collate ral Security) .
g. In the e vent of de fault in handing o ver the plots by the agreed date of 12.01.2006, the seller agree d to pay back Rs. 10,00,00,000/- plus inte rest @ 24% p.a. be yond the date of 12.01.2006.
4.3.2.21 I t transpires that the Se lle r could no t fulfill its obligations to transfer the plots Amendato ry Loan cum purchase Agreement' date d 31.03.2006, exte nde d the period o f the "loan" by ano ther six months i.e. till 31.12.2006. The PDCs were re placed by anothe r set of PDCs, of Rs.10,00,00,000/- towards principal and Rs. 2,96,28,377/- to wards interest (net of TDS of Rs.85,72,212/-). A n amendatory Guarantee agreement was also entere d into on the same date , where by the 12.35 acres o f land belonging to M ark Buildtech P. Ltd. placed as collateral security, was replaced o f land belonging to Wonder De velo pers P. Ltd. (another Vatika Gro up company).
4.3.2.22 Subsequently, the parties, vide an "Extension A gree ment to the Amendatory Loan cum purchase Agreement' dated 31.03.2006, extended the period of the "loan" by ano the r six months i.e ., till 31.12.2006. The PDCs were re placed by anothe r set of PDCs, of Rs.10,00,00,000/- towards principal and Rs.2,96,28,377/- to wards inte rest (ne t of TDS of Rs.85,72,212/-). I t has been specifically 40 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 provide d fo r that all the o ther term and conditions of the o riginal agreement wo uld remain unchange d.
4.3.2.23 Thereafte r, the parties have entered into successive Exte nsio n Agreem ents fo r six months each, each such agreement being similar in content abo ut the terms and conditions as the first Exte nsio n agreem ent dated 31.3.2016. Only the figure in the PDC represe nting inte rest has changed. T he last such e xtension agreement is date d 31.12.2008.
4.3.2.24 On 03.02.2011, the appe llant has entere d into an "Agreement to Sell" with Linco ln Develope rs P. Ltd. to se ll these plots to tal admeasuring 17045 sq. yds. to the latter, for a total conside ratio n of Rs.27,27,20,000/- , i.e . @Rs. 16000 per sq. yd., free of all encumbrances, and including EDC/IDC/municipal and o ther charges.
4.3.2.25 It can be seen from the discussion above , that the key agreement betwee n the parties is the first agreement dt. 12.8.2005, calle d a "loan-cum-purchase " agree ment. All subse quent agreements are merely e xtension agreements on the same lines, with o ne differe nce, viz. the replacement of PDCs repre senting interest on the sum of Rs.10,00,00,000/- the manifest agreement is calle d an "loan- cum-purchase agreement", indicating it is both a loan and a purchase agreement . Howe ver, the nomenclature given by the parties is no t dete rminative of the nature of the agree ment, nor does it actually reso lve the issue , so we must proceed further. In the te xt of the agreement there are two agreements viz., (a) A lo an agreement and (b) A purchase agreement. The gist of these two separate agreements have been discussed abo ve. The consideratio n amount in questio n viz., Rs. 10 cro res is the subject matter o f both the agreements. The question the refore that arises is whe the r the 41 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 transactio n is primarily a loan agreement or an agreement of purchase of prope rty. Undoubtedly, the loan agreement comes earlier in the agreement than the purchase agreement...................
This clause fo rms part of the "loan agreement" portion of the document. It is abundantly clear that this clause se ts out that the primacy of the agreement lies in the "purchase agreem ent". It is only when the appellant wo uld choose no t to exe rcise optio n of purchase the prope rty that the agreement wo uld acquire the co lour o f a loan transactio n. No o ther clause to the contrary is provide d, either specifically or by implicatio n. The "purchase agreement" part o f (Part B) of the agreement reads as a pure purchase agree ment, and does not anywhe re refe r to the sum of Rs.10 crores as a lo an; rathe r, it is referred to the "sale conside ratio n". Undoubte dly, the consideratio n amount o f Rs. 10 crores has been re ferre d to as "loan" amount in the extension agreem ents (tho ugh no t in the main agree ment) but the extension agreements invariably mentio n that the extension is taking place on the same terms and conditio ns as instead of main agreement. There fore, I am of the view that the mere mention of the word "loan" to de scribe the sum of Rs. 10 crores in the extension agreements is in the conte xt of the "lo an" part of the first agreement, which as we have seen, is only of a subsidiary and fall- back nature . In co nclusion, I am of the view that the agreement per se has to be he ld as a purchase agreement as not as a lo an agreement. I t wo uld also be see n that the entries in the balance sheet re flect the outcome of these agreements. Se izure of these agreements therefore does not automatically make them incriminating documents to be use d against the appellant. What has to be seen is that whe ther any e vidence re late d to the transaction between appe llant and Vatika group has been se ize d, which would prove o r even indicate that the transaction was not re ally a purchase transactio n but one of loan, on which interest has been 42 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 receive d/rece ivable. The details of the assessment o rder have been discussed in the preceding paras of this o rde r. To my mind, none o f the othe r evidence referred to by the A.O., either individually or collectively, can be said to indicate that this specific transactio n between S EH Re alto rs P. Ltd. and Vatika was actually a lo an transactio n. The fact that ce rtain agreements be twee n Vatika and other parties have been found in a folder called "ICD exceptions" in the compute r of Vatika/ U.K . Paints canno t be held against the appe llant. Even otherwise, placing an agreement in a folde r which is named in a particular way, does no t de tract from the true nature o f the transactio n as evidenced from the language o f the agreement. On the co ntrary, the A.O. has refe rred to an inte r-office memo dated 20.04.2011 issued by S h. Manmohan Mehra, V .P. ( Co rporate A ffairs) of Vatika gro up where it is clearly mentione d that the Vatika group is planning to repurchase the plo ts sold to the Shahi group (i.e. SEH Realto rs P Ltd.) . I t also mentio ns therein that the purchase price by Linco ln Develo pers is Rs. 16,000/- per square yard and would be so ld to Vatika Ltd. at the price o f Rs. 22,000/- per square yard. There is yet ano ther se ized document extracte d from the hard disc at Annexure A-75 from Vatika premises which particularly re lates to SEH Realto rs P. Ltd. Even in this inter-o ffice memo seized during search, after the subject matte r of the memo is a diffe rent transactio n at Sector-86, NH- 8, it is abundantly clear that "Old NH- 8" (i.e . the subj ect matte r of the present discussion) is a "re- purchase ". The inter-office memo also refe rs to issue of allo tment lette rs in respect of these plo ts re lating o f "Old NH- 8" transaction, which constitutes inde pende nt conte mporaneous evidence of internal discussions within the parties to the agreement, and which actually suppo rt the view that the transactio n was one o f purchase and not a loan transaction. I am the refo re of the vie w, that the conclusion drawn by the A.O. on the appellant's transaction with SEH Realto rs 43 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 P. Ltd. is errone ous. I there fore direct the A.O.to exclude the transactio n with S EH Realto rs P. Ltd., while computing unaccounted expenditure in the appellant's hands.
4.3.2.27 A connected question is whe the r as a conseque nce of the agreements, (o the r than with SEH Realto rs Pvt. Ltd.) interest income should be held to have accrued in the hands of the appe llant, ye ar afte r year, as has been done by the A.O. The payme nt, nor debite d any inte rest expe nditure in each year, there is no case to make additions eve ry year on account o f deemed inte rest paid. I have evaluated the appellant's submission in the light of the se ize d material. The incriminating materials relie d upo n by the A.O. are the loan agreements and the e xte nsio n agreements themselves, and there fore these do cuments have to be appreciated in their totality. I t is seen from the agreements the mselves no inte re st was actually paid till the allotment of plots. With each extensio n, the appellant provide d revised PDCs in advance , for an increased interest amount (which, howe ver, were no t encashe d). Even the le dger acco unts of the le nders in the books of the appellant sho w that the inte rest amount is debited upon issue of the PDCs , but upon e xtension o f the loan and non encashment, the entry has been re versed. The point here is that the act of making entrie s of inte rest also is corrobo rative evide nce o f the nature o f the transaction as was unde rstood be tween the parties in re spect o f the so-calle d NH8 Gurgao n transaction. Clearly, as per the extension agreements, no actual payment of inte rest took place of the vario us years. Yet the plots were allocated by the appe llant to the lenders, without any other agreement overriding the terms of interest o f the extensio n agre ements. I t can only be conclude d that the terms o f the e xtension agreement have been adhere d to before the plots were allocated. I n other words, accrue d interest as per the agreement would have been paid befo re the plots we re allotted. This interest payment is not reflecte d on the 44 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 books of the appe llant. The only conclusion that can be drawn is that the appe llant has paid the entire accrue d inte rest till the date of allo tment of plots to the lende r, as agreed, but outside its books in cash. This constitutes unaccounted expenditure to be assessed u/s 69C of the Income Tax Act, 1961. In fact, there is no contemporaneous documentation found during search or adduced late r by the appellant befo re the se arch te am or the A.O. to show that the e xhaustive te rms of the earlier loan agreements and the repeated e xte nsio ns and PDCs we re explicitly o verridden so as to free the appellant from its contractual o bligatio ns to pay interest to the lende rs. The plots have been transferred in consequence o f the agreement betwe en the parties, and in the absence of any contemporaneous evide nce to the co ntrary, it must be presumed that the plo ts we re transferred as per the terms o f agree ment. Howeve r, this inte rest cannot be assesse d in the appe llant hands ove r the entire period AY 2006- 07 to AY 2011- 12, since the agreements themselves show that the interest was not actually paid in each year paid, but accumulated. The entire accrued interest upto 27.08.2010 shall be compute d by the A.O. @ 24% p.a., compounded quarte rly (as per te rms of agreement) fo r the period starting from the date of receiving the loan till 27.08.2010 (i.e . the date of allotment of plots) , shall be assessed in the assessment year 2011- 12 o nly. To that extent, the taxable amount shifts from the A .Y. 2006- 07, 2007- 08, 2009- 10 and 2010-11 to the AY 2011- 12.
4.3.2.28 There is yet another way of looking at this transaction. Even assuming that the appellant has not actually paid this accrue d inte rest as it claims, it wo uld be seen that the agre ements pro vided that the loan plus accrue d interest would be utilized as the sale conside ratio n. On the othe r hand, when the actual sale/transfe r was reflected in the books of the appellant in the A.Y. 2011- 12 (the allo tment letters were issued in August 2010), the re corded sale was 45 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 for a much smaller consideration viz., the original loan amount. Thus, for e xample, in the case of loan amount o f Rs.5.50 crores taken from UK Paints P. Ltd., the accrued inte rest amount alone on 30.06.2009 was Rs.7,80,94,128/ - (as per the loan extensio n agreement dated 31.12.2008) , whereas the plots were transfe rred to UK Paints P. Ltd. for a principal sum of Rs. 5.50 cro res only. After the disco very of the lo an agree ments (whose authenticity the appe llant does no t deny) during the search, the appellant has not been able to explain with any conviction as to what compulsions resulted in the re corded sale co nsideratio n being so much less that the agree d sale consideration ( principal plus accrued inte rest thereon) . It is notewo rthy that in the course of the e arlie r assessment proce edings u/s 143(3) for A.Y . 2006- 07, the appe llant had, while explaining its practice of issuing allo tment lette rs, submitted that "the company used to receive the sale conside ration in installments, in part payment. Unless and until the complete sale conside ratio n, alo ng with the other expenses are not received, by the company, the sale deed in respect o f the said land is not execute d in favo ur o f the inte nding receiver. Sim ilarly, the possession of the said land is being give n to the intending purchase r only after the rece ipt of full sale consideration and incide ntal expenses". T hus it the e vent that the appellant has no t actually paid the interest due, it has to be held that plots have been allotte d in lieu of the original lo an amount plus accrued inte rest thereo n; in other words, the appellant has unde r-repo rte d the sale conside ration (by an amount equivalent to the accrued intere st discussed at para 4.3.2.27 above ) that accrued to it as a result o f these agreements. This a real income, to be taxe d unde r the specific pro visions of Se ction 5 of the Income tax Act, 1961.
4.3.2.29 As discussed in para 4.3.2.25 above, the conclusion that is drawn is that the accrued inte re st has been paid in A.Y .2011- 12.
46 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Accordingly, the additio n would have to be delete d fo r A.Y .2006- 07 (and the assesse d income would be correspondingly enhance d fo r A.Y. 2011- 12. This enhancement matte r is dealt with separately in my appe llate order fo r A.Y . 2011- 12) . The A .O. is dire cted accordingly."
35. The ld. CIT(A) held that, The recitals of the original loan agreement were important in determining the nature of the transactions and since the agreement mentions the parties as lenders and borrowers, the interest needs to be paid.
There was no indication of real purchase of land except on agreement.
The continuance of agreements and the PDCs prove that these are loan transaction but not sale & purchase transaction.
The option to purchase at a future date by itself does not convert the loan agreement into a purchase agreement. The frequent extension of the agreements gives a credence to the fact that these are loan agreement.
The plots have been allotted in A.Y. 2011-12 and hence the unaccounted interest paid has also to be taxed in the A.Y. 2011-12.
The loan transactions with SEH Realtors Pvt. Ltd. and the clauses thereof are different from the other agreements and hence the transactions with SEH Realtors Pvt. Ltd. can be treated as loan-cum-purchase agreement and hence no unaccounted interest can be charged on the loans received from SEH Realtors Pvt. Ltd.
47 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 At the same time, the ld. CIT(A) has also held that there is no contemporaneous documentation found during search or adduced later by the appellant before the search team or the A.O. to show that the exhaustive terms of the earlier loan agreements and the repeated extensions and PDCs were explicitly overridden so as to free the appellant from its contractual obligations to pay interest to the lenders. The plots have been transferred in consequence of the agreement between the parties, and in the absence of any contemporaneous evidence to the contrary, it must be presumed that the plots were transferred as per the terms of agreement. This is a contradiction to what the ld. CIT(A) has been canvassing all through.
36. Holding thus, the ld. CIT(A) confirmed the order of the AO in determining the interest on the loans received by the assessee except from SHE Realtors Pvt. Ltd. pertaining to NH8 project.
Jaipur Project
37. The total loan was Rs.50 Cr. from four parties including SEH Realtors Pvt. Ltd. The ld. CIT(A) deleted the "unaccounted interest payment" brought to tax by the Assessing Officer. The reasons given by the ld. CIT(A) while deleting the addition are as under:
The parties executed documents of agreement to sale in respect of certain properties owned by Vatika at Jaipur. As per these agreements, a specific right was granted to 48 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 the buyers that the plots, which were subject matter of the sale agreement, may be sold back by them to Vatika at a pre-determined sale consideration.
Additional payments of Rs.1,87,77,000/- was made by these parties for preferential plots allotted, as per existing agreement between the parties proves that the transactions were for purchase of plots but not a financial transactions in the nature of loan.
The agreements for sale have been entered by these parties with Vatika the "seller", on various dates in the month of May and June, 2005. Sanskar Buildtech P. Ltd. and Nakshatra Buildcon P. Ltd., who are the owners of the property, were the "confirming parties" to these agreements.
The parties made full and complete payments of the cost of the plots including preferential location charges. The assessee has the exclusive rights of development of these properties.
Corporate guarantee agreements have also been entered into between parties. The Seller offered collateral security of immovable property which is distinct from the property which was the subject matter of the agreement. Construing the intention of the parties from the contents of a contractual document between the, the entirety of the contract must be construed and an effort must be made to harmonize the individual parts into the whole. A harmonious reading of the agreements reveal that the intention was to purchase the plots but not loans as same 49 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 from the vary first agreement and the accounting treatment also proves the same.
None of the evidences referred to by the A.O. either individually or collectively, can be said to indicate that the specific transaction between the buyer and the assessee was actually a loan transaction.
38. Aggrieved with the deletion made by the purported unaccounted interest payment in the case of Jaipur Project, the revenue filed appeal before us. Similarly, in the case of NH8 Project, the revenue filed appeal against the deletion of the unaccounted interest payment in the case of SEH Realtors Pvt. Ltd. and the lender groups namely, U. K. Paints Pvt. Ltd., Span India Pvt. Ltd, S.S. Dhingra (HUF) and Smt. Heminder Kumari and the assessee filed appeal against the confirmation of unaccounted interest payment.
39. The arguments in writing of the ld. DR is as under:
" S ub : W r itt e n s u b m i s s io n o n m e ri t s i n th e ab ov e c a s e - r eg .
I. A dd it i on on u n a cco u nt ed i nt er e st on W H S D e a l :-
F act s :-
1. D u rin g t h e c ou r s e o f s ea r ch ac t i on u / s 1 3 2 an d su rv e y ac t ion 1 3 3A on U K P ain t s/ D h in g ra G r ou p , S h ah i G r ou p , S p an G r ou p a n d V at i k a G r ou p an d ot h e rs on 1 6 .0 1 .2 0 1 3 . V a ri ou s d o cu m en t s p e r t ai nin g to m on ey ad v an c e d b y U .K . Co n s o rt i u m o f l en d e r viz . U K P ain t s/ D h in g ra G r ou p , S h ah i Gr ou p , S p an G r ou p , H a rm an S i n g h D h in g ra G r ou p t og et h e r wi t h S m t .
Ha r m in d e r K u m a ri e n t e r ed in t o a fin an ci al d e al wi t h V at i k a Lt d .
50 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
2. Bri e f d e sc r ip t i on o f s eiz ed d o cu m e n t s r eli e d b y t h e A s s e ss i n g O ffi c e r wh il e m a k in g ad d it i on .
i. In it ia l s e p a rat e l o a n ag r e e m en t en t e r e d b y v a ri ou s m em b e r s o f t h e c on s o rt iu m wit h V at ik a L t d . in 2 0 0 5 . O n e o f su ch a gr e e m e n t is d et ail ed a s u n d e r: -
Lender Borrower Date of Pages Annexure Seized/impounded execution No. No. from premises U.K. Paints Vatika 13.09.2005 (1) 4 8 (1) A43 (1) Vatika Triangle India Pvt. Landbase to 142 Ltd. Pvt. Ltd. (2) A4 (2) 19, DDA (2) 11 Commercial Complex, to 5 Zamrudpur, Kailash Colony, New Delhi on 16.09.2011 ii. Gu a r an t e e A g r e em e n t :
L en d e r an d B o r r ow e r g r ou p c on c ern s h av e sim u lt an e ou sl y e n t e r ed w it h a g u ar an t e e a g r e e m e n t t o s e cu r e t h e rig h t o f l en d e r of t h e su ch g u a r an t e e ag r e e m en t i s d et ail ed a s u n d e r:
Lender Guarantor Date of the Page Annexure Seized from
agreement No. No.
U.K. Mark 13.09.2005 141 to A43 Vatika Triangle
Paints Buildtech Pvt. 134 Sushant Lok-1,
India Pvt. Ltd. M.G. Road,
Ltd. Gurgaon
iii. P er s on al Gu a ran t e e ag r e e m en t : -
L en d e r an d S h ri A n il Bh all a ( p ro m ot e r of B o rr o w e r gr ou p ) en t e r ed
sim u lt an e ou sl y in a p e r so n al g u a r an t e e ag r e em e n t t o s e c u r e t h e r ig h t of t h e l en d e r an d ob l ig at i on o f t h e b o r r ow e r . On e of su ch ag r e e m en t i s d et ail ed a s u n d e r: - 3 Le nd e r D ate o f Pa g e N o. A nn ex u re No . Se iz ed fr om th e a gr e em e nt U .K . 1 3 . 0 9 .2 0 0 5 1 3 7 t o 1 3 3 A43 V at ik a T ri a n g le Pain t s S u sh an t L ok -1 , M . G. In d ia P vt . R o ad Lt d .51 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 iv. Th e le n d e r an d Bo r r o w e r t h en en t e r ed su b s eq u en tl y in t o an am en d at o ry l oan c u m p u r ch a s e ag r e e m en t d at ed 3 1 .0 3 .2 0 0 6 wh e r e t h e b o r r ow e r w a s g iv en op t i on t o p u rch a s e o f r es id en t i al p l o t . V a ri ou s su ch ag r e e m en t s a r e d et ail ed a s u n d e r: -
Lender Borrower Date of the Page Annexure Seized from
agreement No. No.
Sohan Vatika 31.03.2006 125 to 116 A41 Vatika Triangle
Singh Landbase Sushant Lok-1, M.G.
Dhingra Pvt. Ltd. Road, Gurgaon
(HUF)
U.K. Paints Vatika 31.03.2006 (1) 107 (1) A41 (1 & 2) Vatika
India Pvt. Landbase to 99 (2) A43 Triangle Sushant
Ltd. Pvt. Ltd. (2) 1 5 8 (3) Lok-1, M.G. Road,
A4
Buzz Estates to 149 Gurgaon
Pvt. Ltd. (3) 19 DDA
(3) 48
commercial
to 10
complex, zamrudpur,
Kailash Colony, New
Delhi
Heminder Vatika 31.03.2006 55 to 46 A41 Vatika Triangle
Kumari Landbase Sushant Lok-1, M.G.
Pvt. Ltd., Road, Gurgaon
Wonder
Developers
Pvt. Ltd.
Span India Vatika 31.03.2006 35 to 30 A41 Vatika Triangle
Pvt. Ltd. Landbase Sushant Lok-1, M.G.
Pvt. Ltd., Road, Gurgaon
Buzz Estates
Pvt. Ltd.
v. Th e l en d e r an d B o r r ow e r g r ou p c on c e rn en t e r ed int o ag ain g u ar an t e e
ag r e e m en t t o s e cu r e r ig h t o f l en d e r s an d ob li g at i on s o f t h e b o r r ow e r as su m e d in am en d a t o r y lo an cu m p u r c h as e ag r e e m en t . S u ch ag r e em en t s ar e d et ail ed a s u n d e r: -
Lender Borrower Date of the Page No. Annexure Seized from
agreement No.
Sohan Vatika 31.03.2006 136 to 132 A41 Vatika Triangle
Singh Landbase Pvt. Sushant Lok-1,
Dhingra Ltd. M.G. Road,
(HUF) Gurgaon
U.K. Paints Buzz 31.03.2006 (1) 92 (1) A41 Vatika Triangle
India Pvt. Estates Pvt. t o 8 8 (2) A43 Sushant Lok-1,
Ltd. Ltd. (2) 131 to M.G. Road,
125 Gurgaon
52 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Heminder Wonder 31.03.2006 45 to 41 A41 Vatika Triangle Kumari Developers Sushant Lok-1, Pvt. Ltd. M.G. Road, Gurgaon Span India Buzz 31.03.2006 28 to 23 A41 Vatika Triangle Pvt. Ltd. Estates Pvt. Sushant Lok-1, Ltd. M.G. Road, Gurgaon vi. E xt en si on A g r e e m e n t t o a m en d at o ry l oan c u m p u rch a s e ag r e e m en t by wh i ch the d at e of l o an an d in t e r e st p a ya b l e is ex t en d ed upto
3 0 . 0 6 .2 0 0 7 . Th e d et ail s o f su ch ag r e em en t a r e a s u nd e r: -
Lender Borrower Date of the Page No. Annexure Seized from agreement No. Sohan Vatika 30.12.2006 130 to 128 A41 Vatika Triangle Singh Landbase Pvt. Sushant Lok-
Dhingra Ltd. as 1, M.G. Road,
(HUF) confirming part Gurgaon
U.K. Vatika 30.12.2006 86 to 84 A41 Vatika Triangle
Paints India Landbase Pvt. Sushant Lok-
Pvt. Ltd. Ltd., Buzz 1, M.G. Road,
Estates Pvt. Gurgaon
Ltd. as
confirming part
Heminder Vatika 30.12.2006 40 to 38 A41 Vatika Triangle
Kumari Landbase Pvt. Sushant Lok-
Ltd., Wonder 1, M.G. Road,
Developers as Gurgaon
confirming part
Span India Vatika 30.12.2006 22 to 20 A41 Vatika Triangle
Pvt. Ltd. Landbase Pvt. Sushant Lok-
Ltd., Buzz 1, M.G. Road,
Estates Pvt. Gurgaon
Ltd. as
confirming part
vii . S u b s e q u en t l y t h e e xt en si on ag r e e m e n t wa s en t e red b e t w e en t h e
len d e r g r ou p n am e l y S E H R ea lt o rs Pv t . Lt d . , U .K . P ain t s In d ia Pv t . Lt d . , S p an In d i a P vt . Lt d . , S oh an S in g h D h in g ra ( HU F ) , Ha r m in d e r K u m a ri w h i ch is s ei z ed d ocu m en t s d u rin g S ea r ch c on d u ct ed at 1 6 . 01 . 2 0 1 3 p ag e 1 2 7, 8 3, 3 7 an d 1 9 of an n e x u r e A - 4 1 ( s eiz e d f r o m V at ik a T rian g l e, S u sh an t L ok , M G R o ad , Gu rg ao n ) wh i ch e xt en d ed t h e t e r m s of r ep ay m ent u p t o 3 0 .0 3 . 2 0 0 7 .53 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 viii . L en d e r an d B o r r o w er s c on c e rn s e n t e r ed in t o an ot h e r e xt en si on ag r e e m en t wh i ch w e r e s ei z e d f r om d u ri n g t h e c ou r s e of S e ar ch d et ail ed a s u n d e r: -
Lender Borrower Date of the Page No. Annexure Seized from extension No. agreement SEH Vatika Ltd. and 29.06.2007 160 to 157 A41 Vatika Triangle, Realtors Wonder Sushant Lok-1, Pvt. Ltd. Developers Pvt. M.G.Road, Ltd. as Gurgaon confirming party Sohan Vatika Ltd. and 30.06.2007 115 to 112 A41 Vatika Triangle, Singh Wonder Sushant Lok-1, (HUF) Developers Pvt. M.G.Road, Ltd. as Gurgaon confirming party U.K. Paints Vatika Ltd. 30.06.2007 80 to 77 A41 Vatika Triangle, India Pvt. Buzz Estates Sushant Lok-1, Ltd. Pvt. Ltd. as M.G.Road, confirming Gurgaon party Span India Vatika Ltd. 29.06.2007 17 to 14 A41 Vatika Triangle, Pvt. Ltd. Buzz Estates Sushant Lok-1, Pvt. Ltd. as M.G.Road, confirming Gurgaon party Th e f oll o win g w e r e s om e of t h e f e at u r e s o f t h i s e xt en si on a g r e em en t / M O U :
Lender Extended period of loan Extended period of the and the right of the lender right o the lender group group concern to exercise concern to re-sell the the option of purchasing land so purchased to the land, upto the seller (borrower group) SEH Realtors Pvt. Ltd. 31.12.2007 31.12.2008 Sohan Singh Dhingra 31.12.2007 31.12.2008 (HUF) U.K. Paints India Pvt. 31.12.2007 31.12.2008 Ltd.
Span India Pvt. Ltd. 31.12.2007 31.12.2008 S im il a r e xt en si on ag r e e m en t s b et w e en L en d e r s g r ou p m em b e r s an d Bo r r o w e rs wa s f ou n d we r e f ou n d in p h ys ic al f o rm o r in h ar d d r iv e d u rin g t h e S e ar ch a ct i on c on d u ct ed on V a t ik a T rian g l e, S u sh a n t L ok , Gu r g a on .
54 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 ix . F u rt h e r , e x c el d o cu m en t s e xt ra ct ed f r o m Ha rd D i sk S eiz e d fr om t h e V at ik a T ri an g l e , S u s h an t L o k , Gu rg a on r ev e al s t h a t t h e s e e xt en si on i s an d lo an ag r e em en t evi d en c ed f r om n avig at i on p a t h wh e r e H : \ u s e rl e ft A D C & S y st em Ba ck u p \ l eg al\ v iv ek \ l eg al \ sh ah i g r ou p \ Gu rg a on L oan A g r e em en t E xt en si on \ K D e xt en si on \ 3 0 . 0 6 .2 0 0 7 \ c o rr e ct e d in t e r es t cal cu l at i on 3 1 . 0 7 .2 0 0 7 xl s .
x. Th e p a rt o f p r op e rt y o f V at ik a G ro u p wh i ch w as all ot t e d t o va ri ou s len d e r g r ou p wa s r ep u r ch a s ed by the g r ou p c on c e rn M/ s Lin c oln D e v el op e r s Pvt . Lt d . o f V a t ik a G r ou p . D et ail s o f a gr e e m e n t o f s al e s eiz ed d u ri n g t h e S e a rc h i s t ab u lat e d as u n d e r: -
Intending 'Intending Date of the Page Annexure Seized from Seller' Buyer' agreement No. No. to sell Span India Lincoln 03.02.2011 74 to 71 A12 Vatika Triangle, Pvt. Ltd. Developers Sushant lok-1, Pvt. Ltd. MG Road, Gurgaon U.K. Paints Lincoln 03.02.2011 (1) 70 (1) A2 (1) Vatika India Pvt. Developers to 67 (2) A30 Triangle, Sushant Ltd. Pvt. Ltd. (2) 103 Lok-1, MG Road, to 100 Gurgaon (2) 19, DDA Commercial Complex, kailash colony, zamrudpur, New Delhi Sohan Lincoln 03.02.2011 (1) 66 (1) A12 (1) Vatika Singh Developers to 63 (2) A5 Triangle, Sushant Dhingra Pvt. Ltd. (2) 63 Lok-1, MG Road, (HUF) to 60 Gurgaon (2) 85 Golf Links, New Delhi SEH Realtors Lincoln 03.02.2011 62 to 59 A12 (1) Vatika Pvt. Ltd. Developers Triangle, Sushant Pvt. Ltd. Lok-1, MG Road, Gurgaon Th e fu n d fl ow w a s a n alyz e d wh i ch sh o w ed t h a t t h e fun d u s ed in r ep u r ch a s e t h e p r op e rt y f ro m l e n d e r in t h e n a m e o f M/ s Lin c oln D ev e lo p e r s Pv t . L t d . i s t h e f u n d o f V a lid a t e t ab u lat e d as u n d e r: -55 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Date of Amount Receiving Paying Ultimate Source receipt Company Company Lincoln Date Amount Paying Company
04.02.2011 9,09,12,000 SEH Lincoln 03.02.2011 9,09,12,000 Vatika Ltd. 07.02.2011 9,09,12,000 SEH Lincoln 07.02.2011 9,09,12,000 Vatika Ltd. 09.02.2011 9,09,12,000 SEH Lincoln 09.02.2011 9,09,12,000 Vatika Ltd. 14.02.2011 7,50,00,000 UKPI Lincoln 14.02.2011 7,50,00,000 Vatika Ltd. 21.02.2011 7,25,00,000 UKPI Lincoln 21.02.2011 7,25,00,000 Vatika Ltd. 24.02.2011 7,50,00,000 Span India Lincoln 24.02.2011 10,50,00,000 Vatika Ltd. 24.02.2011 3,00,00,000 UKPI Lincoln 08.03.2011 2,40,60,000 Sohan Singh Lincoln 08.03.2011 9,66,00,000 Vatika Ltd. 28.04.2011 25,00,000 Sohan Singh Lincoln 01.04.2011 15,00,000 Vatika Ltd. 28.04.2011 5,00,000 Sohan Singh Lincoln 31.05.2011 1,00,00,000 UKPI Lincoln 31.05.2011 1,10,00,000 Vatika Ltd. 02.06.2011 1,50,00,000 Sohan Singh Lincoln 02.06.2011 1,50,00,000 Vatika Ltd. 06.06.2011 1,00,00,000 Span India Lincoln 06.06.2011 1,00,00,000 08.06.2011 1,00,00,000 Span India Lincoln 08.06.2011 1,00,00,000 Vatika Ltd.
10.06.2011 1,00,00,000 Span India Lincoln 10.06.2011 1,00,00,000 14.06.2011 1,00,00,000 Span India Lincoln 14.06.2011 1,00,00,000 15.06.2011 1,00,00,000 Span India Lincoln 15.06.2011 1,00,00,000 Total 62,72,96,000 69,93,36,000 AO c on c lu d ed on the b a si s of these d o cu m en t s in p a ge 16 & 17 of
as s e ss m en t o rd e r A .Y . 2 0 0 7 - 0 8 t h at V at ik a G r ou p h a s c am ou f lag ed t h e ag r e e m en t as s al e an d p u r ch as e ag r e em en t wh ich w as b a si call y a l oan ag r e e m en t . S im i la r fin d in g s i s g iv e n b y t h e A O in v ar i ou s a s s es s m en t y ea r s t h at t h e a ss e s s e e h as c am ou flag e d t h e l o an t ra n s ac ti on s in t o s al e a n d p u r ch a s e t ran s ac t i o n s. Th e a s s es s e e h as p aid u n a c c ou n t ed p ay m en t of in t e r e st t o l en d e r g r ou p a t t h e r at e of 2 4 % p er an nu m f r om as s e s sm en t y ea r 2 0 0 6 - 0 7 t o 2 0 1 1 - 1 2 .
F in d in g s o f C IT ( A ) i n t h i s is su e:
CI T( A ) p a s s ed c om m on o rd e r f o r A .Y . 2 0 0 7 - 0 8 t o 2 0 1 3- 1 4 .
CI T( A ) h as c on fi rm ed t h e a ct i on o f t h e A s s e ss in g Offi c e r in N H- 8 d eal t r ea t in g t h e ag r e em en t as l oan ag r e e m en t si m p li cit or an d h as g iv en fin a l fin d in g in p a ra 4 . 4 . 1 .1 8 . In ca s e o f ag r e em en t w it h S E H R ea lt o rs P vt . L t d . h as h el d it t o b e a p u r ch a s e a g r e e m en t wh e r e a s with ot h e r l en d e r s , in it i al ag r e e m en t wa s l oa n ag r e em en t an d s u b s eq u en t ag r e e m en t wa s l o an c u m 56 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 p u r ch a s e ag r e em en t . Th e CI T( A ) h a s an al yz ed t h e ag re e m en t w it h S E H R e alt o r s Pvt . Lt d . an d h el d t h e ag r e e m en t t o b e p u rch a s e ag r e em en t a s d at e of i n it ia l ag r e em en t is d if f e r e n t f r om ot h e r a g r e em en t s an d d o m in an t ly it i s p u r ch a s e ag r e em en t . H e h a s d i scu s s ed t h e f ac t s of S E H R e alt o r A g r e e m en t f ro m p a ra 4 .4 .1 .1 9 t o 4 . 4 . 1 . 2 6 and d i r e ct ed t o d el et e t h e ad d it i on s m ad e on a c c ou n t of in t e r e st p a ya b l e t o S E H R e alt o r s P vt . Lt d .
F u rt h e r , C IT( A ) h a s h eld t h at u n a cc ou n t ed in t er e st p ay ab l e t o t h e p a rt i e s e xc e p t S E H R ealt o r s Pvt . Lt d . i s t a xab l e in t h e A . Y . 2 0 1 1 - 1 2 fo r al l in t e r es t c om p u t ed f r om t h e d at e o f in it ia l a g r e em en t t o fi n al b u y b ac k o f l o an b y on e s is t er c on c e rn o f M/ s V at i k a Lt d . wh i ch t o o k p la c e in A .Y . 2 0 1 1 - 1 2 , as all in t e r e st w a s a cc u m u lat e d an d t h e C IT( A ) en h an c ed t h e in c om e o f t h e as s e ss e e on su ch u n ac c ou n t ed in t e r e st in A .Y. 2 0 1 1 - 1 2 a f t e r g iv in g S h ow Cau s e.
A rg u m e nt s o f L d. A R:
A rg u m en t s o f L d . A R a r e su m m a riz ed a s u n d e r:
1 . Th e r e is n o e vid en c e of p a ym en t o f in t e r e st b y M/ s V a t ik a Lt d . t o t h e len d e r s of t h e g r ou p , wh il e m ak in g t h e a d d it i on . 2 . Th e D ep a rt m en t h a s a s s es s ed t h e t r a n sa ct i on as t r an sf e r of l an d t ra n s ac t i on an d ad d it io n ad d ed in t e r e st t o o . 3 . S u ch e xp en d i t u r e wh i ch is impugned ad d it io n has n e v er been r e c or d ed .
4 . Th e A s s e ss in g O ff i c e r h as g i v en the fin d in g t h at a ss e s se e has in cu r r ed li ab ili t y of in t e r e st ex p en d it u r e p r oc e e d ed t o in v ok e S e ct i on 6 9 C t o m a k e ad d it i o n .
5 . Ld . CI T( A ) h a s e r r e d in c on f i rm in g t h e en t i r e a d d it io n f o r N H- 8 d e al f or A . Y. 2 0 1 1 - 1 2 wit h ou t an y evi d en c e .
6 . F o r u n ab at ed a ss e s sm en t , n o ad d it i o n c an b e m a d e u / s 1 5 3A in ab s en c e of in c ri m in at in g m a t er ial s f ou n d a s a r esu lt o f s e a r ch . 7 . In en h an c em en t n o t ic e CI T( A ) h as n ot q u an t i fi ed t h e en h an c e m en t n ot i c e .57 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 My su b m is si on on t h e i ssu e o f ad d it i on o f i n t e r es t in N H- 8 a r e a s u n d e r:
1 . A ll l en d e r s h av e en t e r ed in t o a g r e e m en t wit h ad van cin g of m on e y t o t h e as s e s s e e in it i al ly a s l oa n ag r e em e n t e x c ep t S E H R eal t o r s P vt .
Lt d . w h e r e in it i al a g r e em en t i s Lo an c u m Pu r ch a s e ag r e e m en t . In a ll ot h e r ca s e s t h e in it i al l en d e r s h av e en t e r ed in t o l oan ag r e em en t an d su b s eq u en t ly lo an ag r e e m en t wa s ch a n g ed t o l oan cu m p u r ch as e ag r e e m en t .
H ow e v e r, in all ca s e s m at e ria l f a ct s h a s r em ain ed sa m e i . e . t h e ad v an c es ar e fu ll y b ac k e d u p b y s ec u r it y ag r e em en t , g u a ran t ee ag r e e m en t an d ob t ain in g PD C s at d i ff e r en t t i m e s o f e xt en si on of ag r e e m en t .
F o r t h e sa k e o f b r ev it y fo ll ow in g s e cu rit y f o r a m oun t ad v an c e d were r e c eiv e d b y t h e l en d e r s: -
1 . Co llat e r al S e cu rit y in f or m o f im m ov a b le p r op e r t i es o f M/ s V at ik a G r ou p w as o ff e r ed v id e g u a ran t e e ag r e e m en t . 2 . P er s on al g u a r an t e e o f S h . A n il Bh a lla p r om ot e s o f th e c om p an y wa s o ff e r ed b y p e r s on al g u a ran t e e ag r e e m e n t . In t h e ev en t o f failu r e of p ay m en t of l o an g u ar an t o r ag r e e s f o r t h e r ep a ym en t o f loan an d in t e r e st .
3 . PD C s w as g i v en f o r t h e p rin ci p al an d in t e r e st . 4 . Th e r e wa s p r o vi si on o f c o m p u l s o ry b u y b ac k b y l en d er at t h e o p t i on o f in v e st o r.
In vi e w o f t h e ab o v e s ecu ri t i e s t h e ad van c e g i ve n is fu ll y s ecu r e d n o t in t e rm s o f g u a ran t e e o f im m o vab l e p ro p e rt i e s & p er s on al g u a ran t ee b u t al s o liq u id s e cu rit y in f o rm o f p o st d at e d ch eq u e s . S u ch s e cu rit y can n ot b e g iv en in c as e of p u r ch a s e t r an sa ct i on . In sp it e o f fu lly s e cu r ed ad van c e s al on g wit h in t e r es t , t h e p r op e rt y w as b ou g h t b a ck by V at i k a G r ou p e it h e r at p r in c ip a l val u es o r at m u ch l e s s e r va l u e co m p ar ed t o p r in cip al & in t e re st t ill b u y b a ck , wh ic h cl ea rl y e st ab li sh ed t h at it wa s n e v er a p u r ch a s e t ra n s ac t i on .
F u rt h e r , t h e fu n d u s ed f o r b u y b ac k is b el on g in g t o a s se s s e e i . e . M / s V at ik a L t d . a s d i s cu s se d in t h e a s s es sm en t o rd e r . S t ill fu rt h e r , t h e r e i s n o 58 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 r eg i st ra t i on of p r op e rt y in the name of l en d e r . Th er ef o r e , en t i r e t ra n s ac t i on of o p t i o n o f p u r ch a s e a n d b u y b ac k i s n ot h in g b u t c o lo u r ab l e d e vi c e to c on ce al the r e al t ran s act i o n of l oan on wh i c h u n ac c ou n t e d in t e r e st h a s b e en p aid .
If it w ou ld have b e en a p u r ch as e t ra n s ac t i on s wh y there w ou l d be p r o vi si on of buy b ac k . Th e p r ovi si o n of c om p u l so r y buy b a ck it s el f e st a b li sh e s t h a t t h e t r an sa ct i on is b a si cal ly fin anc in g an d n ot a p u r ch as e t ra n s ac t i on .
F u rt h e r , t h e ar g u m en t s of Ld . A R t h at t h e r e i s n o ev id en c es o f in t e r e st p ay m en t is n ot t en a b le a s in sp it e of fu l ly s e cu r ed ad van c e at t h r e e l ay e r i. e. g u a ra n t e e g i v en in f o rm o f i m m o va b le p r op e rt y, p er s o n al g u a r an t e e o f t h e p r om ot e r s an d t ot a l PD C s of v alu e p rin ci p al an d in t e r e st , t h e b u y- b a ck p ri c e s w e r e a cc e p t e d b y t h e l en d e r ei t h e r at p rin cip al v alu e or a t m u ch le s s e r am ou n t c om p a r ed t o t h e a m o u n t d u e p r in c ip a l p l u s in t e r e st . S u ch ac c ep t an ce o f l o w e r b u y b a ck p r ic e s b y t h e l en d e r wit h ou t a n y d is p u t e p r o v es t h e p ay m en t of u n a c c ou n t ed in t e r e st on p rin ci p al .
Ld . A R s a rg u m en t t h at t h e A s s es sin g O ffi c e r h a s ac cep t e d t h e a ss e s s e e 's c on t en t i on in a s s e s sm en t y e ar 2 0 1 1 - 1 2 t h at t h e t ran s act i on i s a p u r ch a s e an d s al e t ran sa ct i on , t h er e f o r e , t h e r e i s c on t r ad i ct i on in t r ea t in g the t ra n s ac t i on as l oa n t ran sa ct i on an d p a ym en t of in t er e st for sa m e t ra n s ac t i on . Th e r e v en u e' s st a n d i s t h e p ay m en t of u n a c c ou n t ed i n t e r est wh i ch i s n ot r e fl e ct ed an d r e c o rd ed in B o ok s of A cco u n t s . Th er e f o r e , u n ac c ou n t e d in t e r e s t p a ym en t s h a s n o b e a rin g in r e cor d ed t r an sa ct i on s . I f t h e t r an sa ct i on is h el d t o b e l oan t r a n sa ct i on an d u n a cc ou n t ed in t e r e st p ay ab l e is u p h el d , t o t h e e xt en t o f ch a n g e in w o rk i n p r og r e ss d u e t o b u y b ac k o f p r op e rt y , s e t of f c an b e g iv en fr om t h e in t e r e st .
Ld . A R s a rg u m en t t h at t h e s e ct i on 6 9 C h as b e en w r ong l y in v ol v ed b y t h e Ld . A O i s n ot t en a b le a s f r om t h e c o n d u ct of a s s es se e b y ac c ep t in g b u y b ac k val u e le s s t h an p rin cip al an d in t e r e st at b u y b a ck p r ov e s t h e as s e s s e e h as p aid u n a c co u n t ed in t e r es t an d t h e r e f or e su ch e xp en d it u r e h a s in cu r r ed an d s e ct i on 6 9 C c an b e in v o k e d .
59 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Ld . A R s a rg u m en t t h at Ld . C IT ( A ) h a s en h an c e d t h e in t e r e st f o r A .Y . 2 0 1 1 - 1 2 wit h ou t a n y b a si s is a ls o n ot t en a b l e as CI T( A ) h as h el d t h at all in t e r e st wa s p aid at t h e t i m e of b u y b a ck wh en all t h e lia b ilit y o f a s s e ss e e g ot d is ch a rg e d t o wa r d s t h e l en d e r .
Ld . A R s c on t en t i on t h at CIT ( A ) h a s e n h an c e d t h e u n a c c ou n t ed in t e r e st p ay m en t w it h ou t q u an t if yin g t h e a m ou n t in en h an c em en t n ot i c e h as b e en d e alt by Ld . CI T( A ) t h at in en h an c em en t n ot i c e, the p r in c ip al s of en h an c e m en t h a s b e en g iv e n n am el y t ot a l in t e re st p ay ab l e f r om d at e o f ad v an c e o f l oan b y len d e r s w a s p ai d at t h e t i m e o f b u y b a ck . F r om t h e r e e xa ct am ou n t o f in t e r e st c an b e c om p u t ed .
A n ot h e r c on t e n t i on o f Ld . A R ' s t h at t h e r e i s n o in crim in at in g d o cu m en t f ou n d f r o m A ' s p r em is e t h e r ef o r e , f o r u n ab at ed as s es sm en t n o ad d it i on can b e m a d e u / s 1 5 3A . Ld . CI T( A ) c on clu d e in P ar a 4 .4 .1 .1 8 t h at t h e s eiz e d lo an ag r e em en t c on st it u t e t h e p rim ar y e vid en c e on th e b a si s o f w h ic h t h e ad d it i on em an at e s. Th i s h old s g o od s f o r a ll ag r e e m en t s f o r N H- 8 & J aip u r d e al. C IT ( A ) h a s g i v en t h e fin d in g in r e sp e ct o f S EH R ea lt o r s & J aip u r d eal t h at t h e r e wa s n o in c rim in at in g m at e ria l b ec au s e h e h as t r eat e d the ag r e e m en t a s p u r ch as e ag r e e m en t . If t h e s e ag r e em en t is t r ea t ed a s l oan ag r e e m en t as d i s cu s se d in su b s eq u en t p a ra , t h en t h es e l oan ag r e em en t s b e c om e p ri m a r y b a s is f o r m ak in g a d d it i on of u n a c c oun t ed i n c om e & h en c e in c ri m in at in g m at e ria l to a ss e s s s u ch u n a cc ou n t e d in c om e . Ot h er e vid en c e s f ou n d d u rin g s ea r ch i . e . em ail s, st at em ent et c on l y su p p o rt in g e vid en c e s t h e r e f o r e , o rig i n of t h e ad d i t ion i s b a s ed on s e i z ed d o cu m en t s , h en c e t h e t h e or y o f n on a va ilab ilit y s eiz e d d o cu m ent s f o r a d d it io n m ad e u / s 1 5 3A f o r u n ab at ed a s s es s m en t wil l n ot ap p ly .
I I. Su bm i s s io n in s u pp or t o f a dd it i on of u n acc o un te d i n te re st in NH - 8 de a l s b y t h e a s s es s ee i n c as e of le n de r M / s S E H Re a lt o rs P . Ltd . R ev e nu e Ap p e a l) :
CI T( A ) h as an al yz ed the l o an cu m p u r ch a s e a g r e e m en t b et w e en the ap p ell an t an d l en d e r M/ s S E H R eal t o r s Pvt . Lt d f or N H- 8 p r oj ec t an d in Pa ra 4 .4 .2 .1 9 t o 4 .4 .1 .2 6 an d 4 .4 .2 .1 t o 4 .4 . 2 . 1 8 an d h el d t h at t h e 60 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 ag r e e m en t wit h S E H R ealt o r s is a p u r ch a s e t r an sa ct i on m ain l y on t wo g r ou n d s:
1 . D at e of ag r e em en t i n ca s e of S E H R ea lt o r s P vt . Lt d i s d i ff e r en t f r om d at e o f ag r e em en t wit h U .K . Pain t s an d ot h e rs in t h e ca s e N H- 8 d ea l.
2 . In ca s e of S E H R e alt o rs f ro m t h e d at e of en t e rin g th e ag r e e m en t t h e r e wa s op t i on t o p u rch a s e t h e p l ot s b y t h e le n d er. In fa ct f r om t h e in it ial d at e of ag r e e m en t , t h e l oa n an d p u r ch a se ag r e em en t s w er e si m u lt an e ou sly en t e r ed . Th e r ef o r e , CI T( A ) wa s o f t h e vi ew t h at these ag r e e m en t s we r e b a sic all y in the nature of p ur ch a s e ag r e e m en t s wh e r e as in ot h e r l en d e r s can in N H 8 d eals in it i al ag r e e m en t s wa s a l oan ag r e em en t s . A c c o rd in g l y Ld . CI T( A ) d el et ed t h e a d d it i on o f u n ac c ou n t ed in t e r e st m a d e b y t h e A O. M y S ub m is s io n ag a i ns t de l et io n o f un a cc ou nt e d i nt er es t i n c as e o f SE H R e a lt or s P vt. Ltd . ( Re v en u e' s A pp e a l) :
In su b st a n c e , t h e ag r e e m en t s b et w e e n t h e a ss e s s e e an d U .K Pa in t s & ot h e r a r e sim i la r t o ag r e em en t s en t e r ed b et w e en t h e a s se s s e e & S E H R e alt o r s Pvt . Lt d . O n ly ch a n g e o f d at e o f ag r e e m en t s a n d i n it ial ag r e em en t in t h e ca s e U .K Pai n t s Lt d . & ot h e r b e in g l oan ag r eem en t s an d l oan cu m p u r ch a s e ag r e e m en t in t h e c as e o f S E H R eal t or s P vt . Lt d will n o t ch a n g e t h e b asi c ch a ra ct e r o f t h e t r an s ac t i on . Ba si c Ch a ra ct e r s of t h e t ran sa ct i on ar e a s u n d e r wh i ch ar e c o m m on in b ot h t r an sa ct i on eit h e r wit h U .K p a in t s & o t h e r wit h S E H R e alt o rs Pvt . Lt d .
1. In b ot h the ca s es the a m ou n t of p rin ci p l e wi t h in t er e st is g u ar an t e ed b y a g u ar an t e e ag r e e m en t wh er e im m o va b l e p r op e rt y o f a g r ou p c on c e rn is o ff e r e d a s g u a ra n t e e wh i ch c an b e u t ili s ed f or s e cu rin g in t e r e st p lu s P rin ci p al s in c as e of d efau l t b y l e ad e rs .
2. In b ot h c a s es the p e r s on al g u a ran t e e has b e en o ff e red the p e r s on al g u a ran t e e ag r e em e n t b y sh . Bh alla b ei n g p ro m ot e r of t h e M / s V at ik a Lt d .
3. In b ot h Ca s es PD C s ( P os t d at ed Ch e q u e) we r e g iv en b y M/ s V at ik a Lt d . c o v e r p r in c ip al s & in t er e st .61 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
4. In b ot h ca s e s, t h e r e wa s op t i on t o p u r ch a s e t h e p l ot s o f M/ s V at ik a Lt d . b y l en d e r s & l en d e r s h a v e a cq u i r ed t h e p l ot s b u t r eg i st ra t i on wa s d on e .
5. In b ot h t h e Ca s e s, t h e r e w as p r o vi si on o f C om p u ls o ry p u rc h as e b y b o r r ow e r i . e. M/ s V at ik a Lt d . at t h e o p t ion of l en d er s .
6. Bu y b a ck p ri c e i s a t m u ch l es s e r ra t e t h an p rin cip al p lu s i n t e r e st .
Mo st ly b u y b a ck p ri c e at t h e p rin cip a l o n ly.
Wh en t h e am ou n t ad v an c e d al on g wit h in t e r e st in c o v er e d b y S o m an y g u ar an t e e s as d is c u s s ed above, wh y buy b ac k p ri c e s wa s less t h en p rin ci p al s & in t e r e st wit h ou t an y d i sp u t e ? Th i s a cti on of l en d e rs & b o r r ow e r can n ot b e exp lain e d b y t h e p rin cip l e o f h um an p r ob a b ili t y . I r el y on t h e d e ci si on o f S u m at i D a ya l v s . C IT( 1 9 9 5) 8 0 Ta xm a n n 8 9 ( S C) / 2 1 4 ITR 8 0 1 ( S C) .
In fa ct CI T( A ) h a s u p h e ld t h e a d d it io n in ca s e o f ot h e r l en d e r s in N H- 8 d e al s m ain l y on t h e ab o v e g r ou n d t h at b u y b ac k p r ice i s m u ch l e s s t h e n p rin ci p al p lu s in t e r e st [ P a ra 4 . 4 . 1 .2 8 o f CI T( A ) ord e r] .
In vi e w o f t h e a b ov e C IT ( A ) ou g h t t o h av e u p h el d t h e u n a c c ou n t ed in t er e st p aid t o b y M / s V at ik a Lt d . in c as e of M/ s S E H R ealt o r s P vt . Lt d . t oo .
I ss u e o f J a ip u r d e a l s:
F ac t s a r e S i m il ar t o t h e fa ct s , o f N H- 8 d e al s e x c ept t h e fir st ag r e e m en t t h at i s l oan ag r e e m en t . In t h e s e c a s e fi rs t ag r e em en t wa s of l o an cu m p u r ch a s e ag r e em en t . Ot h e r wi s e e xt en si on o f ag r e em ent , PD Cs , p e rs on al g u ar an t e e a g r e e m e n t , g u a r an t e e ag r e e m en t S eiz ed m at e r i als & ot h e r fa ct s ar e S i m il a r.
CI T ( A ) F i nd i n g:
CI T( A ) h a s g iv en t h e r e li ef t o t h e as s e s se e on t h e S im i la r g ro u n d t h at of SEH R e alt o rs of N H- 8 d ea ls w h ic h h as b e en d i scu s s ed , in ea r li e r p a rag ra p h .62 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 M y S u bm i ss i on :
My S u b m i s si on i s o n sa m e lin e s t h at o f M/ s S E H R e alt o r s P. Lt d . in N H- 8 d e al D i scu s s ed S u p r a.
I ss u e o f I nt e re st of IC D s:
F act s M/ s V at ik a Lt d . h a s r e c ei v ed IC D f r o m U . K . P ain t Gr o u p of C o m p a n i es S PA N Gr ou p & S h ah i g r ou p o f c o m p an i e s in t e r e st p a ym en t s h as b e en m ad e ran g in g f r om 1 1 - 1 6 % p e r an n u m in t h e b o ok s o f a cc oun t s .
D u rin g t h e C ou r se o f s ea r ch p r o c e ed in g s a t 1 st fl o or , 1 9, D D A co m m e r ci al c om p l ex Za m ru p in , K ail ash C ol on y E x t n . , G. K .- I N ew D e lh i in t h e g r ou p Ca s e of U . K . Pa in t s g r ou p on 2 4 .1 1 .2 0 1 1 , V a ri ou s do cu m en t s a g re e m en t s & d e ed s o f l oan / I CD in c lu d in g t h e h a n d wr it t en d a i ry in t h e h an d w ri t in g o f S h . Na v e en Ch ou d h a ry w a s s eiz e d f r om t h is cab in m a rk ed a s an n e xu r e A A - 1 & A A - 2 r es p ect iv el y.
Co n t en t s o f v a ri ou s p ag e s o f A A - 1 & A A - 2 h as b e en an al y z ed b y A O an d wh er e e v e r ' M / M a t e ri al ' is w rit t en , on su c h p ag e s h a s b e en h eld as Ca sh in t e r e st p aid b y M / S V at i k a Lt d . A O' s fi n d in g in sup p or t ed b y in t e r e st cal cu l at i on of i n t e r e st wh ich c om e s @ 3 6 % p er an n u m , 1 5 % in t er e st h as b e en d i s cl o s ed in t h e b o ok s o f a cc ou n t s an d b alan c e in t e r e s t h as b e en p ai d in ca sh b y M / s V at i k a lt d . C on t e n t of t h e s eiz ed d ocu m en t s of Pag e N o. 1 2 o f A A 1 , Pag e 5 2 o f an n e x r e- A A 1, Pag e 5 3 o f A A 1 , Page 1 2 o f A n n exu r e- A A 1, Pa g e 5 2 o f A n n e x A A - 1 wh i ch c on t ain s t h e in t e re st ca lcu l at i on o f l oan ad v an c e d b y l en d e r g r ou p an d in t er e s t Cal cu la t i on is c o d ifi e d wit h 'M / Mat e ri al ' h as b e en s can n e d & r ep r od u c e d in t h e a s s es sm e n t .
S h . Na v e en Ch ou d h ar y , C F O of U . K . Pa i n t s Lt d h a s acc ep t e d t h at t h e d ai ry is in h is h an d w ri t in g b u t g av e e va s iv e r ep l y b y s ay in g t h at "I d on 't r e call " .
H e su b s eq u en t ly st a t ed t h at ' M' s t an d s f or m a t er ial su p p li e d b y U .K . Pain t t o V at i k a Lt d . & fi n ally an s w er t o q u e st i on n o 6 0 & 6 1 o f st at e m en t t o 63 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 r e c or d ed d u rin g S im u lt an e ou sly S ea r ch in D h in g r a / U . K . P ain t g r ou p , S h . Na v e en . Ch ou d h a ry on 1 6 . 0 1 .2 0 1 3 on c on f ro n t in g t h e d ocu m en t s a cc e p t ed t h at " M / Mat e r ial " st an d s f o r C al cu la t i on o f d ela y ed in t e r e st on p rin ci p al am ou n t . Th es e s t at em en t s r ep r od u c ed in t h e a s s e ss m en t o rd e r . Th er e f o r e 'M ' i s ac c ep t ed a s in t e r e st c al cu la t i on w rit t e n in t h e s eiz ed d o cu m en t s . F u rt h e r d u rin g t h e s ea r ch p r o c e ed in g on 1 6 . 0 1 .2 0 1 3 at t h e r e sid en c e o f Sh. Nav e e n Ch ou d h ar y , CF O of U. K. P ain t s g ro u p of these J ot t in g s sp e cia lly wh en ' M / Mat e ria l' h as b e en u s ed in t h e d o cu m en t s S eiz e d o n 1 6 - 9 - 2 0 1 1 S h . Na v e en Ch ou d h a r y h a s s en t b ri e f f o r th e op i n ion f or m ak i n g d is cl o su r e t o S h . C . S . A g a rwa l ( A n n e xu r e A - 6 f r om h a rd d i s c o f la p t op o f S h . N av e en C h o u d h ar y) .
S h . C .S . A g ra wa l h as ad vi s ed U . K . P ain t s g r ou p ( K .S . D h in g ra / G. S . D h in g ra) t o S u rr e n d e r t h e c ash l oan o f 2 .7 5 c r o r es & in t e r e st Co d ed a s m at e ria l in S e iz ed a n n e xu r e, wh i ch i s p art o f s eiz ed d o cu m en t .
A A - 1 & A A - 2 . In f act h a rd d i r e c on t a in s t h e d is cl o su r e on t h e b as is o f c on t a in s in A n n e xu r e A A - 1 & A A - II a m o u n t in g t h e R s .7 ,9 5, 4 5, 5 3 0/ - in t h e h an d o f S h . K . S . D h in g r a.
CI T( A ) aft e r an al yz i n g t h e en t i r e e vid e n c e fo u n d d u rin g s ea r ch o f s eiz u r e op e ra t i on h a s a fu n d in g t i r ed , t h e ad d i t ion of u n acc ou n t e d , in t e r est p aid t h e U . K . P ain t s t o b e c al cu la t ed @ 3 6 % p e r an n u m aft e r d e d u c t in g t h e in t e r e st sh own in t h e of a c c ou n t s, b ) ad d it i on of un ac c ou n t ed Ca sh L oan f o r R s 2 . 7 5 c r o r e ad van c ed b y U .K . P ain t L t d . f o r A . Y. 2 0 1 0 - 1 1 .
CI T( A ) h a s d el et ed t h e p en a l in t er e st d el ay ed in t e re st d ela y ed p a ym en t of in t e r e st a s A O h a s n ot m en t i on ed t h e m an n e r b y wh i ch it in co m p u t ed & t h e r e i s n o s eiz ed d o cu m en t s in s u p p o rt of su ch p en al in t e r e st .
S im il a rly CI T( A ) h a s u p h eld t h e in t e r e st p a yab l e t o on t h e L o an ad v an c ed b y M/ s Wan g In v e st m en t Pvt . Lt d . @ 3 6 % . a ft e r r e d u c in g t h e in t e r e st p aid in t h e b o ok s o f a c co u n t s .
CI T( A ) h a s d el et ed t h e ad d it i on on u n a c cou n t ed in t er e st p aid ot h er l en d e r s on the b a si s t h at in s e iz ed d o cu m en t s those i n v e st or s name is n ot ap p ea rin g .
64 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 A rg u m e nt s o f Id A R b ef or e H o n' b le I T AT :
A rg u m en t s o f L d . A R a r e b r oa d ly su m m ari z ed a s u n d e r: -
1 . Th e ad d it i on has b e en m ad e by the AO on the b a si s of d o cu m en t s S eiz e d f ro m t h i rd p a rt i e s wit h ou t r e co r d in g the S at i sf a ct i on n ot es & in v o k in g p r ov isi on s of S e ct i on 1 5 3 C . 2 . Th e d o cu m e n t s r eli ed f o r m ak in g a d d i t ion n a m ely A A - 1, A A - 2 f ro m t h e p r em i s e s o f U .K . p ai n t s g r ou p ar e d u m b d ocu m en t s. 3 . N o op p or t u n it y t o c r o ss e xam in e t h e p e r s on h as b e en g i v e n b y t h e A O . B ef o r e u t il iz in g t h e su c h st at em en t . 4 . D u rin g t h e p r e s en t s ea r ch , n o in c ri m i n at in g d o cu m ent s w er e s eiz ed , t h e r ef o r e , n o ad d it i on C an b e m ad e f o r n on a b at ed as s e ss m en t u / s 1 5 3 A r ely in g on t h e d e ci si on s o f H on 'b l e D elh i in t h e ca s e o f K ab u l Ch awl a.
My a rg u m en t s in s u p p or t of ad d it i on s m ad e f o r u n a ccou n t ed in t e r e st on ICD s C on fi rm ed b y ( CI T ( A ) & a g ain st t h e a rg u m en t s o f Ld . A R :
1. Ld . A R h a s ra is ed t h e i s su e of in v ok in g p r o vi si on s o f S e c t ion 1 5 3 C f or u t iliz i n g t h e s ei z ed d o cu m e n t s A A - I , & A A - 2 s eiz e d f r om t h e p r em is e o f Zam ru p u r , fr o m t h ird p a rt y on U. K. Pa in t g r ou p on 2 4 . 1 1 .2 0 1 1 for in v ok in g a d d it io n & arg u ed , t h at wit h o u t in v ok in g p r o vi si o n s o f S e e 1 5 3 C , su ch e vid en c e s c an n ot b e u s e d .
Th e p rim a ry i s su e i s wh et h e r d u r in g t h e p r e s en t S e ar ch w h e r e M / s V at ik a lt d & U .K . Pain t s , g r ou p w e r e si m u l t an e ou s ly s ea r ch ed on 1 6 .0 1 .2 0 1 3 e vid en c e f or m a k in g t h e ad d it i on o f u n a c cou n t ed in t e re st o n ICD wa s f ou n d o r n ot . D u rin g t h e p r e s en t s ea r ch . e vid en c e in fo r m of e m a ils & t e xt s w e r e f ou n d f ro m t h e c o m p u t e r of S h . N av e en Ch ou d h a r y , CF O o f U . K . Pa in t g r ou p i n f o rm o f em ail s t o S h . C . S . A g ar wal f o r op in i on , o p in i on g i v en b y S h . C. S . A g a rw al o n t h e en t r i es on s ei z ed . A n n e ru re A A - 1 & A A 2 & fi n all y a d ra ft w rit t en st at em en t o f S h . S . K . D h in g ra , MD o f U . K . Pain t s g r ou p f or su r r en d e rin g the a m ou n t of R s. 7,9 5, 4 5 ,5 3 0 / - on the b a si s s e iz ed d o cu m en t A A - I & A A - 2 f r om ea rl ie r s e ar ch . Th e r e f or e, in p r e se n t s ea r ch als o in c ri m in at in g e vid en c e s in f o rm o f su b s eq u en t c o r r es p on d en c e s on t h e 65 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 b as is o f e a rli e r S eiz ed c om m en t s. A A 1 & A A - 2 o f U . K Pa in t s g r ou p s eiz ed 2 4 . 1 1 .2 0 1 1 wa s f ou n d .
Th e r ef o r e in present s e a rch al s o , e v id e n c e s in f or m of in c ri m in at in g m at e ria ls wa s found. H en c e ea rli e r s eiz ed d o cu m en t s AA-1 AA-2 Co r r ob o r at e s t h e u n ac c ou n t ed in t e r e st Pa ym en t on IC D s . C IT( A ) h a s g iv en sa m e fu n d in g in p a r a 4 .6 .1 6 o f t h is o rd e r . In vi ew o f t h e a b o v e, sin c e t h e ad d it i on of u n a c c ou n t ed in t e r e st o n I C D s e m an at es fr o m S eiz e d d o cu m en t s o f p r e s en t S ea r ch i . e. 1 6 .0 1 . 2 0 1 3 an d se iz ed d ocu m en t s A A - I & A A - 2 of ea rl i e r s e ar ch C or r ob o ra t es t h e fin d in g o f u n a cc ou nt ed i n t e r e st p ay m en t , s ep a r at e p r o c e ed i n g s u / s 1 5 3 C i s n o t r e q u i r ed f o r u t ili z in g t h e s ei z ed d o cu m en t A A - 1 & A A - 2 o f ea rli e r s e a rc h u / s 1 5 3 C. S e c on d i ssu e i s wh et h e r f o r u t iliz in g t h e evi d en c e s ob t a i n ed d u rin g t h e sim u lt an e ou s s ea r ch in U K Pain t s g r ou p i. e. o n 1 6 .0 1 . 2 0 1 3 , t h e p r o c e ed in g u / s 1 5 3 C i s r eq u i r ed o r t h e s e e vid en c e s can b e u s e d in t h e p r o c e ed in g s u / s 1 5 3A . M y su b m i ss i o n s a r e as u n d er : -
( i) In sim u lt an e ou s s ea r ch , there is a co m m on s at i sf a ct ion for is su an c e o f w a rr an t u / s1 3 2 wh e r e ov e r l ap p in g in t e re st of v ari ou s c on c e rn s a r e e st ab l ish ed o r a p p r eh en d ag a in s t va ri ou s p e r s on s s ea r ch ed si m u lt an e ou sl y. Th e r e f o r e, on c e e vid en c e s is s eiz e d f ro m on e p er s on w h ich i s c on n e ct e d t o ot h e r p e rs on h as t o b e u s ed sim u lt an e ou sl y in on e h an d r e c ip i en t an d in oth e r h an d p ay e r . L ik e in p r e s en t ca s e in U .K . P a in t s g r ou p h av e ac c ep t ed in t e r e st wh ich i s t h e u n a c c ou n t ed in c o m e an d in vati k a L t d . h o w it is u n ac c ou n t e d e xp en d i t u r e. H en c e , in s im u lt an e ou s s ea r ch , c on c e p t of t h i r d p er s on wil l n o t ap p l y b e cau s e of un it y of c om m on b u sin e s s a ct i vit i e s o f all p e r s on ' s s e a rc h ed t og et h e r .
( ii) If a vi ew i s t ak en t h at e v en sim u lt an e o u s s ea r ch , se ct i on 1 5 3 C i s r eq u i r e d t o b e in v ol v ed t o u s e d o cu m en t s s eiz ed f r om on e p e r s on in t h e h an d s of ot h e r p e r s on , t h en t h e r e w ill b e m ult ip l icit y of p r o c e ed in g s u / s 1 5 3A an d 1 5 3 C . F u rt h e r , c om p r eh en s iv e vi ew o f e vid en c e g at h e r ed d u ri n g s e ar ch op e r at i on u / s 1 3 2 can n ot b e t ak en if e ach s e p ar at e e vid en c e is an al yz ed for u n d is cl o s ed 66 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 in c om e s ep ar at el y, S u ch in t e rp r et at i on w ill j e op a rd i es the op e ra t i on o f p r e s en t s ea r ch an d as s e s s m en t sch e m e u/ s 1 5 3 A & 153C.
( iii) I r el y on t h e d ec is i o n of H on 'b l e S u p r em e C ou rt in t h e ca s e o f S h .
V in o d Gu p t a 2 0 1 8 - TI O L- 3 5 0 ( S C) Wh e r e H on 'b l e S u p r e m e C ou rt h as u p h eld t h e u s e o f evi d en c e g at h e r e d f r om on e p er s on i n t h e h an d s o f ot h er p e r s on in si m u lt an e ou s s ea r ch .
In vi ew of the ab ov e the c on t en t i on of Ld. AR is n ot t en ab l e t h at sat is fa ct i on s h o u ld h av e b e en r e c o rd ed u / s 1 5 3 C & p r o c e ed in g s sh ou l d h av e b e en t ak en u / s 1 5 3 C b ef o r e u t i l iz in g t h e s eiz ed d o cu m en t s o f on e p e r s on s in the h an d s of ot h e r p e r s on wh en b ot h p e r son were sim u lt an e ou sl y s ea r ch ed b ein g p a rt o f sam e g r ou p b y vi r t u e of co m m on sat is fa ct i on s an d p r o c e ed in g s a r e p en d i n g u / s 1 5 3 A f o r s am e b l o ck p e ri od .
ii. S e c on d ar g u m en t s o f Ld . A R i s t h at t h e s e d ocu m en t s ar e d u m b d o cu m en t s . Th e s e d o cu m en t s h av e b e e n an al yz ed b y t h e a s se s sin g o f fi c e r Ld . C IT ( A ) in d et ai ls in t h e a s s es s m e n t o rd e r . Th e c on t en t s o f v a ri ou s p ag e s in an n e xu r e A A - 1 & A A - 2 cl e a rl y in d ica t e t h at ag ain st t h e w o rd u s e d 'm at e rial ' , t h e r e in cal cu lat i on o f in t e r e st a s p r in c ip al is m u lt ip li ed b y p e ri o d an d in t e r e st ra t e wh ich c o m es in t e r e st r at e of 3 6 % as d ec ip h e r ed b y L d . A O an d CI T ( A ) . F u rt h e r wh e r e t h e co n t en t of t h e s e p ap e r s w a s c on f r on t e d t o t h e wr it t en of t h e p ap e r S h . Na v e en Ch ou d h a ry h a s g iv e n e va siv e r ep l y an d wr on g st at e m en t t h at it p er t ain s t o g o od s t ra n s ac t ed wh en t h e r e wa s n o g o od s t r an sa ct ed b e t w e en U K P ain t s an d v at ik a & ot h e r b o r r ow e r . U lt im a t el y Sh. Na v e en Ch o u d h a ry a c c ep t e d t h at ca lc u lat i on ag ain st t h e w o rd s ' Mat e ri al/ M'i s r el at e d t h e in t e r es t c al cu l at i on f o r d el ay e d in t e r e st / p a ym en t . T h e c on t en t s of S eiz ed m at e ri al i s s e lf- sp ea k in g an d i s n ot h i n g b u t in t e r es t c al cu la t i on p a yab l e on ICD .
iii. Th e n e xt a r g u m en t s of Id . A R i s t h at t h e d o cu m en t s r e li e d b y t h e as s e ss in g o f fi c e r wa s n ev e r co n f r on t ed t o t h e a s s ess e e an d p e r s on s wh os e st at e m en t h a s b e en r eli ed wa s n ev e r all ow ed c r o ss exa m in at i on . In t h i s r eg a r d it su b m it t e d that the c on t en t of s ei z ed d o cu m e n t s r e li ed wa s c on f r on t e d t o t h e a s se s s e e an d s can n e d c op y o f su c h d o cu m en t s w e r e p a rt 67 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 o f sh o w cau s e an d as s es s m en t o r d er , t h e r ef o r e , t h e c on t en t s of s eiz ed d o cu m en t s w er e b e i n g ap p ri s ed t o t h e a s se s s e e .
F u rt h e r t h e s t at e m e n t o f S h . Na v e en C h ou d h a ry h a s b e en r ep r od u c ed wh o h as g i v en e va si v e r ep l y on t h e c on t en t s o f s ei z ed d ocu m e n t s . Th e r e fo r e , t h e is su e o f c ro s s e xam in at io n wi ll n ot s e rv e m u ch p u rp o s e as t h e s am e is on l y u s ed t o co r r ob o rat e t h e f a ct s o f t h e c a se .
iv. Th e Ld . A R ' s a rg u m en t s t h at in as s e s s e e' s p r em is e n o in c rim i n at in g m at e ria l wa s f ou n d , h en c e n o ad d it i on c an b e m ad e by ap p lyin g t h e d e ci si on of Kabul Ch awl a cit e d su p ra . In p r es e n t ca s e, e vid en c e of u n ac c ou n t e d in t e r e st r e c eiv e d fr o m a s s es s e e h a s b e en f o u n d an d s ei z e d f ro m t h e p r e m i se s of r e ci p i en t 's M/ s U .K . P ain t s g rou p . Th e r e f o r e, t h e d e ci si on o f H on 'b l e D elh i H ig h C ou rt in t h e ca s e of K ab u l C h awl a sh ou l d b e in t e r p r e t ed a s e vid en c e s ei z ed at an y p r em i s e of ei t h er o f t h e p a rt i e s o f t ra n s ac t i on . In p r e s en t c a s e e vid en c e fr o m e xt e rn a l p a r t ie s ot h e r t h an sim u lt an e ou s s e a rc h h a s n o t b ee n u s ed f or m ak in g add it i on .
Su bm i s s io n ag a i n s t de l et i on of un a c co un te d in te r es t o n I C D to ot he r p ar ti e s ( R ev en u e a pp e a l) : -
Ld . C IT ( A ) h as c on f ir m ed t h e ap p e al o n t h e i ss u e of u n a c c ou n t ed in t e r e st on I CD ca s e o f M/ s U K Pa in t s P vt . Lt d . an d M/ s Wa n g In v e st m en t P vt . Lt d . b u t d el et e d t h e ad d i t ion m a d e f o r t h e in t e r e st p aid on I CD i n ca s e o f ot h e r len d e r o f U K G r ou p s , S h ah i G r ou p , S p an Gr ou p .
Th e Ld . CI T( A ) has d el et ed the ad d i t ion in ca s e of ot h e r l en d e r for u n ac c ou n t e d in t e r e s t on ICD on t h e g r ou n d t h a t t h e re i s n o evi d en c e s in ca s e of another l en d e r . E vid en c e is on ly for U .K . Pa in t s an d W an g In v e st m en t ( Pa r a 4 . 6 .1 0 o f CI T( A ) ' s o rd e r) .
H on 'b l e CI T( A ) h a s ov e r lo o k ed t h e fi n d in g s o f A O on p ag e 4 9 f o r A . Y .
2 0 0 7 - 0 8 wh i ch c on t ain s t h e s can n ed c o p y o f p a g e 8 1 & 8 2 o f an n exu r e A - 1 3 s ei z ed d u rin g t h e s ea r ch on p ag e 4 9 & 5 0 o f A O ( f o r A Y 2 0 0 7 - 0 8 ) . S ca n n ed c op i es of p ag e 4 9 & 5 0 sh ow s t h at S h . Na v e en ch ou d h a ry w as in p o s s es si on o f in t er e st ch eq u e s f or M/ S a rla f ab ri cs P vt . L t d . ( S h ah i g r ou p ) , S p an H ol d in g s P. Lt d . ( S p an g r ou p ) & Wan g In v es t m ent & F in an c e P. L t d .
68 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 S im il a r f in d in g s i n g iv en f or all A Y s . Th e r ef o r e , in s ei z ed d o cu m en t s f o r a ll t h r e e g r ou p o f l en d e r s n am el y U .K . P ain t s g r ou p , S pa n g r ou p an d S h ah i g r ou p , in t e r e st c h e q u e s a r e m en t i on e d . S h . N av e en Ch o u d h a ry u s ed t o c o or d in a t e all l en d e r s f o r in t e r es t on I C D S . Th e r e fo r e, sim il ar ca sh in t e r e st p ay m en t m u st h a v e b e en m ad e t o all m em b e rs o f U .K . P ain t s g r ou p , S h ah i g r ou p & S p an G ro u p . A cc o r d in g l y it i s p ra y ed t h at un a c c ou n t ed in t e r es t p aid t o all l en d e r s a s p e r as s e s sm en t o r d e r , sh ou l d b e u p h e ld .
V. Re ve n ue A pp e a l f o r A. Y. 20 10 -1 1 :
D el et i on o f ad d it i on on ac c ou n t o f ( G ND N o . 9 & 1 0) Ca sh r e c eip t R s . 4 5 c r or e s .
F act s o f t he c a s e :-
V at ik a g r ou p an d S h ah i g r ou p , s p an G r ou p & D h in g ra G r o u p en t er e d in t o d e al in F . Y. 2 0 0 9 - 1 0 & 2 0 1 0 - 1 1 wh e r e v at ik a g ro u p ha s ag r e ed t o s al e l an d at s e ct o r 8 4 & 8 5 of Gu rg a on lan d vid e ag r e em en t t o sal e wit h S h ah i g r ou p , sp an g r ou p & D h in g ra G r ou p . T h e d et a il s o f su ch ag r e e m en t i s as u n d e r: -
' B uy e r' / G ro u p T ot a l ' s a l e s' R at e p er sq . T ot a l ar e a ( sq .
Co n si d er a t io n Y a rd s ( A m o u nt Y a rd s ) u nd e r
( Am ou nt Rs . ) Rs .) ' s a le'
S c o rp i o R e s ea r ch & 3 5, 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000
Co n su lt an t s P vt .
Lt d ./ D h in g ra G r ou p
H .A . R ea lt o rs P vt . 3 5, 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000
Lt d . ( S h ah i E xp o rt s
g r ou p )
P osi t iv e Bu i ld w e l l 3 5, 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000
Pvt . Lt d . (Span
In d ia g r ou p )
D u rin g s e ar ch op e r at i on v a ri ou s m ai ls we r e r e c ov e r ed f r om h a rd d i s c
A n n e xu r e A - 6 6 fr o m 'V at ik a T r ian g l e " S h u sh an t Lo k - 1 M. G . R oad Gu rg a on in r e sp e ct of t h is t r an s f e r o f l an d . Ld . A O h a s r ep r od u c ed t h e c on t en t s of t h e f o ll owi n g m ai ls i n t h e a ss e s sm en t o r d e r:69 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 S . N O. M a i l D a te Fr om To
1. 0 2 . 0 1 .2 0 1 0 S h . A n u p u m Na g ali a S h . A n i l Bh a lla ( p r om ot e r o f M/ s V at i k a Gr ou p )
2. 1 3 . 0 1 .2 0 1 0 S h . B ala P a ram e sh w ar a S h . A n u p am N ag a lis a
3. 1 5 . 0 1 .2 0 1 0 S h . B ala P a ram e sh w ar a S h . A n u p am N ag a lis a Co p y m a rk ed t o N av e en Ch ou d h a ry , CF O , U . K . Pai n t s g r ou p .
Th e a b ov e m a il s e vid en c e s t h at M/ s V at ik a Lt d . r e c ei v e d u n a c c ou n t ed m on e y of R s , 4 5 c r o r e s on t h e ab ov e l a n d d e al & t h e A O h a s m a d e ad d it i on o f R s . 4 5 cr o r e s .
Fi n di n g s of C IT ( A ) Ld . C IT ( A ) h as c on si d e r ed t h e e vid en c e s in f o r m of em a il r eli e d b y t h e Id . A O an d h eld t h at t h e c on t en t s of m a il is in p r o p o s al f o r m an d d o e s n ot c on s t it u t e ev id en c e of p a ym en t for the ag r e em en t to sa l e under c on s id e rat i on . Th e Ld . C IT ( A ) h a s g iv e n h is fin d in g s in p a r a 4 . 8 . 7, 4 . 8 . 8 & 4 .8 .9 wh e r e h e h a s d el e t ed t h e ad d i t i on m a in l y on 3 c ou n t s .
1. In t h e e m ai ls t h e r at e of sal e f o r lan d a r e d i f f e r en t . Th er e f or e , t h e m ail s a r e in p r o p o sa l f o rm .
2. Th e fig u r e m e n t i on ed in a c c ou n t ed p a ym en t in ca s e of S c o rp i o r e s ea r ch & c on su lt a n t sh ow s en t ir e p a ym en t o f a cc ou n t ed is 3 5 c r or e s as per RTGS, as per s eiz ed m ail there is a c co u n t e d p ay m en t o f R s . 3 c r o r e b e f o r e 2 0 . 0 0 1 . 2 0 1 0 . Th e r e f o re , ev e n ac c ou n t ed p a ym en t d o e s n ot m at ch h en c e e m ail i s a p r op o sal on l y & n ot in r es p e c t of a g r e e m en t t o s al e.
3. N o s t at e m en t w a s r e c o rd ed u / s 1 3 2 ( 4) in r e sp e ct o f t h e s e s eiz ed p ap e r.
M y s u bm i s s io n o n th i s i s su e :-
1. U n d is p u t ed l y M/ s V at ik a Lt d . h a s e n t e r ed in t o 3 a g r e e m en t s of sal e t o 3 g r ou p c om p an ie s of S h ah i , D h in g ra & S p an g r ou p as t ab u la t ed in ea rl i e r p a rag ra p h o f A O' s fin d in g s . Th e p e ri o d o f su ch a g re em en t s of sal e 70 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 is J an . 2 0 1 0 . In ca s e o f S c o rp i o r e s ea r ch & c on su lt an t s Pv t . Lt d . Th e d at e o f ag r e em en t s t o sa le i s 2 0 .0 1 .2 0 1 0 .
2. A ll t h r e e m ail s a re in t h e m on t h o f J a n 2 0 1 0 i .e. d a t e 0 2 .0 1 .2 0 1 0 . 1 3 . 0 1 .2 0 1 0 & 1 5 . 0 1 .2 0 1 0 .
3. Th e s e e m ai ls a r e b et w e en p r o m ot e rs o f M/ s V a t ik a Lt d . & s en i o r p e r s on s o f Pu rch as e r g r ou p o r c o p y wo r k ed t o t h em su c h a s S h . A n i l Bh a lla o f M/ s V at ik a Lt d . S h . P a rm e sh w a ra A r o ra , S h . Na v e en C h o u rd h a ry CF O o f U .K . Pa in t s g r ou p , D h in g r a g r ou p .
4. Em a il d at ed 1 3 .0 1 . 2 0 1 0 h a s at t a ch ed wit h d o cu m en t s n a m e d V a t ik a 1 0 0 c r o r e s N H 8 a g r e em en t w o rd 1 9 9 7 d o cu m en t s . T h ere f o r e , t h e n am e of d o cu m en t s c l ea rl y s u g g e st s t h at t h e d e al i s r eg ar d in g N H- 8 lan d in r e sp e ct o f s e ct o r 8 5 & 8 6 o f Gu rg a on wh i ch m a t ch e s wit h t h e a g r e em en t s t o sal e .
F u rt h e r t h is at t ach m en t c on t ain s t h e S h ah i fu n d in g , U .K . Pain t s fu n d in g & S p an g r ou p fu n d in g r ep r od u c ed i n t h e as s e ss m en t o rd e r ( p ag e 6 8 & 6 9) . S t ill fu rt h e r t h e a r ea so ld f o r e ach g r ou p i s 3 7 5 5 6 sq . Ya r d & ac t u al ag r e e m en t t o s al e is f o r 4 0 0 0 0 sq . Ya rd wh i ch alm o st m at ch e s.
5. In t h e at t a ch m en t t o m a il d at e d 1 3 . 0 1 .2 0 1 0 t ot a l b ala n c e p a ym en t to be m ad e in d if f e r en t g r ou p are as under: - S h ah i G ro u p - R s . 3 3, 3 3 ,3 1 ,9 0 0/ - UK Pain t s G r ou p Rs. 3 3,3 3, 5 4 ,3 0 0/ - S PA N g r ou p R s. 3 0, 3 3 ,2 9 ,7 0 8/ - .
If w e ad d 'A ' a s a c cou n t ed fr o m al r e ad y p aid i n t h e g r ou p , t ot al s al e c on s id e rat i on c om e s t o S HA H I G r ou p R s .3 4, 8 3, 3 1 ,9 0 0/ - ( R s. 1, 5 0,0 0, 0 0 0/ - + Rs .3 3, 3 3, 3 1 ,9 0 0/ - ) 'A ' fu n d g i v en al r ea d y U K Pain t G r ou p R s .3 6,3 3, 5 4 ,3 0 0 / - ( R s. 3 ,0 0 ,0 0, 0 0 0/ - + R s .3 3,3 3, 5 4 ,3 0 0 / - ) 'A ' fu n d g i v en al r ea d y S PA N G r ou p R s. 3 1, 3 3 ,2 9 ,7 0 8/ - ( R s . 1 0 0 0 0 0 0 0/ - + R s .3 0 ,3 3, 2 9 ,7 0 8 / - ) A c c ou n t ed f u n d g iv e n al r e ad y ( A O p ag e N o. 6 7 & 6 8) Th e ab o v e fig u r e a lm ost m at ch e s wit h sal e c on si d er at i on sh o wn in t h e ag r e e m en t f o r sal e wh i ch i s R s . 3 5 c r o r e in ea ch g rou p .
71 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 In vi ew i f t h e ab o v e t h e d at a c on t ai n ed in t h e s e m ai ls m at ch e s w it h ag r e e m en t t o s al e e n t e r ed b y t h e p a rt i e s.
Ld . C IT( A ) 's fin d in g t h at R s. 3 cr o r e s ac c ou n t m o n ey r e c ei v ed t i ll em ail d at ed 1 3 . 0 1 .2 0 2 1 & 1 5 . 0 1 .2 0 2 1 in ca s e of S co r p i o R es ea r ch & C on su lt an t Pvt . L t d . ( U K Pa in t s G r ou p ) is n ot su p p o r t e d b y sal e d e ed a s a c co u n t ed fu n d p a ym en t d o e s n ot c on t ain R s .3 c r o r e, it m a y b e m e n t ion e d t h at Ld . CI T( A ) h im s el f in P ar a 4 .4 .8 on p ag e 1 1 9 h as n ot ed t h a t t h e c on si d er at i on d ep ic t ed in t h e ag r e em en t f o r s al e i s R s. 3 5 c r o r e p ai d b y R TG S on 2 0 . 0 1 .2 0 1 0 w h er e a l ed g e r of Vatika S h o ws p a ym en t by ch eq u e on 1 0 . 0 1 .2 0 1 0 for Rs 2 9,3 3, 3 9 ,9 0 6 / - & R s. 5, 6 6 ,6 0 ,0 9 4/ - on 2 1 .0 1 .2 0 1 0 ( R T GS ) . Th e r ef o r e , en t r y in t h e b o o k s o f ac c ou n t s of M/ s V at ik a Lt d . d o e s n ot m at ch wit h ag r e em en t t o sa l e. H en c e on t h i s b a si s ab o v e , t h e c on t en t s o f m ail can n ot d is ca rd ed .
In vi e w o f t h e ab o v e , t h e c on t en t s m en t ion e d in t h e m ail i s n ot e st i m at e d fig u r e but h av e a c o r r ela t i on wit h act u al d eal of ag r e em en t to sa l e b et w e en V at ik a & t h r e e g ro u p s.
N ow c om in g to fi g u r e 'B ' wh i ch h as b e en d e cip h e r e d by b la ck or u n ac c ou n t e d , t h e r e is a c oh e r en c y i n t h e m a il
i) In t h e d o cu m en t s at t a ch ed wit h t h e m ail d at ed 1 3 .0 1 .2 0 1 0 . T ot al Bla ck / u n a cc ou n t e d f u n d a l r ead y g iv en g r ou p w is e a s u n d e r:
a. S HA HI G r ou p " B " R s. 1 . 5 0 c r o r e b. U .K P ain t G r ou p "B " R s . 3 .0 0 C r o r e c. S PA N G r ou p "B " R s . 1 2 .0 0 c r o r e ( Pag e No . 6 8 & 6 9 o f A O ) ii) In t h e d o cu m en t s at t a ch ed the m a il d at e d 2 0 .0 1 .2 0 1 0 . t ot a l
b la ck / u n ac c ou n t e d f u n d a l r ead y g iv en / t o b e g iv en i s a s u n d e r:
a) S H A HI G ro u p B 8 .5 0 C r o r e
B+ - 6 . 5 0 c r o r e ( t o b e g i v en )
b) . U .K p a in t fu n d in g
'B ' - Rs. 7.00 crore
72 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 B+ - R s . 8 .0 0 c r or e ( t o b e g i ve n )
c) . S PA N fu n d in g 'B ' - R s . 1 2 .0 0 c ro r e B+ - R s . 3 .0 0 c r or e ( t o b e g i ve n ) ( Pg N o 7 2 & 7 3 of A O) T ot al c om e s t o R s . 4 5 C r o re .
Th es e fu n d al r e ad y g iv en o r t o b e g i v en i s r ed u c e d f r o m t ot al c o st in g t o ar ri v e at t h e f ig u r e fo r ag r e e m en t t o sal e . In v i ew of t h e ab o v e , t ot a l b la ck / u n ac c ou n t e d f u n d al r ead y g i v en o r t o b e g i v en a s p e r r ec o rd e m ai l d at ed 2 0 .0 1 .2 0 2 2 s h ou l d b e c on si d er e d a s fin al b l ack m o n e y c o rr e sp on d en t wh i ch i s R s . 4 5 c r o r e in t h e d eal wh i ch i s j u s t a da y e a rli e r t o d at e o f ag r e e m en t t o sa l e. S in c e t h e w o rd i n g s o f s eiz ed m at e ria l a r e q u it e c l ea r & sp e ci fi c, t h e ad d it i o n m ad e b y A O m a y b e r e st or e d . "
Sd/-
( H .K . Ch ou d h a r y) Co m m is si on e r of In c om e Ta x ( D R ) , G- B en ch , I TA T, N ew D elh i
40. The ld. DR argued extensively on various dates detailing the entire events of all the groups involved along with the M/s Vatika Ltd. He has taken us through the seized material pertaining to U.K. Paints India Pvt. Ltd. and the agreements thereof, the agreements with Sohan Singh Dhingra, Heminder Kumari, Span India Pvt. Ltd. and also SEH Realtors Pvt. Ltd. He has argued based on the fund flow showing that the fund used in repurchase of the property from the lender in the name of M/s Lincoln Developers Pvt. Ltd. is the fund of M/s Vatika Ltd. The table has been shown at page no. 6/7 of the written submission of the ld. DR which is reproduced above. The ld. DR has also argued based on the initial agreements, advancing the money, subsequent agreements, loan-cum-purchase agreement, collateral securities, personal guarantees and the PDCs. The ld.73 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 DR has also emphasized on the compulsory buy-back from the lender at the option of the investor lender parties. The ld. DR's main argument was that in view of the securities, the advance given is fully secured and it can never be treated as a purchase transaction.
41. The ld. DR argued that the unaccounted interest payment had no bearing in the recorded transaction. It was argued that if the transaction is held to be a loan transaction and unaccounted interest payment is upheld, to the extent of change in the work-in-progress due to buy-back of property, set off can be given from the interest. The ld. DR disputed the contention of the assessee regarding erroneous, invocation of Section 69 and submitted that such contention is not tenable as from the conduct of the assessee by accepting buy-back value less than principal and interest at buy-back proves that the assessee has paid unaccounted interest and therefore such expenditure has indeed been incurred and hence Section 69C can be invoked. At this juncture, it is pertinent to mention that this interest has been held to be chargeable in the A.Y. 2011-12 by the ld. CIT(A) instead of A.Y. 2006-07. The ld. CIT(A) held that all the interest was paid at the time of buy-back and all the liability of the assessee got discharged towards the lender.
42. The ld. AR argued that the transactions with U.K. Paints Pvt. Ltd., Dhingra Group, Span India Pvt. Ltd. and Heminder Kumari are business transactions and there was no evidence that the assessee made any actual payment, be it A.Y. 2006-07 or 2011-12, in the case of NH8 Project. It was argued that the 74 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 assessee received advance against the sale both in respect of Jaipur Deal and NH8 deal and that against such advances, the plots of land have been allotted, the same have been reflected in the regular books of accounts and then sold and offered to tax as income on the basis of percentage completion method. It was argued that the revenue has accepted the income so offered by the assessee while framing assessment, thus, accepting that the transactions have been accepted as that of sale. The ld. AR argued that notwithstanding the fact whether these transactions were loan transactions or advance received against sale of plots, the interest cannot be charged in the A.Y. 2011-12 as no evidence was found either as a result of search or even otherwise to indicate that the assessee actually made the payments. It was argued that even the ld. DR during the arguments did not bring out any evidence to prove that any interest has been paid to the lender parties.
43. Heard the arguments of both the parties and perused the material available on record.
44. We find that the learned CIT(A) while summing up in para 4.3.3.18 has held that the conclusion drawn by the AO in respect of the appellant's transactions for the Jaipur deal are erroneous and thus interest income added by the AO for AY 2006-07 to A.Y. 2011-12 in respect of the Jaipur deal was deleted. With regard to Jaipur Deal, the ld. CIT(A) held that the parties executed documents of agreement to sale in respect of certain properties owned by Vatika at Jaipur. As per these agreements, a specific right was granted to the buyers that the 75 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 plots, which were subject matter of the sale agreement, may be sold back by them to Vatika at a pre-determined sale consideration and additional payments of Rs.1,87,77,000/- was made by these parties for preferential plots allotted. The terms of the existing agreement between the parties prove that the transactions were for purchase of plots and not a financial transaction in the nature of loan. It was held that the agreements for sale have been entered by these parties with Vatika the "seller", on various dates in the month of May and June, 2005. Sanskar Buildtech P. Ltd. and Nakshatra Buildcon P. Ltd., who are the owners of the property, were the "confirming parties" to these agreements. It was a fact on record that the parties made full and complete payments of the cost of the plots including preferential location charges. We agree with the observation of the ld. CIT(A) that for construing the intention of the parties from the contents of a contractual document between them, the entirety of the contract must be construed and an effort must be made to harmonize the individual parts into the whole. The ld. CIT(A) has rightly inferred through the harmonious reading of the agreements that the intention was to purchase the plots and not to advance loans as terms of the very first agreement and the accounting treatment given in the books of the parties also proves the same. We affirm the finding of the CIT(A) that none of the evidences referred to by the A.O. either individually or collectively, can be said to indicate that the specific transaction between the buyer and the assessee was actually a loan transaction.76 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
45. With regard to NH8 Deal, the five customers namely, UK Paints Pvt. Ltd., SS Dhingra (HUF), Span India Pvt. Ltd., M/s SEH Realtors Pvt. Ltd and Smt. Heminder Kumari have lent monies for purchase of space in NH-8 Gurgaon known as "Vatika India Next", which aggregate to Rs. 25 crores and learned CIT(A) had held that out of the five customers, amount advanced by four customers i.e. other than M/s SEH Realtors Pvt. Ltd., was on account of loan till the date of allotment of the plot and the amount advanced by M/s SEH Realtors Pvt. Ltd. was on account of purchase of space, as such, proportionate interest in respect of sum received as advance of Rs. 10 crores from M/s SEH Realtors Pvt. Ltd. was deleted. Whereas, the proportionate interest in respect of sum of Rs. 15 crores received from 4 customers/lenders has been sustained on the ground that transaction with such 4 customers/lenders was loan simplicitor till the date of allotment of plot. While concurring with the decision of the ld. CIT(A) pertaining to M/s SEH Realtors Pvt. Ltd. on the issue of deletion made on account of alleged interest paid, we are unable to agree with the decision of the ld. CIT(A) holding that transaction with such 4 customers/lenders was loan simplicitor for the following reasons. In respect of NH-8 deal qua aforesaid four customers, the ld. CIT(A) has held that initial agreements were loan agreements, as in such agreements there was no indication of any purchase of land. By entering into the amendatory loan cum purchase agreement, the original agreement is amended to extend the periodicity of loan with an additional amendatory clause giving an option to the lender to opt for purchase of plots. It was held that this clause only provide an option to 77 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 purchase at future date, and same by itself does not convert the loan agreement to purchase agreement. It was held that subsequent extension agreements only change the date of tenure of loan and the amounts of PDCs, and all other conditions of the amendatory agreement continues in the extension agreement. It was held by the learned CIT(A) that it is only in the AY 2011-12 i.e. upon the exercise of the option to purchase the space, and allotment of plot thereafter, the loan agreement got converted into purchase agreement and till the exercise of the option, nature of agreement continued as a loan transaction till the AY 2010-11. Such findings of ld. CIT(A) are not correct on facts as he has failed to appreciate that loan agreement was subsequently modified as "Amendatory Loan cum Purchase Agreement", under which the vendees had opted to convert the loan as purchase consideration for the purchase of plot of land which tenure was extended from time to time and plot of aforesaid land was indeed allotted to the lenders in AY 2011-12.
46. All the lender parties were allotted the same area of plot as was quantified in the Amendatory Loan cum Purchase Agreement without any further charges. That infact, it is only such amendatory agreement which had been acted upon when the vendees had also taken both constructive and physical delivery of plots allotted to them. Thus, the lenders have exercised their option to acquire the plots of land instead of accepting the amount of interest originally agreed to be taken from the assessee. This fact itself shows that the original loan agreements, at this juncture, were effectively converted into an 78 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 agreement to sell/purchase of plots, and hence accrual of any interest does not arise at all. It is a fact that as per the terms of the Amendatory Loan cum Purchase Agreement, on exercise of the option to purchase the residential plot, the loan agreements and Amendatory Loan cum Purchase Agreement shall be deemed to be an agreement to sell and purchase of the residential plots. Under the loan agreements, Amendatory Loan cum Purchase Agreement and Extension Agreements, PDCs were given to the lender/customer in respect of principal amount and interest amount. However, since the lenders/customers never treated the agreement as loan agreement but always wanted to purchase the plot, as such, PDC's were never encashed. Had it been a case of loan instead of advance then obviously the allottees of the land, instead of taking the delivery of plots would have enchased the PDCs. The PDCs were given only as a security pending allotment so that the amounts are secured.
47. It is an undisputed fact that ultimately the plots were allotted to these parties as per Amendatory Loan cum Purchase Agreement/extension agreements. The situation could have been different, had they not exercised the option to purchase the plots or the plots were not allotted to such lenders. Once the plots were ultimately allotted to such parties, the nature of the agreements changed from loan agreement to agreement to sell/purchase of the plots. It is also a fact on record that no evidence of payment of any such interest has been found, which itself proves that no such liability by way of interest has accrued to the assessee. Infact, neither in the assessment proceedings nor in the first appellate proceedings, any material 79 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 has been brought on record to support the assumption that the assessee has incurred a liability by way of interest. There is no evidence, even, to suggest that the lenders have actually received any interest. Under these circumstances, the contention of the revenue that the assessee has paid the entire accrued interest till the date of allotment of the plots to the lenders, as agreed, but outside its books in cash is nothing but a figment imagination and based on mere suspicion and surmises.
48. Academically, if the statement of the revenue, that the assessee has paid unaccounted interest to the lender parties is considered as correct, in the backdrop of the fact that the principal amount received is accounted by the assessee as well as by the loan parties, the payment of interest from the books would be advantageous to the assessee to reduce their taxable income and hence we are not in a considered situation to accept the presumption of the revenue.
49. Further, we find that the agreements themselves show that the interest was not actually paid upto 27.08.2010 but accumulated and hence the question of payment of interest annually and disallowance of such interest by the revenue doesn't arise. And since the space was allotted by the assessee to these parties even the purported accumulated interest cannot be taxable in the A.Y. 2011-12. With regard to the allegation of the revenue that buy-back value is less than the principal plus interest proves that assessee has paid the unaccounted interest and is taxable u/s 69C of the Act is erroneous in the absence of 80 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 any material found either from the premises of the assessee or from the premises of investors that assessee has paid any unaccounted interest, as there can be none, since the investors were allotted the plot of land as was stipulated in the Amendatory Loan cum Purchase Agreement and Extension Agreements.
50. In the result, we decline to interfere with the order of ld. CIT(A) pertaining to the interest chargeable in case of SEH Realtors Pvt. Ltd. and unaccounted interest payment on account of Jaipur Project. With regard to NH8 Project, since the plots have been duly allotted as per the modified agreements and in the absence of any material found and seized/impounded suggesting interest payment in cash/unaccounted, we hold that no interest can be taxed on notional basis.
ITA No. 3709/Del/ 2017 : A.Y. 2010-11 Addition on account of Cash Receipts:
Excerpts from the Assessment Order
51. Vatika group and Shahi Exports group, Span India group and Dhingra group entered into a deal in the F.Y.2009-10 and 2010-11. As per this deal the various groups agreed to 'buy' and Vatika group agreed to 'sell' land in sector 84 & 85 of Gurgaon, Haryana. Separate 'Agreements for sale' were entered into between these groups and Vatika group. Following are the amounts stipulated [in the 'agreements to sell'] to be 'advanced' by each of these groups:81 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 'Bu y e r s/ G ro u p T ot al 's al e s ' R at e p e r T ot al a r e a Co n si d e rat i on sq . ya rd s ( S q . ya rd s) ( A m ou n t R s. ) ( A m ou n t R s. ) u n d e r ' sal e' S c o rp i o R e s ea r ch & C on su l t an t s 3 5 , 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000 Pvt . L t d . / Dh i n g r a g r ou p H .A R eal t o r s P vt . Lt d . ( S h ah i 3 5 , 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000 E xp o rt s g r ou p ) P osi t i ve Bu i l d wel l Pvt . Lt d . ( S p an 3 5 , 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000 In d i a g r ou p )
52. E-mail dated 02.01.2010 retrieved from the computers reads as under:
"F r om : an u p am n ag a lia@ va t ik a g r ou p . c o m D at e: S at , 2 J an 2 0 1 0 1 8 : 3 6 0 5 +0 5 3 0 T o: an il b h all a@ va t ik ag r ou p . c om S u b j ec t : S h ah i N ew D e al D e ar M r. Bh all a, Maj o r h ig h lig h t s o f t h e n ew ag r e e m en t wit h S h ah i G rou p
1. T ot al d e al si z e 1 5 0 c rs ( in cl u d in g 3 0 o f p r e s en t l oan ) .
2. T ot al a r e a t o b e p u r ch a s ed - 1 0 0 a cr e s .
3. T ot al ya r d s t o b e g iv en - 1, 3 0 ,0 0 0 y d s c om p u t e d at 1 3 0 0/ - y d s p e r a c r e.
4. T ot al Ch c om p on en t i s R s .1 0 0 C r s ( R s.3 3 .3 4 C r. p e r p a rt y) .
5. T ot al yd s p e r en t i t y - 4 3, 3 3 3 y d s .
6. T ot al N et r at e p e r y ar d - 1 0 0 c r s/ 1, 3 0 , 0 0 0 = R s. 7, 69 2 p e r yd .
7. R e- p u rch a s e p ri c e - R s .2 5, 0 0 0/ - per yds. T ot al r e- p u r ch a s e s c on s id e rat i on R s .3 2 5 c rs .
8. En t i r e n e w lan d p u r ch a s e an d a ll ot m e n t o f p l ot s t o b e d on e in S e ct o r 8 4 & 8 5 on ly .
9. T ot al o f 1 0 % o f a r ea b ein g all ot t e d t o b e P LC p l ot s w it h ou t an y PL C ch a rg e s. A n y P LC a r e a ab ov e 1 0 % t o b e ch a rg ed at n o rm al PL C ch a rg es a s a p p l ica b l e.
10. F u n d r e c ei v ed t o b e u t i liz ed fo r b u yin g lan d p o ck et a t s e ct o r 8 4 , 8 5 wit h i n t h e o ve r al l p r oj e ct .82 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
11. Pl ot s t o b e al lo t t ed b y 3 0 t h J u n e 2 0 1 0 . Pl ot s t o b e f r ee o f a n y lien / m o rt g ag e b u t t h e l an d s p u rch a s e d c ou ld b e u n d er lien f o r p r oj e ct r elat e d T e r m L oan o r Ban k Gu a ran t ee s ."
53. The AO held that the following seized documents show that the actual deal size was Rs. 150 crores out of which only Rs. 105 crores were recorded, and the deal entailed cash payments/receipts which were not recorded in the books of accounts of each of the parties mentioned above.
54. From the above email of 02.01.2010 wherein Sh. Anupam Nagalia is apprising Sh. Anil Bhalla regarding the latest 'deal' struck with the consortium referred as 'Shahi Group', the AO held that, • Th i s d eal is r eg a rd i n g S e ct o r 8 4 & 8 5 Gu rg a on d eal wit h t h e ab ov e c on s o rt iu m ( r ef e r r e d t o a s 'S h ah i G r ou p ') a s ca n b e s e en f ro m p oin t no. 8.
• Th e d eal in v olv e s c ash p a ym e n t s / re c ei p t s . Th i s i s s e en f r om p oin t n o .4 wh ich l ay s out Ch C om p on e n t ( o st en sib l y r ef e r rin g to the ch eq u e a m ou n t s) a s R s. 1 0 0 c r o r e s o u t of t h e t ot al d ea l o f R s . 1 5 0 c r or e s . Th i s sh ow s t h e r e m ain in g am o u n t of R s . 5 0 cr o r e s i s ot h e r t h an ' ch eq u e a m ou n t s '.
• P oin t n o. 1 s p eak s o f t ot al d e al siz e of R s . 1 5 0 c ro r es ou t of wh i ch R s . 3 0 c r o r e s is t h e 'p r e s en t l oan '.
• F u rt h e r , an em ail d at ed 1 3 .0 1 .2 0 1 0 s e n t b y S h . Bal a Pa r m e sw a ran t o S h . A n u p a m Nag ali a. Th i s e m ai l h a s als o b e en e xt ra ct e d f r om t h e ab ov e r ef e r r ed h a r d d i s c A n n exu r e A 6 6 .
83 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
55. The scanned image as found from the seized material is as under:
FUNDING PROPOSED Total Funding Rs.130 Cr.
Funding by each party Rs.130 Cr. divided by 3 i.e .
Rs.43,33,33,330/-
Cost agreed Rs.1.50 Cr per acre
Plo ts agree d per acre 1300 sq.yds. per acre
Cost agreed per sq. yd. Rs.1.50 Cr divide d by 1300 i.e. Rs.
11538.50 per sq. yd.
Total No of Plot area to be Rs.43,33,33,330 divide d by Rs.
Allotted to each party 11538.50. i.e . 37555.430 sq. yd. o f plots That is, 37556 sq. yd. of Plots (making round F igure) SHAHI FUNDIN G Total Plots to be taken 37555 sq.yds @ Rs.11538.50 pe r sq.yd i.e . Rs.43,33,39,906.00 Funds A lready given "A" .. Rs.1.50 Cr "B" .. Rs.8.50 Cr Cost of plot pe r sq. yd re-wo rke d to give adjustment of "B" i.e. Rs.43,33,39,905.00 minus Rs.8,50,00,000/- divided by 37556 which is Rs.9275.213 (ro undabout figure o f Rs.9275 per sq. yd) After abo ve adjustments, 37556 sq.yd @ Rs.9275/- pe r sq. yd Total Plots to be taken by i.e . Rs.34,83,31,900/-
Shahi Money alre ady given Rs. 1,50,00,000/-
Balance to be given by Rs.Rs.33,33,31,900/- 15.1.10 Re-purchase agre ed after 2 37555 sq. yd @ Rs.25000/- pe r sq. years yd i.e. Rs.93,89,00,000/-
UK PAINTS FUNDING Total Plots to be taken 37556 sq.yds'@ Rs.11538.50 per sq.yd i.e. Rs.43,33,39,906.00 Funds Already given "A" .. Rs.3.00Cr "B" .. Rs.7.00 Cr Cost of plot per sq. yd re-worked to give adjustment of "BB i.e. Rs.43,33,33,906.00 minus Rs.7,00,00,000/- divided by 37556 which is Rs.9674.61 (roundabout figure of Rs.9675 per sq.yd) 84 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 After above adjustments, 37556 sq.yd @ Rs.9675/- per Total Plots to be taken by sq.yd i.e. Rs.36,33,54,300/-
UK Paints Money already given Rs 3,00,00,000/- Balance to be given by Rs.Rs.33,33,54,300/- 15.1.10
Re-purchase agreed after 2 37556 sq.yd @ Rs.25000/~ per years sq.yd i.e. Rs.93,89,00,000/-
SPAN FUNDING
Total Plots to be taken 37556 sq.yds @ Rs. 11538.50 per
sq.yd i.e. Rs.43,33,39,906.00
Funds Already given "A" .. Rs.1.00 Cr
"B" .. Rs.12.00 Cr
Cost of plot per sq.yd re-worked to give adjustment of "B" i.e. Rs.43,33,39,906.00 minus Rs. 12,00,00,000/- divided by 37556 which is Rs.8343.27 (roundabout figure of Rs.8343 per sq.yd) After above adjustments, 37556 sq.yd @ Rs.8343/- per Total Plots to be taken by sq.yd i.e. Rs, 31,33,29,708/-
Span Money already given Rs. 1,00,00,000/-
Balance to be given by Rs.Rs.30,33,29,708/-
15.1.10 Re-purchase agreed after 2 37556 sq.yd @ Rs.25000/-
years persq.yd i.e. Rs.93,89,00,000/-
56. The AO held that on the perusal of the document, it can be seen that:
• Th e d eal t h e r ei n r el at es t o S e ct o r 8 4 & 8 5 Gu rg a on d eal . • Th es e a g r e em en t s a r e t o b e en t e r ed i n t h e m on t h of J an u a r y 2 0 1 0 . • A s a p a rt o f d eal i t i s p r e- d e ci d e d t h at ad d en d u m ag r e e m en t s t o ag r e em en t f or sal e ar e t o b e en t e r e d . Th es e ad d en d um a g r e em en t s 85 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 wi ll g i ve t h e 'b u y er ' t h e ri g h t t o r e- s el l t h e 'p l ot s ' t o t h e s el l er at a p r ed e t er m i n ed rat e .
• Th i s d eal i s r eg a r d i n g 'f u n d i n g ' o f R s . 1 3 0 cr o r e s t o b e p r o vi d ed b y t h r e e g r ou p s t o V at i ka g r ou p .
• Ea ch p ar t y wi l l fu n d ap p r o x . R s . 4 3 c ro r e s. • Ba s ed on a b o v e t ot al fu n d i n g ra t e p e r sq . y a rd s i s ag r e ed t o b e R s . 1 5 3 8 .5 0 .
• Ba s ed on t h i s r at e o f t ot al fu n d i n g e a c h p a rt y o f th e C on s o rt i u m wi ll g et 3 7 5 5 6 sq . y ar d s .
• N ow 'm on e y al r ea d y g i v en ' is brought into cal cu l at i on s an d ad j u s t m en t i s m ad e i n t h e rat e p e r sq . y ar d s t o e x cl u d e ' B' am ou n t al re ad y r e c ei ve d . In the r e su l t r at e per sq. Ya r d s goes d o wn . H ow e v e r t h e t ot al ar e a t o b e ' s ol d ' d o e s n ot g et s ch a n g e d . Th e f ol l owi n g b e co m e s t h e rat e p e r s q . y a rd s:
Sl. No. G r ou p R at e p e r sq . y ar d s ( R s .)
1 S h ah i Ex p or t s 9275
2 Dh i n g ra ( U K Pai n t s ) 9675
3 S p an In d i a 8343
• A l l t h es e fa ct s cl e arl y sh ow t h at t h e "B" p a rt of "m on e y al r ea d y g i ven " i s a ct u al l y cash am ou n t wh i ch i s n ot a c c ou n t ed f o r . Th i s i s su p p o rt e d f r om t h e fa ct t h at t h e c o st p e r sq . Y a rd s i s re - w o rk e d an d i t g o e s d own wi t h t h e i n t r od u ct i on o f "B " p o rt i on i n t o cal cu l at i on s. • F u rt h e r t h e ab o v e f u n d i n g p r op o sal cl e arl y sh o w t h at s om e p a rt of t h e m on e y t ot al i n g R s . 3 3 cr o r e s h a v e al re ad y b e en g i v en b y t h r e e g r ou p s t o t h e V at i k a g r ou p . Th i s m on e y i n cl u d e s am ou n t s o f R s . 2 7 . 5 c r or e s o f " B" p o rt i on . H o w e v er i t i s e vi d en t l y s e en ab o v e t h a t t h e d e cl ar e d am ou n t s o f ' c on si d e ra t i on s' t o b e r e fl e ct ed i n t h e ab ov e ag r e em en t s wi ll be ad j u st ed to sh o w on l y "A " part an d ot h e r am ou n t s wh i ch a r e st i l l t o b e g i v en an d n ot t h e "B " p a rt . • Th e c on c eal m en t of "B " p a rt of the ' co n si d e rat i on ' cl ea rl y c o rr o b or at e t h e ab o v e m en t i on ed e m ai l o f S h . A n u p a m N ag a li a t o S h . Anil Bh all a h i g hli g h t i n g the u n d e r st a n d i n g of the d eal wi t h the Co n s o rt i u m , wh e r ei n ch eq u e p o rt i on o f t h e d eal i s Rs . 1 0 0 c r or e s ou t o f t ot al d eal si z e of R s . 1 5 0 c ro r e s .
86 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 • A n ot h er em ai l d at e d 1 5 . 0 1 . 2 0 1 0 f r om S h . A n u p a m N ag ali a t o S h . Ni ran j an B eh e ra f o r wa rd i n g c op y o f e m ai l d at ed 1 5 .0 1 .2 0 1 0 f r om S h . Bal a Pa rm e s wa ran t o S h . A n u p am N a g al i a ( of wh i ch cop i es w e r e m a rk e d t o S h . Na v e en Ch ou d h a r y an d S m t . V an d an a W ad h wa al s o) . Th es e e m ai l s h av e b e en e xt ra ct ed f r om h a rd d i s c A n n e xu r e A 6 6 s ei z ed d u ri n g t h e c o u r s e o f s ea r ch at V a t i ka Tri an gl e, S u sh a n t L o k- 1 , M. G . R oa d , Gu rg a on . Th e n avi g at i o n p at h for its e x tra ct i on is Ba cku p : / A l l A r ch i v e Mai l / Cu r r en t U s er A r ch i v e/ A n ag al i a/ a r ch i v e.n s f. In t h e l a st r e f e rr e d e m ai l S h . Bal a P a r m e s wa ran h a s at t a c h ed d ra ft o f t h e fi n al ag r e em en t s t o b e e x e cu t e d b e t w e en t h e l e n d e r g r ou p s an d V at i ka g r ou p on t h e n ew d eal . P e ru sal o f p ag e 2 of t h e at t a ch ed "A g r e em en t f o r sal e " sh o w s t h at t h e ab ov e ag r e ed rat e o f R s. 9 2 7 5 h as b e en i n c o rp o r at ed as the s al e p ri c e per sq . ya rd s in the ag r e em en t b et w e en V at i ka L t d . an d S E H R eal t o r s Pv t . Lt d . ( S h ah i E xp o rt s g r ou p ) .
• Th e r ea ft e r i n l i n e o f t h i s c om m u n i cat i on i s an ot h e r e m ai l d at ed 1 6 . 0 1 .2 0 1 0 f r om S h . Bal a Pa r m e swa r an t o S h . A n u p am Nag al i a. Th es e e m ai l s h av e b e en e xt ra ct ed f r om h a rd d i s c A n n e xu r e A 6 6 s ei z ed d u ri n g t h e c o u r s e o f s ea r ch at V a t i ka Tri an gl e, S u sh a n t L o k- 1 , M. G .R oa d , Gu rg a on . Th e n avi g at i o n p at h for its ex t ract i o n is Ba cku p : \ A l l A r ch i v e Mai l \ Cu r r en t U s er A r ch i v e\ A n ag al i a\ a r ch i v e.n s f. S ca n n ed i m a g e o f t h i s em ai l i s i n s e rt ed b el o w:
b al a.p ar sn e s wa ran @ sh ah i . c o.i n 0 1/ 1 6 / 2 0 1 0 0 2 : 2 3 P M T o an u p a m n a g al i a@vat i ka g r ou p .c o m cc S u b j ec t : V at i ka N ew T r an s a ct i on D ea r M r . Na g al i a, V an d an a 's ag r e e m e n t wi l l b e i n t h e n am e o f Po si t i ve Bu i l d wel l Pvt . Li m i t ed h avi n g o ffi c e a t 2 2 2 , Ok h l a In d u st ri al E st at e, P h - III, N e w D el h i . Th e fu n d i n g wi ll b e s am e a s I al r ea d y s en t t o y ou .
Th e r e wi ll b e a f ou r t h p e r so n / ag m n t . , as I t ol d y ou . It i s f or 2 6 0 0 sq . yd of p l ot s @ R s .1 1 5 3 B .5 0 fo r a t ot al i n ve st m en t of 87 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 R s .3 0 0 , 0 0 ,1 0 0 ./ - ( T h r e e C r o r e s an d H u n d r e d ) . Na m e i s Mr . S an j a y Is ra n i S / o GK Is ran i , R / o 1 0 1 - A , P e a rl A p a rt m en t s , 3 rd C r o ss R o ad , L okh an d wal a C om p l e x, A n d h e ri ( W) , M u m b ai - 5 3 . R e st al l t e rm s a r e sa m e as ot h e r t h r e e .
R g d s.
Pa ra m es wa r an F r om t h e ab ov e e m ai l i t can b e s e en t h at S h . Bal a Pa r m e sw a ran i s t el li ng S h . Nag al i a t h at t h e a g r e e m en t f or t h i s d e al i n t h e ca s e of S p an In d i a g r ou p wo u l d b e i n t h e n a m e o f P o si t i ve Bu i l d wel l Pvt . Lt d .
57. The Assessing Officer relied on the emails and held that it established that the above deal finally entailed cash component of larger amounts. The details are as under:
Em ai l d at ed 2 0 .0 1 . 2 0 1 0 fr o m S h . Bal a Pa rm e sw a ran t o S h . A n u p am Nag al i a wi t h cop i e s m a r k ed t o S h . Na v e en Ch ou d h ar y an d S m t . V an d an a W ad h wa . T h e s u b j e ct o f t h e e m ai l i s "V at i ka N ew F u n d i n g ". It m a y b e m en t i on e d t h at t h i s e m ai l h as b e en wa s f ou n d d el et e d an d t h u s h a s b e en r ec o v e r ed fr o m a h a rd d i s c A n n exu r e A 3 5 s ei z ed i n t h e ca s e of s e a rch of Dh i n g ra g r ou p on 1 6 . 0 9 .2 0 1 1 at 19 D DA Co m m e r ci al Co m p l e x, Za m ru d p u r , N e w D el h i on 1 6 . 0 9 . 20 1 1 . Th e n avi g at i on p at h for its e xt ra ct i on is D ri ve : \ V as an ta m ai l \ ou t i oo k e xp r e ss\ 2 0 1 0 m ai l .d b x .
A w o rd d o cu m en t i s at t a ch ed t o t h i s em ai l . S c an n ed i m a g e of t h i s w o rd d o cu m en t i s i n s e rt e d b el o w:
F U N D IN G PR O P OS E D BY S HA H I, S PA N A N D U K
T ot al F u n d i n g R s .1 5 0 C r
Co st a g r e ed R s .1 .5 0 C r p e r a c r e
Pl ot s ag r e ed p e r a cr e 1 3 0 0 sq .yd s p e r a c r e
Co st a g r e ed p e r sq . yd R s 1 .5 0 C r d i vi d ed b y 1 3 0 0 i .e .
R s .1 1 5 3 8 "5 0 p e r sq . yd
T ot al No o f Pl ot ar ea t o b e 1 5 0 ,0 0 ,0 0 ,0 0 0 d i vi d ed b y R s. 1 1 5 3 8 .5 0 A l l ot t ed i .e. 1 3 0 0 0 0 s q . yd of p l ot s 88 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 S H A H I F U ND IN G T ot al Pl ot s t o b e t a k en 4 4 0 0 0 sq .y d s @ R s . 1 1 5 3 8 .5 0 p e r s q . yd i .e. R s .5 0 ,7 6 , 9 4 ,0 0 0 .0 0 F u n d s A l r e ad y g i ve n "A " . .R s. 1 . 5 0 C r "B " . . R s .8 .5 0 C r "B + - R s .6 .5 0 C r ( T o b e g i ven ) Co st o f p l ot p e r sq . yd r e - w o r k ed a ft e r g i vi n g ad j u st m en t o f "B " an d "B +" i .e. R s 3 5 , 7 6 ,9 4 ,0 0 0 / - d i vi d ed b y 4 4 0 0 0 wh i ch i s R s ,8 1 2 9 .4 0 9 ( r ou n d ab ou t fi g u r e of R s .8 1 2 9 p e r s q . yd ) A ft e r ab o v e ad j u st m en t s , 4 4 0 0 0 sq . yd @ R s. 8 1 2 9/ - .p e r s q . yd i . e. T ot al Pl ot s t o b e t a k en b y S h ah i R s . 3 5 ,7 6 ,7 6 ,0 0 0/ -
Mo n ey al r e ad y g i v e n R s .1 ,5 0 ,0 0 , 0 0 0/ -
Bal an c e t o b e g i v en b y 2 0 .1 .1 0 R s .3 4 ,2 6 , 7 6 ,0 0 0 / -
R e- p u rch a s e ag r e ed a ft e r 2 4 4 0 0 0 sq .y d @ R s .2 5 0 0 0/ - p e r s q . yd
y ea r s i .e. R s .1 1 0 , 0 0 ,0 0 ,0 0 0/ -
U K PA IN TS F U ND IN G
T ot al Pl ot s t o b e t a k en 4 3 0 0 0 sq .yd s @ R s . 1 1 5 3 8 . 5 0 p e r s q . yd
i .e. R s .4 9 ,6 1 , 5 5 ,5 0 0 .0 0
F u n d s A l r e ad y g i ve n "A " . .R s. 3 . 0 0 C r
"B " . . R s .7 .0 O C r
B+ . . R s. 8 . 0 0 C r ( T o b e g i v en )
Co st o f p l ot p e r sq . yd re - w o r k ed a ft e r g i vi n g ad j ust m en t o f "B ° an d "B +" is R s .3 4 ,6 1 , 5 5 , 5 0 0 .0 0 d i vi d ed by 43000 wh i ch is R s. 8 0 5 0 127 ( r ou n d ab ou t fi g u r e o f R s .8 0 5 0 p e r s q . y d ) A ft e r ab o v e ad j u st m en t s , 4 3 0 0 0 s q . yd @ R s .8 0 5 0/ - p er s q . yd T ot al Pl ot s t o b e t ak en b y U K i .e. R s .3 4 ,6 1 , 5 0 ,0 0 0/ -
Pai n t s Mo n ey al r e ad y g i v e n R s .3 ,0 0 ,0 0 , 0 0 0/ - Bal an c e t o b e g i v en b y 2 0 .1 .1 0 R s .3 1 ,6 1 , 5 0 ,0 0 0 / -
R e- p u rch a s e ag r e ed a ft e r 2 y e a rs 4 3 0 0 0 sq .y d @ R s .2 5 0 0 0/ - p e r s q . yd i .e. R s .1 0 7 , 5 0 ,0 0 ,0 0 0/ -
S PA N F U ND IN G
T ot al Pl ot s t o b e t ak en 4 3 0 0 0 sq .y d s @ R s . 1 1 5 3 8 .5 0 p e r s q . yd
i .e. R s .4 9 ,6 1 , 5 5 ,5 0 0 .0 0
F u n d s A l r e ad y g i ve n "A " .. R s . 1 .0 0 O r
"B " . . R s . 1 2 .0 0 Cr
"B +" .. R s .3 .0 0 Cr ( T o b e g i v en )
Co st o f p l ot p e r sq . yd r e - w o r k ed a ft e r g i vi n g ad j u st m en t o f "B " an d "B +" i s R s .3 4 , 6 1 ,5 5 ,5 0 0/ - d i vi d ed b y 4 3 0 0 0 wh i ch i s R s .8 0 5 0 .1 2 7 ( r ou n d a b ou t fi g u r e of R s .8 0 5 0 p e r s q . yd ) A ft e r ab o v e ad j u st m en t s , 4 3 0 0 0 s q . yd @ R s .8 0 5 0/ - p er s q . yd i . e .89 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 T ot al Pl ot s t o b e t a k en b y S p an R s .3 4 ,6 1 , 5 0 ,0 0 0 / -
Mo n ey al r e ad y g i v e n R s .1 ,0 0 ,0 0 , 0 0 0/ - Bal an c e t ob e g i v en b y 2 0 .1 .1 0 R s . 3 3 ,6 1 ,5 0 ,0 0 0/ - R e- p u rch a s e ag r e ed a ft e r 2 4 3 0 0 0 sq .y d @ R s .2 5 0 0 0/ - p e r s q . yd y ea r s i .e. R s . 1 0 7 ,5 0 , 0 0 ,0 0 0/ -
58. From the perusal of this word document, the AO held that an amount of Rs.45 Cr. needs to be taxed being the cash money involved in the transactions. For the sake of ready reference, the relevant part of the order of the AO is reproduced as under:
• The deal the rein relates to Secto r 84 & 85 Gurgao n de al. • The deal size has incre ased to 'funding' of Rs. 150 crores by three gro ups to Vatika group, from the earlier Rs. 130 crores. • Based on abo ve total funding, rate per sq. yards is agree d to be Rs.11538.50.
• Now 'money alre ady given' is bro ught into calculations and adjustment is made in the rate pe r sq. yards to exclude 'B' amount already re ceived as well as "B+" amount (which is yet to be given) . In the result rate per sq. Yards goes down. The following becomes the rate pe r sq. yards:
S l. N o. G r ou p R at e p e r s q . ya rd s T ot al a r ea t o b e ' s o ld ' ( R s .) ( sq .y a rd s) 1 S h ah i Ex p or t s 8129 44000 2 D h in g ra (UK 8050 43000 Pain t s) 3 S p an In d ia 8050 43000 • All these facts clearly show that the "B" part of "mone y alre ady give n" and "B+" amount (which is yet to be given) are actually cash amounts which are not accounted for. This is suppo rte d 90 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 from the fact that the cost pe r sq. Yards is re-worked and it goes down with the increase in "B" portio n which is re flected by introduction o f "B+" portion.
• It is further notice able that even tho ugh the rate per sq. yards to be shown as the 'sale price' goes down with the 'B* and ' B+' component going up/increasing, the 'repurchase' price remains constant at Rs. 25000/- pe r sq. yards. This furthe r corrobo rates the finding that these 'B' and 'B+' portion represe nt unaccounted cash portion of the deal.
• Further the above funding pro posal clearly sho w that some part of the money to taling Rs. 33 cro res have already been given by three gro ups to the Vatika gro up. This money includes amounts of Rs. 27.5 crores of "B" po rtion. Further this mail shows that about Rs. 17.5 crores is the "B+" po rtion of the total 'conside ration' which is yet to be given.
• The refere nce to the part o f money to be given ( for which adjustment in the 'sale price' has be en made) by the words "B+" sho ws an extended po rtion o f "B" only.
• It is there fore e vident from the above calculations that the declared amounts of 'conside rations' to be refle cted in the above agreements will be adjuste d to show only "A" part and other amounts which are still to be given and not the "B" and "
B+" part.
The concealment of "B" and " B+" part of the 'consideration' cle arly corrobo rate the above mentione d email o f Sh. Anupam Nagalia to Sh. Anil Bhalla highlighting the understanding of the deal with the Consortium , where in cheque po rtion of the deal is Rs. 100 crores out of total deal size o f Rs. 150 crores.91 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 It is worthwhile to mention that the abo ve understanding o f funding and the modus o perandi was then e xecute d be tween the parties. This is evident from the seized documents evide ncing the "Agreement fo r sale" be tween V atika gro up and these lende r groups. These documents have been discusse d in detail in para 7.4.1 (B.5) infra. From these agree ments it can be seen that the fo llowing area was 'sold' at the given rates:
'Bu y e r' T ot al ' sal e s ' R at e p e r sq . T ot al ar e a (Sq.
c on s id e rat i on ya rd s ya rd s) u n d e r ' sa l e'
( A m ou n t R s. ) ( A m ou n t R s. )
S c o rp i o R e s ea r ch & 3 5, 0 0 ,0 0 ,0 0 0/ - 8 1 4 0/ - 43000
Co n su lt an t s P vt .
Lt d .
H .A R ealt o r s P vt . 3 5, 0 0 ,0 0 ,0 0 0/ 8 1 4 0/ - 43000
Lt d .
P osi t iv e Bu il d w el l 3 5, 0 0 ,0 0 ,0 0 0/ 8 1 4 0/ - 43000
Pvt . L t d .
T OT A L 1 0 5 ,0 0 ,0 0,0 0 0/ - 129000
Comparison of the above terms of the agreement with the
unde rstanding of funding discussed abo ve it therefore appe ars that there is little de viation from the funding pro posed. It is there fore evide ntly established that the parties have eve n acted on the 'funding pro posed' and it can be cle arly see n that the actual rate of Rs. 11538.50 per sq. Yards fo r plots have no t been state d as 'sale price' in the agree ment. Rathe r the unde rstated rate o f Rs. 8140 has been mentione d in these agreements because cash payments/rece ipts as discusse d abo ve are invo lve d in the de al.
It is the refo re evidently established from the documentary evide nce seized during the search that the following amounts in cash have been received by Vatika Gro up.92 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 S I. N o. Nam e of t h e Ca sh am ou n t Ca sh a m o u n t T ot al " B " an d c om p an y / Gr ou p wh i ch is n ot wh i ch i s n ot "B +" p or t i on r e fl ec t ed in t h e r e fl ec t ed in ( R s .) b o ok s of the books of ac c ou n t s "B " ac c ou n t s " B+ "
p o rt i on ( R s .) p o rt i on ( R s .)
1 S c o rp i o R e s ea r ch & 7,0 0, 0 0 ,0 0 0 / - 8,0 0, 0 0 ,0 0 0 / - 1 5, 0 0 ,0 0 ,0 0 0/ -
Co n su lt an t s P vt . Lt d .
2 HA R eal t or s P vt . L t d . 8,5 0, 0 0 ,0 0 0 / - 6,5 0, 0 0 ,0 0 0 / - 1 5, 0 0 ,0 0 ,0 0 0/ -
S h ah i Ex p or t s G r ou p
3 P osi t iv e Bu ild w ell P vt . 1 2, 0 0 ,0 0 ,0 0 0/ - 3,0 0, 0 0 ,0 0 0 / - 1 5, 0 0 ,0 0 ,0 0 0/ -
Lt d . S p an In d ia G r o u p
T ot al 2 7, 5 0 ,0 0 ,0 0 0/ - 1 7, 5 0 ,0 0 ,0 0 0/ 45 ,0 0, 00 ,0 0 0
- /-
59. Aggrieved with the addition of Rs.45 Cr., the assessee filed appeal before the ld. CIT(A).
60. The ld. CIT(A) deleted the addition on the grounds that these emails do not patently show any agreement or discernible consent arrived at 'between the buyer and the seller regarding the actual area to be purchased or the rate per yard. These emails seem to be in the nature of proposals relating to a planned purchase transaction. The figures are different in the different emails, thus indicating that the emails are more in the nature of discussions. The actual entities from the purchaser group is not identified also in these emails.
61. The ld. CIT(A) considered the transaction with Scorpio Research & Consultants Pvt. Ltd. (a UK paints group concern) as an illustration, the contents of the emails can be summarized in the table below:93 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,
2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Sl. - As per As per email As per email dt. As per email dt.
No. Agreement dated 13.01.2010 20.01.2010
to Sale 02.01.2010 from Bala from Bala
from Anupam Parmeshwara n Parmeswaran to
Nagalia to to Anupam Anupam Nagalia
Anil Bhalla Nagalia
1. Date of 20.01.2010 02.01.2010 13.01.2010 20.01.2010
agreement/
email
2. Area(Developed 1,30,000 1,30,000 1,12,666.29 1,30,000
area only)
3. Total Rs. 105 cr. Rs. 150 cr. Rs. 130 cr. Rs. 150 cr.
Consideration
4. Payment to Rs.35 Not Rs.43,33,39,906 Rs.49,61,55,500
Vatika (only for crores mentioned (including 'A' (including 'A'=
U.K. Paints Rs. 3.00 crores Rs.3.00 cr 'B'=
group) 'B' Rs. 7.00 Rs.7.00cr 'B+'
crores = Rs.8.00 cr (to
be given)
5. Payment to Rs. 105 Rs. 150 cr. Rs. 130 cr. Rs. 150 cr.
Vatika by U.K. crores (including (including A (including A, B
group, Span 'present loan' (Rs.5.50 Cr.) & & B+ = Rs.
group, Shahi R s . 3 0 crores) B ( R s . 2 7 . 5 0 c r . ) 5 0 . 5 0 crores
group = Rs.33 crores) (incl. Rs. 17
crores under
'B+' "to be
given")
6. Sale price - Rs. 7692 Rs.9675 Rs.8050
computed after,
excluding 'B' &
'B+'
62. The ld. CIT(A) held that subsequent to these emails,
Scorpio Research & Consultants Pvt. Ltd. has entered into an agreement to Sale with Vatika Ltd. on 20.01.2010, in which the sale rate is Rs.8050/- p. sq. yd., which raises a suspicion that the recorded transaction excludes the 'B' and 'B+' sums, which were paid as unaccounted consideration. However, suspicion however strong, cannot take the place of evidence. It can be seen that even after excluding the 'B' part from the email dt.13.01.2010 and the 'B' plus 'B+' parts from the email- dated 20.01.2010 from the total amounts mentioned in the respective 94 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 emails, the consideration so computed does not quite match the actual consideration mentioned in the Agreements to Sale.
There is no evidence about the exact nature of these 'B' and B+" categories that establish that these sums are unaccounted consideration paid in respect of the Agreements to Sale. The ld. CIT(A) also held that no statement has also been recorded u/s 132(4A) or 132(1A) of the Income Tax Act, 1961 on these seized emails.
63. The ld. CIT(A) also held that in the absence of any seized material conclusively showing that the 'B' and 'B+' amounts were actually paid or that any such sums were adjusted against the sale consideration, it has also to be examined if the proposals contained in the emails are actually in respect of the Agreement to Sale entered into with Scorpio Research & Consultants Pvt. Ltd. on 20.01.2010. It would be noticed from the table at para 4.1.7 above that the consideration amounts mentioned in the Agreement to Sale does-;not quite match with the consideration figures in the emails (after excluding the 'B' and 'B+' sums). Moreover, it would be seen that the mainstay of the A.O.'s finding is that the recorded sale rate of Rs.8,050/- per sq yd is similar to the sale value that would be computed after, excluding 'B' and 'B+' amounts, but including the 'A' amount. In the case of Scorpio Research & Consultants Pvt. Ltd., this means that the final sale consideration paid includes an accounted-for sum of Rs. 3 crores (i.e. the 'A' sum), which had apparently already been paid in or before January 2010 (the dates of the emails). Examination of the actual Agreement for Sale dated 20.01.2010 shows that the total sale 95 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 consideration is for a sum of Rs.35 crores. The consideration is depicted in the Agreement to Sale as Rs.35 crores paid by RTGS Transfer on 20.01.2010. The ledger account of Vatika Ltd however shows payment of Rs.29,33,39,906/- ( paid by cheque) on 10.1.2010 and Rs. 5,66,60,094/- on 21.1.2010 (by RTGS). It is thus seen that the consideration paid does not include any sum of Rs. 3 crores paid earlier, thus showing that the proposals seen in the emails could not be in respect of the land which is the subject matter of the Agreement to Sale dated 20.01.2010. Similar is the case with the transactions with H.A. Realtors P. Ltd and with Positive Buildwell P. Ltd.
64. To wrap up, the ld. CIT(A) held that the conclusions drawn by the A.O. are neither backed by any conclusive evidence nor can any such conclusion be logically drawn from an interpretation of the seized material.
65. Aggrieved the revenue filed appeal before us.
66. In these grounds the appellant challenges the additions made on the merits of the A.O's interpretation of the seized documents, The materials relied upon by the A.O. pertains to emails recovered from certain hard disks seized during the search actions of both 16.09.2011 and 16.01.2013. These emails contain an internal discussion of Vatika group and also exchange of emails between the Shahi group and Vatika group, and copies. These emails contain reference to a certain proposed transaction of purchase of developed land from Vatika Ltd by Shahi group, UK Paints group and Span Group (with the purchasers forming a loose consortium). The emails indicate 96 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 details of consideration in respect of a proposed purchase of property by Scorpio Research & Consultants Pvt. Ltd. for purchase of developed plots at a project being undertaken by Vatika Ltd. at Sector 84 & 85, Gurgaon.
67. Before us, the ld. DR relied on the order of the Assessing Officer and the ld. AR supported the order of the ld. CIT(A). The ld. AR argued that the assessment order is merely an extract/reproduction of the Appraisal report and therefore does not bear any application of mind by the A.O. It was argued that no notice, much less any notice of enquiry or a show cause notice was issued to the appellant requiring it to show cause why the addition of a sum of Rs. 45,00,00,000/-, as has been made in the assessment order, being made. Therefore the addition suffers from a basic legal infirmity, inasmuch as that the appellant had not been provided any opportunity. The appellant relied on certain case laws in support of its contention that an order made in violation of principle of natural justice is a nullity in the eyes of law. It was argued that there was no basis of the conclusion that the agreed consideration was Rs. 105 crores, but actual deal size was of Rs. 150 crores. Neither the assessee nor the parties to the agreements have confirmed that finally agreed sale price was actually in excess of the amount of Rs. 8,140 per sq. yard as recorded in the agreement for sale.
68. We have considered rival submissions and perused materials on record. From the observations of the Assessing Officer in the assessment order, it is clearly evident, relying 97 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 upon certain email communications between some persons related to the assessee company and other entities, the Assessing Officer has concluded that in addition to the amount recorded in the agreement towards consideration for sale of land in Sector 84 and 85 of Gurgaon, the assessee received money in cash, as, the information in the email suggests that the total consideration paid towards purchase of land by different entities was to the tune of Rs.150 crores and not the recorded amount of Rs.105 crores. Accordingly, he has inferred that the assessee has received an amount of Rs.45 crores in cash outside the books towards sale consideration of land, which was added back to the income of the assessee. It is observed from the materials on record, except the email communications, the Assessing Officer has no other corroborative evidence to conclusively prove that money in cash had actually changed hands. Except the email communications, no other documents have been seized, either from the assessee or from other entities to indicate that cash payment was actually made. Apart from relying upon the email communication, the Assessing Officer has not made proper inquiry to establish on record that cash payments were actually made to the assessee. As rightly observed by learned Commissioner (Appeals), the emails on which the Assessing Officer placed reliance, essentially, do not patently show any agreement or discernible consent arrived at between the buyer and seller regarding the land to be purchased or the rate per sq. yards. The emails are in the nature of discussions and proposals to a planned purchase transaction. It has been factually found by learned Commissioner (Appeals) that the 98 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 figures relating to the alleged total deal vary in different emails. Learned Commissioner (Appeals) has also given a factual finding that no seized materials were found conclusively establishing that any amount in cash was actually paid or any such sum was adjusted against the final sale consideration.
69. We must say, the Revenue has failed to controvert any of the factual findings recorded by learned Commissioner (Appeals). Though, email relied upon by the Assessing Officer may give rise to suspicion that there may be cash payment in addition to the recorded sale consideration, however, such suspicion, howsoever strong, cannot take place of evidence. It is a fact on record that the Assessing Officer has not brought any evidence to establish that cash payments were actually made to the assessee.
70. In view of the aforesaid, we do not find any reason to interfere with the decision of learned Commissioner (Appeals) on this ground.
ITA No. 3712/Del/ 2017 : A.Y. 2013-14 Addition u/s 69A:
71. During the course of search on 16.01.2013, cash of Rs. 3,42,93,000/- has been found from the office premises of appellant. The A.O. held that a sum of Rs. 32,93,000/- is explained and the remaining sum of Rs. 3,10,00,000/- has been treated as unexplained and addition has been made u/s 69A of the Income Tax Act, 1961.
99 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
72. The assessee submitted that this sum of Rs. 3.10 crores has been received by the appellant as in advance on 15.01.2015 against booking of property by 9 persons. The appellant submitted that these advances were received one day prior to the date of the search and therefore not entered into books of accounts of the assessee company on the day of the search. It was submitted that in the absence of booking forms provided by the Sales Department, these sums were yet to be entered in the books before the date of search. Subsequently allotment letters has also been issued in respect of 9 persons, the names and the amounts received are as under:
Sl. No. Name/PAN Address Amount
1, Chbote Lai S/o Lai H.No.-4, Village and Post 25,00,000
Krishan officer, Sikander Pur, Distt.
Gurgaon - 122001
2. Leela Ram S/o XJmrao Village and Post Office 15,00,000
Sikender Pur, Badha Distt
Gurgaon-122001
3. Jagbeer S/o Madhu Village and Post Office 35,00,000
Singh Harsru, Distt. Gurgaon
4. Satbir S/o Jagan Singh H. No. -16 SikenderPur, - 20,00,000
Badha Distt - Gurgaon-
122004
5.' Deepak S/o Daya Ram Village and Post Office 15,00,000
Sikender Pur, Badha Distt
Gurgaon-122001
6. Ram Singh Yadav S/o H. NO. -16 Village and Post 35,00,000
Seesh Ram Office, Sikender Pur, Badha
Distt Gurgaon-122004
7. Dharam Bhushan Jain Shakahar Building, 1, Ansari 20,00,000 S/o RC. Jain PAN: Road, Daryaganj, New Delhi-
AAFPJ9620G 110002
8. Krishna Yadav - Prop 116-119, Anand Nagar, Sisri 50,00,000 Devi Construction PAN: Road, Vaishali Nagar, Jaipur AADPY8394A
9. Mahender Talk S/o Ram 71, Shanti Nagar, Sirohi, 95,00,000 Prtapji Tak Distt, Rajasthan Total 3,10,00,000 100 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022
73. The evidence submitted by the assessee are allotment applications, allotment letter, confirmation from the party and allocation card from these persons. It was submitted that these persons had duly confirmed having made advanced the respective sums to the appellant. The Assessing Officer examined four parties namely, Dharam Bhushan, Deepak, Chhote Lal and Jagbeer. The observations of the Assessing Officer are as under:
Sh. Dharam Bhushan Jain From the examination of Sh. Dharam Bhushan Jain S/o P. C. Jain it is observed that the party has claimed certain cash withdrawals to have been made prior to the claimed date of booking of flat with Vatika Ltd. The party has failed to substantiate with documentary evidence whether the sum of Rs. 5 lakh withdrawn in the month of November 2012 was actually lying with him.
Sh. Chhote Lal Statement of another party Chhote Lai S/o Lai Krishan is also being referred for analysis. From the statement of the party it is observed that the party is neither carrying his PAN Card or ITR nor remembers the PAN Card no. Further, the source of investment is explained as compensation money received on acquisition of his agricultural land.Further, when be was asked to explain the date of withdrawals he was not able to recall the same. Analysis of the bank statement of the party shows that the credit balance in the account of the party on 27.12.2012 was Rs. 1,50,052/-. The party has not furnished his bank 101 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 statement for January 2013 onwards. Hence, the creditworthiness of the party could not be established. Further, it is important to note that the party was not having his copy of application form or allotment letter/receipt of the payment made it was submitted by him that it will be furnished later. But no such submission was made. Another interesting fact is that which emerges is that the party having the annual source of income of Rs. 50,000/- has booked the plot with M/s. Vatika Ltd for a sum of Rs 1.25 crores. Also, two years have been passed since the date of application of the plot but no further installments have been paid by the party. Hence, the genuineness of the so-called transactions claimed by M/s. Vatika Ltd is in itself questionable.
Sh. Deepak Kumar Similarly, if we examine the statement of the third party Sh. Deepak Kumar S/o Daya Ram it is observed that he has also claimed the source of investment in M/s. Vatika Ltd to be on account of sale of his father's agricultural land in the year 2007. No supporting document of such sale could be furnished by the party. In support of his claim, he produced the bank statement of his father's but no such withdrawal was made on 15.01,2013 rather it must be noted that no cash withdrawal was made from the bank account of his father's in the month of January 2013. Also, it must be noted that the credit balance in this account as on 31.12.2012 was Rs. 6,808/-. Hence, the genuineness and creditworthiness of this transactions could not be established by M/s. Vatika Ltd.
102 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382,2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Sh. Jagbeer It is observed that he has also claimed the source of investment in M/s. Vatika Ltd to be on account of sale of his mother's agricultural land. No supporting document of such sale could be furnished by the-party. When the party was asked to explain the details of withdrawal he claimed to have made a withdrawal of a sum of Rs. 50,00,000/- in February 2012. But he could not explain any plausible reason as to why such huge amount was kept in cash with him for around one year. Hence, the genuineness of the claim of the assessee is not established as no prudent man would keep so much of cash with him for such a long period without any purpose of utilization. Another fact which raises doubt over the claim of the assessee is he could not establish whether this cash withdrawal had actually been received by him from his mother. This once again doubts the genuineness and creditworthiness of these transactions could not be established by M/s. Vatika Ltd.
74. Hence, the AO held that the parties produced by the assessee shows that the assessee could not establish his claim regarding the cash receipts on account of booking amount received from various parties. It was also held that the claim of the assessee is not acceptable as assessee has claimed to have made bookings made on 15.01.2013 that is just a day before search on 16.01.2013 but no copy of booking forms received from the above mentioned customers or the copy of receipt given to them could be seized or found on the date of search. Considering the fact that the assessee was given repeated opportunities during post search investigation to file the 103 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 submissions and explanations regarding the cash found and seized from his premises but no reasonable explanation could be furnished by the assessee, the AO treated the amount of Rs.3.10 Cr. u/s 69A of the Income Tax Act, 1961.
75. The addition made by the AO has been confirmed by the ld. CIT(A) on the grounds that reasons given by the A.O. while rejecting the same has been elaborately brought out in the assessment Order and the AO has found that the explanation for the sum of Rs.3.10 crores as unsatisfactory. The ld. CIT(A) held that the onus is on the appellant not only provide a prima facie satisfactory explanation but also to lead evidence in support of its claim.
76. Heard the arguments of both the parties and perused the material available on record.
77. Having considered rival submissions, we find that the assessee had explained the source of cash seized amounting to Rs.3,10,00,000/- by stating that he has received the amount towards advance booking from 9 persons, who intended to purchase land from the assessee. In support of such contention, the assessee had furnished the names and addresses of the concerned persons and the amount received from them. It is a fact on record that in course of assessment proceeding, the assessee had made a specific request to the Assessing Officer to issue summons to the concerned persons, as they were not cooperating with the assessee. Instead of summoning them, the Assessing Officer called upon the assessee to produce the concerned parties. It is observed, out of 9 persons 4 persons 104 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 confirmed that they had paid money to the assessee towards advance booking of the land. However, the Assessing Officer disbelieved their statements citing various reasons. Another crucial reason for which the Assessing Officer disbelieved assessee's explanation is because of the fact that the advance booking amounts were received on 15.01.2013 just one day prior to the search and seizure operation conducted on 16.01.2013. However, perusal of record reveals that before the departmental authorities the assessee had submitted booking application, allotment letter, confirmations and some other evidences to prove the source of cash found and seized. Having taken note of factual position emerging on record, we are of the view that proper inquiry has not been conducted, either by the Assessing Officer or learned Commissioner (Appeals) to ascertain the veracity of assessee's claim regarding receipt of money from 9 persons towards advance booking of land. When the assessee has furnished the booking application, allotment letters, names and addresses of the persons, who had given advance booking with their PAN, bank statements etc., the minimum that the department could have done is to conduct necessary inquiry not only with the assessee but with the concerned persons to find out, whether, actually the lands were allotted to the concerned persons subsequently. Absolutely, no such inquiry has been made by the Assessing Officer. It is evident, in course of assessment proceeding, not only the assessee had requested the Assessing Officer for issuing summons to the concerned persons to verify assessee's claim, but on the insistence of the Assessing Officer, the assessee could be able to produce 4 persons. As it appears, the Assessing 105 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 Officer has not made any effort to ensure the attendance of the other 5 persons. The Assessing Officer has been conferred with adequate power under the statute to not only conduct necessary inquiry, but even enforce attendance of witness. In the facts of the present appeal, the Assessing Officer has failed to exercise such statutory power.
78. On the other hand, he has put the entire burden on the assessee to prove the source of cash seized. When the assessee has furnished explanation regarding the source of cash seized, the Assessing Officer was duty-bound to make proper inquiry to take the issue to its logical end. Since, the departmental authorities have failed to undertake necessary inquiry to ascertain the veracity of assessee's claim regarding source of cash seized, the assessee cannot be faulted for not providing the required details and proving the source, identity of the persons from whom the amount has been received on account of advance bookings of the plots. The onus having been discharged by the assessee, it was for the revenue to disprove the contentions of the assessee. The assessee cannot be faulted for not issuing the summons u/s 131 by the Assessing Officer and to make further enquiries as deemed fit. Hence, the appeal of the assessee on this ground is liable to be allowed.
79. In the result, this ground of appeal is allowed.
80. To conclude, • With regard to payment of unaccounted interest by Vatika Ltd., in the absence of any details, proof, it is hereby held 106 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 that the addition made on interest paid is liable to be deleted.
• The decision of the ld. CIT(A) in ITA No. 3591, 3592, 3593, 3594, 3595, 3596, 3597 & 3598/Del/2017 in M/s Vatika Ltd. is hereby affirmed.
• The appeal of the assessee in ITA No. 3705, 3706, 3707, 3708, 3709, 3710 & 3711/Del/2017 in M/s Vatika Ltd. are hereby allowed on merits.
• In the absence of any proof of receipt of cash, the decision of the ld. CIT(A) in ITA No. 3709/Del/2017 for the A.Y. 2010-11 is hereby affirmed.
• In the absence of enquiries conducted, the addition made on account of cash on advance booking in ITA No. 3712/Del/2017 for A.Y. 2013-14 is hereby deleted. • Owing to the conclusion that no interest has been paid by M/s Vatika Ltd., the additions made in the hands of M/s U.K. Paints, M/s Span India Pvt. Ltd., M/s Scorpio Research & Consultants Pvt. Ltd., M/s SEH Realtors Pvt. Ltd. on account of interest income are unsustainable. • Owing to the conclusion on merits that no interest has been paid, the additions made in the hands of M/s Span India Pvt. Ltd. and M/s SEH Realtors Pvt. Ltd. would not survive, hence the COs in the case of M/s Span India Pvt. Ltd. and M/s SEH Realtors Pvt. Ltd. are treated as allowed for statistical purpose.
• Since, the matter has been adjudicated on merits of the issue based on facts and judicial pronouncements, any adjudication on the grounds raised on account of Section 107 ITA Nos. 309 to 314, 788 to 792, 2376 to 2382, 2686 to 2692, 3583, 3591 to 3598, 3705 to 3712/Del/2017 CO No. 64/Del/2020 CO Nos. 4 to 8, 11 to 16/Del/2022 148 and Section 153D becomes academic in nature hence not adjudicated.
81. In the result, the appeals of the assessee are allowed, the COs of the assessee are allowed for statistical purpose and the appeals of the Revenue are dismissed.
Order Pronounced in the Open Court on 20/04/2023.
Sd/- Sd/-
(Saktijit Dey) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 20/04/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR