Income Tax Appellate Tribunal - Delhi
Trishla Buildtech Pvt Ltd, Haryana vs Dcit, Central Circle Karnal, Haryana on 9 August, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H', NEW DELHI
Before Sh. C. M. Garg, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
ITA No. 2093/Del/2022 : Asstt. Year: 2012-13
Trishla Buildtech Pvt. Ltd., Vs DCIT,
C/o Rajiv Goel & Associates, Central Circle,
179, Bank Road, Ambala Cantt. Karnal,
Haryana-133001 Haryana-132001
(APPELLANT) (RESPONDENT)
PAN No. AADCT8691C
ITA No. 2468/Del/2022 : Asstt. Year: 2012-13
DCIT, Vs Trishla Buildtech Pvt. Ltd.,
Central Circle, C/o Rajiv Goel & Associates,
Karnal, 179, Bank Road, Ambala Cantt.
Haryana-132001 Haryana-133001
(APPELLANT) (RESPONDENT)
PAN No. AADCT8691C
Assessee by : Sh. Ashwani Kumar, CA &
Sh. Hitesh Minhas, Adv.
Revenue by : Sh. Amit Katoch, Sr. DR
Date of Hearing: 20.07.2023 Date of Pronouncement: 09.08.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the assessee and the Revenue a gainst the orders of ld. C IT(A)-3, Gurgaon dated 29.07.2022
2. In ITA No. 2093/Del/2022 , following grounds have been raised by the assessee:
2 ITA Nos. 2093 & 2468/Del/2022Trishla Buildtech Pvt. Ltd.
"1. That the ld. CIT(A) has erred in law and on facts in confirming the actions of learned AO in reopening the assessment proceedings u/s 147 of the Act, which is bad in law.
2. That the ld. CIT(A) has erred in law a nd on facts in holding that the assessee had failed to prove genuineness of payments of Rs.1,75 ,00,000/- for buyback of flats which was not claimed as expenditure during the year but remained as part of work in progress as on 31.03.2012.
3. That the ld. CIT(A) has exceeded his jurisdiction by advising the AO to make disa llowances of Rs.1,75,00,000/- in the relevant years during which revenue was booked from sale o f flats purchased under buyback scheme."
3. In ITA No. 2468/Del/2022 , following grounds have been raised by the Revenue:
(i) On the facts and in the circumstance s of the case, the L d. CIT(A) has erred in law in deleting the addition of Rs . 1,85,00 ,000/- on account of unexplained credit by ignoring the facts that the limb of Se ction 68 of the Act i.e. genuineness of transaction was not proved.
(ii) O n the fa cts and in the circumstances of the case, the L d. CIT(A) has erred in law in deleting the addition of Rs . 1,85,00,000/- made on account of unexplained credit by holding that the asse ssee has proved all the three limbs of sectio n 68 of the Act, wherea s Ld. CIT(A) himse lf doubted the whole transaction while deciding the issue of addition of Rs. 1,75,00,000/-
thus, the order of Ld. CIT(A) is self contradictory.
(iii) O n the fa cts and in the circumstances of the case, the L d. CIT(A) has erred in law in deleting the addition of Rs . 1,85,00 ,000/- on account of unexplained credit on one hand holding that the assessee has prov ed all the three limbs of section 68 i.e. identity, genuineness and creditworthiness, o n the other hand it was held by Ld. C IT(A) himself that whole arrangement i.e. s ale of 3 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
buy-back of flats was nothing but in the nature of colourable device."
Reopening - Issue notice u/s 148:
4. The reasons recorded by the AO for issue notice u/s 148 are as under:
"Sub:- Assessment procee dings fo r the A.Y . 2012-13 u/s 148 of the I.T. Act, 1961 in your case-Regarding Please refer to yo ur letter da ted 28.04.2018 received in this o ffice on 08.05.2018 wherein requested to treat the or iginally filed return on 29.09.2012 as a valid return in r esponse to no tice u/s 148 of the I.T. Act, 1961 dated 31.03.2018 and fur the r requested to pro vide d copy of re asons recorded for re-opening the assessment. Accordingly, no tice u/s 143(2) date d 21.05.2018 has been issued to you and case fixed for 28.05.2018. On the fixed date, yo u have again file d le tter in 'Dak' requested the rein for co py of reaso ns recorde d for re-o pening the assess ment. Accordingly, as per your reques t the co py of reasons recorded for re-opening the assessment are being supplied to you as unde r:-
"Reasons for issue of Notice unde r sectio n 148 for reopening of assessment u/s 147 o f the Income T ax Act, 1961.
"1. The assessee company has derived income from business of real estate . The return of income fo r A.Y . 2012- 13 was filed on 29.09.2012 decla ring total income at Rs. 60,825/-. Return w as processe d u/s 143(1) of the Inco me tax Act, 1961 on 14.05.2013 accepting the returned income of Rs.60.825/-.
2. A searc h & surv ey actio n u/s 132 of the I.T. Act, 1961 was carried out at Maharishi Markandeshwar Unive rsity Gro up o f Cases, Ambala on 31.10.2014. Also a surve y u/s 133A o f the I.T . Act, 1961 w as 4 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
conducted at business premises of assessee company being connecte d c ase with MMU Trust group.
3. Ding the course of search proceedings, it w as no ticed that the group companies and Individuals of MMU Group he received substantial amounts from the assessee company in vario us AYs for various reaso ns . It was found that assessee com pany has paid commission and rent to the gro up companies and pro moters of MMU Trust Group during F.Y . 2011-12 relev ant to the A.Y. 2012-13 without any bus iness purpose . It was a lso found that the company had booked e xpenditure en account of payments made to MMU group on account o f buy back scheme The details o f the such amounts are under:
I) Commission Paid:-
Sr. No. Name of the group company of M MU Amount Trust G roup
1. M/s M.M. Prope rties and Infrastructure 9,60,000/-
Pvt. L td.
2. M/s M.M. Infratech Pvt. Ltd. 9,10,000/-
3. M/s Eternity Infratech Pvt. L td. 4,95,000/-
Total 23,65,000/- II) Rent Paid :-
Sr. N o. Name of the in div idua l/promo ter Amount of MMU Trust Group
1. Sh. Tarsem Ga rg 8,80,000/-
2. Smt. S anto sh Ga rg 8,80,000/-
Total 17,60,000/-
Grand Tot al (I ) + (II) 41,25,000/-
Buy Back scheme:-
It is seen that the assessee compa ny has claimed e xpenses of Rs .
3,60,00,000/- on this count be ing shown paid to MMU group in the FYs 2011-12 & 2012- 13 (AY 2012-13 & 2013- 14) 5 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
During the surve y procee dings in the case of the as sessee company, the s ta tement o f Sh. Harish Gupta, M D of Trishla Group was reco rded on 31.10.2014 and continued upto 02.11.2014. He was ques tio ned to fur nis h jus tific atio n fo r e xpenses cla imed on account o f commissio n, rent as well as lo ss booked under buy back scheme with members of MMU Trust Group. The relevant extract of t he statement is repro duce d as under:-
"Q .35. Do you know Mr. Visha l ga rg and/or Mr . Tars em Kumar Garg personally. Also a part from this transaction have yo u undertake n in any c apac ity any business or perso nal tra nsac tio n of any nature w ith the abo ve mentioned pe rsons.
Ans. Yes I know Mr. Tarsem Kumar Gar g and Mr. Vishal Garg as our company ha d rented a building in Chandigarh whic h was ow ned by them and also we did business transactio ns for selling of flats in our project fo r the ir personal inves tment as well as sale for getting commission from o ur company.
Q.36. C an yo u please specify the nature o f investments made by the said persons in yo ur project?
Ans. I don' t remember the exact no. flats sold by me to the mentioned persons in Q. No . 35. Also I want to clar ity that they have also referred to other clie nts for pur chase of our flats and they have receive d commission in lieu o f that.
Q.37. The rent paid by yo u to Mr. Ta rsem Garg and Mr. Santosh Gar g in F.Y . 2011-12 and F.Y. 2012-13 was of how much amount. How w as it paid? Do you have re nt deed for the same prese ntly?
Ans. Tota l rent paid in these two F.Y.s was appro x. Rs. 36 Lac s rupees and re nt deed will be provided subsequently as the same is not available in this o ffice. The payments have been made through cheque and TDS has been duly deducte d which may be verified 6 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
thro ugh bank A/ c or le dger A/ cs w hich have bee n provide d to you. No further trans actions of rent was made with these persons.
Q. 38. I am showing you the . Commission A/c legal of Trishla Buildtec h P. Ltd., of F.Y. 2012-13. Kindly identify the parties , Mr. Tarsem Garg and Mrs. Sa ntos h Garg or any related concern to whom commission was paid?
Ans. Mr . Ta rsem Garg and his family members contacted me and to ld that the y have gr oup of clients w ho were interested to buy flats and they nego tiated commission with me for maturing that sale after the booking of the ir refe rred flats. We have give them commission cheque in the ir various concer ns and we have deducted the TDS and duly depos ited to Govt. A/c.
Q. 39. Are you a ware that these are the bogus companies being r un by MMU Trus t Mullana and perso ns concerne d w ith it?
Ans. I am not awa re about their company pro fit at all. I had merely paid the commission.
Q.40. Ca n you give the status of bo okings/investments made by Mr. Tarsem G arg and or his family members?
Ans. Mr. Tarsem Garg and his family members purchased a few flats in our housing project with the com mitment and assurance of certain profit in spec ified time. When the y found that market of re al esta te is becoming slow , then they opted to retur n the flats booking and get committed premium on their paid amount.
Q.41. Kindly give deta ils of the buyback scheme?
Ans. Buy back scheme is booking of flats for sales pro motion to give comfort and confidence to our clie nts. They will surely ge t good return o n their investment e lse we provide to buy back at premises . Through this but back scheme is not a part o f all agre ement to s ale , 7 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
howeve r if and when we give, this after to any pe rs on the same is mentioned in addition to the agreement to sale .
Q.42. Can you provide a. copy of agreement to sale of any o f the buyback scheme w ith a dde d clause o f buyback o ffe r?
Ans. You can go through the agreement copy for flat no . C-l 76 whic h was booked in the name of Mr. Tarsem Garg and verify the conditio n o f buy back.
Q. 43. Please provide a list of clients to w hom you had. offe red this buy back scheme?
Ans. Just now I don' t have the exact list of these c lie nts. I will provide the s ame later on.
Q. 44. C an you give the audite d balance shee ts and. P&L A/c of the F. Y . in which these buy back scheme were offere d to you o r can you give any documentar y evidence whatsoever regarding the wo rking or the modus o perandi of the buyback schemes. Also pro vide a copy of your bank A/c statements from which these payments made collaborating it w ith the amounts received by initially during the booking o f these flats?
Ans. I am trying my best to provide the audited statements. Hopefully the sam e shall be provide d dur ing the state ment recording.
Q.60 W ith regard to the rented premises i.e . kothi No. 526, Sector- 16, C handigar h, complete de ta ils o f other e xpe nses like electricity bill, w ate r bills a nd deta il s of fur ni ture and fixtures may please be provide d. You may produce any other relevant do cument which may prove yo ur te nancy at the above stated kothi during F.Y. 2011-12 and F.Y . 2012-13?
Ans. T his H. No . 526, Sector 16A was rented to m y co mpany Trishla Buildtec h P. L td., for a perio d o f approx. 2 years and the re was no 8 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
extra charges paid fo r electricity or wate r bills which were inc lusion in the re nt. It was used for liaison and promotion of s ales and I used to sit there for promotional wo rk . A rent w as paid through cheque only to the landlo rd and TDS duly deducte d. Rent deed was prepared for the s ame which we have tried to locate but sill it was not been found. It may also be the part o f papers which are c ollecte d by the Sales Tax De par tment. I w ill try to find out o r will contac t to the landlo rd for s upply of co py of the same and that will be pro vided to the respec tive authorities.
Q. 61. You have not been a ble to provide us the rent agreement i n spite of the re peated o ppo rtunities during the last 3 days , nor you were able to pro vide any othe r documentary evide nce in form of electricity bill/wa ter bill etc. to pro ve yo ur tenancy for H. No. 526, Sector - 16A, C handigarh fo r the F. Y. 2011- 12 & 2012-13 for w hic h you had pa id Sh. Tarsem Gar g and Mrs. Santosh Garg, a total re nt of approx. Rs . 36 lacs for these two ye ars . You are asked to sho w c ause as to why this rent paid may not be treated as a bo gus expense by you and an accom modation entr y provided to the Garg family?
Ans. As s tate d earlie r that H. No . 526 w as rented to our company M/s Trishla Buildtech Pv t. Ltd. and rent was paid through cheques and TDS was duly deducted and deposited to Govt. a/c. As concerned to electric ity and water bills that is not pro vi ded bec ause it was paid by them. We had this facility inclusive in our rent and as I told earlier that I will arrange the rent deed soon from Sales Tax Department or will try to find out everywhere to handover you as soon as poss ible . The location of this address was hopefully beneficial fo r the growth o f business of our concern.
Q. 62. In refere nc e, to q. no . 38, please identify the flats for which commission was paid to Sh. Ta rsem Garg and/o r his family members or business conce rns namely MM Properties and Infrastructure Pvt. Ltd., M/s MM Developers Pvt. Ltd., M/s MM Infratec h Pvt. Ltd., M/s 9 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
Bits pace Develo pers Pvt. Ltd., and M/s Eternity Infratech Pvt. Ltd., in F .Y. 2010-11, F .Y. 2011-12, F.Y . 2012- 13?
Ans. Jus t now I don't remember the exact no. o f flats for w hic h commission was paid.
Q. 63. You have not been a ble to pr ovide us the details of the flats for which commission was paid. Yo u have no t been to provide any other kind of documentary evidence in suppo rt of co mmission found at the premises . I n view of the abo ve, please s how c ause so as why an amount o f Rs. 68,50,000/- paid as commission to the companies mentioned in q. no. 62 for the F.Ys. 2010-11, 2011- 12, 2012- 13 may not be treated as the bogus expense and accommodatio n entry give n to Sh. Tarsem Gar g through his busines s co ncerns?
Ans. I res pectfully deny this a llegation that I have no t provide d the documents re la ted to this subjec t. I have already provided ledger a/c bank a/c ledge r, details of payments give by cheque, ledge r a/c showing, TDS deducted and deposited and bank a/c statement c anno t be prov ided today is holiday and I will pro vide any time when it wi ll be demande d by the department after today. You wer e asked in q. no. 43 to prov ide a list of clie nts to whom yo u had offere d the buyback scheme. You have provide d us the ledgers of Sh. T arsem Garg, Sh. Vishal Gar g and Sh. Vishal G arg, HUF which shows that they had booked the flat and subsequently the s ame was cancelled by them and money was re funded to them which as pe r your ledgers has been twice the amount for which the fiat was or iginally booked i.e. for e .g. For flat no . C-l 76 an a mount of Rs. 12.5 lacs was paid by Tarsem Garg o n 06.09.2011, subsequently on 12.10.2011, the same bookings se en to ha ve bee n cancelled and amount o f Rs. 25 lacs was given ba ck to Sh. Tarsem Garg. The re is a loss of Rs. 12 lacs was booked o n account o f buyback of flats. The s ame has bee n done in flats C-l 76 to C-l 77 to C-l 87 w hich are e ither in the name of Sh. Tarsem Ga rg, Vishal Garg or Vishal Garg HUF. Thus, you have 10 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
booked a los s of Rs. 1.75 cro res on account of buyback of flats scheme specifica ll y in the case of Sh. Tarsem Garg and family. Now , howeve r ano the r ledger list of cancelled flats has been provided by you, the details are as fo llow s:-
1. Flat No. C-121 -Aruna Malik
2. Flat No. C-124-S amian Agarwal
3. Flat No. C-16-Sour av Agar wal From the ledger s, it is clear that with these people also, buyback scheme was undertaken, however no loss has been bo oked by you in these c ases i.e. if an amount of Rs. 10 lacs was receive d from the customer in buyback the same amount was returned to the customer.
Thus, it is clear that only in case of Sh. Tarsem Garg and family, the buyback scheme resulted in excess money being paid to them. You are asked to sho w cause as to why this amount of Rs. 1.75 cro re may not be disallowe d as a bogus expense book ed by you for providing a ccommodation entry to Tarsem Garg and family?
Ans. T he buyback scheme is not a usual scheme which we offer regularly to the customers . However during the tim e of financia l crunc h a nd s pecifically in this case Tarsem Garg and family were ready to advance a huge amount at a very sho rt duration since these flats were boo ked by them in bulk , so we offered the m the buyback scheme. Howe ver in o ther cases as mentione d by you, there were individuals who have ca ncelled their booking on their own ei ther on account of inability to pay the installments or any other reason. Thus the same amount was re turned to them and no buyback scheme was offe red to them. Thus we offe r buyback scheme who are ready to purc hase fat in bulk . In reply to show cause, buyback scheme is offe red by our co mpany to the customer only to ge t help from them in susta in the business by wa y of getting a handsome fund to establis h and pro mote the business of the company. As these funds 11 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
are lifelines of the company's busines s. So the same may be treated, as allowa ble expenses.
Q. 69. You were a lso earlier duri ng the statement, to produce a co py of agreement w herein buyback scheme was offere d. Howe ver the same was not been provide d by you, also as mentioned earlier in the statement, co py of agreement of Sh. Tarsem Garg and his family members with whom buyba ck sche me was undertake n have not been provide d by you. You have been given an o ppo rtunity to go through all of the impounded ma terial which was seized from the site office of Trishla C ity a nd Trishal Little India project s ite and the same was not found. What do you have to say in this regard?
Ans. As stated earlier , I a gain submit that many of our do cuments , files and other re cords were seized by the Sale s Tax Department, Punj ab during a survey conducted in March, 2013. These files might be the re. I will request the authorities to go through the reco rd to provide a copy of the same. Just in case, it is no t there. I will sear ch for it and try to prov ide your goo self at the e arliest as and whe n required.
Q. 70 Is there any thing else which you w ish to state?
Ans. Our company is in the business of builders and develo pers and same in the c ase with our firms and in no way provide service as contr acto rs. We a re following the project completion method for a/c purpose continuo usly since ince ption a nd department is also accepting our returns acco rdingly. We have tried our best to pro vide you all k ind of held, records and informatio n readily available with us at our o ffices. If anything has been left we assume you that we will try to pro duce the same to you as and when required by the department."
From perusal of the above statement, it transpires that the expenditure c laimed by the assesse e on account of re nt, commiss ion 12 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
& buy back sc heme was merely a fictitious loss and in the shape of accommodation e ntries. This beco mes evide nt from the fo llow ing fac ts
a) For flat no. C-176 an amount of Rs. 12.5 lacs was paid by Tarsem G arg on 06.09.2011, subsequently on 12.10.2011, the same book ings seen to have be en cance lled and amount o f Rs. 25 lacs was given back to Sh. Tarsem Garg. This negates the c laim o f the assessee company that there was financ ial crunc h as the small amount of Rs. 12.5 lacs was taken & returned twice of the said amount immediate ly in the next month.
b) The above findings shows falsity o f the claim o f the assessee company tha t, the money was invested by the MMU group w ith assur ance of certain profit in spe cified time and when the market o f rea l estate became slo w, they opted to return the fla t booking.
c) No such loss fo und to have been incurred by the assessee company in respect o f o ther book ings.
d) It was claimed that MMU gro up w as re ady to invest conside ra ble amount by way o f book ing o f flats. However , from the deta ils a vailable , it is found that the MMU group didn't inves t co nsiderable amounts with the assessee company.
e) Sh. Ha ris h Gupta, M.D. of Trishla Group faile d to submit or produce any agreement regarding the claim of loss on buy back scheme dur ing the survey proce edings and post survey proceedings.
f) It was also found that the MMU group has taken such accommodation entries from other builders such as Ajanara India Ltd, New Delhi e tc.
g) In respec t of rent, the assessee company could not produce rent agreement in respect of H.No. 526, Secto r 16-A, Chandigarh. Though claimed to have been taken on rent, the 13 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
assessee could no t produce copy of electr icity bill or water bill whic h is a reaso nable ev ide nce of usage of the property. Further, the pro perty was claimed to have been used for promotio nal work . However , nothing more than such c laim was fur nis hed. Pa yment of re nt by cheque & TDS from such payments was in fact the de liberate arrangement to launder the unacco unted inco me of MMU group.
h) Similarly, in respect of Commissio n paid, the assessee could not give the ser vices rendere d by various pe rsons from MMU group to the assessee company. Also the assessee failed to give the deta ils of the clients received due to effor ts o f pe rsons from MMU group. In fact, the assessee company could not give any de tails o f flats sold by it due to the effor ts o f the perso ns Of MMU group.
6. Keeping in vie w the abo ve facts, it is c lear that the assessee company has claimed expenditure on account of abovementio ned expenses only to provide accommodatio n entries to the MMU group. It is to be no ted that that prov iding such entries was beneficial to both the parties for the re ason that MMU group co uld conver t its unacco unted mone y in the guise of commission, buy back pro fit, rent etc. On the o ther hand; the assesse e company co uld reduce its profit by claiming s uch e xpenses which were not incurred in reality.
7. I n view of the aforesaid discussion, I have reasons to believe that the income of Rs. 41,25,000/- on account of rent and commissio n has esc ape d the assessment for AY 2012- 13. Fur ther, the expenditure c la imed on acco unt of buyback sche me represents income whic h has escaped assessment by reason of the fai lure on the par t o f the asse ssee company to disclose fully and truly all mate rial fac ts necessa ry fo r its assessment for the assessment year 2012-13.
14 ITA Nos. 2093 & 2468/Del/2022Trishla Buildtech Pvt. Ltd.
2. The previous appr oval of the Pr. C IT(Central) , Gurugram has been obtained for issue o f notice as conveye d vide o ffice lette r F .No. Pr.CIT(C)GGN/Approva l 147/ 2017-18/8120 de te! 31.03.2018.
You are required to file yo ur reply on the abo ve mentioned points alongwith s ubstantial documentary e vidence on or before 11.06.2018. Also furnish one set of ITR, balance s hee t, profit & loss a/c, audit repo rt alongw ith all the annexures & notes on acco unts."
5. The crux of the reasons are as under:
6. The asse ssee paid commission of Rs.41,25,000/- to two perso ns name ly, Sh. Tarsem Garg and Smt. Santosh Gar g who are the trus tees/promoters of MMU group and their other entities. The AO alleged that such "rent paid" was an "accommodation entry" given by the assessee group to MMU group.
7. The AO held that providing such entry is beneficial to both the parties for the reason that MMU group could convert its unac counted money in the guise of rent whereas the assessee company could reduce its profit by claiming such expenses which are no t incurred in reality. The AO pres umed that the MMU group has given Rs.41,25,000/- to the assessee in cash and the asse ssee has given cheque to the MMU group on account of rent and debited the same in his account as an expe nse. It is not in question that the rent re ceived by any entity is a revenue receipt and taxable as the income earned. The AO has not really brought out any tangible material to prove the theoretical proposition. There is no whisper in the reasons recorded abo ut any fresh material available post assessment to form basis of AO about bogus expenditure as 15 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
alleged. In the entire reason for reopening, statement of Sh. Harish Gupta, Director of Company recorded during survey on 31.10.2014 is reproduced which is neither incriminating nor can be a basis for reopening of assessment. Hence, at the o utset, we hold that the reopening cannot be he ld to be valid and so as the assessment comple ted base d on such notice.
Disallowance a/c of Buyback Scheme and Cash Credit :
8. The AO held that the asse ssee has claimed an expenses of Rs.3,60,00,000/- on account of buyback scheme and the amount is shown to be paid to MMU group in the A.Y. 2012-13.
The AO allege d that the assessee has obtained booking of 12 units from three perso ns against which an amo unt of Rs .1.85 Cr. has been received. These 12 units have been brought back by the asses see company by paying these three "advance booking parties" by pa ying them an extra amount of Rs.1.75 Cr. as premium in addition to the refund of Rs.1.85 Cr. received as advance booking amount.
9. The AO made addition of Rs.1.85 Cr. on account o f the receipt of "advance booking" treating the same as unacco unted mone y of the assessee and also Rs.1.75 Cr. as non-allowable expe nditure u/s 37(1) of the Income Tax Act, 1961. The addition of Rs .1.85 Cr. has been delete d by the ld. CIT(A) and hence the revenue appeal before the Tribunal. The ld. CIT(A) has also held that the amount of Rs.1.75 Cr. be added to the total income of the ye ar in which the income ha s been booked for the sale of flats purchased under buyback s cheme. Hence, the assessee as well as the Revenue are in appeal before us. Both the issue are being dealt as under:
16 ITA Nos. 2093 & 2468/Del/2022Trishla Buildtech Pvt. Ltd.ITA No. 2468/Del/2022 (Rev enue Appeal)
Deletion of Rs.1.85 Cr. / Cash Credit:
10. Heard the arguments of both the parties and peruse d the material available on record.
11. Facts relevant to the adjudication of this issue are that the assessee is a real estate deve loper engaged in developing a proje ct by na me "Trishala City" at Zirakpur on 12.77 acres of land. During the course of reassessment, the AO observed that Sh. Tarsem Garg (HUF) and Sh. Vishal Garg (HUF) booked 4 flats each in the project of the assessee on 31.05.2011 and paid an amount of Rs.5,00,000/- as token money. Later, the buyers agreement s igned on 23.07.2011 for a consideration of Rs.3,60,00,000/- and the complete payment was envisaged over a period of 3 years and the assessee would given possess ion of the flats after three years and on receipt of full sale consideration. On 05.09.2011, an addendum a greement was made to the effect that if the buyers were ready to make the payment of full and final sale co nsideration imme diately a gainst all the 12 flats, the a ssessee would offer them a discount of Rs.1,85,00,000/- and also purchase the entire flats from them after a period of 4 months fro m the date when payment plan was agreed (31.05.2011) at consideration of Rs.3,60,00,000/-. The purchasers have paid Rs.1,85,00,000/- to the assessee and subse quently all the flats were brought back by the assessee after making a payment of Rs.3 ,60,00,000/- in Oc tober 2011.
12. The AO held that in the original agreement to sell, there was no clause of buyback scheme and the addendum agreement 17 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
dated 05.09.2011 was after thought. The AO held that the assessee produced a photocopy of such addendum agreement during the assessme nt proceedings, however , the or iginal agreement was neither found nor produced by the appellant despite sufficient opportunities during the course of s urvey proceedings u/s 133A of the Act. It was observed by the AO that the appellant has failed to establish genuine ness, source of payment and creditworthiness of the buyers in respe ct of receipt of amount of Rs.1,85,00 ,000/- from them which inc luded the token advance of Rs.5,00 ,000/- initially re ceived against booking the flats. It w as held by the AO that the amount of Rs.1,85,00,000/- was deemed income of the assessee as the credits were unexplained.
13. The ld. CIT(A) deleted the addition made by the AO on account of unexplained credit of Rs.1,85,00,000/-.
14. The deta ils of the amounts paid to the assessee from the three parties on account of purchase of 12 flats are as under:
1. Tarsem Garg HUF - Rs.52,00,000/-
2. Visha l Garg - Rs.52,00 ,000/-
3. Visha l Garg HUF - Rs.81,00,000/-
15. The sour ces of the above payments are as under:
1. Tarsem Garg HUF - Rs.52,00,000/-
An amount of Rs.2,00,000/- was paid on 14.04.2011 and Rs.50 ,00,000/- was paid on 06.09.2011. The amount of Rs.50 ,00,000/- has been paid o ut of the amount received from M/s Santosh Hostel as repayme nt of unsecured loans. This fact has been duly supported with the confirmation from Smt. 18 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
Santo sh Garg. The amount of Rs.2,00,000/- wa s given out of Rs.6,60,000/- withdrawn vide cheque on 28.03.2 011. The copy of the ITRs a long with computation of income, copy of bank state ments ha ve been submitted before the revenue authorities.
2. Vishal Garg - Rs.52,00,00 0/-
An amount of Rs.2,00,000/- was paid on 14.04.2011 and Rs.50 ,00,000/- was paid on 23.09.2011. The amount of Rs.45 ,00,000/- has been paid out of the loan amount received from Oriental Bank of Commerce and the remaining amount paid from repayment of unsecured loan of Rs.12,55,842/- from MMU University. The confirmation fro m MMU University has been duly filed along with the bank statement and the ITR consisting of computation o f income. It was also submitted that the case of Sh. Vishal Gar g was assessed by the same Assess ing Officer u/s 143(3) for the same Assessment Year and no addition has been made in the hands of Sh. Vishal Garg.
3. Vishal Garg HUF - Rs.81,00,000/-
An amount of Rs.1,00,000/- was paid on 14.04.2011 and Rs.50 ,00,000/- was paid on 06.09.2011 and Rs.30 ,00,000/- was paid on 29.09 .2011. The amount of Rs.80,00,000/- has been paid out of the amount receive d from Smt. Santosh Garg. This fact has been duly supported with the confirmation from Smt. Santo sh Garg. The copy of the ITR alo ng with c omputation of income, copy of bank stateme nts have been submitted before the revenue authorities.
16. These de tails have been remanded to the AO by the ld. CIT(A) where in the AO could not bring anything on record to counter the identity, creditworthiness of the persons and 19 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
genuineness of the transactions. The AO has duly accepted the evidences submitted by the assessee and no dispute has been raised by the AO during the remand pro ceedings on this issue. Hence, we hold that the ld. CIT(A) has rightly delete d the addition. The appeal of the Revenue on this ground is dismissed.
ITA No. 2468/Del/2022 (Rev enue Appeal) ITA No. 2093/Del/2022 (Assessee Appeal)Disallowance u/s 37(1)/Buyback Scheme:
17. The AO made disallowance of Rs.1,75,00,000/- paid by the assessee to the three parties namely, Tarsem Garg HUF, Sh. Vishal Garg a nd Vishal Garg HUF on account of buyback of 12 flats. These flats have been booked by paying an amount of Rs.1,85,00,000/- and sold to the assessee for Rs.3,60,00,000/-. Thus, the assessee has paid an amount of Rs.1,75,00,000/- which is taxable in the hands o f the recipients as profit against sale of booking. Further, the assessee having the se 12 flats and paid an amount of Rs.3,60,00,000/- to these 3 parties in turn sold the 12 fla ts at rate of Rs.4 ,16,00,000/-. Thus , the assessee made a profit of Rs.56,00,000/- on the sale of 12 flats.
18. At the outset, it was submitted that the amounts have not been claimed in the P&L account and hence, we hold that no disallowance is called for in the instant year.
19. However , we also find that the ld. CIT(A) held tha t the amount of Rs .1,75,00,000/- be disallowed in the year in which these 12 flats would be sold.
20 ITA Nos. 2093 & 2468/Del/2022Trishla Buildtech Pvt. Ltd.
20. We have gone through the entire issue in de tail.
21. We find that the AO made the alleged disallowance on the grounds that the addendum agreement is not signed in the prese nce of w itness and as such not verifiable . It is not in disputed that the agreement is signed by the seller and the buyer. The law in respect of sale agreement is clear that a contract will be said to be valid if signed by even one party and accepted by o ther. The require ment of witness becomes more relevant in case of any dispute arising in between the parties. In this case both par ties have confirmed the transactio n and abse nce of signatures of witness does not make the agreement unverifiable when bo th the e xecutants have confirmed the agreement. The revenue's allegation was that there was no such buyback offered of any other customer is a lso against the facts on record. The similar arrangeme nt has been made with two other customers namely, Sh. Pushpinder Bansal and Smt. Anju Khanna wherein the total payment has be en reduced by Rs.14 .33 lacs and Rs.15.33 lacs respectively. Fur ther, it is also a fact on record that the payment under construction plan was to be realized in 30-36 months as such the ca sh disco unt is offered at the prevailing marke t rate of present value of future cash flow. In this case , inspite of giving a cash discount, the aa could earn a profit of Rs.56,00,000/- on this transaction. It was also a fact on record that the assessee has submitted before the revenue authorities that the upfront dow n payment received has been utilized in purchase of materials used in work-in-pro gress. Further, the revenue has alle ged that the assessee has not made any efforts to mo bilize funds from banks and the assessee has also failed to use the land of 10 acres as collateral for 21 ITA Nos. 2093 & 2468/Del/2022 Trishla Buildtech Pvt. Ltd.
which the assessee submitted that since the land has been purchased out of the funds of the partie s or by taking advances from the market and hence the lands are not free but encumbered. Hence, the possibility of getting loan from the financial institutions is meager and lean. The entire transaction is sale cum finance arrangement wherein the three parties who have booked the 12 flats in advance have been benefited by Rs.1,75,00,000/- of investment profit and also the assessee has bene fited by Rs.56,00 ,000/- of business profit. Hence, the decis ion of the ld. CIT(A) cannot be supported as the disallowance of these amounts cannot be upheld either in this year (assessee has no t claime d) nor in the future years . The expe nse is he ld to be an eligible business expe nditure a s per the provisions of Section 37(1) of the Income Tax Act, 1961.
22. Hence, the appeal of the assessee is allowed and that of the Revenue is liable to be dismissed on this ground.
Order Pronounced in the Open Court on 09/08/202 3.
Sd/- Sd/-
(C. M. Garg) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 09/08/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR