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2018 (10) TMI 491 - AT - Income TaxBogus transactions with ten parties - authenticity and genuineness of the agreements - Colourable Device - genuineness of collaboration agreement - Non existing assets - Conversion of fixed assets into stock to avoid tax liability - Held that - On perusal of the facts narrated by the AO, the whole series of facts go to doubt the transactions. The assessee enters into a collaboration agreement with M/s. Omaxe Ltd on 08.02.2005, as noted above for development of assessee s land. In this agreement, there were some time limitations for completion of the project. But, before the expiry of the time limitation and completion of the project, the appellant transferred one plot of land to M/s. Supreme Ceramics Pvt. Ltd. on 04.05.2005 and some other plots which the assessee was supposed to receive from Omaxe on completion of the project, to nine other parties. The assessee sold the plot in advance on the basis of collaboration agreement with Omexe, before actually receiving the plots. In such situation, if the collaboration agreement is taken to be correct, then the assessee had no right to transfer the plots to other parties before their development or agreed expiry of the development project undertaken by Omaxe. This fact itself goes to support the objections of the AO on the genuineness of transaction, but the ld. CIT(A) has not considered this aspect of the case properly, particularly when the agreements entered with other parties were neither registered nor were their original copy was placed before the AO. Also as per AO once two of the parties, namely, M/s. Prime Quality Construction and Ram Devi Steels Tikamgarh in response to summons sent to them denied to have made any transaction or execution of any such agreement with the assessee in response to the summons issued by AO to them. CIT(A) has also not considered this vital objection of the AO which has direct bearing on the veracity of assessee s version. Further we observe that the agreements made with 10 parties do neither contain any specification of developed land nor Khasra Number of agricultural land, which is necessary to mention in the sale agreement. The nature of such agreements, in our opinion, has rightly led the Assessing Officer to doubt the genuineness of the transaction - decided against assessee.
Issues Involved:
1. Deletion of addition of ?15,35,62,500/- on account of transactions with ten parties held as bogus by the AO. 2. Genuineness of transactions and documents provided by the assessee. 3. Non-production of original documents by the assessee. 4. Doubts about the genuineness of notarized documents. 5. Alleged colorable device to evade taxes. 6. Authority of the assessee to enter into agreements. 7. Specific transactions with M/s Prime Quality Construction Pvt. Ltd., Ram Devi Steel Pvt. Ltd., and Supreme Ceramics Ltd. Issue-wise Detailed Analysis: 1. Deletion of Addition of ?15,35,62,500/-: The Revenue filed an appeal against the deletion of the addition of ?15,35,62,500/- made by the AO on account of transactions with ten parties held as bogus. The AO had disallowed the payment made to these parties, considering the transactions as colorable devices to avoid taxes. The CIT(A) deleted the addition, relying on the submissions of the assessee without adequately addressing the AO's findings. 2. Genuineness of Transactions and Documents: The AO questioned the genuineness of the transactions, noting that the assessee entered into agreements to sell plots before actually receiving them from Omaxe Ltd. The AO observed discrepancies in the documents provided by the assessee, such as differences in the position of signatures and stamps on agreements, and the lack of notarization on documents directly obtained from the parties. The CIT(A) failed to consider these objections in the right perspective. 3. Non-production of Original Documents: The AO repeatedly requested the assessee to produce original documents for verification, but the assessee only provided photocopies. The AO emphasized that the production of original documents was crucial for verifying the genuineness of the transactions. The CIT(A) did not address this issue adequately and relied on the assessee's submissions without rebutting the AO's findings. 4. Doubts about the Genuineness of Notarized Documents: The AO found that the notarized documents provided by the assessee did not contain the notary's register number, raising doubts about their authenticity. The notary public, Archana Sharma, stated that she always put a register number on notarized documents, but the documents provided by the assessee lacked this. The CIT(A) disregarded this objection, suggesting that the AO could have obtained the documents from the office of the registrar of properties, despite the documents not being registered. 5. Alleged Colorable Device to Evade Taxes: The AO considered the entire transaction as a colorable device to evade taxes, citing the Supreme Court judgment in McDowell and Co. Ltd. v. CTO. The AO noted that the transactions were designed to avoid tax liability by creating artificial losses. The CIT(A) did not adequately address this aspect and failed to rebut the AO's findings. 6. Authority of the Assessee to Enter into Agreements: The AO questioned the assessee's authority to enter into agreements to sell plots before actually receiving them from Omaxe Ltd. The assessee had entered into a collaboration agreement with Omaxe Ltd. for the development of land, and the AO argued that the assessee had no right to transfer plots before their development. The CIT(A) did not consider this aspect properly. 7. Specific Transactions with M/s Prime Quality Construction Pvt. Ltd., Ram Devi Steel Pvt. Ltd., and Supreme Ceramics Ltd.: - Prime Quality Construction Pvt. Ltd.: The AO noted that Prime Quality denied executing any agreement with the assessee, and payments were made by individuals, not the company. The assessee failed to provide original documents, and the AO disallowed the transaction. - Ram Devi Steel Pvt. Ltd.: The AO observed inconsistencies in the documents and noted that the director of Ram Devi Steel denied any transaction with the assessee. The assessee did not provide original documents, and the AO disallowed the transaction. - Supreme Ceramics Ltd.: The AO found that the assessee did not produce any documents for this transaction. The investigation revealed that Supreme Ceramics was involved in providing accommodation entries. The AO concluded that the transaction was a paper transaction and disallowed it. Conclusion: The ITAT found merit in the Revenue's appeal and held that the CIT(A) was not justified in deleting the addition without adequately addressing the AO's findings. The ITAT noted that the AO had raised significant objections regarding the genuineness of the transactions, which were not properly considered by the CIT(A). The appeal of the Revenue was allowed, and the order of the CIT(A) was set aside.
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