Shaligram Infra Projects LLP Vs JCIT (ITAT Ahmedabad)
Background
- A search u/s 132 was conducted on 06.03.2018 in SSS Group (Sangani, Satyam & Shaligram).
- Assessee: Shaligram Infra Projects LLP, engaged in real estate development.
- AO made substantial additions for:
Alleged on-money investments in land & bungalows.
Alleged on-money receipts from sale of flats in projects “Shaligram Plush” & “Lakeview”.
Unrecorded investments in Ambli, Kathwada & Hanspura lands.
Unexplained receipt of ₹1 crore from K.P. Sanghvi.
Disallowance of interest u/s 40A(2)(b) on related party loans.
CIT(A) partly deleted & partly sustained additions. Both Revenue & Assessee filed cross-appeals.
AYs 2015-16 & 2016-17 – On-money for Land/Bungalows
- AO relied on seized papers from third party to conclude that Assessee had paid “on-money” of ₹66,521 per sq. yard for Raj Villa Society plots, leading to additions of ₹7.09 cr (2015-16) & ₹53.76 cr (2016-17) u/s 69B.
- CIT(A): Deleted — papers were third-party documents, no corroboration, no cross-examination allowed.
- Tribunal: Confirmed CIT(A). Additions cannot rest on third-party loose papers without direct nexus to Assessee.
AYs 2017-18 & 2018-19 – On-money Receipts from Sale of Flats
- AO: Based on statements of buyers (Vasant Patel, Chunilal Jani), seized papers from Viral Patel & special audit, extrapolated 1/3rd of turnover as cash receipts, making additions of ₹9.65 cr (2017-18) & ₹23.76 cr (2018-19) u/s 69A.
- CIT(A): Held extrapolation unjustified but accepted that on-money in few instances was proved.
- Instead of taxing gross receipts, applied profit rate of 12% on such on-money, treating it as business income.
- Sustained additions: ₹1.15 cr (2017-18) & ₹2.85 cr (2018-19).
- Tribunal: Upheld CIT(A) — only profit element to be taxed, not entire on-money receipts.
AY 2018-19 – Unexplained Investments & Receipt
- AO (based on seized Annexure A/5) made additions:
- ₹4.20 cr (Ambli land, u/s 69B),
- ₹1.36 cr (Kathwada & Hanspura lands, u/s 69),
- ₹1.00 cr (receipt from K.P. Sanghvi, u/s 69A).
- CIT(A): Confirmed but allowed telescoping against estimated undisclosed profit from on-money (₹4.01 cr).
- Net sustained addition = ₹2.54 cr.
- Tribunal: Upheld CIT(A). Loose papers corroborated; telescoping adjustment justified.
Interest Disallowance u/s 40A(2)(b)
- AO disallowed ₹9.11 lakh (2015-16 to 2018-19) alleging 15% interest to related parties excessive compared to 12%.
- CIT(A): Deleted — AO provided no comparables; even SBI charged 12.35% secured loans, hence 15% unsecured loans to related parties not excessive.
- Tribunal: Confirmed deletion.
Technical Grounds
- Assessee argued assessments time-barred u/s 153B & misapplication of Relaxation Ordinance, 2020.
- Grounds not pressed & dismissed.
Final Verdict
- Revenue appeals dismissed.
- Assessee appeals partly allowed.
- Key sustained additions:
- Profit on on-money receipts: ₹1.15 cr (AY 2017-18) & ₹2.85 cr (AY 2018-19).
- Net unexplained investments: ₹2.54 cr (AY 2018-19).
Key Takeaways
- Third-party loose papers without nexus to Assessee cannot justify additions u/s 69B.
- On-money receipts to be taxed only on profit element, not gross receipts.
- Telescoping principle applies: undisclosed profit can be set off against unexplained investment.
- Disallowance u/s 40A(2)(b) requires concrete evidence; higher interest to related parties not per se excessive.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
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