Income Tax Appellate Tribunal - Delhi
M/S Green Valley Tower Pvt. Ltd.,, New ... vs Acit, New Delhi on 15 January, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'C': NEW DELHI
BEFORE,
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No.1735/Del/2013
(ASSESSMENT YEAR-2006-07)
AND
ITA No.1750/Del/2013
(ASSESSMENT YEAR-2007-08)
Green Valley Tower Pvt. Ltd. Asst. CI T, Central
M-11, Middle Circle, Circle-23
Connaught Circus, Vs. New Delhi-110001
New Delhi-110001
PAN -AAACG 4032B
(Appellant) (Respondent)
Appellant By Sh. Ajay Bhagwani, CA
Respondent by Sh. Jagdish Singh, Sr. DR
ORDER
PER SUDHANSHU SRIVASTAVA, JM:
ITA 1735/Del/2013 is the appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)- XXXIII, New Delhi {CIT (A)} dated 17.12.2012 for Assessment Year (AY) 2006-07 and ITA 1750/Del/2013 is an appeal filed by the assessee against the order of the Ld. CIT (A)-XXXIII, New Delhi 2 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT dated 18.12.2012 for the AY 2007-08. Both the appeals were heard together and are being disposed by this common order for the sake of convenience.
2.0 The brief facts of the case are that the assessee is a part of the BPTP group and engaged in the business of land aggregation and consolidation. A search u/s 132 of the Income Tax Act, 1961 (hereinafter called 'the Act') was conducted on the BPTP group and some other companies on 15.11.2007. However, admittedly, no search was conducted on assessee. 2.1.0 For AY 2006-07, the return of income declaring income of Rs.4,03,150/- was filed on 15.11.2006. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called 'the Act') and no assessment was completed u/s 143(3) of the Act. During the course of search on BPTP group, certain documents were found and seized. As per these seized documents and on the basis of post search enquiries, the Assessing Officer (AO) held that BPTP and its group companies were purchasing land by making some payment at the time of execution and registration of sale 3 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT deeds and balance payment was made through post-dated cheques and for the period in between from the date of sale deed to the date of encashment of post-dated cheques, interest in cash at the rate of 1.25% p.m. was being paid in cash to vendors of land outside the books of accounts.
2.1.1 The AO recorded reasons for reopening of the assessment on 29.03.2010 and issued notice u/s 148 of Income Tax Act, 1961. The Assessee filed return of income in response to notice u/s 148. Reasons recorded for the reopening of assessment were provided to assessee. The Assessee filed objections to reopening of assessment which were disposed-off by the AO by passing speaking order. Subsequently, the AO issued notice u/s 143(2) and completed the assessment by making addition on account of interest paid on Post Dated Cheques (PDCs) amounting to Rs.27,11,182/- in cash and outside books of accounts and another addition on account of disallowance of additional payment of Rs.9,52,625/- made in respect of purchase of land. 2.1.2 The assessee filed appeal against the assessment order before the Ld. CIT (A) on assumption of 4 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT jurisdiction under section 147 as well as on merits. The Ld. CIT (A) dismissed the contentions of the assessee in respect of assumption of jurisdiction and upheld the action of the AO in respect of initiation of action u/s 147. On merits, the Ld. CIT (A) gave direction to the AO to delete the addition made on account of interest paid on PDCs for the period of six months from date of sale deed and on issue of disallowance of additional payments, the Ld. CIT (A) gave directions to delete addition in respect of additional payment made to vendors or his relatives.
2.1.3 Aggrieved, the assessee has approached this Tribunal and has raised the following grounds: ITA No.1735/Del/2013:
1. That on the facts and circumstances of the case and in law the CIT (A) erred in rejecting appellant's contention that assessment order made by Assessing Officer was bad in law and void ab-
initio on the ground that it ought to have been made u/s 153C of the Income Tax Act, and not, as was done u/s 143(3)/147 of the Income Tax Act.
2. That without prejudice, on the facts and circumstances of the case and in law, the CIT (A) erred in upholding the assumption of jurisdiction u/s 147 by the Assessing Officer and in making the assessment in pursuance thereof, without dealing with appellant's objections on merits.
5 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT 2.1 That the CIT (A) having given a finding that no seized material obtained from the search of BPTP Group of cases (no search having been made on the appellant ) belonged to the appellant, clearly erred in yet upholding the action u/s 147 taken in the hands of the appellant based on such seized material.
3. That on the facts and circumstances of the case and in law the CIT (A) erred in holding to quote, 'that seized documents definitely proves that interest is paid on PDC' despite- i. that the seized record on the basis of which above finding was given, even according to his own finding by the CIT(A), did not belong to the appellant and, ii. that no enquiries were made from any of the alleged recipients of the interest and none was confronted with relevant document(s). 3.1 That the finding of the CIT (A) is based on mere surmises and conjectures without proof and corroboration by independent evidence. 3.2 That without prejudice the CIT (A) erred in upholding the addition of interest for the period for which PDC's were extended. 3.3. That without prejudice the CIT (A) erred in not quantifying the addition and instead giving ambiguous directions to compute the interest after six months from the date of sale.
4. That on the facts and circumstances of the case and in law the CIT (A) erred in not accepting the appellant's contention that Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant.
4.1 That without prejudice the CIT (A) erred in upholding the disallowance of Additional Payments made to the recipients who were not the owners of land and to the payment made in cash. 4.2 That without prejudice the CIT (A) erred in not himself quantifying the addition to be made.
4.3 That without prejudice the CIT (A) did not deal with the following specific ground No.4.1:-
6 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT "4.1. That the learned Assessing Officer has erred in making an addition of Rs.9,52,625/- on account of additional payments as recorded in books of account of appellant company as against amount of Rs.6,63,000/- paid on account of additional payment and recorded in books of accounts."
5. That the orders passed by the Assessing Officer and Commissioner of Income Tax (Appeals)-XXXIII, New Delhi are bad in law and void ab-initio.
6. The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal.
2.2.0 For AY 2007-08, the return of income declaring income of Rs.1,15,271/- was filed on 23.10.2007. The assessment was completed u/s 143(3) the Act on 30.12.2009. The assessment was completed after making addition on account of interest paid on Post Dated Cheques (PDC) of Rs.28,93,733/-; disallowance of additional payment made of Rs.27,000/- and disallowance u/s 40A(3) of the Act of Rs.12,31,160/- in respect of cash payment made for purchase of land. The total income was assessed at Rs.42,67164/-. The addition on account of PDC interest was later reduced in an order passed u/s 154 of the Act to Rs.21,78,045/-.
2.2.1 The Assessee filed an appeal before the Ld. CIT (A) in which part relief of Rs.19,39,484/- was allowed in respect of 7 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT addition on account of PDC interest against the total addition made of Rs.21,78,045/- and addition of Rs.2,38,561/- was confirmed.
The Ld. CIT (A) also gave relief in respect of disallowance made on account of Additional payment made of Rs.27,000/- while the disallowance made u/s 40A(3) of the Act of Rs.12,31,160/- in respect of additional cash payment for the purchase of land was confirmed.
2.2.2 Both the assessee as well as the revenue approached this Tribunal against the order of the Ld. CIT (A). 2.2.3 The appeal by the Revenue was against the relief allowed of Rs.19,39,484/- in respect of addition on account of PDC interest and disallowance of additional payment made of Rs.27,000/-. The appeal of Revenue was dismissed due to low tax effect in ITA no.1407/ Del/2013 vide order dated 25.07.2016. ITA No.1750/Del/2013:
1. That on the facts and circumstances of the case and in law the CIT (A) erred in rejecting appellant's contention that assessment order made by Assessing Officer was bad in law and void ab-initio on the ground that it ought to have been made u/s 153C of the Income Tax Act, and not, as was done u/s 143(3) of the Income Tax Act.
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Greem Valley Tower Pvt. Ltd. vs. ACIT
2. That without prejudice, on the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of the Assessing Officer in relying upon the material seized in the case of search on M/s BPTP group of cases despite:-
i) that such material had no nexus/relevance with the case of the appellant and,
ii) that, the CIT (A) himself holding that such material did not belong to the appellant.
3. That on the facts and circumstances of the case and in law the CIT (A) erred in holding to quote, 'that seized documents definitely prove that interest is paid on PDC' despite-
i. that the seized record on the basis of which above finding was given, even according to his own finding by the CIT (A), did not belong to the appellant and, ii. that no enquiries were made from any of the alleged recipients of the interest and none was confronted with relevant document(s). 3.1 That the finding of the CIT (A) is based on mere surmises and conjectures without proof and corroboration by independent evidence. 3.2 That without prejudice the CIT (A) erred in upholding the addition of interest for the period for which PDC's were extended. 3.3 That without prejudice the CIT (A) erred in not quantifying the addition and instead giving ambiguous directions to compute the interest after six months from the date of sale.
4. That on the facts and circumstances of the case and in law the CIT (A) erred in not accepting the appellant's contention that Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant.
4.1 That without prejudice the CIT (A) erred in upholding the disallowance of Additional Payments made to the recipients who were not the owners of land and to the payment made in cash. 4.2 That without prejudice the CIT (A) erred in not himself quantifying the addition to be made.
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Greem Valley Tower Pvt. Ltd. vs. ACIT
5. That on the facts and circumstances of the case and in law the CIT (A) erred in upholding the disallowance u/s 40A(3) in respect of which no deduction was claimed by the appellant. 5.1 That even on merits the disallowance was not justified.
6. That the orders passed by the Assessing Officer and Commissioner of Income Tax (Appeals)-XXXIII, New Delhi are bad in law and void ab-initio.
7. The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal."
3.0 The Ld. Authorised Representative (AR) submitted that first the issues involved in AY 2006-07 will be addressed by him. He filed detailed synopsis during the course of hearing. The Ld. AR at the outset stated that issue of initiation of reopening of assessment proceedings is covered in favour of assessee in one of the group companies viz. Westland Developers Pvt. Ltd. in ITA no. 1757/Del/2013 vide order dated 23.11.2015 wherein identical reasons were recorded by same AO on the same date. A Copy of the said order of Delhi Bench 'H', New Delhi was filed in the paper book. The Ld. AR argued that identical reasons were recorded by the same AO in case of Westland Developers Pvt. Ltd. on same date i.e. on 29.03.2010. The reasons recorded in Westland Developers Pvt. Ltd. are reproduced as under:
10 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT "REASONS IN CASE OF WESTLAND DEVELOPERS - AY- 2006-07 Reasons for reopening the case u/s 147 read with section 148 Assessment in this case was completed vide order u/s 143(3) dated 31.12.2008 at an income of Rs.8,01,951/-
A search and seizure action was conducted on BPTP and its Group companies on 15.11.2007. Certain documents seized in the search action (Details enclosed as per Annexure-A) on the Group and the post-search enquiries made revealed that the group was 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 payment of balance sale consideration was invariably made through post datedcheques (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 the land by the vendee company on monthly basis @ 1.25% p.m. on the amount of PDCs. During the course of post search enquiries, it was also noticed that the said payment of interest by the vendee company in cash has not been accounted for by it in its books of account. The assessee company has also purchased a large chunk of land and followed the same modus operandi of making payment through PDCs and has made payment of interest of Rs.31,90,204/- in cash out of books of account. The income of the assessee to the tune of Rs.31,90,204/- on account of interest paid in cash out of the books of account has, thus, escaped assessment.
I have, therefore, reason to believe that income chargeable to tax amounting to Rs.31,90,204/- has escaped assessment within the meaning of section 147.
Notice u/s 148 is issued"
11 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT 3.1 The Ld. AR also drew our attention to the reasons recorded in case of assessee which are also being reproduced as under:
Reasons for reopening the case u/s 147 read with section 148 "Return declaring an income of Rs.4,03,150/- was filed on 15.11.2006. The case was processed u/s 143(1).
A search and seizure action was conducted on BPTP and its Group companies on 15.11.2007. Certain documents seized in the search action (Details enclosed as per Annexure-A) on the Group and the post-search enquiries made revealed that the group was 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 payment of balance sale consideration was invariably made through post datedcheques (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 the land by the vendee company on monthly basis @ 1.25% p.m on the amount of PDCs. During the course of post search enquiries, it was also noticed that the said payment of interest by the vendee company in cash has not been accounted for by it in its books of account. The assessee company has also purchased a large chunk of land and followed the same modus operandi of making payment through PDCs and has made payment of interest of Rs.24,78,080/- in cash out of books of account. The income of the assessee to the tune of Rs.24,78,080/- on account of interest paid in cash out of the books of account has, thus, escaped assessment.
2. During the course of search on BPTP and its Group companies a document was found and seized (Pages 1 to 11 of 12 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT Annexure-A-1 of Party BO-I) from the premises 5th & 6th Floor, DCM Building, Barakharnba Road, New Delhi which revealed that the assessee company had made additional payments 'aggregating to Rs.9,52,625/- against the purchase of land to various land owner's. The post-search Investigations / enquiries were also made to verify the genuineness of the additional payments actually having been made end summons u/s 131 were issued to several farmers from whom the land was acquired. The enquiries made revealed that the additional payments made were not genuine. Moreover, the additional payments were made in violation of the section 24 of the Stamp Duty Act and as such the same are not admissible as expenditure as per explanation to u/s 37 (I) of the I.T. Act. The income has, thus, been under assessed to the extent of Re.9,52,625/- on account of additional payments against the purchase of land I have, therefore reasons to believe that income chargeable to tax amounting to Rs.34,30,705/- (Rs.24,78,080+Rs.9,52,625) has escaped assessment within meaning of section 147. Notice u/s 148 is issued."
3.2 The Ld. AR submitted that 'Annexure -A' which is annexed along with reasons recorded and contains details of seized documents seized during the course of search on BPTP group in case of Westland Developers Pvt. Ltd. was also annexed along with Reasons recorded in case of the assessee and contain details of same documents. He further stated that none of these seized 13 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT documents mentioned in 'Annexure- A' annexed along with the reasons recorded belong or relate or pertain to the assessee which is evident from the fact that no proceedings u/s 153-C were initiated against the assessee. Copies of all the seized documents which are referred in 'Annexure- A' to the reasons recorded were filed along with summary of each and every seized documents to show and evidence that none of these seized documents mentioned in the 'Annexure- A' to reasons recorded or in the assessment order belong or relate or pertain to the assessee.
3.3 To support his arguments further, the Ld. AR drew our attention to the findings given by the Ld. CIT (A) at Para 4.3.and Para 4.4 of his order wherein the Ld. CIT (A) has categorically stated as under:
4.3: "However, the Assessment order nowhere mentions that any part of the seized material belong to appellant company"
4.4: "Nowhere, finding has been given by assessing officer that certain seized material belongs to the appellant company"
3.4 The Ld. AR stated that the Ld. CIT (A) has analysed each and every seized document mentioned in 'Annexure-A' 14 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT /assessment order and his finding in Para 4.3 and Para 4.4 was given by him after complete verification of all seized documents. 3.5 It was further submitted by the Ld. AR that the fact of the matter is that none of these seized documents which were referred to, relied upon and used in the Reasons recorded for initiation of reopening of assessment belonged to the assessee company. This further gets proved from the fact that the assessment was completed u/s 147 and not u/s 153C of the Act as in the case of seized documents found during the course of search which belong to the 'other assessee', assessment has to be mandatorily made u/s 153C of Income Tax Act. It was submitted that it clearly shows and proves that none of the seized documents belonged to assessee.
3.6 The Ld. AR submitted that seized documents of 'other assessee' cannot be used or relied upon to make additions in the hands of any other assessee other than the assessee to whom the seized document belong. It was submitted that this issue was decided by the co-ordinate bench in case of one of the group companies of BPTP viz. Westland Developers Pvt. Ltd. in ITA no. 15 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT 1757/Del/2013 vide order dated 23.11.2015 wherein it was held by the Tribunal that in absence of any cogent, definite material which belonged to the assessee or any evidence demonstrating the payment of interest by the assessee on PDCs, reasons recorded for initiation of proceedings u/s 147 will not be in consonance with law having been based on mere suppositions, surmises and extrapolation of the material seized. The Ld. AR submitted that in this case, the Tribunal completely discarded the argument of the AO and the Ld. CIT (A) of common management and assessee belonging to the same group and held that it cannot be equated with existence of incriminating seized material belonging to assessee. It was submitted that this order of the Tribunal equally applies to the present case. It was submitted by Ld. AR that in the aforesaid case also, the same AO took action u/s 147 of the Act on the basis of material seized u/s 132 in the case of search conducted on BPTP Ltd on 15.11.2007 (and there was no search on that assessee -West Land Developers) which had no nexus with West Land Developers and none of the documents belonged to West Land Developers. It was submitted that the Tribunal disapproved the 16 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT action of AO to make use of 'alien material' having no specific nexus with the assessee.
3.7 The Ld. AR further argued that finding of the Ld. CIT (A) in justifying the use of seized documents of other assessee on the ground that these seized documents have shown some trend of unaccounted expenditure in the form of PDC interest is not justifiable and correct in view of the fact that each assessee is separate and distinct and addition cannot be made on the basis of seized documents of the other assessee simply by making presumption in the hands of assessee by extrapolating. 3.8 The Ld. AR further submitted that none of the parties from whom land was purchased by the assessee were called by the AO, no enquiries were conducted by the AO from any of the vendors of land and that there is no mention of any enquiry or its outcome in the reasons recorded by AO for reopening of assessment.
3.9 The Ld. AR argued that the AO has stated in the reasons recorded that interest of Rs.24,78,080/- is paid by the assessee in cash outside the books of accounts and to that extent 17 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT the income of assessee has escaped. However, in the assessment order, the AO has made addition of Rs.27,11,182/-. It was submitted that the AO has not brought any material or document or evidence on record to show as to how the amount of Rs.24,78,080/- was mentioned by the AO in the reasons recorded as against the addition made for Rs. 27,11,182/- in the assessment order. This clearly shows that the reasons were recorded simply by making presumptions and on suspicion and by just putting arbitrary figures in the reasons recorded.
3.10 In respect of second Para of reasons recorded where the AO has used seized documents page 1-11 of Annexure A-a, Party BO-I seized during the course of search on BPTP and its group companies, the Ld. AR argued that these seized documents contain details of payment made towards sale consideration of land, stamp duty and details of additional payments made by various companies which is duly recorded in the books of these companies. In respect of the reason recorded by the AO that post search investigations/enquiries were made to verify the genuineness of additional payments made, the Ld. AR argued that as no search 18 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT was carried out on the assessee, question of post search investigation and enquiries in the case of the assessee is not applicable. He further stated that there is no mention of any adverse finding in the case of the assesse of any investigation done by the AO or any other authority.
3.11 In respect of the observations of the AO that additional payments were in violation of Section 24 of the Stamp Duty Act and not admissible as expenditure as per explanation to Section 37(1) of the Income Tax Act, the Ld. AR argued that additional payment is a payment which is made subsequent to execution and registration of sale deed. It is duly recorded in the books of account. The assessee has received reimbursement of additional payments made from Countrywide Promoters Pvt. Ltd. This Additional payment is neither debited to the Profit & Loss a/c nor claimed as expenditure in the computation of Taxable income. It was submitted that, therefore, the question of making disallowance on account of additional payment in the hands of assessee does not arise. He further stated that appeals of all the 19 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT group companies are allowed by various co-ordinate benches of Tribunal on this issue.
3.12 The Ld. AR also drew our attention to the finding of the Ld. CIT (A) in Para 6.3.7 of his order (Page 24) that the additional payment is not illegal under the provisions of Stamp Duty Act and that it is not hit by the Explanation to section 37(1) of the Act.
3.13 The Ld. AR further stated that the Hon'ble Delhi High court has not admitted the appeal of the department in the case of one of the group companies viz. Vasundara Promoters Pvt. Ltd. in ITA no.211/2018 vide order dated 14.05.2018 where in the Hon'ble Delhi High Court has held that "This court is of opinion that the broad interpretation of the Explanation to Section 37(1) of the Act given by the Revenue is in the circumstances of this case not well founded. The other submission is that such amount has to be taken as falling within the mischief of the said provision, in our opinion, is an incorrect premise."
3.14 The Ld. AR argued that both the reasons given in reasons recorded do not have any nexus with assessee and that 20 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT there is no valid reason for formation of belief that income of the assessee has escaped assessment and, therefore, the notice issued u/s 148 and action initiated u/s 147 is bad in law and void ab-initio and needs to be quashed.
4.0 The Ld. Sr. Departmental Representative (DR) supported the orders of the AO and the Ld. CIT (A). It was argued that lot of seized documents were found during the course of search which indicated payment of interest in cash outside the books of account in respect of purchase of land where part of sale consideration was paid through post- dated cheques and the assesse being part of BPTP group might also have adopted the same modus operandi as in other group companies.
5.0 With respect to the assessee's appeal for AY 2007- 08, the Ld. AR, at the outset, submitted that Ground nos.1, 4, 6 and 7 were not being pressed. Accordingly, these Grounds are dismissed as not pressed.
5.1 The Ld. AR submitted that Ground nos. 2 and 3 are in respect of use of seized documents found during the course of search on BPTP and some of its group companies which do not 21 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT belong to assesse and challenge the addition confirmed of Rs. 2,38,563/- on account of so called interest paid on post-dated cheques in cash outside the books of account. It was submitted that during the course of search on BPTP Ltd. and some of its group companies on 15.11.2007, certain documents were found and seized. However, there was no search conducted on assessee. No proceedings were initiated against the assessee under section 153C of Income Tax Act. As per these seized documents and on the basis of post search enquiries, the AO held that BPTP and its group companies were purchasing land by making part payment at the time of execution and registration of sale deed and the balance payment was made through post-dated cheques and for the period in between from the date of sale deed to the date of encashment of post-dated cheques, interest in cash at the rate of 1.25% per month was allegedly paid in cash to vendors of land outside the books of account. The Ld. AR submitted that the AO issued notice u/s 143(2) of the Act and completed the assessment by making addition on account of interest paid on post-dated cheques of Rs.28,93,733/- in cash outside the books of accounts. It was 22 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT submitted that while making the impugned addition on account of interest paid on post-dated cheques, the AO had used lot of seized documents seized during the course of search on 15.11.2007 on BPTP Ltd. and some of its group companies.
5.2 During the course of hearing, the Ld. AR filed detailed synopsis along with 242 pages paper book and submitted that none of the seized material found, seized and used in the assessment order belongs to the assessee. To substantiate the contention that none of the seized material belongs/ relates/pertains to the assesse, copies of all seized documents referred to, relied upon and used by the AO in the assessment order were filed along with the summary of all seized documents. It was submitted that each of these documents referred to, relied upon and used by the AO were examined by the Ld. CIT (A) and there is no finding by the Ld. CIT (A) that any of these seized documents belonged to the assesse. It was submitted that the contention of the assessee that none of the documents belonged to the assessee is accepted by the Ld. CIT (A).
23 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT 5.3 The Ld. AR drew our attention to Para 5.2.2, wherein the Ld. CIT (A) has stated "......undoubtedly AO has utilized the documents seized from the premises of BPTP Ltd and group companies. ..........,the assessment order nowhere mentions that any part of the seized material belong to the appellant company." 5.4 The Ld. AR further submitted that again in Para 5.3, the Ld. CIT (A) states "Nowhere, finding has been given by the AO that certain seized material belongs to the appellant company". 5.5 It was submitted by the Ld. AR that the fact of the matter is that none of these seized documents which were referred to, relied upon and used in the assessment order for making addition belong to assessee. It further gets proved from the fact that the assessment was completed u/s 143(3) and not u/s 153C of the Act because in case of seized documents found during the course of search which belong to the 'other assessee', assessment has to be mandatorily made u/s 153C of Income Tax Act. This clearly shows and proves that none of the seized documents belonged to the assessee.
24 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT 5.6 The Ld. AR submitted that seized documents of other assessee cannot be used or relied upon to make additions in the hands of any other assessee other than the assessee to whom these seized documents belonged to. The Ld. AR relied on the decision of the co-ordinate bench in the case of one of the group companies of BPTP viz. M/s Westland Developers Pvt. Ltd in ITA No.1757/Del/2013 for the AY 2006-07 dated 23.11.2015. It was submitted by the Ld. AR that in the aforesaid case, the AO took action u/s 147 on the basis of material seized u/s 132 in the case of search conducted on BPTP Ltd on 15.11.2007 (and there was no search on that assessee -West Land Developers) which had no nexus with West Land Developers and none of the documents belonged to West Land Developers. It was submitted that the Tribunal disapproved the action of AO in making use of the 'alien material' having no specific nexus with the assessee. 5.7 The Ld. AR argued that the finding of the Ld. CIT (A) of justifying the use of seized documents of other assessee on the contention that these seized documents have shown some trend of unaccounted expenditure in the form of PDC interest is not 25 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT justifiable and correct in view of fact that each assessee is separate and distinct and addition cannot be made on the basis of seized documents of other assessee simply on a presumption. 5.8 The Ld. AR further submitted that none of the parties from whom land was purchased by the assessee were called by the AO. No enquiries were conducted by the AO from any of the vendors of land. It was submitted that the assessee had requested the AO to call these parties by issuing summon u/s 131 of the Act and examine them. However, none of the parties were called and examined by the AO.
5.9 The Ld. AR argued that although nothing is stated by the AO as to under which provision of law addition on account of PDC interest was made, the addition on account of interest paid on PDCs in cash outside the books of account was made under section 69C of Income Tax Act, 1961 as unexplained expenditure. It was submitted that none of the pre-requisites of Section 69C were complied with. The Ld. AR submitted that the provisions of Section 69C were applied without giving any finding and bringing on record any evidence to show that expenditure in the form of interest was 26 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT actually incurred by the assessee as the assessee denied having incurred any expenditure in the form of interest in cash outside the books. It was submitted that submissions made before the AO and the Ld. CIT (A) were not dealt at all in the orders passed by them. 5.10 Reliance was placed on the following decisions:
a) Hon'ble Delhi High Court in CIT vs. Lubtec India Ltd.
in 311 ITR 175 (Delhi).
b) Hon'ble Supreme Court in CIT vs. General Insurance Corporation in 240 ITR 139 (SC)
c) Hon'ble Delhi High Court in CIT vs. Lalit Bhasin in 147 taxmann.619 (Delhi)
d) Hon'ble Supreme Court in Common Cause vs. Union of India (2017) 77 taxann.com245 (SC)
e) Hon'ble Delhi High Court in CIT vs. Ved Prakash Choudhary in 305 ITR 245 (Delhi) (2008)
f) Hon'ble Delhi High Court in CIT vs. Dinesh Jain in 25 taxmann.com 550 (Delhi) 27 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT 5.11 The Ld. AR argued that the Ld. CIT (A), while sustaining the addition beyond the period of six months from the date of sale deed, has stated in Para 6.4 of his order that his decision of sustaining the addition is formed on the basis of the statement of one Shri Chottu Ram during post search enquiries wherein he has stated that normally PDCs are given for a period of 8-10 months. The Ld. AR argued that first of all, statement of Shri Chottu Ram was not given to the assessee during the course of assessment proceeding and no opportunity to rebut his statement was provided to the assessee. It was submitted that no opportunity of cross examination of Shri Chottu Ram was allowed to the assessee. Further, as there was no search was carried out in the case of the assessee, question of post search enquiries in the case of the assessee does not arise at all. The Ld. AR further argued that there was no purchase of land by the assessee from Shri Chottu Ram. Accordingly, there is no logic of applying statement of Shri Chottu Ram in the case of the assessee. The Ld. AR further submitted that even the Ld. CIT (A) has not accepted the statement of Shri Chottu Ram as Shri Chottu Ram in his statement had stated 28 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT that normally PDCs were given for a period of 8 to 10 months while the Ld. CIT (A) has allowed relief only for the period up to six month. It was submitted that no reason or justification has been given by the Ld. CIT (A) for allowing relief for a period up to six months as against period of 8 to 10 months as stated by Shri Chottu Ram and sustaining addition for the period beyond six months. The Ld. AR further argued that in the case of the assessee even if a lower period of 8 months, as stated by Shri Chottu Ram, is considered then, the entire of addition needs to be deleted as the maximum period in the case of the assessee within which the PDCs were en-cashed is of 6.5 months only.
6.0 The Ld. Sr. DR supported the assessment order for making the addition on account of interest paid on post-dated cheques. The Ld. Sr. DR submitted that the assessee is part of the BPTP group which is headed and controlled by Mr. Kabul Chawla. Search was conducted on BPTP group on 15.11.2007. Lots of incriminating documents were found during the course of search and seized. Post search enquiries were also conducted. The seized documents and post search enquiries revealed that BPTP group was 29 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT following business model of purchase of land by making part payment at the time of execution and registration of sale deed and balance sale consideration was paid through post-dated cheques (PDCs). From the seized documents and post search enquiries, it was proved that BPTP group used to make payment of interest @ 1.25% per month for the period from the date of sale deed to the date of encashment of cheques. The Ld. Sr. DR stated that the details of these seized documents are given in the assessment order which clearly evidences the fact of payment of interest where PDCs were given for purchase of land. The Ld. Sr. DR stated that in this case also, the assessee has purchased land and the whole consideration was not paid at the time of execution of sale deed. Part consideration was paid through post dated cheques. It clearly shows that the assessee has also paid interest in cash outside the books for payment of sale consideration through post-dated cheques and addition has been correctly made by the AO. 7.0 Having heard both the parties and after having gone through the paper books filed by the assessee, we now take up the appeals one by one for adjudication.
30 ITA No.1735 & 1750/Del/2013
Greem Valley Tower Pvt. Ltd. vs. ACIT 7.1 As far as the appeal for AY 2006-07 is concerned, we have perused the reasons recorded in case of assessee as well as reasons recorded in the case of West Land Developers Pvt. Ltd. The reasons recorded in case of assessee are identical to the reasons recorded in the case of West Land Developers Pvt. Ltd. on the issue of the alleged interest paid on post dated cheques. We have gone through the seized documents and the summary of these seized documents. It is the assessee's contention that there are no seized documents which are referred to and relied upon in the reasons recorded as well as in the assessment order and which belong to assessee. The Ld. Sr. DR has also failed to bring anything on record to establish that any seized documents found during the course of search belonged to assessee. There is a clear finding by the Ld. CIT (A) in his order at Para 4.3.and Para 4.4 that none of the seized documents belong to the assessee which the Ld. Sr. DR was unable to controvert. The Ld. CIT (A) has relied on the judgment of the Hon'ble Supreme court in the case of Pooran Mal vs. CIT (1974) 093 ITR 505 (SC). However, in our considered view this judgment would apply only where in the course of search, documents of any other 31 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT assessee are found. However, undisputedly, in the present case, no documents belonging to the assessee were found during the course of search. This issue is dealt at length by a co-ordinate Bench of this Tribunal in the case of one of the group companies of the assessee M/s Westland Developers Pvt. Ltd. in ITA no. 1757/Del/2013 vide order dated 23.11.2015 wherein at Para 7 of order, the following was held:
"7. Now adverting to the second limb of assessee's stand, i.e., whether the reasons recorded for forming the belief of escapement of income on the basis of material seized are justified or vague to take recourse of section 147. In this context, on perusal of the orders of authorities below, we find that the assessee has categorically denied that any of the seized documents, discussed in the impugned order, belonged to the assessee. We also find that the assessment order also nowhere records any finding that any of the documents seized belong to the assessee. Even the ld. CIT(A) at para 4.3 has categorically stated that the assessment order nowhere mentions that any part of the seized material belong to the appellant company. The assessee has been denying to have paid any interest on PDCs. No cogent material was found during the course of search which could 32 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT repel this contention of assessee. The reasons have been recorded by the AO after drawing the inference from the seized documents that trend of payment of interest on PDCs by the group companies stood depicted and the assessee being a group company of BPTP Ltd., might have also paid interest on such PDCs. This approach of the authorities below, to our mind, is not tenable at all being based on fake inferences drawn. The assessee is a separate and distinct assessee under the Act and is to be assessed on the basis of material which belongs to it or specifically relevant for its assessment. In the instant case no specific document is pointed out belonging to the assessee nor any evidence or material,whatsoever, has been demonstrated by the authorities below to show that the assessee had paid interest on PDCs. Therefore, there being no definite material belonging to the assessee, in our opinion, the reasonsrecorded for initiation of proceedings u/s. 147 against the assessee, are not in consonance with law, having been based on mere suppositions and surmises and extrapolation of material seized. The fact that the assessee is a group company of BPTP Ltd. and overall management is controlled by one person cannot be equated with the existence of incriminating material belonging to the assessee for drawing the adverse inference. We, therefore, find considerable force in the contention of the assessee that 33 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT assessment is based on alien material having no specific nexus with the assessee and that there is no corroborating and independent evidence to justify that the assessee had paid interest of PDCs, as alleged by the authorities below. The action taken u/s. 147 by the AO is, therefore, void ab initio and not sustainable, having been resorted to on vague reasons.
8. Once, as observed above, we have held the proceedings u/s. 147 as void, we need not to enter into the merits of additions challenged by assessee by way of other grounds and also by the Revenue in its appeal. Accordingly, the appeal of the assessee is liable to be allowed and that of Revenue to be dismissed."
7.2 In the case of West Land Developers Pvt. Ltd, there was only one issue of PDC interest on which the assessment proceedings were reopened. However, in this case there is one more issue of payment of additional payment besides the issue of PDC interest which was made the basis for reopening of assessment proceedings. There is nothing in the reasons recorded that the payments of additional payments made by the assesses is claimed by the assesses as the stand of the assessee is that the payments of 34 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT additional payments made by the assessee are neither debited to the Profit & Loss account nor claimed by the assessee as expenditure. Nothing has been brought on record by the department to demonstrate that additional payments made by the assesse are claimed by the assessee as deduction. Even the basis of disallowance of additional payments in terms of explanation of Section 37(1) has been dismissed by the Hon'ble Delhi High Court in the case of Vasundara Promoters Pvt. Ltd. Thus, this ground was also not a valid ground for reopening of assessment proceedings of assessee.
7.3 In our considered view, each and every assessee is a separate and distinct assessee. It is a fact on record that no seized material belonging to the assessee was found during the course of search on BPTP Ltd. and some of its group companies. None of the vendors of land who sold land to assessee were called and examined by the AO. There is nothing adverse brought on record by the AO in form of any material or any statement that interest outside the books was paid in cash by the assessee. The reasons were recorded by the AO by relying on seized documents which belonged to some 35 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT other assessee during the course of search on BPTP Ltd. and some of its companies. Considering the rules of precedence and consistency and in absence of any material, document, evidence or statement which could implicate the assessee, in our view, the impugned assessment could not have been reopened. In view of these specific facts, the action taken by the AO of reopening of the assessment u/s 147 of assesse is not sustainable and the same is quashed as being void ab-initio as being based on seized documents of other assessee and based on presumptions, assumptions and incorrect interpretation of law.
7.4 As we have held the re-assessment as being void ab- initio, the grounds raised by the assessee on the merits of the additions become academic in nature and are not being adjudicated upon.
8.0 In the result, ITA 1735/Del/2013 filed by the assessee is allowed.
9.0 Coming to assessee's appeal for AY 2007-08, it is seen that in the assessment order, lots of seized documents are mentioned while making the addition in respect of interest paid on 36 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT post dated cheques. However, nowhere has the AO stated that these seized documents belonged to the assessee. The Ld. CIT (A) has analysed all these seized documents and has given a categorical finding that none of the seized documents mentioned in assessment order belong to the assessee. It is clear from this that the AO has used documents which belonged to other assessees for making the addition in the hands of assessee. Further, the AO has neither called any of the vendors of land nor recorded any statement to arrive at the correct facts. Under such circumstances, question arises as to whether additions can be made in absence of any document/s or any adverse statement/s simply on the basis of suspicion and assumption that the assessee might have also paid interest on post dated cheques given towards purchase of land. This issue is settled by the co-ordinate bench in case of Westland Developers Pvt. Ltd. in ITA no. 1757/Del/2013 vide order dated 23.11.2015 wherein it was held by the Tribunal that in absence of any cogent, definite material which belonged to the assessee or any evidence demonstrating the payment of interest by the assessee on PDCs, reasons recorded for initiation of proceedings u/s 147 were 37 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT not in consonance with law having been based on mere suppositions, surmises and extrapolation of material seized. The bench completely discarded the argument of AO and Ld. CIT (A) of common management and the assessee belonging to the same group and held that it cannot be equated with existence of incriminating seized material belonging to the assessee. In this case also, there is no seized document found which belongs to the assessee and it is so confirmed by the Ld. CIT (A) also in his order. No statement of any vendors of land is recorded by the AO. Statement of Shri Chottu Ram is referred to although the assessee has denied to have purchased any land from Shri Chottu Ram. The statement of Shri Chottu Ram was not even provided to the assessee. In our view, the statement of Shri Chottu Ram cannot be made as the basis for taking adverse inference without the assessee even having been confronted with it. Reliance is placed on the judgment of the Hon'ble Supreme Court in M/s Andaman Timber Industries vs. Commissioner of Central Excise wherein it was held that order becomes null if based merely on statement of witness without allowing opportunity to cross examine them. None of the 38 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT vendors of land and the alleged recipients of interest paid by the assessee were examined by AO who would have confirmed of having received any such interest. It is the basic principle of law that unless there is a corroborative evidence, no addition can be made in an assessment. Reliance is placed on the judgment of the Hon'ble Supreme Court in case of Dhakeshwari Cotton Mills Ltd. vs. CIT 26 ITR 775(SC), Omar Salay Mohd. Salay vs. CIT 37 ITR 151 (SC) and Lalchand Bhagat Ambica Ram vs. CIT 37 ITR 288 (SC) wherein it is held by the Hon'ble Supreme Court that there must be something more than mere suspicion in support of an assessment and mere suspicion cannot take the place for the purpose of passing an order of assessment.
9.0.1 The issue of the alleged payment of interest by the assessee is covered by the judgment of the Hon'ble Jurisdictional (Delhi) High Court in case of CIT vs. Lubtec India Ltd. reported in 311 ITR 175 ( Delhi) (2009) wherein it was held by the Hon'ble Delhi High Court that where there was nothing to show that expenditure in question was in fact incurred by assessee and assesese had denied having incurred expenditure and had contended that it did 39 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT not have that kind of money, no addition on account of such expenditure could be made to assessee's income. The issue of alleged payment of interest by the assessee is also covered by the decision of Hon'ble Delhi High Court in the case of CIT vs. Ved Prakash Choudhary reported in 169 taxman 130 (Delhi) ( 2008) wherein the addition was deleted as there was no corroborative evidence to show that there was in fact transfer of money. Accordingly, considering the facts of the case and judicial pronouncements as discussed above, the Ground nos. 2 & 3 relating to addition confirmed by the Ld. CIT (A) in respect of interest paid on post-dated cheques outside the books is deleted. 9.1 Ground of Appeal no. 5 is related to disallowance u/s 40A(3) of Income Tax Act, 1961 of Rs.12,31,160/- in respect of cash payment made by the assessee for purchase of land. The Ld. AR has submitted that the assessee has not claimed the amount paid for purchase of land as amount paid is neither debited to the Profit & Loss a/c nor claimed as deduction in the Computation of Taxable income as the assessee has received reimbursement of amount from M/s Countrywide Promoters Pvt. Ltd. He has further 40 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT stated that the issue is covered by the decision of the co-ordinate bench of the ITAT 'H' bench, New Delhi in case of M/s West Land Developers Pvt. Ltd. in ITA no. 1752/Del/2013 vide order dated 22.08.2014. He has further stated that no appeal was filed by the department against this order before the Hon'ble Delhi High Court. It has further been stated that this issue is decided in favour of various assesses by the co-ordinate benches of the Tribunal in 31 other appeals of group companies of BPTP. On the other hand, the Ld. Sr. DR has placed reliance on the concurrent findings of the lower authorities. It is seen that the issue of disallowance u/s 40A (3) is decided by several co-ordinate benches in various cases of group companies of BPTP in favour of the respective assessees by taking the view that issue of disallowance of expenses does not arise as the amount paid for purchase of land is neither debited to the Profit & loss a/c nor claimed as expenditure in the Computation of taxable income as the assesses have got reimbursements of the amounts paid for purchase of land from M/s Countrywide Promoters Pvt. Ltd. on assignment of development rights in land purchased by assesses in favour of M/s Countrywide Promoters 41 ITA No.1735 & 1750/Del/2013 Greem Valley Tower Pvt. Ltd. vs. ACIT Pvt. Ltd. This issue was first decided in the case of M/s West Land Developers Pvt. Ltd. in ITA no. 1752/Del/2013 vide order dated 22.08.2014 and later on in more than 30 other cases of BPTP group on identical facts. Therefore, respectfully following the decision/s of the co-ordinate benches on the issue of disallowance u/s 40A (3) and following the rules of precedence and consistency, the disallowance made by the AO of Rs.12,31,160/- is hereby deleted. 10.0 In the result ITA 1750/Del/2013 stands allowed. 11.0 In the final result, both the appeals of the assessee stand allowed.
Sd/- Sd/-
(PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 15/01/2021
*DRAGON
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI