ITO Vs Neminath Homes Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai held that addition u/s 68 for investment in joint venture unsustainable as assessee has duly discharged the onus and given all the necessary documents for the identity, genuineness and creditworthiness of the parties.
Facts- On this issue, while completing the assessment, the AO perused the audited P & L account and observed that the appellant had paid the interest on loans of Rs.l,03,78,696/- and had disclosed the interest income of Rs.46,70,002/-. The AO also observed that the appellant had given the interest free loans to its 2 group concerns of Rs.74,00,000/-. The AO held that the appellant is incurring the interest on loans taken and is not recovering the interest on loans given to its associate concerns. Accordingly, AO directed the appellant to justify as, to why interest should not be disallowed in proportionate manner. In response, the appellant furnished its’ reply and submitted that the loans and advances had been given to its associate concerns to undertake the project activities and such is in normal course of its business. However, AO rejected the appellant’s contention and held that the burden is on to prove that the interest bearing funds had been utilized for and appellant had not justified the commercial expediency for which the interest free loans were given to its associate concerns. Thus, AO held that there is diversion of interest bearing funds for non-business purpose and accordingly, made the disallowance of interest on prorate basis of Rs. 8,88,000/- @ 12% of interest free loans given of Rs. 74,00,000/- u/s. 3(1)(iii) of I.T.Act, 1961.
Further, AO has confirmed addition u/s 68 for investment in joint venture.
Conclusion- Held that assessee has actually not debited the amount in profit and loss account. Rather the entire interest has been debited to work in progress. Hence, ld.CIT(A) has agreed with the AO that there is diversion of interest, but he has directed that since the interest has been debited to work in progress, the said amount be reduced from work in progress. Hence, ld.CIT(A) has correctly appreciated the issue. We do not find any infirmity in the same. Thus, the revenue’s appeal being misplaced is dismissed on this account.
With regard to addition u/s 68 for investment in join venture it is held that ld.CIT(A) has duly examined the documents and found that all the necessary details of the parties i.e PAN card, CIN master data, confirmation, joint venture agreement reply to notice u/s. 133(6), IT acknowledgment receipt, bank statement, balance sheet of the parties were all produced. Ld.CIT(A) has also given sequence of the events and examined and verified the financial worth of the parties by analyzing the net worth of the parties elaborately and has found that there is no doubt about the creditworthiness of these parties. Nothing has been brought by the revenue to controvert these findings. The case laws relied upon by the ld.CIT(A) are also germane and support the case of the assessee. Assessee has duly discharged the onus and given all the necessary documents for the identity, genuineness and creditworthiness of the parties. Ld.CIT(A) has duly examined the same and found the same to be correct.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the Revenue is directed against the order of learned Commissioner of Income-tax(Appeals)-47 dated 15.04.2021 and pertains to Assessment Year 2012-13.
2. The grounds of appeal are as under:-
1. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition u/s. 68 of share application money of Rs. 2,35,00,000/-without appreciating the fact that money has been received from bogus parties with no liabilities,
2. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 2,35,00,000/- holding that same is capital receipts without appreciating the fact that same is accommodation entry received from hawala operator and liable to be taxed u/s. 68 of the I.T. Act, 1961.
3. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 5,95,00,000/- received as unsecured loan without appreciating the fact that same is accommodation entry received from hawala operator Sh. Bhanwarlal Jain.
4. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the disallowance of interest paid of Rs. 8,88,000/- without appreciating the fact that interest bearing fund has been diverted for non business purpose.
5. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 26,17,60,000/- received as investment from bogus parties under Joint Venture agreement without appreciating the fact that same was received from bogus parties without any commercial expediency.
6. Whether On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of Rs. 26,17,60,000/- received by assessee under Joint Venture agreement without appreciating the fact that same was received from
3. Brief facts of the case are that that the appellant company is engaged in the real estate and construction business. The appellant filed its return of income u/s. 139(1) on 30/09/2012 declaring the total income of Rs.48,380/-. The case was selected for scrutiny and therefore, the AO issued a notice u/s.143(2) on 06/08/2013 and took up the proceedings. During the course of hearing, AO issued the notices u/s 142(1) and directed the appellant to furnish the documents on various issues raised namely share application money, unsecured loans received from entities connected to Jain group of cases as also investments made by joint venture partners. In response, the appellant had filed the written submissions and supporting documents to justify the transactions recorded in audited books of accounts. However, the AO rejected the contentions of the appellant and made various additions u/s 68 of the Act and disallowances in the assessment order dated 30.03.2015, and consequently determining the income at Rs. 35,09,82,040/-.
4. Apropos issue of share application money of Rs. 2.35 crores u/s. 68 of the I.T.Act. During course of assessment proceedings, the Id. AO observed that the appellant had received the share application monies @ 5/- per share (Face value is of Rs.10 per share- as part payment) along with share premium of Rs.10/- per share (total share premium is of Rs.20/- per share) from the 7 parties.
The AO observed that the appellant had forfeited the above mentioned share application money (part paid) of Rs.2,35,00,000/- during the year, on the grounds that these parties failed to pay subsequent payments as per schedule. The AO therefore asked the appellant to furnish the party wise details of share applications and return of allotment in Form 2 filed with Registrar of Companies (ROC). Further the AO had also issued notices u/s 133(6) to all the above share-applicants at their given addresses. However he noted that all the notices were returned unserved by the postal- authorities. The AO therefore directed the appellant to furnish the I.T. returns, Ledger account, PAN card and bank statements of share applicants. In response, the appellant filed the submissions and documents on record. The appellant requested the AO to issue fresh notices u/s 133(6) due to change in name of the company from Orbit Heights P. Ltd to Neminath Homes P Ltd . However, the Id. AO rejected the appellant’s request and held that the appellant had not proved the identity and creditworthiness of the share applicants and genuineness of transactions and there after relying on certain judicial pronouncements, the AO treated this share application as unexplained and made an addition of Rs.2,35,00,000/- u/s 68 of I.T. Act, 1961.
5. Before the ld.CIT(A) assessee submitted that these share application money were received in earlier year. That on the touchstone of several case laws, these can not to be taxed in the present assessment year. The ld.CIT(A) accepted the submissions and held as under:-
“I have considered the facts of the case, submissions and contentions of the assessee as also the order of the AO. I have also perused the material on record as also legal and factual matrix. On perusal of the documents submitted by the assessee, it is seen that the disputed share applications monies of Rs.2,35,00,000/-, in respect of which addition is made u/s 68, had not been received during impugned year (A.Y.2012-13). On the contrary such share applications monies had been received in earlier years viz. A.Y.2010-11. The copies of ledger accounts and bank statements fortify the fact that such share applications monies had been received during A.Y.2010-11. The audited balance sheet of earlier year of the assessee also show such share applications money of Rs.2,35,00,000/- and further the balance sheet of impugned year does not disclose the receipt of share application during the year. Accordingly, it remain an undisputed fact that such share application monies has not been received during the year, rather had been received in earlier year( A.Y. 2010-11). Therefore, such investments or otherwise could have been considered by the AO only in the year of receipt, which is A.Y. 2010-11. Therefore the addition made by the AO u/s 68 in this regard during the year becomes unsustainable in law and is liable to be deleted.”
6. In this regard, he also referred to following case laws
i) PCIT v Real value Realtors Pvt. Ltd. 113 com 62 (Bombay High Court)
ii) Ivan Singh vs. ACIT 116 com 499 (Bombay High Court)
iii) CIT vs Parmeshwar Bohra 301 ITR 404 (Rajashtan High Court)
iv) CIT vs Usha Stud Agricultural Farms Ltd. 301 ITR 384 (Delhi High Court)
v) DCIT v Global Mercantiles (P) Ltd. 67 com 166 (Kolkatta High Court)
vi) Tulip Hotels Pvt.Ltd. vs DCIT 132 TTJ 3 ( ITATs)
vii) Vardhman Overseas Ltd. vs ACIT 24 SC 393 (ITAT, Delhi)
7. The ld.CIT(A) also found force in assessees contention that addition u/s. 68 cannot be made as necessary amendment provisions were not applicable in the assessment year under consideration and the share premium is a capital receipt. In this connection, he referred to following case laws
i) M/s. Apeak Infotech 397 ITR 148(Bom.HC)
ii) Orchid Industries Pvt.Ltd. 397 ITR 136 (Bom.HC)
iii) Gagandeep Infrastructure Pvt.Ltd. in ITA 1613 of 2014 (Bom.HC)
iv) Green Infra Ltd. (2017) 392 ITR 7 (Bom.HC)
v) S.Homes & Hotesl Pvt.Ltd. 7 tamxann.com 120 (Bombay High Court)
vi) Vodafone India Service Pvt.Ltd. vs Addl.CIT 368 ITR 1 (Bombay High Court)
8. The order of ld.CIT(A) in this regard as under:-
“There is also force in submission of Ld. AR that addition u/s.68 cannot made of share capital and premium since such is a receipt on capital account and is not of revenue nature. It is observed that the provision of Sec.56(2)(viib) inserted by Finance Act, 2012 had been made applicable from A.Y.2013-14 at does not apply to the year relevant to A.Y.2012-13. The said view had bet adopted in the jurisdictional High Court decisions in the cases of M/s. Apeak Industies (397 ITR 148) Orchid Industries Pvt Ltd (397 ITR 136), Gagandeep Infrastructure Pvt Ltd and M/s., Green Infra Ltd cited supra and by Hon’ble Apex Court in the case of M/s G. S. Homes & Hotels Pvt Ltd (7 Taxmann.com 120 ) wherein it is held that the share premium is a Capita receipt. Also in the present case, on forfeiture the share application money ha, been credited to the capital reserve account and not in profit and loss account.
Hon’ble Jurisdictional High Court of Bombay in the case of Vodafone India Service Pvt Ltd vs. Addl. CIT reported in 368 ITR 1 has decided that “the amounts received on issue of share capital including the premium are undoubtedly on capital account”. The CBDT vide Circular No.02/2015 dated 29/01/2015 decided not to file the SLP before Hon’ble Supreme Court of India as a result of which such decision of Jurisdictional High Court of Bombay has reached to finality. The judicial decisions relied by Ld. AR also support the case of the appellant wherein it has been decided that forfeiture of shares cannot be brought to tax since is of capital account. Accordingly, respectfully following the judicial decisions cited supra, I hold that AO is not justified in making the addition u/s.68 of the share applications monies received in earlier years and the same therefore deserves to be deleted. I therefore direct the AO to delete the addition of Rs. 2,35,00,000/- u/s 68 of I.T. Act, 1961.”
9. Apropos consequent of Rs. 5.95 crores. On this issue the AO held that the appellant had disclosed the unsecured loans, in the audited balance sheet, of Rs 22.85 crores. As per the break-up of the details of unsecured loans, the appellant had received unsecured loans of Rs.5,95,00,000/- from 6 parties belonging to Bhanwarlal Jain Group of cases, during the year.
The AO further observed that the appellant had claimed the interest on loans of Rs 1.03 crores which includes the interest of Rs.52,85,654/- paid t,o various parties belonging to Shri Bhanwarlal Jain Group. The AO held that Shri Bhanwarlal Jain, Rajesh Banwanlal Jain and Manish Bhanwarlal Jain manage various entities in name of various persons who are fictitious and are name sake directors and such entities are engaged in providing the accommodation entries of loans, advances, sales, etc for commission. The AO held that during course of search conducted at the premises of Shri Bhanwarlal Jain and his group entities, it had been admitted that various entities are controlled by Shri Bhanwarlal Jain and the transactions are the accommodation entries only. The AO held that transactions had been entered with such entities wherein cheques are given in exchange of cash for commission and the directors of such entities are name sake persons. In response, the appellant filed the written submissions before AO along with supporting documents to prove the identity and credit-worthiness of the lenders and genuineness of the loans received during year and interest paid thereon. The appellant also submitted that all lenders are assessed to Income Tax and had filed their Income Tax returns and entire loans had been received through banking channel by A/c payee cheques/ RTGS. However, Ld. AO rejected the appellant’s contentions and held that the lender entities are run, controlled and operated by Shri Bhanwarlal Jain who is engaged in providing accommodation entries wherein the cheques/RTGS had been given in exchange of cash for commission. Accordingly, AO made the addition u/s.68 of the unsecured loans received from the entities belonging to Shri Bhanwarlal Jain of Rs.5,95,00,000/-. Consequently, AO also made the disallowance of interest paid to the concerns/ entities belonging to Shri Bhanwarlal Jain of Rs.52,85,664/-/
10. Upon assessees appeal, ld.CIT(A) noted the assessees submissions and reliance upon case laws. He noted that, the appellant disputed the addition made by the AO. That the appellant in this regard had furnished the documents such as PAN of lenders, confirmation of account, own bank statement disclosing receipt and repayment of loans through A/c payee cheques/RTGS, IT acknowledgment receipt, Balance sheet and Bank statement of the lenders, TDS certificates of interest paid on such loans to prove the identity and credit worthiness of the lenders and genuineness of loan transactions. That the AO had not pointed any defects in such documentary evidences filed on record. That it is observed that such loans had been received through banking channel by A/c payee cheques/RTGS and thereafter had been subsequently repaid through banking channel by A/c payee cheques/RTGS. That the appellant had paid the interest on such loans and in support had filed the copies of own bank statements and bank statements of the lenders and also filed the copies of TDS certificates of interest paid on the disputed loans. That it appears that the Id. AO had placed much reliance on the statements of Shri Bhanwarlal Jain recorded by the Investigation wing, during course of their search in his case, however it is observed that such statements had been retracted subsequently by him and therefore its evidentiary value reduces. That further, it is also seen that the appellant was not provided the copies of such statements for rebuttal and an opportunity of cross examination had not been allowed to the appellant. That the appellant had furnished the copies of bank statements of the lenders and it is submitted that there is no immediate cash deposits against the loans provided to the appellant.
That it is also gathered that no independent verification has been made by the AO and he did not issue even the notices u/s 133(6) to the bankers to verify the source of lenders funds and had not brought any contrary material on record to prove that unexplained funds belonging to the appellant had been routed in garb of loans. That there is also force in submission of Ld. AR that appellant is not required to prove the source of lenders funds and that the proviso of Sec 68 would apply w.e.f. A.Y-2013-14 onwards.
11. Thereafter, he referred to following case laws
i) Hon’ble High Court in the case of Pr.CIT v. Veeedhata Tower Pvt. Ltd. (ITA No. 819 of 2015)
ii) Hon’ble Apex Court in the cae of Pr.CIT vs. Vaishnodevi REfoils & Solvex 96 com 469(SC)
iii) Nemichand Kothari v CIT (264 ITR 254-Gauhati)
iv) Hon’ble Bombay High Court in the case of CIT vs. Haresh D. Mehta 86 com 22
v) CIT v. Nikunj Exim Enterprises (P) Ld. 35 com 384
vi) Hon’ble Bombay High Court in the case of CIT vs. Orchid Industries (P) Ltd. 88 com 502
12. He also referred to several other case laws and held as under:-
“As discussed above, the appellant had furnished all relevant documents to prove the genuineness of the transactions like; PAN of lenders, Confirmation of account, own bank statement disclosing receipt and repayment of loans through A/c payee cheques/RTGS, I.T acknowledgment receipt, Balance sheet and Bank statements of the lenders, TDS certificates of interest paid on such loans to prove the identity and credit worthiness of lenders and genuineness of loan transactions. Accordingly, the appellant had discharged its onus to prove the identity and credit-worthiness of the lenders and genuineness of the loans, then the addition made by the AO u/s 68 deserves to be deleted.”
13. He further found that assessees own group concern case and in assessees own case. Tribunal has decided in favour of assessee, he concluded as under:-
“ From the above discussion, it is crystal clear that this issue has been decided in favour of the assessee, by the Hon’ble ITAT Mumbai in assesee’s own case for AY 2013-14 and 2014-15 vide order dated 08.07.2019. Further my ld. Predecessor has also decided this issue in assessee’s own case, for AY 2010-11, 2011-12, following above order of the ITAT and the present year is the only year which is pending. Further, it is observed that the facts of the presents year are identical to the appeals decided by the Hon’ble ITAT, Mumbai and my Id. Predecessor in the case of the assesses for A.Y. 2010-11 to2014-15 and there is no variation in facts. Therefore on adopting the consistent approach, the addition made u/s.68 is liable to be deleted, in the present year as well.
In view of the above discussion, I direct the AO to delete the addition unsecured loans of Rs. 5,95,00,000/- made u/s 68 of I.T Act, 1961.
Consequently, the disallowance of interest paid to the parties belonging to Shri Bhanwarlal Jain also deserves to be deleted. I therefore direct the AO delete the disallowance of interest of Rs.52,85,664/as well.”
14. Apropos issue of disallowance of interest paid of Rs. 8.88 lacs. On this issue, while completing the assessment, the AO perused the audited P & L account and observed that the appellant had paid the interest on loans of Rs.l,03,78,696/- and had disclosed the interest income of Rs.46,70,002/-. The AO also observed that the appellant had given the interest free loans to its 2 group concerns of Rs.74,00,000/-. The AO held that the appellant is incurring the interest on loans taken and is not recovering the interest on loans given to its associate concerns. Accordingly, AO directed the appellant to justify as, to why interest should not be disallowed in proportionate manner. In response, the appellant furnished its’ reply and submitted that the loans and advances had been given to its associate concerns to undertake the project activities and such is in normal course of its business. However, AO rejected the appellant’s contention and held that the burden is on to prove that the interest bearing funds had been utilized for and appellant had not justified the commercial expediency for which the interest free loans were given to its associate concerns. Thus, AO held that there is diversion of interest bearing funds for non-business purpose and accordingly, made the disallowance of interest on prorate basis of Rs. 8,88,000/- @ 12% of interest free loans given of Rs. 74,00,000/- u/s. 3(1)(iii) of I.T.Act, 1961.
15. Upon assessees appeal, the ld.CIT(A) has held in this issue as under:-
“I have considered ‘ the facts of the case and the submissions’ of the assessee. It is undisputed fact that the appellant had given the interest free loans to its associate concerns of Rs 74,00,000/- during the year .and on the other hand, had made the interest payments on borrowings. The appellant had not proved the commercial expediency for which the interest free loans were given to the associate concerns. Also, appellant had not brought any evidence on record to prove that the interest free loans were given to the associate .for business purpose. The onus lies on the appellant to prove that non-interest bearing funds had been utilised for providing the interest free loans which had not been discharged by the appellant. Thus, I hold that AO is justified in making the disallowance of interest @ 12 % of interest free loans given of Rs 8,88,000/-.
However, it is also true that the appellant had not claimed the interest paid on loans as deductible expense, rather the appellant had capitalised the entire finance cost to Capital Work in progress (WIP) account since its project was not completed. Thus, the addition of unclaimed interest made by the AO is not justified. It is true that the entire finance cost had been transferred by the appellant to Capital Work in progress (WIP), accordingly, I direct the AO to reduce the Capital Work in progress (WTP) by Rs 8,88,000/- on Account of disallowance of such interest. This will result into addition in the hands of the assessee in subsequent years.”
16. Apropos issue of addition us. 68 of the investment in joint ventures. On this issue the AO noticed that the appellant had disclosed the investment in Joint Venture of Rs.26,17,60,000/- under “Current Liabilities”, The notes attached along with audited balance sheet also disclosed that the appellant had received the amounts under Joint venture agreement. The AO therefore asked the appellant to furnish the details along with supporting documents” of such investments towards Joint venture. The appellant furnished the names and address of 17 parties from whom the contributions has been received under the Joint Venture agreement. In the assessment proceedings, the AO had issued the notices u/s 133(6) to all 17 Joint Venture investors. The compliances were received from 4 parties and the notices u/s 133(6) issued to 13 parties were not complied, either due to non-service or due to non-furnishing of their replies. Accordingly, the AO directed the appellant to furnish the details such as Income Tax returns, ledger account, PAN card and bank statements of such joint venture investors. In the meantime the appellant had also intimated the AO that the parties had not responded to notice u/s.133(6) since its erstwhile name M/s. Orbit Heights Pvt Ltd had been changed to M/s. Neminath Homes Pvt Ltd, which created some confusion at their end and it requested the AO to re-issue the notice u/s 133(6)/ summons with the amended name’as M/s. Neminath Homes Pvt Ltd. Thereafter, the replies from all parties had been received by the AO along with documentary evidences such as PAN, confirmation of account, I.T return, bank statements, – balance sheet, Joint venture agreement and other documents. The appellant also submitted the documents such as ledger account, own bank statement, Joint venture agreement and evidence of repayment of their investments to justify the identity and credit worthiness of the investors and genuineness of the transactions.
However, the Id. AO did not accept the appellant’s contention and replies u/s 133(6) received from Joint Venture investors and held that the appellant had not proved the genuineness of the amounts received as investments towards Joint Venture. The relevant finding of the AO is as under :-
a) “Out of total 17 parties, around 9 to 10 parties are maintaining their bank account with Bank of Baroda, which appears to be highly improbable.
b) High value credits in the bank account and subsequent circular transactions between the related accounts and immediate withdrawals.
c) These transactions do not appear to be in the normal course of business.
d) The date of amount of deposits received into the bank accounts of the aforesaid party were diverted to the assessee “company towards investment in JV’ on the same day.
e) The replies were filed directly in the Tapal not received through ‘post’.
f) Cross-holdings were observed. One company is holding investments in other-companies in the aforesaid set of 17 companies and the other in other company of the set of 17 companies, and so on.
g) Most of the companies are newly registered. Some of the companies were found to be registered as latest as in F.Y.2011-12
h) In some of the companies, it is noticed that there is a ‘change in name of the company’ from one name to another. Similar feature is also observed in the case of assesses company as well. It means these entities are in the habit of changing their frequently.
i) In some cases, there is a mismatch of balance outstanding as on 31/03/2012 as per the assessee’s books and as per the ledger a/c furnished by these investors in response to notice u/s.l33(6).
j) In some of the cases, for example, Hunger Real Estate Pvt Ltd, there are no commercial activities or receipts from business.
k) Most of the concerns are not making substantial profits, so as to support their creditworthiness to invest huge amounts.
l) In some of the cases, the Auditors are also observed to be common.”
Accordingly, the AO held that the appellant had not proved the .genuineness of the amounts received as investment towards Joint Venture, and accordingly made the addition of Rs.26,17,60,000/- u/s.68 of I.T Act, 1961.
17. Upon assessee’s, appeal, ld.CIT(A) elaborately referred to the assesees submissions. He observed that out of 17 parties, 4 parties namely Conart Securities ltd., Orignet Technologies ltd., Shantoshima Leasing and Finance ltd., and Siwana Agri Marketing Ltd and Twinstar Industries Ltd had replied to the AO in response to the notice u/s 133(6) and the AO did not point out any discrepancies in their replies. Therefore it is not clear as to why did the Id. AO doubted their investments totaling to Rs2,97,60,000/- and why did he choose to add the same in the hands of the assessee u/s 68, without really assigning any reasons. That evidently these parties had invested a sum of Rs. 2.97 cr. in terms of joint venture agreement dated 08.04.2011, as per which they will develop the project at vesova, Andheri West, Mumbai jointly with the assessee and their share in profits will be 40% ; 17 parties put together, while that of the assessee would be 60%. As per the terms of “Agreement for Joint Ventfare” dated 08.04.2011 between Orbit Heights Pvt. Ltd. (now known as Neminath Homes Pvt. Ltd.) and seventeen investors, they will re-develop land bearing CTS no.1374/B/293 in village Versova, Andheri (West), Mumbai, which was owned by Swagat Cooperative Housing Society Ltd. That in this regard, society had entered into a development agreement dated 23.03.2009 and granted development rights in respect of the property to the present assessee. That as per clause (d) of the Joint Venture agreement, the assessee was unable to commence and complete the said project through its own means and was looking for some financial assistance to join the said project to commence and complete the said project on Joint Venture basis. Further, (e) the part of the Second Part have to give financial assistance to commence and complete the said project on Joint Venture basis. That further, (f) the Part of the First Part had other and Party of Second Part had agreed to jointly develop such property particularly described in the Schedule hereunder wherein on Joint Venture which is in the name and style of Orbit Construction and also they have agreed on certain terms and conditions which they desirous to reduce in writing which is in fact these present. That further the Joint Venture would be carried out in the name and style of Orbit Construction and its address would be 115, 4th floor, Crawford Market, Mumbai. That further, the profit sharing ratios of various Joint Venture partners and the assessee company were mentioned in clause no.9 of Joint Venture agreement. That it was also agreed upon, as per clause no.8 that development shall be completed within eighteen months. That however, it appears that this project went into difficulty and could not be started, because of various problems, despite the fact that the assessee had paid a sum of Rs.28.31 crores to MHADA and Bank Guarantee worth Rs.3 crores to the Housing Society. That it is in these circumstances that the investors lost patience and started demanding refund of their investment. That though the assessee tried to pursuade the investors to stay put but he failed to do so and ultimately had to refund the investments.
That it is seen that the investors have also furnished the documents; such as PAN and CIN of investors, Confirmation of account, Joint venture agreement, Own bank statements disclosing receipt and repayment of amounts through A/c payee cheques/RTGS, I.T acknowledgment receipt, Balance sheet and Bank statements of the investors to prove the identity and credit worthiness of the genuineness of the transactions. That these companies are active on the roll of ROC and have been filing tax returns regularly and are showing significant incomes. That it is also seen that they case out of the project because it was not getting started because of a host of problems and was getting delayed and there were fears that their investments may have gone bust. That further the investments were made through cheque and were also received back through cheque. That there appears to be nothing unusual in such transactions in real estate business which is capital incentive and requires lot of funding initially. Therefore ld.CIT(A) held that he was unable to agree with the findings of Id. AO in respect of these four parties. Accordingly, he held that investments made by them is held to be explained. Hence, he directed deletion of addition in this regard.
Thereafter, ld.CIT(A) observed that coming to remaining 13 parties, which either did not reply or notices sent to them returned as unserved, it is seen that the appellant had intimated the AO vide letter dated 09.03.2015that as the name of the company had changed from Orbit Heights Pvt Ltd to Neminath Homes Pvt. Ltd, there was some confusion/misunderstanding at the end of the investors because of which they failed to respond to the notices u/s 133(6). That therefore the assessee requested the AO to issue summons u/s 131 in the names of these parties again, by mentioning the name of the assessee company as Neminath Homes Pvt Ltd. That these facts have been clearly mentioned by the AO also in the body of the assessment order in para7.4. That however the AO chose not to issue any summons to these investors. That simultaneously it appears that these parties had submitted detailed replies to the AO, confirming their investments in joint venture project as also furnishing their IT. Returns, Bank statements, financial accounts and other relevant details and also furnished the documents such as PAN and CIN of investors, Confirmation of account, Joint venture agreement, Own bank statements disclosing receipt and repayment of amounts through A/c payee cheques/RTGS, I.T acknowledgment receipt, Balance sheet and Bank of the investors to prove the identity and credit worthiness of the genuineness of the transactions. That evidently the AO had, not pointed any defect in such documentary evidences filed which are placed on record.
18. Thereafter, ld.CIT(A) referred to the documents submitted by the parties. These included PAN card, CIN master data, confirmation, join-venture agreement, reply to notice under section 133(6), IT acknowledgment receipts, bank statement, balance sheet of the parties.
19. The ld.CIT(A) gave further finding as under:-
‘Coming to the reply filed by various investors, in response to the notices issued by the AO u/s.133(6) of the Act, it may be mentioned that Anikesh Trading Pvt. Ltd, filed a letter dated 07.03.2015 to the AO, which has been duly received by the AO himself as on 13.03.2015 and his signature and seal is clearly visible. Further, the AO also asked the investor to furnish Balance Sheet and Profit & Loss a/c. It is mentioned that the investor had submitted copy of bank statement, copy of ledger account, copy of Income Tax acknowledgement and confirmation that they had invested a sum of Rs.50 lacs in the Joint Venture. Similarly, Conarts Traders Ltd. had submitted a reply vide letter dated 03.03.2015 which has been duly received by the AO as on 23.03.2015 and his signature are there on the acknowledgement of the reply. In the said reply they had submitted various details to the AO including ITR acknowledgement, confirmation of account, bank statement, Profit & Loss a/c. and Balance Sheet. As per their Income Tax return, they have shown an income of Rs.22,05,106/- for the A.Y.2012-13. However, the company has a net worth of Rs.31.98 crores. Similarly, Hetu Investment & Trading Ltd. have submitted its reply they had furnished all relevant details to the AO. They are also assessed to tax and their income for A.Y.2012-13 is Rs.34,64,500/- and they made and investment of Rs.50 lacs in the Joint Venture. Similarly, Dolex Investment Pvt.Ltd. submitted its reply dated 26.02.2015, which is duly received in the office of the AO as on 10.03.2015. Likewise, Hunger Real Estate Pvt. Ltd. submitted a reply dated 25.02.2015 which is duly received in the office of the AO as on 10.03,2015 and had submitted all relevant details. Likewise, Jagvi Development Pvt. Ltd. submitted a reply dated 26.02.2015 as on 10.03.2015. The Company had a net worth of Rs.21.95 crs. during the relevant period and is being assessed to tax. Similarly, Lunkad Textile Pvt.Ltd. which has made an investment of Rs.50 lacs, had filed its reply dated 02.03.2015 with the AO as on 09.03.2015. As per their ITR they have shown an income of Rs.13,47,435/- during the year. Similarly, Nimbus Industries Ltd. which has made an investment of Rs.25 lacs has filed its reply dated 04.03.2015, which is received in the office of the AO as on 05.03.2015. As per the Income Tax return it has shown an income of Rs.45,64,450/-. Similarly, P. Saji textiles Ltd. had filed its reply with the AO as on 10.03.2015 and as per Income Tax return it has shown an income of Rs.12,64,134/-. Similarly, Santoshimi Lease Financial & Investment Ltd. filed its reply dated nil with the AO as on 10.03.2015. As per their ITR its returned income is Rs.21,19,100/- for A.Y.2012-13. The company has invested a sum of Rs.25 lacs in the Joint Venture project. Similarly, Shipra Fabrics Pvt. Ltd. filed its reply dated 03.03.2015 on 09.03.2015 and it has shown return income of Rs.17,48,038/-.Shivana Agriculture Marketing Pvt.Ltd. filed its reply dated 16.02.2015 and submitted their ITR which shows returned income at Rs.7,61,81,313/-. Similarly, Synazzy Exports Ltd. which has invested a sum of Rs.30 lacs, filed is reply with the AO as on 05.03.2015 and as per the ITR their returned income is Rs. 40,59,550/-. Similarly, Victory Sales Pvt.Ltd. made an investment of Rs. 25 lacs submitted its reply to the AO vide letter dated 26.02.2015 which is duly received in the office of the AO as on 10.03.2015. Their return of income for the year is Rs. 11,08,393. Further, status of all these companies on ROC website shown as active and they have been filing their return of income regularly.”
20. Thereafter, he mentioned the net worth of the parties as under:
Net worth of the Joint Venture Investors
