Income Tax Appellate Tribunal - Raipur
I.T.O. Ward -1(2), Raipur (Cg) vs M/S Rcp Infratech Pvt.. Ltd, Raipur (Cg) on 9 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
RAIPUR BENCH, RAIPUR
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI RAM LAL NEGI, JUDICIAL MEMBER)
ITA. No: 273/RPR/2014
(Assessment Year: 2011-12)
Dy. Commissioner of V/S M/s. RCP Infratech Pvt.
Income Tax-1(2), Raipur Ltd. B-54,VIP Est ate,
Khamhardih, Shankar
Nagar, Raipur (C.G)
(Appellant) (Respondent)
PAN: AAPPT0319Q
Appellant by : Shri P.K. Mishra, D.R.
Respondent by : Shri Praveen Jain & R.B. Doshi C.A
(आदे श)/ORDER
Date of hearing : 06 -03-2018
Date of Pronouncement : 09 -03-2018
PER N.K. BILLAIYA, ACCOUNTANT MEMBER
1. With this appeal, the Revenue has challenged the correctness of the order of the Ld. CIT(A), Raipur dated 30.07.2014 pertaining to A.Y. 2011-12.
2 ITA No273/RPR/2014
. A.Y.2011-12
2. The grievance of the revenue reads as under:-
(a) "Whether in law and on facts & circumstances of the case, the learned CIT(A) has erred in deleting the disallowance u/s 40A(3) of IT Act, 1961 of Rs. 34,86,300/- being cash payment towards purchase of land which was stock in trade?"
(b) "Whether in law and on facts & circumstances of the case, the learned CIT(A) has erred in deleting the disallowance u/s 40A(3) without pointing out under what clause of the Rule 6DD, the assessee was entitled to make such cash payments?"
(c) "Whether in law and on facts and circumstances of the case, the learned CIT(A) has erred in giving relief of Rs. 1,16,100/- out of addition of Rs.2,85,550/- made by the AO as unexplained expenditure ? ."
(d) "Whether in law and on facts and circumstances of the case, the learned CIT(A) has erred in deleting the additions u/s 68 of the IT Act, 1961 of Rs. 8.02,00,000/- and Rs. 2,90,00.000/- made by the AO as unexplained cash Credits in the form of unexplained share capital?."
(e) "Whether in law and on facts and circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 36.86.000/- made by the AO on account of unexplained brokerage and commission expense ? ."
3. Briefly stated the facts of the case are that the assessee is engaged in the business as property developers and real estate. The return for the year was filed electronically declaring total income at Rs. 1.04 crores. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
4. During the course of the scrutiny assessment proceedings, the A.O. found that in the immediately preceding assessment year A.Y. 2010-11, the A.O. had made disallowance u/s. 40A(3) of the Act on account of cash payments made for purchase of land as stock-in-trade/transferred to stock-in-trade. Taking a leaf 3 ITA No273/RPR/2014 . A.Y.2011-12 out of the findings given in A.Y. 2010-11, the A.O. called for the details of purchase of land during the year under consideration. The A.O. found that during the year, the assessee has incurred an expenditure of Rs. 52.42 lacs towards purchase of land being stock-in-trade and the same read as under:-
1 Plot purchase: Rs. 50,20,000 Pramod Kedia 3,00,000 by 13,00,000 cheque & 10,00,000 Diptesh Chatterjee 5,00,000 by four 18,60,000 cheques & 13,60,000 by cash Anand Swarnkar 9,56,500 by two 18,60,000 cheques & 9,03,500 by cash 2 Stamp & Fees by cash Rs. 2,22,800 Total Rs. 52,42,800
5. The A.O. was of the opinion that the aforementioned purchases were hit by the provision of Section 40A(3) of the Act. Drawing support from various judicial decisions, the A.O. made the addition of Rs. 34,86,300 u/s. 40A(3) of the Act.
6. The assessee agitated the matter before the ld. CIT(A) and pointed out that the facts in issue are identical with the facts for A.Y. 2008-09. The assessee also placed reliance on various decisions of the Hon'ble High Courts.
7. After considering the facts and the submissions, the ld. CIT(A) observed that the A.O. has applied the provisions of Section 40A(3) in a mechanical manner
4 ITA No273/RPR/2014 . A.Y.2011-12 without appreciating the facts and getting in to objects behind the insertion of Section 40A(3) in the Act being convinced with the genuineness of the expenses. The ld. CIT(A) deleted the addition of Rs. 34,86,300/-.
8. Aggrieved by this, the revenue is before us. The ld. D.R. strongly supported the findings of the A.O. and the ld. Counsel reiterated what has been stated before the lower authorities.
9. We have carefully considered the orders of the authorities below. We find that in assessee's own case in earlier years on identical set of facts, the matter travelled up to the Hon'ble High Court and the Hon'ble Jurisdictional High Court of Chhattisgarh in TAXC No. 154 of 2017 held as under:-
7. We have heard learned counsel for the revenue at length, however, we are not in a position to take any different view than the one taken by the Coordinate Bench in the matter of Assistant Commissioner of Income Tax- Circle- 1(2) vs M/s R.P. Real Estate Pvt. Ltd. In the said matter, this Court has referred to the order passed by Gauhati High Court in [Walford Transport (Eastern India) v. CIT] 1999- 240 ITR 902 and Saraswati Housing & Developers v. Additional Commissioner of Income Tax, (2013) 142 ITD 0198, Delhi Bench (G) to hold that once the Appellate Court and the Tribunal have concurrently found that the explanation offered by the assessee as to why the cash payments made to the sellers is acceptable, the same does not involve any substantial question of law as the reasoning assigned and the interpretation applied by the Tribunal and the CIT (Appeals) are duly supported by the judicial precedents.
8. In view of the above, we find no substance in this appeal as it does not involve any substantial question of law. Accordingly, the appeal is dismissed.
10. As the issue is now stand settled in favour of the assessee and against the revenue by the judgment of the Hon'ble Jurisdictional High Court of Chhattisgarh (supra), we do not find any reason to interfere with the findings of the ld. CIT(A). Ground no. 1 is accordingly dismissed.
5 ITA No273/RPR/2014
. A.Y.2011-12
11. The next grievance of the revenue relates to giving of relief of Rs. 1,16,100/- out of addition of Rs. 2,85,550/-.
12. The A.O. drawing support from the copies of the registered purchase deeds observed that expenses relating to Stamp duty and Fees were at Rs. 5,08,350/-. The same can be understood from the following chart:-
Plot No Particulars Consideration Stamp + Other Fees 1 Plot No. C-19, Saddu 4000 Sq.ft. 18,60,000.00 154400 + 15050 2 Plot No. C-19, Saddu 4000 Sq.ft. 18,60,000.00 154400 + 15050 3 Plot No. C-19, Saddu 4000 Sq.ft 13,00,000.00 154400 + 15050 50,20,000.00 5,08,350.00
13. The A.O. found that the assessee has debited only a sum of Rs. 2,22,800/- in the books of account. The A.O. was of the opinion that difference of Rs. 2,85,550/- is unexplained expenditure of the assessee and accordingly added the same.
14. Before the ld. CIT(A), the assessee furnished the details of Stamp duty which is as under:-
Plot Particulars Area Consideration Stamp Duty Stamp Duty No. Actually Paid As per Sale consideration 1 Plot No. C-19, Saddu 4000 Sq.ft 13,00,000.00 154400 + 107900 + 15050 15050 2 Plot No. C-19, Saddu 4000 Sq.ft 18,60,000.00 154400 + 154400 + 15050 15050 3 Plot No. C-19, Saddu 4000 Sq.ft 18,60,000.00 154400 + 154400 + 15050 15050
15. It was explained that it was agreed with the sellers of the land that any Stamp duty/Fees over and above, the duty mentioned in the sale agreement was to be 6 ITA No273/RPR/2014 . A.Y.2011-12 borne by the seller himself. It was explained that the alleged difference is on this account.
16. After considering the facts and the submissions, the ld. CIT(A) observed that the A.O. has gone merely on presumption that the appellant had borne the entire expenses on account of payment of registration charges including Stamp duty without verifying the same from the verifiable facts. The ld. CIT(A) further observed that the claim of the assessee is not fully verifiable from the sale deed, therefore, out of the total addition of Rs. 2,85,550/-. The ld. CIT(A) deleted the addition of Rs. 1,16,100/- and the balance was confirmed.
17. Before us, the ld. D.R. relied upon the findings of the A.O. and the ld. Counsel on the findings of the ld. CIT(A).
18. We have carefully considered the orders of the authorities below. It is true that the Stamp duty and the registration charges are borne by the purchaser. It is equally true that sometimes it is agreed between the parties that part of the Stamp duty/ registration charges shall be borne by the seller. In the case in hand, we find that the sellers have agreed to bear the charges over and above, the charges mentioned in the deed. We find that after due verification, the ld. CIT(A) has restricted the addition to Rs. 169450/- which calls for no interference. Ground no. C is accordingly dismissed.
19. The next ground relates to the deletion of the addition of Rs. 8.02 crores and 2.90 crores made by the A.O. u/s. 68 of the Act.
7 ITA No273/RPR/2014
. A.Y.2011-12
20. While scrutinizing the return of income, the A.O. noticed that the share capital which was at Rs. 94.17 lacs as on 31.03.2010 was increased to Rs. 4.92 crores as on 31.03.2011. The A.O. further noticed that the share premium account as on 31.03.2010 was Rs. 3.71 crores and became 10.15 crores as on 31.03.2011.
21. The A.O. asked the assessee to furnish complete details of the persons from whom share capital and share premium has been received. The assessee was further directed to furnish names, address, PAN and the copy of return of income of the share applicants.
22. In its reply, the assessee explained that the share application money was received from -
(i) Greenfield Commotrade Private Limited
(ii) Silvershine Tradecom Private Limited
(iii) Tulsi Barter Private Limited.
23. The assessee furnished the PAN details alongwith certificate incorporation/Memorandum of Association/Article of Association along with copies of audited financial statement and Income Tax Return with copy of bank statements in the case of all share applicants. The details of share application/allotment can be understood from the following chart:-
Date Investor Shares Allotted Share Capital Share premium Share premium Total Amount per share 01-09-2010 Green Field 16000 1600000 400 64.00,000 80,00,000 Commotrade Pvt. Ltd.
Kolkata
09-09-2010 Tulsi Garter 18000 1800000 400 72,00,000 90,00,000
Pvt. Ltd,
Kolkata
15-09-2010 Silvershine 32000 3200000 400 1,28,00,000 1,60,00,000
8 ITA No273/RPR/2014
. A.Y.2011-12
Tradecom Pvt.
Ltd., Kolkata
04-10-2010 GreenField 9500 950000 900 85,50,000 95,00,000
Commotrade
Pvt. Ltd.
Kolkata
12-11-2010 GreenField 3000 300000 900 27,00,000 30,00,000
Commotrade
Pvt. Ltd.
Kolkata
06-12-2010 Tulsi Barter 12100 1210000 900 1,08,90,000 1,21,00,000
Pvt.Ltd.
06-12-2010 Silvershine 12500 1250000 900 1,12,50,000 1,25,00,000
Tradecom Pvt.
Ltd., Kolkata
06-12-2010 GreenField 5100 510000 900 45,90,000 51,00,000
Commotrade
Pvt. Ltd.
Kolkata
Total 108200 10820000 64380000 75200000
24. The share application money received from three share applicant companies is as under:-
Sr. No. Particulars Rs. (In Lakhs)
1 Greenfield Commotrade Private Limited 281.00
2 Silvershine Tradecom Private Limited 310.00
3 Tulsi Barter Private Limited 211.00
802.00
25. After considering the facts and the submissions, the A.O. was of the opinion that the assessee has issued shares at very hefty share premium . The A.O. was of the opinion that the financial credentials of the share applicant companies is not creditworthy to purchase shares at such hefty premium. The A.O. further observed that all the three companies were incorporated nearly the same dates and have common promoters. The A.O. further observed that one of the directors of the assessee company was also the director of the share applicant 9 ITA No273/RPR/2014 . A.Y.2011-12 companies. The A.O. was of the strong belief that the share applicant companies are paper companies of Kolkata. The A.O. questioned the genuineness of the transaction and came to the conclusion that the assessee has not discharged the primary onus cast upon it by virtue of Section 68 of the Act and proceeded by making the addition of 8.02 crores being share application/share premium amount received from the three companies mentioned elsewhere.
26. The assessee strongly agitated the matter before the ld. CIT(A) and vehemently contended that the share applicant companies are investment companies and the promoters were known to the appellant company as one of the director of the appellant company Shri Rakesh Pandey happens to be the director of all the three share applicant companies. It was further explained that the allegation that the assessee has charged hefty share premium is not correct as the book value of the shares of the appellant company is about Rs. 1007 per share. It was explained that in the first trench of the shares which were issued at Rs. 500 per share, the same was approximately 50% of the book value of the shares and the second trench of share which was issued at Rs. 1000 per share is approximately 50% of the intrinsic value of the share. It was brought to the notice of the ld.
CIT(A) that the allegation of cash deposit in the bank account of the share applicant company is not true. The assessee explained from the bank statement of the three companies that there was no cash deposited when these companies applied for the shares. It was explained that the cash deposit is only 0.73% of the total deposit.
27. After considering the facts and the submissions, the ld. CIT(A) observed that it is a settled principle of law that reason for suspicion however grave it may be 10 ITA No273/RPR/2014 . A.Y.2011-12 cannot be a basis for holding adversity against appellant. Drawing support from various judicial decisions mentioned in his order, the ld. CIT(A) directed the A.O. to delete the addition of Rs. 8.02 crores.
28. Before us, the ld. D.R. strongly supported the findings of the A.O. and ld. Counsel for the assessee reiterated what has been stated before the lower authorities.
29. We have given a thoughtful consideration to the orders of the authorities below and with the assistance of the ld. Counsel, we have considered the relevant documentary evidences brought on record in the form of paper book in the light of Rule 18(6) of the ITAT Rules. The undisputed fact is that one of the directors of the assessee company became director of the share applicant companies much before the first allotment of shares. We find that the book value of share as on 31.03.2010 was at Rs. 1007 per share and the fair market value of the share was at Rs. 2083 per share. This calculation is given at page 147 of the paper book. The assessment order is completely silent on the verification of the book value and the fair market value of the shares. Further, we find that the Assessing Officer has not made any enquiry in respect of the share applicant companies. The A.O. has merely made the additions by discarding/disbelieving the submissions and the documentary evidences filed by the assessee. It is not the case of the A.O. that the share applicant companies are in fact Shell companies because in such cases, there is always information from the Investigation Wing of Kolkata. Nor the A.O. has demonstrated that the share applicant companies fulfill the requirement of Shell Company. Merely because the share applicant companies are located at Kolkata would not make them ipso facto Shell Company. The A.O. has 11 ITA No273/RPR/2014 . A.Y.2011-12 completely ignored the fact that Shri Rakesh Pandey is also one of the directors of the share applicant companies and is also a director in the assessee company. Therefore, it can be safely concluded that the share applicant companies are not strangers to the assessee company.
30. The undisputed fact is that the entire transactions have been done through banking channels. Complete details along with bank statements of the share applicant companies have been furnished before the A.O. The A.O. has disregarded the direct evidences furnished by the assessee merely on the basis of surmises and conjectures.
31. Surprisingly, the very same share applicant companies have also purchased shares in A.Y. 2012-13 & 2013-14. In those years, the A.O. has accepted the transactions in the assessment framed u/s. 143(3) of the Act. For the transactions with the same three parties, the A.O. cannot blow hot and cold in the same breath.
32. An identical issue was considered by the Hon'ble Jurisdictional High Court of Chhattisgarh in the case of Venkateshwar Ispat Pvt. Ltd. 319 ITR 0393 wherein the Hon'ble High Court was seized with the following substantial question of law:-
"1.1 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the CIT(A) and whether it was justified in confirming his views in deleting the addition made by the AO on account of unexplained investment in share capital in spite of the respondent's failure to discharge the onus cast upon it as per the provisions of the law.
1.2 Whether on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of the CIT(A) in respect of the share capital 12 ITA No273/RPR/2014 . A.Y.2011-12 ignoring the fact that no verification pertaining to its source was ever carried out in the year in which it was introduced.
1.3 Whether, on the facts and circumstances of the case, the Tribunal was justified in confirming the order of the CIT(A) deleting the addition of ignoring the fact that the said additions are backed by specific provisions of the IT Act."
33. And the Hon'ble High Court held as under:-
2. The short question for consideration of this appeal is whether the Tribunal as well as the CIT(A) were justified in deleting the addition made by the Assessing Officer (in short "AO") on account of unexplained investment in share capital in spite of the respondent's failure to discharge the onus cast upon it as per the provisions of law.
3. Briefly stated, the facts of the case are that the assessee-company filed its return for the asst. yr. 1989-90. In the assessment proceedings, the AO called upon the assessee to establish the identity and creditworthiness of the share applicants as the balance sheet reflected the capital amount of Rs. 26,45,200. In order to confirm the investment, notices were issued to the shareholders in their given addresses and in 29 cases, the letters sent were returned unserved with the remark that the address is not complete or other similar reason. The AO, not satisfied with the explanation of the assessee, added Rs. 13,36,000 towards holdings of the shareholders, whose confirmation could not be adduced.
4. Before the CIT(A), the assessee sought permission for adducing additional evidence under r. 46A of the IT Rules, 1962, which was accepted and appeal of the assessee was allowed on the basis of additional evidence adduced by the assessee as also keeping in view of the fact that for subsequent assessment year, the shareholders investment was confirmed during the assessment proceedings.
5. The appeal preferred by the Revenue was further dismissed by the impugned order.
6. Mr. Dubey, learned senior advocate appearing for the respondent submits that apart from the reasons assigned by the respondent, the Tribunal, wherein it has been held that the investment has been verified on the basis of the additional evidence adduced by the assessee, in view of the latest judgment of the Hon'ble Supreme Court in the matter of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308, investment by the alleged bogus shareholders 13 ITA No273/RPR/2014 . A.Y.2011-12 in a company cannot be regarded as the undisclosed income of the assessee-
company, though individual investors can be proceeded against by the Department.
7. Mr. Rajeshwar Rao, learned counsel for the appellant, does not dispute their ratio of law laid down by the Hon'ble Supreme Court in the aforesaid judgment.
8. We have heard learned counsel for the parties and perused the impugned order.
9. In the matter of Lovely Exports (P) Ltd., the question before the Hon'ble Supreme Court was whether the amount of share money can be regarded as undisclosed income under s. 68 of the Act ? Answering the above question, the Hon'ble Supreme Court has held that if the share application money is received by the assesseecompany from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee-company.
10. Thus, in view of the binding judgment of the Hon'ble Supreme Court as also the findings recorded by the CIT(A), which have been subsequently confirmed in appeal by the Tribunal, we are of the opinion that there is no question of law, much less a substantial question of law, arising for adjudication of this appeal. The appeal is, accordingly, dismissed.
34. The impugned assessment year is A.Y. 2011-12 and the first proviso to Section 68 of the Act has been introduced by the Finance Act, 2012 with effect from 01.04.2013. Thus, it would be effective only from A.Y. 2013-14 onwards and not for the subject assessment year. For this proposition, we draw support from the judgment of the Hon'ble High Court of Bombay in the Case of Gagandeep Infrastructure Pvt. Ltd. 394 ITR 680.
35. As mentioned elsewhere, the A.O. not only added the share application money received from the three companies but has also added Rs. 2.90 crores being share application money received from Shri Rakesh Pandey. We find that Shri Rakesh Pandey who is a company director was summoned by the A.O. at the 14 ITA No273/RPR/2014 . A.Y.2011-12 fag end of the assessment i.e. 27.03.2014. At that point of time, Shri Rakesh Pandey was in Mumbai, therefore, could not attend. But we find that the return of Shri Rajesh Pandey was also scrutinized and in his balance sheet his investment in the shares in assessee company has been accepted. We also find that in the immediately subsequent two assessment years, the investment in shares by Shri Rakesh Pandey has been accepted by the A.O. after thorough scrutiny and in those years, Shri Pandey also appeared before the A.O. Thus, it can be seen that as in the case of these share applicant companies, investment made by Shri Rakesh Pandey has also been accepted by the Assessing Officer in subsequent assessment years.
36. In the light of the judicial decisions referred to hereinabove vis-à-vis the documentary evidences available on record, we have no hesitation in upholding the findings of the ld. CIT(A). This ground is accordingly dismissed.
37. The last grievance of revenue relates to the deletion of the addition of Rs. 36.86 lacs made by the A.O. on account of brokerage and commission expenses.
38. The A.O. noticed that the assessee has paid brokerage and commission to various persons totaling to Rs. 36.86 lacs. The assessee was asked to justify the claim of expenditure by supporting evidences.
39. On receiving no plausible reply, the A.O. disallowed the entire amount of brokerage and commission expenses. Before the ld. CIT(A), the assessee strongly contended that the details of entire brokerage paid have been submitted before the A.O. It was explained that all the payments have been made through account payee cheques and tax has been deducted at source wherever applicable.
15 ITA No273/RPR/2014
. A.Y.2011-12
40. After considering the facts and the submissions, the ld. CIT(A) observed that the assessee has made TDS from the commission/brokerage paid to the brokers and has filed the quarterly TDS returns. The ld. CIT(A) further observed that the A.O. has erred in stating that the assessee has not furnished any detail. Convinced with the claim of the assessee, the ld. CIT(A) directed the A.O. to delete the addition of Rs. 36.86 lacs.
41. The ld. D.R. relied upon the findings of the A.O. and the ld. Counsel on the findings of the ld. CIT(A).
42. We have given a thoughtful consideration to the orders of the authorities below. The nature of business of the assessee is that it cannot purchase/sell lands without engaging the brokers. The A.O. has nowhere disputed that the assessee has purchased lands at various places. Therefore, it can be safely concluded that the services of the brokers must have availed by the assessee. It is also true that all the payments have been made by account payee cheques subject to TDS wherever applicable. These clinching evidences cannot be brushed aside lightly. Considering the facts in totality, we decline to interfere. This grievance is also dismissed.
43. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 09- 03- 2018
Sd/- Sd/-
(RAM LAL NEGI) (N. K. BILLAIYA)
JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER
RAIPUR: Dated 09/03/2018
Rajesh