2021 (2) TMI 597 - AT - Income Tax

Unexplained share application money u/s 68 - genuineness and creditworthiness of the share capital subscription - search and seizure operation was carried out on the GTM group of companies - HELD THAT - The assessee has received amounts varying from Rs. 5 lacs to Rs. 67 lac from various periods from 07.12.2005 to 25.02.2006 and an amounts have been refunded from 27.04.2006 to 19.05.2006 of amounts varying from Rs. 5 lacs to 30 lacs to M/s Arha Buildcon Pvt. Ltd. From the record we also find that M/s Arha Buildcon Pvt. Ltd. has not complied to the summons issued by the Investigation Wing. Regarding the discrete enquiries conducted by the Assessing Officer at the premises we observe that the assessee has not been given any opportunity to the assessee regarding the discrete enquiries conduced and its outcome. The said lender has been existence for 10 years and assessed to tax. While making the addition the Assessing Officer mentions that the assessee was not above to provide any details of cheques that was issued by the assessee and how many of these cheques have actually not been presented for payment or whether any real payments were ever made . The statement is factually wrong as the bank statement of the assessee maintained at HDFC Bank clearly shows the amounts received and paid with regard to M/s Arha Buildcon Pvt. Ltd. Hence in view of the facts are unable to agree with the contentions of the ld. CIT (A). The addition on this account is directed to be deleted. Addition on account of other parties - addition mainly based on the statement of Shri Mahesh Garg - We find that the assessee has not been given opportunity to rebut even the statement of Shri Mahesh Garg by the Assessing Officer. The Assessing Officer has not issued any summons or made any enquiries with regard to any of the parties to prove that the amounts have been in fact rooted through these entities. We have gone through the case laws submitted in judgments relied upon by the revenue. While a valiant attempt have been made by the ld. CIT DR there has not been any tangible facts to treat these amounts u/s 68 especially when there is no premium involved the parties have not been inquired into revenue addition has been made solely on the basis of Shri Mahesh Garg amounts have refunded at various intervals or adjusted against the bookings we hold that the action of the Assessing Officer cannot be held to be valid. Appeal of the assessee on this ground is allowed. Regarding the appeal of the revenue we find that the ld. CIT (A) has duly satisfied himself as the assessee and the parties could provide documents relating to identity genuineness and creditworthiness of the amounts received along with confirmations address cheque number and PAN. Hence we decline to interfere with the order of the ld. CIT (A) on this issue. Unaccounted income from sale of flats in Cooperative Societies - Documents pertaining to the society have been found with Shri Mohit Vohra and Shri Tushar Kumar Directors of the company and assessee has a role in management of the group houses societies - HELD THAT - As confirmed by the society that since there was a rise in the price of steels cement and bricks the cost escalation was worked out to be Rs. 44, 800/- which was duly approved by the members of the society in the AGM. The society cannot be said a benami concern of Shri Tushar Kumar/GTM since it is a separate legal entity and is a registered society under the Haryana cooperative society Act. The scope of its activities objectives is governed by its Memorandum and Articles of the association and nothing else The mere fact that some of the documents information pertaining to its members were found at the premises of Mr. Tushar Kumar/GTM did not make it a concern of Mr. Tushar Kumar/GTM. From the above it is clear that the society is an independent legal entity and is not a benami concern of Mr. Tushar Kumar/GTM. Adverting to the evidences as to whether the assessee has received Rs. 4 lacs from each of 48 flats. We do not find any such reference or evidence gathered collected or investigated by the revenue. The addition made was on theoretical premise on the basis of presumptions. Even the statement recorded from the members of the society did not point to any amount paid to the assessee or the Director in his personal capacity. The society has also clarified that an amount of Rs. 17 lacs each for category A and Rs. 21 lacs for category A1 type. The cost escalation of Rs. 44, 800/- has been approved in the AGM. There was absolutely no evidence of payment of Rs. 4 lacs by each flat owner to the assessee. Hence the addition made by the AO cannot be sustained. The appeal of the revenue on this ground is dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Unexplained Share Application Money under Section 68 of the Income Tax Act, 1961.
2. Unaccounted Income from Sale of Flats in Cooperative Societies.

Issue-wise Detailed Analysis:

1. Unexplained Share Application Money under Section 68 of the Income Tax Act, 1961:

Background: A search and seizure operation was conducted on the GTM group of companies. The Assessing Officer (AO) observed that the share application money account showed &8377; 5,34,50,000/- received from various parties. The AO concluded that the money received was from entry operators and bogus parties, and added it as unexplained income under Section 68.

Assessee's Argument: The appellant argued that the money was arranged from M/s Arha Buildcon Pvt. Ltd., a regular assessee with the Department, for financing projects. It was submitted that the transactions were fully accounted for in the books with supporting documents. The appellant also contested the reliance on the statement of Shri Mahesh Garg, asserting that it was recorded behind their back without an opportunity for cross-examination.

Revenue's Argument: The revenue contended that the appellant failed to prove the genuineness and creditworthiness of the transactions. The departmental representative argued that the bonafides of M/s Arha Buildcon Pvt. Ltd. were not proven, and the entry operator's statement was undisputable.

Tribunal's Findings: The Tribunal noted that the appellant received and refunded amounts from various parties, and an agreement existed for booking 60 flats. The Tribunal found that the AO did not provide the appellant an opportunity to rebut the discrete enquiries conducted. The Tribunal observed that the statement of Shri Mahesh Garg was not sufficient to conclude that the amounts were accommodation entries. The Tribunal directed the deletion of the addition on this account, emphasizing the lack of tangible evidence and the factual inaccuracies in the AO's statements.

2. Unaccounted Income from Sale of Flats in Cooperative Societies:

Background: The AO made an addition of &8377; 1,92,00,000/- on the grounds that the GTM group controlled the Bhagwanti Cooperative Group Housing Society and received &8377; 4 lakhs per flat as undisclosed income. This conclusion was based on documents found during the search and statements recorded from society members and employees.

Assessee's Argument: The appellant denied any involvement in the management of the society and requested cross-examination of the individuals whose statements were recorded. The appellant contended that the society was an independent legal entity, and no payments were received from the society or its members.

Revenue's Argument: The revenue relied on the AO's findings and argued that the GTM group managed the society and received undisclosed income from the sale of flats.

Tribunal's Findings: The Tribunal found that the AO's addition was based on presumptions and lacked concrete evidence of any payment to the appellant. The Tribunal noted that the society confirmed the escalation of costs due to rising prices of materials, which was approved in the AGM. The Tribunal concluded that there was no evidence to support the claim that the appellant received &8377; 4 lakhs per flat. The addition made by the AO was deemed unsustainable, and the appeal of the revenue on this ground was dismissed.

Conclusion: The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, directing the deletion of the additions made by the AO. The Stay Application No. 186/Del/2020 was treated as redundant due to the disposal of the appeals.

Order Pronounced in the Open Court on 04/02/2021.