2016 (12) TMI 1711 - AT - Income Tax

Addition u/s 68 - genuineness of the transaction - Held that - The documents furnished by the assessee, established the identity as well as creditworthiness of M/s Golden Technobuild (P) Ltd. and since the transaction took place through banking channel, the genuineness of the transaction was also proved. Therefore, considering the totality of the facts, it is of the view that the addition made by the AO and sustained by the ld. CIT(A) on account of ₹ 7,00,000/- received from M/s Golden Technobuild (P) Ltd. was not justified Addition from house property - Held that - Addition is made on the basis of presumption that the property at 48, Friends Colony East, New Delhi in which the assessee was having 28.24% was let out to Gambhir brothers but infact, the Gambhirs brothers were the tenant of M/s Today Homes Infrastructure Pvt. Ltd. who was the tenant of M/s Palos Verdes Estate Pvt. Ltd. Therefore, the addition made by the AO on the basis of presumption was not justified particularly when the assessee had not given property on rent to Gambhir brothers as alleged by the AO. The property in question was used by the assessee for its own business purposes. The said fact is evident from page no. 28 of the assessee s paper book i.e. the copy of ROC master data which revealed that the assessee s registered office is situated at 48, Friends Colony East, New Delhi. Therefore the impugned addition made by the AO on the basis of presumption that the assessee had let out the property to Gambhir brothers and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee

Issues Involved:
1. Jurisdiction and legality of the assessment order under Section 147 of the Income Tax Act, 1961.
2. Addition of ?11,77,528 under the head "Income from House Property."
3. Addition of ?7,00,000 as unexplained cash credits under Section 68 of the Income Tax Act, 1961.
4. Discharge of onus by the appellant in terms of Section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction and Legality of the Assessment Order:
The appellant did not press this ground, and therefore, it was dismissed as not pressed.

2. Addition of ?11,77,528 under the Head "Income from House Property":
The Assessing Officer (AO) added ?11,77,528 to the assessee's income, determining it as the fair rental value of the property at 48 Friends Colony East, New Delhi, which was used by Gambhirs for their residence. The AO based this addition on the provisions of Section 23 of the Income Tax Act, 1961, which states that the sum for which the property might reasonably be expected to be let out should be considered as income from house property.

The assessee contended that the property was used as its registered office and provided various documents to support this claim, including the bank account, ITR filing acknowledgment, TAN allotment letter, and Form 18 showing the registered address. The assessee argued that the AO did not consider these documents and relied only on the statement of the Vice President of the group, which indicated that the property was used for residential purposes by Gambhirs. The assessee also argued that the AO did not provide the basis for calculating the annual value of the property and acted against the principles of natural justice.

The CIT(A) confirmed the addition, stating that the property was used for residential purposes by Gambhirs and not for business purposes by the assessee. The CIT(A) relied on the statement of the Vice President of the group and the fact that the property was rented to other companies used by Gambhirs for residential purposes. The CIT(A) also dismissed the assessee's argument that the property was used for board meetings and communication purposes, stating that the group had a huge office establishment elsewhere.

The Tribunal found that the addition was based on a presumption that the property was let out to Gambhir brothers, while in fact, they were tenants of M/s Today Homes & Infrastructure Pvt. Ltd., a tenant of M/s Palos Verdes Estate Pvt. Ltd. The Tribunal noted that the property was used by the assessee for its own business purposes, as evidenced by the ROC master data. Therefore, the Tribunal deleted the addition, concluding that it was not justified.

3. Addition of ?7,00,000 as Unexplained Cash Credits under Section 68:
The AO added ?7,00,000 to the assessee's income under Section 68, stating that the amount was received from M/s Golden Technobuild Pvt. Ltd., which in turn received the amount from a dummy company of Jain brothers, who were engaged in providing accommodation entries. The AO's addition was based on the information obtained during the search and seizure operation at the premises of Jain brothers.

The assessee argued that it had received the amount from M/s Golden Technobuild Pvt. Ltd. and provided sufficient documentary evidence, including the PAN card, Certificate of Incorporation, audit report, balance sheet, ITR filing acknowledgment, confirmation, and bank statement of the creditor. The assessee contended that these documents established the identity and creditworthiness of the creditor and the genuineness of the transaction. The assessee also pointed out that the addition of the same amount had already been made in the hands of M/s Golden Technobuild Pvt. Ltd. for the assessment year 2005-06.

The CIT(A) confirmed the addition, stating that M/s Golden Technobuild Pvt. Ltd. was a dummy/paper company of Today group used to channelize accommodation entries. The CIT(A) relied on the findings of the Settlement Commission, which held that various companies of Today group, including M/s Golden Technobuild Pvt. Ltd., were dummy companies. The CIT(A) dismissed the assessee's argument that it had discharged its primary onus by filing documentary evidence, stating that the amount received was an accommodation entry.

The Tribunal found that the addition was not justified, as the impugned amount was already part of the addition made in the hands of M/s Golden Technobuild Pvt. Ltd. The Tribunal noted that the assessee had provided sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transaction. Therefore, the Tribunal deleted the addition.

4. Discharge of Onus by the Appellant in Terms of Section 68:
The assessee argued that it had discharged its onus under Section 68 by providing documentary evidence, including the PAN card, ITR filing acknowledgment, audit report, balance sheet, confirmation, and bank statement of M/s Golden Technobuild Pvt. Ltd. The assessee contended that the AO did not make any further inquiries and relied solely on the information obtained from the investigation proceedings. The assessee also argued that the third-party statements and documents used against it were not confronted to the assessee, violating the principles of natural justice.

The CIT(A) dismissed the assessee's argument, stating that the documentary evidence did not prove the genuineness of the transaction, as M/s Golden Technobuild Pvt. Ltd. was a dummy company. The CIT(A) relied on the findings of the Settlement Commission and the evidences collected during the search, which indicated that the amount received was an accommodation entry.

The Tribunal found that the assessee had provided sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transaction. The Tribunal noted that the addition was not justified, as the impugned amount was already part of the addition made in the hands of M/s Golden Technobuild Pvt. Ltd. Therefore, the Tribunal concluded that the assessee had discharged its onus under Section 68, and the addition was deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting both the additions of ?11,77,528 under the head "Income from House Property" and ?7,00,000 as unexplained cash credits under Section 68. The Tribunal found that the additions were not justified based on the evidence and arguments presented by the assessee.

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