9911796707
TMI Blog2024 (11) TMI 1383X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment year (AY) 2010-11. The Assessing Officer (hereafter AO) had made an addition to the income as returned by the respondent (hereafter the Assesssee) under Section 68 of the Act and disallowed the addition made under Section 14A of the Act. 3. The Assessee had filed its return of income for AY 2010-11 declaring a total income of Rs. 11,145/-. The said return was initially processed under Section 143(1) of the Act. However, thereafter, the same was picked up for scrutiny and a notice under Section 143 (2) of the Act was issued on 25.08.2011. The balance sheet of the Assessee for the relevant previous year reflected M/s Unitech Ltd. (hereafter Unitech) as a creditor for an amount of Rs. 67.50 crores. In the aforesaid context, the AO issued a notice under Section 143 (2) of the Act calling upon the assessee to furnish details of the transactions with Unitech, which had resulted in an outstanding amount of Rs. 67.50 crores as reflected in its books of accounts. In response to the same, the Assessee furnished certain details including confirmation of balance by Unitech. The AO issued a notice dated 07.12.2012 under Section 133 (6) of the Act to Unitech. In response to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er work filed by the assessee like PAN details, income tax return and bank account and by ignoring on important fact that there was no evidence to prove creditworthiness of the lender under Section 68 of the Act?" 10. The principal question to be addressed is whether in the given facts, the sum of Rs. 67.50 crores reflected as outstanding in the final books of accounts of the Assessee is liable to be included in the total income of the Assessee chargeable to tax, as unexplained credit under Section 68 of the Act. FACTUAL CONTEXT 11. Before proceeding further, it would be necessary to briefly note the facts as obtaining in the present case. 12. As noted above, a sum of Rs. 67.50 crores was shown outstanding as on 31.03.2010 in the books of accounts of the Assessee. The Assessee had explained that the said amount was received from Unitech as a part consideration for the sale of certain lands in the State of Maharashtra. The transactions had not been consummated as Unitech had not paid the balance amount. 13. The AO issued a notice dated 07.12.2012 under Section 133 (6) of the Act to Unitech. Pursuant to the said notice, Unitech's Authorised Representative (AR) appeared before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was sold for an aggregate ice (sic price) of Rs. 135,00,00,000/- (Rupees One hundred thirty five crores only) against which a sum of Rs. 67,50,00,000/- was to be paid as an advance in one or more tranches on or before March 31, 2010. The amount received by the Assesses Company in terms of the said Agreement till 31st March aggregating to Rs.67.50 crores has been disclosed under the head "Sundry Creditors" copy of account duly confirmed by M/s Unitech Ltd. is being enclosed herewith." 15. The Assessee explained that it had received an amount of Rs. 67.50 crores through banking channels. It explained that the said sum was transferred online by Unitech through RTGS (Real Time Gross Settlement) in the following manner: "Date Amount (in crore) 18.03.2010 17.00 19.03.2010 24.00 22.03.2010 16.50 22.03.2010 10.00 Total 67.50" 16. The AO embarked upon an investigation as to the engrossing of the Agreement to Sell on the non-judicial stamp paper. The rear of the stamp paper reflected that it was sold to Unitech by one Mr. Sandeep Kumar, Stamp Vendor, License No. 584, Parliament Street, New Delhi. 17. The AO sought information from the Delhi Treasury, Tis Hazari Court, Delhi w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties agreed to engross the said Agreement to Sell on a non-judicial stamp paper and resultantly the same was typed on a non-judicial stamp paper. The Assessee explained that since the parties were entering into the "mirror agreement of the earlier Agreement dated 12.03.2010", the date as mentioned in the Agreement to Sell - which was executed on a plain paper - was also mentioned in the Agreement to Sell as transcribed on the judicial stamp paper. The Assessee explained that, in fact, the Agreement to Sell on the non-judicial stamp paper was executed in the year 2012 and the date as mentioned remained unnoticed. 23. It is apparent from the above, that there is no dispute as to the following facts: (a) That Unitech had paid an aggregate sum of Rs. 67.50 crores to the Assessee during the previous year relevant to the AY 2010-11. (b) The said sum of Rs. 67.50 crores was received by the Assessee in four tranches - Rs. 17 crores on 18.03.2010; Rs. 24 crores on 19.03.2010; Rs. 16.50 crores on 22.03.2010; and, Rs. 10 crores on 22.03.2010 - through banking channels. (c) That an Agreement to Sell was typed on a non-judicial stamp paper of Rs. 100/-, sometime after 22.03.2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "nature and source" of the same or if the explanation offered by him is not satisfactory in the opinion of the AO. 28. In the present case, there is no dispute as to the source of the credit in question. The Assessee had clearly explained that the source of the funds of Rs. 67.50 crores standing in its books is Unitech. There is no dispute that the aggregate sum of Rs. 67.50 crores was remitted by Unitech through banking channels to the Assessee during the previous year relevant to the AY 2010-11. Concededly, there is no dispute that Unitech had the wherewithal, at the material time, to make the said payment. 29. In view of the above, the condition as mentioned in the first limb of Section 68 of the Act, which contemplates the situation where the assessee offers no explanation as to the nature and source of the amount found credited, is not satisfied. The Assessee has clearly explained the source of the fund and there is no dispute regarding the same. It had also explained the nature of the receipt as being an advance against the transaction for sale and purchase of the subject property. The only aspect to be examined is whether the Revenue's contention that the explanation provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries, "it is necessary for the assessee to prove not only the identity of the creditors, but also the capacity of the creditors to advance money, and establish the genuineness of the transactions". 34. In Sumati Dayal v. Commissioner of Income Tax (1995) 214 ITR 801, the Supreme Court had considered a case of addition of receipts from ostensibly from winnings from horse races as unexplained credit under Section 68 of the Act. In that case, the assessee claimed that she had won an amount of Rs. 3,11,831/- during the previous year 1970-71 relevant to assessment year 1971-72. The said winnings were aggregate of winnings on thirteen occasions, out of which ten were from jackpots and three were from treble events. Similarly, in the previous year 1971-72, the assessee had won races on two occasions from jackpot. Further, the assessee had never claimed any loss in races and had shown only winnings. The winnings from horse races were at the material time not within the net of tax. In the given facts, the two members of the Settlement Commission did not accept the assessee's explanation and came to the conclusion that what was apparent was not real and the assessee's claim was found to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on tickets, which entailed sizeable amounts varying generally between Rs. 2000 and Rs. 3000. The drawings recorded in the books cannot be correlated to the various racing events at which the appellant made the alleged winnings. (iv) While the appellant's capital account was credited with the gross amounts of race winnings, there were no debits either for expenses and purchase of tickets or for losses. (v) In view of the exceptional luck claimed to have been enjoyed by the appellant, her loss of interest in races from 1972 assumes significance. Winnings in racing became liable to income tax from 1-4-1972 but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different, however, if the claim of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources. 10. The majority opinion concludes that it would not be unreasonable to infer that the appellant had not really participated in any of the races except to the extent of purchasing the winning tickets after the events presumably with unaccoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence." 36. It is settled law that the credit in the books of accounts may be taxed under Section 68 of the Act if the AO on the basis of evidence and material on record can reasonably infer that the assessee's explanation regarding the transaction reflected as credit in his books, is a subterfuge and the transaction as disclosed, is not genuine. 37. Having stated the above, it is also necessary to observe that the AO is not required to examine the commercial expediency of the transaction and supplant its view in place of the transacting parties. The AO is required to give a wide latitude to the commercial discret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction. It accepted that the Assessee company had established the identity and creditworthiness of the payer and the genuineness of the transactions. The relevant extract of the order dated 31.10.2014 passed by the learned CIT(A) is set out below: "4.1.2 There is no dispute that the Appellant Company was and is the legal and beneficial owner of land measuring 3-03-40 hectares and 8-25-2 hectares situated at Taluka Khalapur, District Kaigad, State of Maharashtra. The land proposed to be sold is duly reflected in the balance sheet of the appellant company. The fact that land was purchased by the appellant company during the year ended 31.03.2004 was also confirmed by Addl. DIT (Inv.) who reported that the same was purchased in Aug, 2003 for a consideration of Rs. 48.44 lacs. Both the parties have confirmed that the Appellant Company agreed to sell and M/s Unitech Limited agreed to purchase the said land and all rights, interests and title therein, for a total consideration of Rs.135.00 crores, out of which one-half amounting to Rs.67.50 crores was agreed to be paid as an advance. It was confirmed by both the parties that the said understanding was reduced to writing in the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the balance amount and, therefore, amount is still outstanding. It is not the case of the AO that M/s Unitech ltd. is not existing. It is also not the case that M/s Unitech ltd. has no credit worthiness. The transaction are also duly disclosed in the regular books of accounts of both the parties i.e. the Appellant Company as well as M/s Unitech Limited. The transactions are proved from the bank account statement of both the appellant and M/s Unitech ltd. The existence and creditworthiness of M/s Unitech ltd. is also proved from the above. Thus, as a result the documents/explanations filed/furnished during the course of assessment proceedings, the onus cast upon the Appellant Company to prove the identity/creditworthiness of the cash creditors and the genuineness of the transactions stood completely discharged." 41. The learned ITAT has concurred with the aforesaid view. And, we find no infirmity with the learned ITAT's decision. 42. It is material to note that the questions of law as projected by the Revenue and as noted at the outset are premised on the assumption that the creditworthiness of Unitech was in doubt. But as noted before there is no cavil that Unitech had suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
