Delhi High Court - Orders
Pr. Commissioner Of Income Tax -9, New ... vs Virtual Builders (P) Ltd on 29 February, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
$~28
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 1121/2018
PR. COMMISSIONER OF INCOME TAX -9, NEW DELHI
..... Appellant
Through: Mr. Abhishek Maratha, Sr.
Standing Counsel
versus
VIRTUAL BUILDERS (P) LTD. ..... Respondent
Through: Mr. Piyush Kaushik, Adv.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
ORDER
% 29.02.2024
1. Since Mr. Kaushik, learned counsel represents the assessee, no further steps need be taken.
2. Prima facie and for considering the submissions addressed by Mr. Maratha, learned counsel who appears in support of the appeal, we take note of the following findings which came to be returned by the Assessing Officer ['AO']:-
"1. The assesse filed its return of income declaring total income at Rs NIL on 28/11/2006. On the basis of certain documents seized during the course of search and seizure action on BPTP and its group companies on 15/11/2007 and also on the basis of the post- search enquires made, it was established that the group companies of BPTP were following a business model as a part of which only part payments of the sale consideration in respect of the land purchased were paid at the time of execution of the sale-deed and the payments of balance sale consideration were invariably made through post dated cheques (PDCs) and for the intervening period (i.e. period between the date of sale deed and the date of encashment of PDCs), interest was paid in cash to the vendors of This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2024 at 20:49:11 the land by the vendee company on monthly basis @ 1.25 % p.m., on the amount of PDCs and this cash payment of interest by the vendee company, was not accounted for by it, in its books of account. The assessee company had also purchased a large chunk of land during the FY 2005-06 and following the same modus operandi had paid interest in cash to the vendors of the land on monthly basis@ 1.25% p.m. on the amount of PDCs and this cash payment of interest had not been accounted for by it in its books of accounts.
Similarly, there was evidence gathered that the assessee company had made some additional payments (as per pages 1 to 11 of Annexure A-1 of Party BO-I) (These documents are a matter of record) against the purchase of land to various land owners which were not genuine. Therefore, to assess the escaped income, notice u/s 148 of the IT Act, was issued on 29.03.2010 and was duly served upon the assessee by speed post. In response, the assessee filed its return of income for the AY 2006-07 declaring loss at Rs7,182/- on 22.04.2010. Subsequently, notice u/s 143(2) of the IT Act was issued on 13.09.2010 and assessee was provided the copy of the reasons recorded for initiating proceedings u/s 148 of the IT Act. In response to the said notices, Sh A S Aneja, Advocate & Sh Ajay Bhagwani, AR, attended the office from time to time and submitted the necessary details/clarifications asked placed on record. The case was discussed with them.
xxx xxx xxx 2.3 To summarize, as discussed above, there are a large number of seized documents which clearly indicate that the assessee (being one of the group company of BPTP group) has been consistently paying interest @15% on the PDCs in cash which has not been accounted by it in its books of accounts. Further, it is beyond reason to assume that in some of the cases, the group will pay interest on PDCs and not in others. It is not the common human conduct that a farmer with meager source of income who has executed a sale deed and parted with the possession of the land which is probably his/her only asset to a person who is totally unknown and unrelated to him/her, without any consideration. Also there is bound to be a wide suspicion in the minds of farmers about the bonafides of builders, so in general practice a farmer would not wait for such a long period to get his contractual dues unless he/she has been paid consideration for doing so, in the form of interest on PDCs in the present case."
3. Insofar as the issue of additional consideration paid to landholders after execution of the sale deed, the AO had found as This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2024 at 20:49:11 follows:-
"3. During the course of assessment proceedings u/s 153A/153C in the cases of BPTP and its group companies it was further noticed that the BPTP Ltd & its group companies had made additional payments of more than Rs. 45.02 crores to the vendors of the land (basically farmers) and these additional payments were over and above the sale consideration mentioned in the sale deeds. It was also noticed that these payments had been made much after the execution of sale deeds ostensibly without specifying the purpose and the assessee companies had thereby increased the cost of land by the amount of the above payments made to the vendors. In the present case, the assessee had also claimed to have made additional payments to the tune of Rs 2,97,23,785/- to various persons, the details of which are as under:
S.No. Name of the Date of Amount Evidence Payee Payment (in Rs.) 1 Udham Singh 19.12.2005 29,073,785 .....
& Others 2 Mam Chand 20.12.2005 650,000 Receipt & Others 29,723,785 3.1 Therefore, vide questionnaire dated 13/09/2010, the assessee was asked to submit the details of additional payments made during the year along with the mode of payment. Further, the assessee was asked to explain the circumstances under which the same were paid and also to produce the persons to whom the additional payments were claimed to have been made for oral examination. The assessee was also asked during the course of assessment proceedings as to whether the additional payments to the vendors were made on its own or on the instruction of the Collaborator.
xxx xxx xxx 3.3.6 An effort has been made to examine the top 30 additional payments viz-a-viz total purchase consideration which is as below:-
S.No. Name Date of Sale Purchase Additional deed Considerati Payment on 1 Ramwati & 25.10.2006 112131250 40775000 Beero 2 Udham Singh 19.12.2005 46543750 29073785 & Others 3 Dharamveer 16.12.2005 55490625 15414065 & Other 4 Shaym Singh 22.11.2005 34468750 15166248 & Others This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2024 at 20:49:12 5 Paras Ram 18.01.2007 39737500 14450000 6 Deepak 25.11.2005 4583750 12786250 7 Kishan 28.08.2006 62550000 12247500 Chand & Others 8 Prahlad 12.06.2006 58643750 10662500 9 Admire 25.11.2005 3788125 10566875 contractors Pvt.
10 Satish Kmar 22.11.2005 3669375 10235625
& Song
(HUF)
11 Kesari & 14.12.2005 15600000 9200000
Others
12 Zile Singh & 29.08.2005 28299375 8075683
Others
13 Chetram & 08.08.2006 78622500 7743123
Others
14 Beer Singh & 07.06.2007 152650000 7675000
Other
15 Narender 04.01.2006 10000000 7000000
Kumar
16 Seema w/o 28.04.2006 3575000 7000000
Jagjit Singh
17 Ramlal & 06.07.2005 3818750 6984063
Others
18 Amarpal, 15.09.2005 26437500 6971270
Vijaypal
19 Ranjeet 18.05.2006 31831250 6076875
Singh
20 Balbeero 15.12.2005 80281250 6000000
21 Ranveer 17.11.2006 25646875 58000000
&Others
22 Santra & 13.06.2006 19937500 5437500
Others
23 Ram Lal & 14.12.2005 24403125 5374375
Others
24 Rupesh 12.06.2007 39937500 5325000
Kumar
25 Shyam Singh 22.11.2005 1900000 5300000
26 Deepak 27.12.2006 14093750 5125000
27 Ram Pal 03.04.2006 5121875 5121875
28 Ratan Singh 26.07.2005 16662500 5100000
& Azad
Kumar
29 Sudhir, 15.05.2007 14100000 4298125
Sunina
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2024 at 20:49:12 Sharma 30 Rajkali 06.07.2006 5500000 3000000 29,39,85,737 It is seen from the above chart that the quantum of additional payment paid is very high in comparison to the actual purchase consideration paid at the time of sale deed. This high additional consideration can't be justified on any ground, be it for settling disputes, for standing structures and crops, for increase in the land prices or for delayed payments.
3.3.7. The other points raised by the assessee are being dealt with together to avoid repetition. The assessee's submission that all these payments are genuine and paid for commercial expediency is not correct. While Department can't justifiably sit on the judgment of commercial expediency, but the assessee is duty bound to give justification for such huge expenses and furnish supporting evidence. No documentary evidence was furnished and only a general reply has been given. In each and every case, it is essential to know the nature, extent and purpose of payment before invoking the principle of "commercial expediency". The persons to whom the payments have been paid have not been produced in spite of specific requirement. The onus is on the assessee to prove the genuineness of the payments and accordingly produce these persons whom it has failed to produce. It is not that any payment to any person can be claimed and allowed in the name of "commercial expediency" without supporting evidence. Only a proper examination of the payee can reveal the true purpose. The issue is genuineness of these payments and justification or the purpose for which these payments are shown to have been made. Assessee has not been able to fulfill this requirement."
4. It is in the aforesaid context that we prima facie find ourselves unable to sustain the view taken by the Income Tax Appellate Tribunal ['ITAT'] on both scores. We consequently admit this appeal on the following questions of law:-
A. Whether the ITAT has erred in deleting the addition of Rs.81,02,700/- out of total addition of Rs.93,07,200/- made by the AO on account of interest on Post Dated Cheques ["PDCs"] paid by the assessee in cash outside of its books of accounts?
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2024 at 20:49:12 B. Whether the ITAT erred in deleting the addition of Rs. 2,90,73,785/- out of the total addition of Rs.2,97,23,785/- made by the AO in view of the provisions of Section 37(1) of the Income Tax Act, 1961 ['Act'] on account of additional payment in violation of Indian Stamp Act,1899?
5. List again on 06.05.2024.
YASHWANT VARMA, J PURUSHAINDRA KUMAR KAURAV, J FEBRUARY 29, 2024 RW This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2024 at 20:49:12