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TMI Blog2024 (11) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... Nikshal Properties Pvt. Ltd. being only a conduit therein. M/s Ardor Overseas Pvt. Ltd. has made no attempt whatsoever to negate the admission by the directors of M/s Nikshal Properties Pvt. Ltd and the other parties involved in the transaction of the same being only an accommodation entry. The admission of the transaction being accommodation entry by the directors/ parties of M/s Nikshal Properties Pvt. Ltd. coupled with the revelation of the modus operandi adopted for this accommodation entry duly corroborated, sufficiently make out a case against M/s Ardor Overseas Ltd. and the onus shifted to them to prove otherwise of the transaction not being an accommodation entry. Mere filing of documents of purchase and sale of land, without controverting the factual averments of the modus operandi of the transaction or for that matter the admission by the directors/ parties of M/s Nikshal Overseas Pvt. Ltd. of the transaction being accommodation entry, we hold, does not discharge the onus of the assessee to prove the genuineness of the transaction. We concur with the Ld.CIT(A) in the case of M/s Ardor Overseas Pvt. Ltd. holding the transaction of purchase and sale of shares effected betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TANT MEMBER: The impugned appeals relating to two different assessees arise against orders passed by separate Commissioners of Income Tax (Appeals)(CIT(A) for short) u/s 250(6) of the Income Tax Act, 1961, (hereinafter referred to as Act ) pertaining, in both cases, to assessment year (A.Y) 2014-15. The two assessees before us are: M/s. Ardor Overseas Private Limited, M/s. Nikshal Properties Private Limited. 2. While in the case of M/s. Ardor Overseas Private Ltd. there are cross appeals of the assessee and Revenue in ITA Nos. 2785 and 2812/Ahd/2017 respectively, in the case of M/s. Nikshal Properties Private Limited it is only the assessee which has come up in appeal before us in ITA No. 206/Ahd/2018. 3. It was common ground that the issues arising in the appeals of both the assessees are interrelated stated to be emanating on account of a transaction of sale of land involving both the assessees - with one assessee before us i.e. M/s. Ardor Overseas Pvt. Ltd. being the purchaser of land while the other assessee M/s. Nikshal Properties Pvt. Ltd. being the seller of the land. That while the seller of land claims the said transaction to be a mere accommodation entry, the purchaser on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Overseas Pvt. Ltd. to M/s. Nikshal Properties Pvt. Ltd. for buying the said land from it was only a camouflage, the same having been returned back by M/s. Nikshal Properties Pvt. Ltd. to M/s Ardor Overseas Pvt. Ltd. by layering through two entities whose names were also disclosed. Thus, the assessee, M/s. Nikshal Properties Pvt. Ltd, repeatedly contended to its Assessing Officer that both the transactions of short term capital gains on sale of land and the loss on commodity transaction, set off against the same, was bogus and only commission income ought to be subjected to tax. The Assessing Officer, however, treated only the loss incurred on commodity transaction to be bogus and taxed the short term capital gains returned by the assessee, rejecting its explanation of the same being a mere accommodation entry. 6. At the same time, on the basis of the information obtained by the Assessing Officer of M/s. Nikshal Properties Pvt. Ltd., i.e. the statement of the Directors of the M/s. Nikshal Properties Pvt. Ltd. and others associated with the transaction, the Assessing Officer of M/s. Ardor Overseas Pvt. Ltd., during assessment proceedings, asked the assessee i.e. M/s. Ardor Overseas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. These being the facts of the case, it is evident that the issues relating to both the assessees are closely intertwined and arise on account of a transaction of sale of land by M/s. Nikshal Properties Pvt. Ltd. to M/s. Ardor Overseas Pvt. Ltd., which M/s. Nikshal Properties Pvt. Ltd. claimed to be a mere accommodation entry - which explanation was not accepted by the Assessing Officer of M/s. Nikshal Properties Pvt. Ltd., but surprisingly this very explanation was picked up by the Assessing Officer of M/s. Ardor Overseas Pvt. Ltd to reduce the value of the cost of land purchased by it from M/s. Nikshal Properties Pvt. Ltd. Thus both the assessing officers have taken contradictory stand on the issue of the transaction of sale/purchase of land. 10. Before going further, the fate of the addition/disallowance made in the case of M/s. Nikshal Properties Pvt. Ltd. and M/s. Ardor Overseas Pvt. Ltd. in appeal before their respective CIT(A) s also needs to be brought out, which is that:- (i) In the case of M/s. Nikshal Properties Pvt. Ltd., the disallowance of commodity loss was confirmed by the ld. CIT(A) and the assessee s plea of taxing only commission earned by it on purported accomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which are as under:- Sr. No. Registration No. Date Cost 1 526/2014 27.01.2024 8,68,50,000 2 527/2014 - do - 8,68,50,000 3 528/2014 - do - 8,68,50,000 4 529/2014 - do - 6,09,88,000 5 530/2014 - do - 6,09,88,000 6 531/2014 - do - 6,09,39,750 Total 44,34,65,750 M/s. Nikshal Properties Pvt. Ltd. had shown the profit on sale of land in its books of accounts and had set off this amount against loss on sale of commodities of Rs. 33,52,72,458/-. This claim of loss on sale of commodities was disallowed by the Assessing Officer of NPPL, while the AO of AOPL reduced the value of land purchased to Rs. 8,50,03,785/- as opposed to Rs. 44,34,65,750 shown by AOPL These are the facts pertaining to the transactions of land affected between both the assessees before us which are undisputed. 14. As noted above, during assessment proceedings in the case of M/s. Nikshal Properties Pvt. Ltd., when the said assessee was asked by the AO to prove the genuineness of the loss on sale of commodities of Rs.33.52 crores, no details or evidences were filed by the assessee. Therefore, the Assessing Officer issued summons u/s 131(1) of the Act to the Directors of M/s. Nikshal Properties Pvt. Ltd., i.e. Shri Nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the company or the transactions carried out by it and attributed the knowledge of all the transactions carried out therein to one Shri Chintanbhai Shah, Shri Jigarbhai Shah and Shri Hitesh Panchal. 15. The assessment order of the M/s. Nikshal Properties Pvt. Ltd. further reveals that after taking on record the statement of the Director of the company, as noted above, another notice u/s 133(6) of the Act was issued to Shri Vishves A. Shah, CA and Authorized Representative of the assessee who had audited the accounts of the assessee-company during the year. In response thereto, Shri Dharmesh Patni, the Director of the assessee-company, filed a reply categorically admitting that all receipts and outgoings in the books of M/s. Nikshal Properties Pvt. Ltd. were simply book entries and they were neither real receipts giving rise to real income nor real expenses. Shri Dharmesh I. Patni further went on to clarify the transactions carried out by M/s. Nikshal Properties Pvt. Ltd. with M/s. Ardor Overseas Pvt. Ltd. as being only accommodation entry for M/s. Ardor Overseas Pvt. Ltd. He pointed out that this was evident from the unusual facts of the transaction itself wherein property was pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nikshal Properties Pvt. Ltd. in the sale consideration of Rs.44 crores was routed back to M/s. Ardor Overseas Pvt. Ltd. through Manibhadra Securities Services Pvt. Ltd. and Matrix International. In the assessment order of M/s. Nikshal Properties Pvt. Ltd. all these facts stand recorded at paragraph No. 2.10 of the assessment order. Thus the director of Nikshal properties disclosed the entire modus operandi adopted by M/s Ardor Overseas for purchasing land at an inflated price using NPPL and other entities as conduits. 16. The assessment order of M/s. Nikshal Properties Pvt. Ltd. at paragraph No. 2.11 further records the fact that the statement of Chintan Shah and Hitesh Panchal were also recorded and annexed as Annexure A/3 and A/4 of the order. The contents of the same have not been reproduced in the assessment order, but again the Assessing Officer of M/s. Ardor Overseas Pvt. Ltd. has reproduced the statement in his assessment order at paragraph No. 4.6 (i.e. of Shri Hitesh Panchal) and at paragraph No. 4.7 (i.e. of Chintan Pinakin Shah). The statement of Shri Hitesh Panchal reproduced at paragraph No. 4.6 of the assessment order in the case of M/s. Ardor Overseas Pvt. Ltd. revea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Nikshal Properties Pvt. Ltd. and all the persons stated to be involved in these land transactions and treated only the loss on commodity transactions to be bogus, the Assessing Officer of M/s. Ardor Overseas Pvt. Ltd. took cognizance of these statements and culled out the facts emerging from the same at paragraph No. 4.9 of his order as under:- 4.9 From a perusal of the above statements deposed by Shri Neeraj Sharadchandra Merchant the dummy Director of the Nikshal Properties Pvt. Ltd., Shri Chintan P. Shah and Shri Hitesh Mahendrabhai Shah, the following facts emerge: - 6 plots of land was purchased by the assessee company (M/s Ardor Overseas Pvt. Ltd.) for a stated consideration at Rs. 44,34,65,750/-. From Nikshal Properties Pvt. Ltd. - Shri Neeraj Sharadchandra Merchant has stated in his statements that he was made director of M/s Nikshal Properties Pvt. Ltd. only on paper and was not in knowledge of the affairs of the company. He was made director by Shri Chintan P. Shah. - Shri Chintan P. Shah admitted that 'M/s Ardor Overseas P. Ltd.' required an accomodation entry provider' company and then their Managing Director Shri Bharatbhai Shah had called him and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions of the Directors of M/s. Nikshal Properties Pvt. Ltd. that the money for the transactions was funded by and routed back to M/s. Ardor Overseas Pvt. Ltd. through Matrix International - a proprietorship concern of Shri Bharatbhai Shah, director of M/s. Ardor Overseas Pvt. Ltd. He noted from the copy of the accounts of Matrix International, as in the books of M/s. Ardor Overseas Pvt. Ltd., to reflect unsecured loans given to M/s. Ardor Overseas Pvt. Ltd. of Rs.67,08,18,308/- and repayment of Rs.40,30,94,817/-. He noted Matrix International to have confirmed the loans. These facts find mention at paragraph No. 4.12.3 of the assessment order of M/s. Ardor Overseas Pvt. Ltd. as under:- 4.12.3 The assessee company has produced the account of Matrix International as held in the books of assessee company, as per which there was opening balance of Rs. 19,21,27,933/-. During the year under assessment the assessee has received unsecured loan of Rs.67,08,18,308/- and has paid an amount of Rs. 40,30,94,817/-. Matrix International has confirmed the loan given to the assessee company. 20. What emerges from the above is that a piece of land bought by M/s. Nikshal Properties Pvt. Ltd. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas Pvt. Ltd. during the year. These statements have never been retracted. Nor we find has M/s Ardor Overseas Ltd. made any attempt whatsoever to negate these contentions. Thus, the facts and records before us show that the Revenue has made a water-tight case of the impugned transactions being a mere accommodation entry for M/s. Ardor Overseas Pvt. Ltd. 22. Before us, the solitary contention of the ld. Counsel for the assessee for M/s. Ardor Overseas Pvt. Ltd. was that it is merely on the basis of the statements of the Directors of M/s. Nikshal Properties Pvt. Ltd. that the transaction has been held to be a bogus accommodation entry. But we do not find any merit in this contention of the ld. Counsel for the assessee. As noted above, the Revenue s investigation has revealed the entire modus-operandi of the transactions. And the unusual facts circumstances of the purchase and sale transaction coupled with the modus-operandi revealed which is corroborated by the entire money trail revealed from and back to M/s. Ardor Overseas Pvt. Ltd. through M/s. Matrix International, seals the case of the Revenue of the impugned transactions being the mere accommodation entry for M/s. Ardor Oversea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement with the ld. CIT(A) in the case of M/s. Nikshal Properties Pvt. Ltd. to have rejected the plea of the assessee of taxing only the commission earned on the impugned transactions by M/s. Nikshal Properties Pvt. Ltd. The ld. CIT(A), though was correct in treating the commodity loss incurred by the assessee as bogus, but at the same time since we have found the transactions of purchase and sale of land by M/s. Nikshal Properties Pvt. Ltd. to be a mere accommodation entry, the capital gains earned therein also cannot be brought to tax and it is only the commission element embedded therein which is to be subjected to tax which the statements revealed to be to the tune of 2% of the financial transactions carried out in M/s. Nikshal Properties Pvt. Ltd. The Assessing Officer in the case of M/s. Nikshal Properties Pvt. Ltd. is accordingly directed to tax commission income to the extent of 2% of the financial transactions carried out therein after verifying the said facts from the assessee. 26. Having so held, the land transactions between M/s. Nikshal Properties Pvt. Ltd. and M/s. Ardor Overseas Pvt. Ltd. to be a mere accommodation entry, we shall not proceed to deal with the aspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest made u/s 36(1)(iii) of the Act. 29. With regard to the last issue relating to the disallowance u/s 14A of the Act, the fact on record is that no exempt income was earned by the assessee. It is settled law now that where no exempt income is earned, no disallowance u/s 14A is warranted. Therefore, the deletion of disallowance of expenses u/s 14A of the Act by the ld. CIT(A) in the case of M/s Ardor Overseas Ltd. is hereby confirmed by us. 30. Having so dealt with the issues involved in both the appeals we shall now adjudicate the grounds raised in the appeals of both the assessees before us. 31. Taking up first, the cross-appeals filed in the case of M/s Ardor Overseas Ltd. We shall first take up the appeal of the assessee in ITA No. 2785/Ahd/2017 - By Assessee in Ardor Overseas Pvt Ltd. Ground No.1-4 relate to the issue of reduction of cost of acquisition of land by Rs. 36,13,01,242/- and read as under :- 1. The ld. Commissioner of Income Tax (Appeals) has grossly erred in law and on facts of the case in confirming the action of ld. Assessing Officer in reducing the cost of 6 Plots at Ambli by Rs.36,13,01,242/- out of total amount of Rs.44,34,65,750/- after holding that cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This issue with respect to non-appreciation of the submissions/ explanations of the assessee by the Ld.CIT(A), raised in the above ground, stands dealt alongwith the pleadings made on merits dealt with by us in the earlier grounds raised above. This ground therefore needs no separate adjudication. 36. Ground No.7 reads as under; 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s 234A/B/C of the Act. The issue of levy of interest u/s 234A/B/C being consequential is not been adjudicated by us. 37 Ground No.8 reads as under; 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s 271(1)(c) of the Act. The issue of initiation of penalty proceedings u/s 271(1)(c) of the Act being premature needs no adjudication. The appeal of the assessee is accordingly partly allowed in above terms. 38. We shall now take up the Revenue s appeal in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was not warranted as per law. Ground of appeal No.7 8 is accordingly dismissed. In effect appeal of the Revenue is dismissed. 42. We shall now take up the appeal of the assessee in ITA No. 206/Ahd/2018 By Assessee M/s. Nikshal Properties Pvt. Ltd. The grounds raised by the assessee in its appeal are as follows:- 1. The Id. Commissioner of Income Tax (Appeals) has grossly erred in law and on facts of the case in confirming the action of Id. AO in making addition of Rs.33,52,72,458/-on account of alleged Short Term Capital Gain. 2 Both the Id. Authorities have grossly erred in law and on facts of the case in not appreciating the fact that on the basis of the inquiries carried out by the Id. AO in his assessment order, the Assessing Officer of the Purchaser Assessee has not allowed the cost of such properties in the hands of the Purchaser Assessee while determining Total Income of such Purchaser Assessee Company. Under the circumstances, the Id. AO ought not to have added such consideration of sale of properties in the hands of the Appellant and no addition of Rs.33,52,72,458/- should have been made in the hands of the Appellant. 3. The ld. Commissioner of Income Tax (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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