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TMI Blog2019 (9) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... lude in this fact that the lower authorities have erred in treating the impugned sum in assessee s hands as unexplained cash credits. The same is directed to be deleted. Disallowance u/s 40A - cash payments - HELD THAT:- AO remand report itself is very very clear that none of the assessee s cash payments has exceeded the threshold limit of ₹20,000/- during the course of a day so as to trigger the impugned disallowance. We therefore delete the same for this precise reason alone. Disallowance of business expenditure treated as bogus - it was submitted that, assessee has shown gross profit @ 35% on the impugned cost of disallowance which has gone up to 67% giving rise to an absurd result in case both the lower authorities action is upheld. - HELD THAT:- The fact also remains that the assessee himself has not been able to prove one to one matching of impugned material purchases and the respective payee s books. We therefore deem hold in this peculiar factual backdrop that a lump sum addition of ₹7 lac would meet the ends of justice with a rider that the same shall not be taken as a precedent any other case or assessment year; as the case may be - ITA No.2585K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not readily available. The Assessing Officer observes that assessee thereafter filed the other entities ledger copy as on 31.03.2014 with closing balance of ₹6,44,95,068/- after adjusting all credit / debit entries in the relevant previous years. He concluded in this fact that the assessee s failure in getting even the confirmation from the other side invited unexplained cash credits addition u/s68 of the Act. 6. The assessee filed appeal. He placed on record additional submission as well during the lower appellate proceedings. The CIT(A) called for the Assessing Officer s response. The assessee s Assessing Officer submitted his remand report in the lower appellate proceedings. The CIT(A) holds that as per the Assessing Officer s action raising various issues in the remand report, it emerged that Shri Roy had not filed his return for assessment year 2014-15. The assessee s sale agreement with the said entity was unregistered firm, the Stock Exchange Board of India, SEBI had barred its director from capital market with further direction to refund investors money. The police had filed a case on 09.07.2014 and the department s inspector had fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This also proves that genuineness of transaction is not proved for which onus is on the assessee. 7. In this regard during appellate proceeding, the assessee has submitted that he has entered into an agreement for sale with M/s Chakra Infrastructure Ltd. who had admit to purchase a six-storied building alongwith the land of Chakranayantara Hotel including furniture and fixture from the assessee for a consideration amount of ₹ 10 crore. It was further decided that CIL would pay such amount to the assessee from time to time by 31.03.2016.However, the said deal did not materialize and the assessee was returning the money received from CIL [Ledger account of CIL is annexed herewith and marked as Annexure-G] Comments of AO 8. After going through the agreement for sale furnished by the assessee with Chakra Infrastructure Learned. On 24th March, 2011, it is seen that document is not registered anywhere, but it notarized document. It cannot be admitted as evidence u/s. 49 of the Registration Act which requires collateral proof, hence cannot be relied upon the assessee and the balance ₹ 99,980,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the AO wrongly added the closing balance of ₹ 6,44,95,068/- to the income of the assessee without considering that the said amount also included brought forward balance. The details of the transactions with CIL in the relevant year is given as under. Opening balance Amount received Amount paid Closing balance ₹ 6,83,85,969/- ₹ 8,52,000/- ₹ 47,901/- ₹ 6,44,95,068/- The above facts find corroboration with the confirmation of account signed by the said party [Annexure H] Fro the above, it is apparent that the addition made by the Ld. AO was not permissible in law inasmuch as ₹ 6,83,85,969/- was appearing as the brought forward balance form the earlier year and during the instant year, the closing balance has, in fact, been reduced to ₹ 6,44,95,068/-. Comments of AOAs discussed above, confirmation fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down as on 31.03.2013 a. Unsecured loan from friends relatives 4826000.00 b. Advance deposits 3350000.00 8176000.00 68385968.73 It is clarified here that in the earlier years, pursuant to the above mentioned agreement for sale dated 24.11.2011, the assessee was receiving the payments from CIL in his different proprietary concern M/.s Chakra Narayantara Hotel and the closing balance of ₹ 6,44,95,068/- was reflected in the balance-sheet as on 31.03.2014 of the said concern (Annexure-A). 14. The perusal of submission as verified from balance sheet, the whole transaction is found to be accommodated entries shown under the head loan from, others and loan from, friends and relatives and balance ₹ 6,44,95,068/- is shown as outstanding. No transaction directly from Chakra Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund the money along with an interest of 15 per cent per annum. The firm and its directors haves been restrained and prohibited from buying, selling or otherwise dealing in the securities markets for four years and the ban will continue till the completion of refunds to investors. In case, the firm fails to comply with the order in three months, Sebi would make a reference to state government or local police to register a case against them for fraud, cheating and misappropriation of public funds. Besides, the Ministry of Corporate Affairs would initiate the process of winding up of the company. The directions would come into force with immediate effect. 2. Further, SEBI has passed order no.WPM/PS/09/ERO/APR/2016 dated 22.04.2016 restraining the Chakra Infrastructure Ltd along with its Directors from accessing the security market and a further prohibited from buying selling or dealing in securities. In the said order name of assessee also appeared as a director. 3. Further, Dy. Commissioner of Police(II), Detective Department, 18, Lal Bazar Street, Kolkata forwarded it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly supports the lower authorities action and all more particularly the Assessing Officer s above extracted remand report holding his agreement to sale with CIL to be not a genuine one being an unregistered document. He pin-points glaring aspect of the issue as per SEBI s direction criminal proceedings pending against the said entity (supra). 10. We find no reason to concurring with either Revenue s foregoing arguments or both the lower authorities action treating the assessee s advance / loan amount(s) to ₹6.44 crores in case of CIL. We wish to make it clear first of all that the department is fair enough in not disputing the assessee s explanation to have owned / possessed a six storied residence / commercial B comprising of fifty rooms units and that ten of said units stood sold leaving behind forty of them with kitchens, store and other specified emanated of flow rooms reception rooms bath rooms. There is further no issue regarding assessee s cost of construction met out from loans availed from PSU bank. This above stated agreement stated on 24.04.2011 in paper book pages 46 to 57 reveals that CIL had agreed to purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification published on Saturday, February, 2002 whereby amendment of the Indian Registration Act in section 17 of the Registration Act has been published. The ld.CIT(A), while construing the impact of sections 17 and 49 of Indian Registration Act along with section 53A of TPA within the meaning of section 2(47) of the Income Tax Act has concluded that the transfer within the section 2(47) of the Income Tax Act can only be completed, if in part performance of the contract, possession has been handed over as per section 53A of the TPA. Once the agreement was not registered then it will lose its evidentiary value within the meaning of Section 53A of the TPA. In other words, the rights flowing from an agreement can only be recognized if it was duly registered. If the agreement was not registered, then the rights would not accrue to the parties to the agreement. If no rights would accrue, then it will be construed that the possession was not delivered by the assessee vide agreement dated 4.4.2008 and 2.3.2009, meaning thereby, no transfer has taken place. The ld.First Appellate Authority further put reliance upon the judgment of the Hon ble Supreme Court in the case of Suraj Lamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring such power, unless it has been registered : Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (1 of 1877), or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882 (4 of 1882) or as evidence of any collateral transaction not required to be effected by registered instrument. 25. Section 53A of the T.P. Act provide a shield to defend the possession taken by virtue of the agreement. The vendee can claim protection of the possession even against the owner i.e. vendor, during the period sale deed was not registered. The person who has acquired the possession on execution of agreement as referred to in section 53A may not be able to protect his possession on account of non-registration of the agreement, but for all other collateral purposes, i.e. for tendering the agreement into evidence for suit for specific performance, etc. it is to be treated as va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1908, put paid to any argument to the contrary. 14. We, therefore, hold that : (a) a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement; (b) the proviso to section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract. 26. Thus, if the assessee refused to honour her agreement dated 4.4.2008, SDS has a right to get this agreement enforced by way of suit for specific performance and the assessee could be persuaded to execute the sale deed in favour of SDS by virtue of this agreement. The validity of this agreement under general law viz. Specific Relief Act as well as Indian Registration Act has not been effected. This aspect has not been appreciated by the ld.CIT(A) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under consideration was not accepted by the A.O. during the course of assessment proceedings in the absence of documentary evidence filed by the assessee to support and substantiate the same. During the course of appellate proceedings before the Ld. CIT(A), the assessee company however filed such documentary evidence as additional evidence to support and substantiate its claim that the amount in question on account of share capital and share premium having been received in the earlier year and not in the year under consideration, the addition made by the A.O. by treating the same as unexplained cash credit during the year under consideration was not sustainable. The said documentary evidence filed by the assessee was forwarded by the Ld. CIT(A) to the A.O. along with the submission made by the assessee for his verification and comments. As per the direction of the Ld. CIT(A), the A.O. verified the documentary evidence filed by the assessee and found the same to in order. He also verified the claim of the assessee company from the share subscriber companies and found that the entire share capital along with share premium amounting to ₹ 54.35 crores was actually received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that this is not a case of cash credit entered in the books of account of the assessee during the year but it is a case in which the assessee has invested the capital in the business and this amount was shown as a closing capital as on 31st March, 1992 and on 1st April, 1992 it was an opening balance. Considering this aspect, the Tribunal has come to the conclusion that what was already credited in the books of account ending on 31st March, 1992 for financial year 1991-92 relevant to A.Y. 1992-93 cannot be an unexplained cash credit or investment in the books of account maintained for the financial year 1992-93, the accounting period of which ends on 31st March, 1993 so as to warrant its consideration as unexplained investment or cash credit for its relevant A.Y. 1993-94. It does not require any elaborate argument that a carried forward amount of the previous year does not become an investment or cash credit generated during the relevant year 1993-94. 9. As held by the Hon ble Delhi High Court in the case of Usha Stud Agricultural Farms Ltd. (supra) as well as by the Hon ble Rajasthan High Court in the case of Parmeshwar Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid provision of law shows that an addition u/s 68 of the Act for making addition u/s 68 as unexplained cash credit the following condition has to be satisfied: a. sum must be found credited in the books of the assessee for any previous year; b. on being not satisfactorily explained, sum so credited may be treated as income of that previous year. Therefore, for the purpose of section 68 of the Act the year in which the sum is credited in the books of the assessee is very relevant. The main contention of the assessee was that the impugned addition amount/sum was credited in the books of the assessee for financial year/previous year 1999-2000 relevant A.Y. 2000-01. We note that the amount added in the income of the assessee as unexplained cash credit in the A.Y. 2005-06 was the same amount which was credited in the books of account of the assessee in the previous year ending on 31.03.2000. It is not the case of the revenue that this amount of credit entered in the books of account of the assessee during the year ending on 31.03.2005. The assessee s case is that this is the closing capital as on 31.03.2000 and on 01.04.2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity director (supra) also appeared and confirmed the assessee s case before the Assessing Officer to this effect. We conclude in this fact that the lower authorities have erred in treating the impugned sum in assessee s hands as unexplained cash credits. The same is directed to be deleted. 16. Next comes correctness of sec. 40A(3) disallowance of ₹9,60,669/- on cash payments made to Shri J.P. Singh as on 20.08, 9.11.2011 and 28.12.2013 involving varying sums. The Assessing Officer s remand report itself is very very clear that none of the assessee s cash payments has exceeded the threshold limit of ₹20,000/- during the course of a day so as to trigger the impugned disallowance. We therefore delete the same for this precise reason alone. 17. Lastly comes the assessee s sixth substantive grievance challenging correctness of the disallowance of business expenditure of ₹50,50,700/- treated as bogus during the course of assessment as well as in lower appellate proceedings. Learned CIT-DR invites our attention to this Assessing Officer s remand report going against the assessee. We find that the assessee has duly filed his detailed evid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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