Case Law Details

Case Name : ITO Vs M/s. Necleus Steel Private Limited (ITAT Delhi)
Appeal Number : ITA. No. 369/Del./2015
Date of Judgement/Order : 23/03/2018
Related Assessment Year : 2010-2011
Courts : All ITAT (7623) ITAT Delhi (1799)

ITO Vs M/s. Necleus Steel Private Limited (ITAT Delhi)

In this case, assessee received an amount of Rs.67.50 crores from M/s. Unitech Ltd., as advance against the sale of the property. The assessee filed confirmation from M/s. Unitech Ltd., along with its bank statement and acknowledgment of filing of the ITR with balance sheet. The amount in question is received against the sale of the property through RTGS, through banking channel. M/s. Unitech Ltd., appeared before the A.O. in response to the notice under section 133(6) of the I.T. Act, in which, they have confirmed the same facts before A.O. for making advance payment to the assessee against sale of the property. The copy of the balance-sheet of M/s. Unitech Ltd., is also filed to show that they have given loan and advance for Rs. 1729.97 crores to different parties. It would show their worth and creditworthiness. It is not in dispute that assessee is owner of the property in question against whom advance was received. The Agreement to Sell was recorded on 12th March, 2010 on plain paper. However, according to the explanation of assessee, in order to safeguard the interests of both the parties, Agreement to Sell was executed on a Non-Judicial Stamp Paper in the year 2012, on which, inadvertently the date of Original Agreement was mentioned. This has created a doubt in the mind of the A.O. to reject the explanation of the assessee. The A.O. recorded the statement of Stamp Vendor etc., in order to arrive at the finding of fact against the assessee. However, the A.O. has forgot to note that the entire amount was received in 04 installments through RTGS, through banking channel, in March, 2010. If the stamp paper was purchased later on in March, 2012, such entries in the bank account of the assessee could not have been recorded in March, 2010. Therefore, on mere purchase of the stamp paper or recording Agreement to Sell in March, 2012, is of no consequence. Further, assessee need not to resort to any irregularity or illegality because law permits that even oral agreement could have been entered into, which, itself is sufficient to believe the explanation of assessee. The assessee, apart from that the creditor directly confirmed the transaction with the assessee, in response to notice under section 133(6) of the I.T. Act, filed confirmation of the creditor, their affidavits, their ITR and balance sheet, which proved the identity of the creditor, their creditworthiness and genuineness of the transaction in the matter. All the corresponding entries are recorded in the books of account of the assessee as well as in the books of account of the creditor. The assessee explained that the Original Agreement was executed on plain paper on 12th March, 2010 and in order to safeguard the interests of both the parties, later on, Agreement to Sell was executed in March, 2012, but, inadvertently, date of Original Agreement have been mentioned. The explanation of assessee should not have been rejected in this regard because such mistake is obvious because original transaction were completed in March, 2010. The witness to agreement also confirmed in their statements genuineness of the transaction between the parties. The assessee also explained that the creditor is a listed and public owned and reputed company which fact has also not been disputed by the A.O. The A.O. rejected the contention of assessee because Non-Judicial Stamp Paper was purchased later on, on which, Agreement to Sell was executed. The Ld. CIT(A) noted in his findings that the fact that land was purchased by the assessee originally has been confirmed by Additional DIT (Investigation) for a consideration of Rs. 48.44 lakhs. The assessee filed copy of the confirmation, bank statement and income tax return of the creditor, in the paper book, which support the explanation of the assessee that assessee received genuine amount from M/s. Unitech Ltd. Later on, on cancellation of the Agreement to Sell, the amount in question, was returned to the creditor through banking channel. The A.O. did not doubt existence of creditor and its creditworthiness. Thus, A.O. accepted identity of creditor and its creditworthiness and genuineness of the transaction. For proving case under section 68, assessee is required to prove identity of creditor, its creditworthiness and genuineness of the transaction, which assessee has proved in this case. The valuation of property may not be relevant to discard the explanation of assessee particularly when amount is returned in subsequent year. These facts supports the findings of the Ld. CIT(A) that there was no justification to make the addition under section 68 of the I.T. Act. Thus, the assessee, proved the identity of the creditor, its creditworthiness and genuineness of the transaction in the matter. According to Section 68 of the I.T. Act, assessee has to prove only the source of the credit. In this case, it is not an ordinary credit, but, assessee has received advance against sale of the property. Therefore, the explanation of assessee should not have been doubted by the A.O. The Ld. D.R. merely relied upon the order of the A.O. without pointing-out any infirmity in the order of the Ld. CIT(A) in deleting the addition. In the absence of any serious challenge to the findings of fact recorded by the Ld. CIT(A), we do not find any merit in the Departmental Appeal. The Ld. CIT(A), on proper appreciation of facts and material on record, correctly deleted the addition. The Departmental Appeal fails and is dismissed.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This appeal by Revenue has been directed against the order of the Ld. CIT(A)-XVI, Delhi, dated 31st October, 2014, for the A.Y. 2010-2011, challenging the deletion of addition of Rs. 67,50,00,000/- under section 68 of the I.T. Act, 1961.

2. The brief facts of the case are that from perusal of the balance sheet, the A.O. noticed that assessee has shown M/s. Unitech Ltd., as fresh sundry creditor of Rs. 67.50 crores under the head “Current Liabilities”. The assessee was asked to furnish details of sales/purchases or any other type of transaction with evidence with M/s. Unitech Ltd., which is terming as ‘Creditor’ in the books of account of the assessee. The assessee filed reply before the A.O. and also filed required details and confirmation from the creditor. It was also explained that amount have been received on different dates through RTGS. The A.O. noted that assessee did not explain the nature of transactions with M/s. Unitech Ltd., for which, the money was credited in the books of account of the assessee. In response to notice under section 133(6) of the Act, the Ld. A.R. of M/s. Unitech Ltd., have attended the assessment proceedings and filed requisite details before the A.O. in which it was explained that M/s. Unitech Ltd., has paid advance amount of Rs. 67.50 crores for purchase of lands situated at village Savroli and Dhamini, Taluka Khanpur, District Raigad, Maharashtra to M/s. Nucleus Steel Pvt. Ltd., (assessee). They have filed Agreement to Sell for purchase of the land as mentioned above. It was submitted that due to shortage of funds and huge repayments obligations of the debts, the Company is unable to pay the balance amount. The assessee also explained the same facts that Agreement to Sell Dated 12th March, 2010 was executed for sale of the above property, for a sum of Rs.135 crores, out of which, a sum of Rs. 67.50 crores was received as advance from M/s. Unitech Ltd., who have also confirmed the same facts to the A.O. The A.O, therefore, noted that assessee received advance of Rs.67.50 crores from M/s. Unitech Ltd., as against the land in Maharashtra. The Agreement to Sell was executed on 12th March, 2010 between the parties. Agreement to Sell was made on Non-Judicial Stamp paper on 12th March, 2010. The stamp paper was issued to M/s. Unitech Ltd., on 03rd March, 2010 by Shri Sandeep Kumar, Stamp Vendor, New Delhi. The A.O. made investigation from Stamp Vendor etc. The A.O. recorded the statement of Stamp Vendor etc., and made further inquiry into the matter and noted that stamp paper was  issued by the Delhi Treasury on 22nd March, 2012 i.e., 02 years after the date of execution. Valuation of property was found at lessor amount. The A.O, therefore, doubted the entire transaction and made the addition under section 68 of the I.T. Act, for a sum of Rs.67.50 crores.

3. The assessee challenged the above addition before the Ld. CIT(A). It was submitted that the assessee- company had received a sum of Rs. 67.50 crores from M/s. Unitech Ltd., as advance for sale of the property in Maharashtra which were duly evidenced by Agreement to Sell Dated 12th March, 2010 which were adduced into writing on terms and conditions of the said arrangement and fact of receiving of part of consideration of 50% against the aggregate sale consideration of Rs. 135 crores. Subsequently, with a view to guard against any significant movement in the market rate of the land and to safeguard the interests of both the parties, it was decided to execute the same on a Non-Judicial Stamp Paper, which incorporate fully and completely all the items of the Agreement entered into on 12th  March, 2010. For this purpose, an Agreement to Sell on Non-Judicial Stamp Paper was executed in the year 2012, which was copy of the Original Agreement Dated 12th March, 2010, on which, Original Date is 12th March, 2010 was inadvertently mentioned. The error of not amending the date of original agreement and not making mention of the original agreement dated 12th March, 2010, was the result of clerical error compounded by the vagaries of Information Technology and not any malafide intention, which cannot lead to conclusion that entire document is fake or bogus or bad in law. In addition to the above, assessee proved the identity, creditworthiness of the creditor and genuineness of the transaction by producing complete documentary evidence including confirmations, bank statements, ITR and balance-sheet of M/s. Unitech Ltd., were filed before A.O. The assessee has, therefore, discharged the initial onus to prove the conditions of Section 68 of the I.T. Act. The A.O. without justification, made the addition. It was also submitted that assessee is legal and beneficial owner of the land in question. Since M/s. Unitech Ltd., approached the assessee  for sale of the land in question, assessee agreed to sale and M/s. Unitech Ltd., agreed to purchase land and all the rights, interests and title thereon for a consideration of Rs. 135 crore, out of which, half of the amount was received as advance on different dates through RTGS, through banking channel. The Original Agreement was executed on plain paper on 12th March, 2010. The transaction through banking channel have not been disputed by the A.O. The A.O. merely rejected the explanation of assessee because on the Non-Judicial Stamp Paper purchased in 2012, on which date of original agreement have been mentioned. The assessee proved the source of the amount received in the books of account of the assessee and has no malafide intention. The assessee proved the existence of the creditor. The creditor is listed, widely held publicly owned and reputed company. The assessee relied upon the following decisions in support of his contention to prove genuineness of the transaction in the matter.

(i) CIT vs. Orissa Corporation Pvt. Ltd., 159 ITR 78 (SC).

(ii) CIT vs. Divine Leasing & Finance Ltd., (2007) 158 Taxman 440 (Del.)

(iii) CIT vs. Antartica Investment (P) Ltd., (2003) 262 ITR 493 (Del.).

(iv) MOD Creations Pvt. Ltd., vs. ITO (2012) 354 ITR 282 (Del.)

(v) CIT vs. Real Time Marketing Pvt. Ltd., (2008) 306 ITR 35 (Del.)

(vi) CIT vs. Ramneet Singh (2008) 306 ITR 267 (P & H);

(vii) CIT vs. Shri Ram Enterprises (2008) 304 ITR 375 (All.)

3.1. It was submitted that assessee proved receipt of genuine money. Therefore, no addition under section 68 should be made. It was also submitted that amount of Rs. 67.50 crores received from M/s. Unitech Ltd., was subsequently repaid on different dates from the assessee’s bank account starting from 26th March, 2013 to 30th March, 2013. The details of the same were filed and noted in the impugned order.

4. Ld. CIT(A) considering the material on record in the light of findings of the A.O. and submissions of the assessee deleted the entire addition. His findings in paras 4.1.1 to 4.1.7 are reproduced as under :

4.1.1. “I have carefully considered the submissions of the A/R of the appellant company, the facts of the case as well as the findings of the A.O. In ground no. 1 of appeal the appellant has taken the plea that AO was not justified to disallow/add back a sum of Rs. 67.50 crore received by the Appellant Company from M/s Unitech Limited under section 68 of the Income Tax Act, 1961. The brief facts of the case are that the assessee has shown M/s Unitech ltd. (UL) as fresh sundry creditor of Rs. 67.50 crores under the head current liabilities. In response to the query raised by the AO in this regard, AR of the assessee has filed confirmation of the same from M/s Unitech ltd. along with its bank account statement and acknowledgement of filing ITR. From the confirmation filed it is evident that the amount of Rs. 67.50 crores has been credited in the books of accounts of the assessee on different dates in the month of March 2010 through RTGS as under:-

Date Amount (in crore)
18.03.2010 17.00
19.03.2010 24.00
22.03.2010 16.50
22.03.2010 10.00
Total 67.50

To confirm the transaction AO also issued requisition u/s 133(6) to M/s Unitech Ltd., on 07.12.2012. In response Shri Kaushal Nagpal AR of M/s Unitech ltd. appeared before the AO on 19.12.2012 and 21.12.2012 and submitted as under :-

“1. M/s. Unitech Ltd., has paid an advance of Rs. 67.50 crores for purchase of lands situated at Village Savroli Dhamini, Taluka Khanpur, Dist. Raigad, Maharashtra to M/s Nucleus Steel Pvt. Ltd.,

2. Enclosed copy of agreement to sell entered with the  company for payment of advance of Rs. 67.50 crores for purchase of land as mentioned above.

3. M/s. Unitech Ltd. has to pay balance consideration of Rs. 67.50 crores for purchase and registration of land parcel mentioned therein but due to shortage of funds and huge repayment obligations of debts, company is unable to pay the balance amount and, therefore, amount is still outstanding.”

In this regard, the AR of the assessee vide letter date 21.12.2012 submitted before the AO that the assessee company owned a piece of land measuring 3-03-40 hectors & 8-25-2 hectors situated at Taluka Khalapur, Dist. Raigad, Maharashtra, purchased during the year ended 31.03.2004 which stands duly reflected in the Annual Accounts. The assessee company had entered into an agreement to sell date 12.03.2010 with respect to the said property with M/s Unitech ltd. It was submitted that the said land was agreed to be sold for an aggregate price of Rs. 135,00,00,000/- against which a sum of Rs. 67,50,00,000/- was to be paid as an advance in one or more tranches on or before March 31, 2010. The AR submitted that the amount received by the assessee company in terms of the said agreement till 31st March aggregating to Rs. 67.50 crores has been disclosed under the head ‘Sundry Creditors’. In order to verify the genuineness of the transaction as well as the stamp paper used for the agreement to sell dt. 12.03.2010 AO caused necessary investigations with the office of Delhi Treasury, Tis Hazari Court Delhi. From the investigation it emerged that the stamp paper ‘S739345’ used by the assessee for execution of agreement to sell was issued to Mrs. Veena Malhotra, License no. 374 and not to Shri Sandeep Kumar, License no. 584 printed on the copy of stamp paper used for execution of agreement to sell. It w as also confirmed by Mrs. Yeena Malhotra that the stamp paper was issued to her by Delhi Treasury on 22.03.2012, which was misplaced by her and misused by someone else. With regard to the license no. printed as 584 on the back side of the stamp paper, the office of Collector of Stamps (Hqrs.) Delhi confirmed that the license no. 584 had been allotted to Shri Lalit Kumar Sharma and not to Shri Sandeep Kumar as printed on the back side of the stamp paper. Shri Lalit Kumar Sharma also informed that someone else has misused his license number on the stamp paper bearing number ‘S739345’ as the said stamp paper was neither issued to him by Delhi Treasury nor he issued the same to M/s Unitech ltd. on 03.03.2010. AO also recorded the statements u/s 131 of Shri Pankaj Kumar and Shri Kaushal Nagpal who are appearing in the agreement to sell as witness 1 & 2 to verify the genuineness of the transaction. Shri Pankaj Kumar verified and confirmed his signature but failed to recollect the date and year on which he put the signature on the agreement. Other witness Shri Kaushal Nagpal confirmed that the agreement has been signed on 12.03.2010. In view of the above, a show cause notice was issued by the AO to the assessee company to explain as to why the agreement to sell dt.12.03.2010 should not be treated as fake and bogus and to explain as to why the transaction may not be treated as colorable device and treated as unexplained income for the year u/s 68 of the I.T. Act, 1961. In response the AR of the assessee vide letter dt. 26.02.2013 submitted that in the year 2009-10 the assessee company agreed to sell and “UL” agreed to purchase the said land for a total consideration of Rs. 135.00 crores, out of which one-half amounting to Rs. 67.50 crores was agreed to be paid as an advance. The said understanding was reduced to writing in the form of an Agreement to Sell which was executed into between the assessee company and ‘UL’ on 12.03.2010. The aforesaid agreement was executed on plain paper on 12.03.2010. Subsequently, in order to guard against any significant movement in the market rate identical agreement was executed on non-judicial stamp paper, incorporating all the terms of the Agreement entered into on 12.03.2010. Since the assessee company and ‘UL’ were merely entering into a mirror agreement of the earlier agreement date 12.03.2010 the Director of the assessee company did not notice the error of the wrong date mentioned in the agreement to sell and the same went unnoticed. The AR reiterated that the aforesaid ‘Agreement to Sell’ on the non-judicial stamp paper was actually executed/signed in year, 2012 as an additional safeguard. The factum of agreement having been entered is admitted by either party and is buttressed by the fact that consideration of Rs. 67.50 crores has, in fact, moved from ‘UL’ to the assessee company through normal banking channels and is fully and appropriately disclosed in the regular books of account of both the parties. The AR reiterated that the entire money was received by the assessee company through normal banking channels from a listed, widely held, publicly owned and reputed company viz. M/s Unitech Ltd. The AR also submitted that to prove the genuineness of the transactions and the credit worthiness of the parties from whom the amount was received, the following documents were already filed viz.:-

1. Confirmations

2. Copy of bank accounts

3. Copy of acknowledgment for filing ITR

4. Copy of balance sheet of M/s. Unitech Ltd.,

The reply of the assessee company is rejected by the AO on the ground that the assessee has failed to explain how they signed and executed the agreement to sell on 12.03.2010 on the stamp paper which was issued by Delhi Treasury, Delhi on 22.03.2012 i.e. 2 years after the date of execution. The date of issue on the back side of the stamp paper has been printed as 03.03.2010 which has also been proved false and fabricated in view of the report from Delhi Treasury that the stamp paper was issued to Mrs. Yeena Malhotra on 22.03.2012. This was also confirmed by Mrs. Veena Malhotra who also submitted that the stamp papers was misplaced and someone else had misutilised the same. AO also observed that the genuineness of the transaction was never found reliable. The assessee company at first had shown M/s Unitech ltd. as sundry creditor and later on changed its stand and taken the plea that it was an advance against the land for which agreement to sell was executed on 12.03.2010. The assessee has changed its colour again by stating that the agreement to sell on stamp paper was executed in 2012. The changing stand of the assessee itself is sufficient to disprove the genuineness of the transaction. AO also obtained report from the Tehsildar Khalapur, Dist. Raigad, Maharashtra who has valued the land at Village Savroli and Dhamini at Rs. 24.20 crores as on 31.03.2010. Since the market value of the property as on 31.03.2010 was only Rs. 24.20 crores, therefore, AO was of the view that the agreement could not have been made by the assessee at a consideration of Rs. 135 crores and the same reflects malafide intentions of the assessee company and M/s Unitech Ltd. AO also issued commission u/s 131(1)(d) to the Addl. DIT (Inv), Thane who intimated that the market rate of the land of 11.28 hectare at (Savroli and Dhamini) as on 31.03.2010 was Rs. 2,78,72,880/-(Rs. 10 lacs per acre) which was purchased by the assessee in Aug, 2003 for a consideration of Rs. 48.44,104/-. AO observed that the market value of the property is just Rs. 2.78 crores as against the agreement to sell for sale consideration of Rs. 135 crores out of which Rs. 67.50 crores has been claimed to be received as an advance. AO was of the view that M/s Unitech ltd. a leading player in property development would make an agreement with the assessee company for purchase of land on such high, inflated and unreasonable price and as such the agreement shows the mala-fide intention of the assessee company. Other than the advance of Rs. 67.50 crores no further payments/sale deed of the property was executed till date even after expiry of more than three years. To verify the aforesaid facts summons u/s 131 were also issued by the AO to Shri Brij Bhushan Singal, Director of the assessee company and to Shri Ajay Chandra, Managing Director of M/s Unitech Ltd. but they failed to appear. Opportunity was also provided to the assessee company to produce Shri Brij Bhushan Singal, Director of the assessee company and authorized signatory who signed the agreement to sell on 12.03.2010 for personal deposition but he failed to appear. Therefore, AO held that the assessee has failed to explain the genuineness of the transaction of cash credit of Rs. 67.50 crores. AO observed that the amount of Rs. 67.50 crores received by the assessee company has been transferred to three non working companies of the Bhushan Group i.e. M/s SRN Minerals & Mining Pvt. Ltd., M/s Robust Transportation Pvt. Ltd. and M/s Bhushan Exports Pvt. Ltd. and later on transferred to M/s Bhushan Steel ltd., the ultimate user of the accommodation entry. Therefore, AO held that there was no agreement between the assessee company and M/s Unitech ltd. as on 10.03.2010 against which an advance of Rs.67.50 crores was received. It is a colourable device of the assessee company to generate income from undisclosed sources though the accommodation entry taken from M/s Unitech ltd. The agreement to sell is nothing but the afterthought story. AO, therefore, held that the explanation offered by the assessee about the genuineness of the transaction of cash credits is not satisfactory. As such the cash credits of Rs. 67.50 crores is added by the AO as income from other source u/s 68 of the I.T. Act.

4.1.2. There is no dispute that the Appellant Company was and is the legal and beneficial owner of land measuring 3-03-40 hectares and 8-25-2 hectares situated at Taluka Khalapur, District Raigad. State of Maharashtra. The land proposed to be sold is duly reflected in the balance sheet of the appellant company. The fact that land was purchased by the appellant company during the year ended 31.03.2004 was also confirmed by Addl. DIT (Inv.) who reported that the same was purchased in Aug, 2003 for a consideration of Rs. 48.44 lacs. Both the parties have confirmed that the Appellant Company agreed to sell and M/s Unitech Limited agreed to purchase the said land and all rights, interests and title therein, for a total consideration of Rs. 135.00 crores, out of which one- half amounting to Rs. 67.50 crores was agreed to be paid as an advance. It was confirmed by both the parties that the said understanding was reduced to writing in the form of an Agreement to Sell which was executed into between the Appellant Company and M/s Unitech Limited on 12.03.2010. Pursuant thereto; advance consideration of Rs. 67.50 crores was received by the Appellant Company from M/s Unitech Limited and which was transferred online through RTGS. Appellant submitted that subsequently, in order to guard against any significant movement in the market rate of the said land, the parties, in order to protect their respective interests, decided to execute the aforesaid Agreement on non-judicial stamp paper. Accordingly, identical agreement was executed on non-judicial stamp paper to incorporate fully and completely all the terms of the Agreement entered into on 12.03.2010. Appellant explained that since the Appellant Company and M/s Unitech Limited were merely entering into a mirror agreement of the earlier Agreement dated 12.03.2010, the error of the wrong date being mentioned on the first page of the Agreement to Sell went unnoticed. Appellant reiterated that the aforesaid “Agreement-to-Sell” on the non-judicial stamp paper was actually executed/signed m year, 2012.

4.1.3. There is also no dispute that the liability of Rs. 67.50 crores is existing in the books of the appellant company as on 31.03.2010. The entire amount was received by the assessee company through RTGS through normal banking channels from a listed, widely held, publicly owned company viz. M/s Unitech Ltd. Further, to prove the genuineness of the transactions and the credit worthiness of the parties from whom the moneys were received the appellant during the course of assessment proceedings duly filed confirmations, copy of bank accounts statements, copy of acknowledgement for filing ITR return and copy of balance sheet of M/s Unitech ltd. From the bank account statements of M/s Unitech ltd. and the appellant company all the above transactions are duly verifiable. Further in response to requisition u/s 133(6) issued by the AO to M/s Unitech Ltd., Shri Kaushal Nagpal AR and DGM (Finance) of M/s Unitech ltd. who is also one of the witness of the agreement to sale attended the assessment proceedings and confirmed that M/s Unitech ltd. has paid the sum of Rs. 67.50 crores as advance for purchase of lands and that it has to pay balance consideration of Rs.67.50 crores for purchase and registration of land parcel but due to shortage of funds it is unable to pay the balance amount and, therefore, amount is still outstanding. It is not the case of the AO that M/s Unitech ltd. is not existing. It is also not the case that M/s Unitech ltd. has no credit worthiness. The transaction are also duly disclosed in the regular books of accounts of both the parties i.e., the Appellant Company as well as M/s Unitech Limited. The transactions are proved from the bank account statement of both the appellant and M/s Unitech ltd. The existence and creditworthiness of M/s Unitech ltd. is also proved from the above. Thus, as a result the documents/explanations filed/furnished during the course of assessment proceedings, the onus cast upon the Appellant Company to prove the identity/creditworthiness of the cash creditors and the genuineness of the transactions stood completely discharged.

4.1.4. Hon’ble Allahabad High Court in the case of CIT vs. S Kamaljeet Singh (147 Taxman 1 S) held that no addition to income on account of cash credits is called and that the Appellant had discharged the onus on him to explain the nature and the source of cash credit in question by placing, on record :-

  • Confirmation letters of cash creditors,
  • Their affidavits;
  • Their full address and GIR nos. and permanent account numbers.

In Mod Creations Pvt. Ltd., vs. ITO (2012) 354 ITR 282 (Del.), Hon’ble Delhi High Court have held that :-

“Section 68 of the Income-tax Act, 1961, only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. The presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assessee. This burden, which is placed on the assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee’s burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the assessee to prove the creditworthiness of the sub-creditors.”

Similarly, in the case of CIT v. Real Time Marketing Pvt. Ltd. [(2008) 306 ITR 35 (Delhi)], CIT v. Ramneet Singh [(2008) 306 ITR 267 (P & H)] and CIT v. Shri Ram Enterprises [(2008) 304 ITR 375 (All)] it has been held that in a case where an Appellant Company satisfactorily proves the identity, capacity and genuineness of the transactions, no addition u/s 68 is called for.

4.1.5. In this regard, the view of the AO that the transaction are not genuine because the assessee company had first had shown M/s Unitech ltd. as sundry creditor and later on changed its stand that the same was an advance against land, is not sustainable. Because it is an established legal principle that mere nomenclature under which the liability is shown in the books of accounts do not change the nature of transaction. The liabilities appearing in the books of the appellant company as on 31.03.2010 and the debt payable to M/s Unitech Ltd. has been acknowledged by the assessee company as existing as on 31.03.2010. The said advance is also appearing in the books of M/s Unitech ltd. as confirmed by M/s Unitech ltd. and corresponding balance sheet was also filed in this regard.

4.1.6. The view of the AO that the agreement to sale is a colorable device to provide accommodation entry to benefit Bhushan Steel ltd., is nothing but based on suspicion, conjectures and surmises. In this regard reference may be made to the observations of Hon’ble Supreme Court in the case of Union of India vs Azadi Bachao Andolan [(2003) 132 Taxmann 373 (SC)] wherein Hon’ble Court while further expounding on their earlier judgement in the case of McDowell & Co have made the following pertinent topical observations :-

(i) We may in this connection usefully refer to the judgement of the Madras High Court in M.V Yalliappan v. CIT (1988) 170 ITR 238 which has rightly concluded that the decision in McDowell & Co Ltd’s case (supra) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavour. Though the Madras High Court had occasion to refer to the judgement of the Privy Council in IRC v Challenge Corpn. Ltd (1987) 2 WLR 24, and did not have the benefit of the House of Lords pronouncement in Craven’s case (supra), the view taken by the Madras High Court appears to be correct and we are inclined to agree with it.

(ii) If the Court finds that notwithstanding a series of legal steps taken by an Appellant, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intervening legal steps as non-est based upon some hypothetical assessment of the ‘real motive’ of the assessee. In our view, the court must deal with what is tangible in an objective manner and cannot afford to chase a will-o-the-wisp.

(iii) We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interest, as perceived by the respondents.

4.1.7. In view of the above factual and legal position, I am of the opinion that the irregularities pointed out by the AO in respect of the impugned agreement to sale are not of much relevance under the Income Tax Act. Because once the fact of a certain  advance made by assessee ‘A’ to assessee ‘B’ is acknowledged by both of them and so long as the three ingredients of genuineness of transaction, existence and creditworthiness of assessee ‘A’ is proved, no addition can be made in the hands of assessee ‘B’ for the said advance taken from assessee ‘A’. The assessee also submitted that the aforesaid agreement was subsequently mutually cancelled by the two parties and the money in fact was returned during the financial year ended March 31, 2013. The fact that the amount of Rs. 67.5 crore received from Unitech ltd. was subsequently repaid on 28.03.2013 and 30.03.2013 is also verifiable from the corresponding bank statement of the appellant company. AO may also verify the same from the corresponding bank statement. However, I am of the opinion that for the irregularities observed by the AO in respect of the non judicial stamp paper, the appellant is liable for action under the provision of Indian Stamp Act and AO may proceed against the appellant under the relevant provision Indian Stamp Act before the appropriate authority. In view of the above since the genuineness of the transaction is proved from the bank account statements and existence and creditworthiness of M/s Unitech ltd. are also proved, therefore, the addition made by the AO u/s 68 treating the said advance as ‘income from other source’ is not sustainable. The appeal is allowed in this in this ground.”

5. The Ld. D.R. relied upon the order of the A.O.

6. The Learned Counsel for the Assessee, on the other hand, reiterated the submissions made before the authorities below and also filed copy of the balance sheet of M/s. Unitech Ltd., and pointed-out page-79 of the balance sheet to show that in their case loan and advance are of Rs. 1729,97,37,070/-. He has, therefore, submitted that creditor is very sound party. Therefore, addition have been correctly deleted by the Ld. CIT(A).

7. We have considered the rival submissions. The Hon’ble Madhya Pradesh High Court in the case of CIT vs. Nevendram Ahuja (2007) 290 ITR 453 (MP) held as under :

The position in regard to a deposit or advance paid by a tenant in regard to a lease of a premises, is different from “a loan” from a third party. A lease or tenancy is governed by the terms of the lease deed or tenancy agreement. When the premises are let out on terms mutually agreed and one such term relates to the deposit or advance which the tenant agrees to pay, it is not necessary for the landlord to ascertain the source from which the tenant gets the amount to pay as a deposit/advance. When persons take premises on rent variably they will organise the funds required to pay an advance or deposit, rather, as the lessee/tenant will always be available for verification as he will be in occupation of the premises, the fact whether he has paid the deposit or it can be easily verifiable. Therefore, in regard to deposits from tenants, it is sufficient if the assessee proves the identity of the tenant and the genuineness of the transaction under which the deposit is made. It will not be necessary for the assessee to prove the capacity of the tenant to make the deposit/advance. Therefore, where the tenancy is established and the tenant is actually in occupation of the premises and a lease deed or tenancy agreement produced showing the amount agreed to be paid as deposit and the deposit paid by cheque or demand draft and is duly accounted for in the books of account of the assessee as also the tenant, then the assessee has discharged his burden under section 68 of the Income-tax Act, 1961. If the Assessing Officer still wants to treat such amount as unexplained income of the assessee, then the burden lies on the Revenue to establish that the deposit was not really a deposit by the tenant, but the unexplained income of the assesses channelised through the tenant. However the identity of the depositor and the genuineness of the deposit has to be established by showing that the person making the deposit is in occupation of the assessee’s premises as a tenant or had occupied the premises for a considerable time and the deposit was paid by cheque/bank draft and borne out by books of account of both the assessee and the tenant and by the lease agreement, wherever such lease agreement exists. Held accordingly, that the Tribunal was justified in holding that in respect of deposit against tenancy, the assessee was only required to prove the identity of the depositors and that the deposits were made by tenants.”

7.1. The Hon’ble Gauhati High Court in the case of CIT vs. Nemi Chand Kothari vs. CIT & Another (2003) 264 ITR 254 (Gau.) held as under :

“Held (i) that the assessee had established the identity of the creditors. The assessee had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors which was not in dispute. Once assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. The failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been recorded by the sub-creditors from the assessee. Therefore, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources.”

7.2. The Hon’ble Gujrat High Court in the case of DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj.) held as under :

“The assessee was a firm engaged in the business of dealings in land. During the assessment year under consideration the assessee had taken loans from various parties and during the course of assessment proceedings, the assessee had furnished the loan confirmations giving full addresses, GIR numbers/permanent account numbers, etc., of all the depositors. The Assessing Officer however issued summons to some of the creditors and also conducted inquiries into the genuineness or otherwise of the loans taken by the assessee. After considering the evidence, the Assessing Officer made an addition of Rs. 12,85,000/- to the returned income of the assessee. This was confirmed by the Commissioner of Income-tax (Appeals). On further appeal to the Tribunal, the Tribunal held that the phraseology of section 68 of the Income-tax Act, 1961, was clear, that the Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to Income-tax as the income of the assessee of that previous year, that the legislature mandate is not in terms of the words “shall be charged to income tax as the income of the assessee of that previous year”, that the un- satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as income of the assessee. The Tribunal found that the assessee had discharged the initial onus which lay on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent account numbers and the copies of assessment orders wherever readily available, that it had also proved the capacity of the creditors by showing that the amounts were received by the assessee business transaction account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source. Thus taking into consideration the totality or the facts and circumstances of the case, and, in particular the fact that the Assessing Officer had not disallowed the interest claimed/paid in relation to these credits in the assessment year under consideration or even in the subsequent years, and tax had been deducted at source out of the interest paid/credited to the creditors, the Tribunal held that the Departmental authorities were not justified in making the addition of Rs. 12,85,000. On appeal to the High Court :

Held, that considering the facts and circumstances of the case narrated by the Tribunal and the law explained by it, the appeal was liable to be dismissed.”

7.2.1. The Hon’ble Supreme Court had dismissed the SLP filed by the Revenue against the Judgment reported in 254 (St.) 275.

7.3. The Hon’ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd., (1986) 159 ITR 78 held as under :

“Held, that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to slate a case.”

8. In this case, assessee received an amount of Rs.67.50 crores from M/s. Unitech Ltd., as advance against the sale of the property. The assessee filed confirmation from M/s. Unitech Ltd., along with its bank statement and acknowledgment of filing of the ITR with balance sheet. The amount in question is received against the sale of the property through RTGS, through banking channel. M/s. Unitech Ltd., appeared before the A.O. in response to the notice under section 133(6) of the I.T. Act, in which, they have confirmed the same facts before A.O. for making advance payment to the assessee against sale of the property. The copy of the balance-sheet of M/s. Unitech Ltd., is also filed to show that they have given loan and advance for Rs. 1729.97 crores to different parties. It would show their worth and creditworthiness. It is not in dispute that assessee is owner of the property in question against whom advance was received. The Agreement to Sell was recorded on 12th March, 2010 on plain paper. However, according to the explanation of assessee, in order to safeguard the interests of both the parties, Agreement to Sell was executed on a Non-Judicial Stamp Paper in the year 2012, on which, inadvertently the date of Original Agreement was mentioned. This has created a doubt in the mind of the A.O. to reject the explanation of the assessee. The A.O. recorded the statement of Stamp Vendor etc., in order to arrive at the finding of fact against the assessee. However, the A.O. has forgot to note that the entire amount was received in 04 installments through RTGS, through banking channel, in March, 2010. If the stamp paper was purchased later on in March, 2012, such entries in the bank account of the assessee could not have been recorded in March, 2010. Therefore, on mere purchase of the stamp paper or recording Agreement to Sell in March, 2012, is of no consequence. Further, assessee need not to resort to any irregularity or illegality because law permits that even oral agreement could have been entered into, which, itself is sufficient to believe the explanation of assessee. The assessee, apart from that the creditor directly confirmed the transaction with the assessee, in response to notice under section 133(6) of the I.T. Act, filed confirmation of the creditor, their affidavits, their ITR and balance sheet, which proved the identity of the creditor, their creditworthiness and genuineness of the transaction in the matter. All the corresponding entries are recorded in the books of account of the assessee as well as in the books of account of the creditor. The assessee explained that the Original Agreement was executed on plain paper on 12th March, 2010 and in order to safeguard the interests of both the parties, later on, Agreement to Sell was executed in March, 2012, but, inadvertently, date of Original Agreement have been mentioned. The explanation of assessee should not have been rejected in this regard because such mistake is obvious because original transaction were completed in March, 2010. The witness to agreement also confirmed in their statements genuineness of the transaction between the parties. The assessee also explained that the creditor is a listed and public owned and reputed company which fact has also not been disputed by the A.O. The A.O. rejected the contention of assessee because Non-Judicial Stamp Paper was purchased later on, on which, Agreement to Sell was executed. The Ld. CIT(A) noted in his findings that the fact that land was purchased by the assessee originally has been confirmed by Additional DIT (Investigation) for a consideration of Rs. 48.44 lakhs. The assessee filed copy of the confirmation, bank statement and income tax return of the creditor, in the paper book, which support the explanation of the assessee that assessee received genuine amount from M/s. Unitech Ltd. Later on, on cancellation of the Agreement to Sell, the amount in question, was returned to the creditor through banking channel. The A.O. did not doubt existence of creditor and its creditworthiness. Thus, A.O. accepted identity of creditor and its creditworthiness and genuineness of the transaction. For proving case under section 68, assessee is required to prove identity of creditor, its creditworthiness and genuineness of the transaction, which assessee has proved in this case. The valuation of property may not be relevant to discard the explanation of assessee particularly when amount is returned in subsequent year. These facts supports the findings of the Ld. CIT(A) that there was no justification to make the addition under section 68 of the I.T. Act. Thus, the assessee, proved the identity of the creditor, its creditworthiness and genuineness of the transaction in the matter. According to Section 68 of the I.T. Act, assessee has to prove only the source of the credit. In this case, it is not an ordinary credit, but, assessee has received advance against sale of the property. Therefore, the explanation of assessee should not have been doubted by the A.O. The Ld. D.R. merely relied upon the order of the A.O. without pointing-out any infirmity in the order of the Ld. CIT(A) in deleting the addition. In the absence of any serious challenge to the findings of fact recorded by the Ld. CIT(A), we do not find any merit in the Departmental Appeal. The Ld. CIT(A), on proper appreciation of facts and material on record, correctly deleted the addition. The Departmental Appeal fails and is dismissed.

9. In the result, Departmental Appeal is dismissed.

Order pronounced in the open Court.

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