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TMI Blog2025 (3) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... income. First of all, we are unable to understand how any income has arisen on account of such revaluation by the joint venture M/s. DD Associates in assessee's hand. The revaluation has been done by M/s. DD Associates who is independently assessed to tax as an AOP. The assessee was only entitled to receive share debt surplus from AOP because any such tax incidence would be only in the hands of the AOP only. The AOP i.e. M/s.DD Associates have members having determined share therefore, liable to pay tax in its own hands. Even otherwise also there is no sale or transfer of any assets warranting liability to tax as it is only a revaluation of stock in trade to recognize in the books of accounts and the present value does not trigger in tax liability either in the hands of joint venture AOP from any of its members. It has also been brought on record and also noted in the CIT(A) order that credit of small share of re-valuation of stock-in-trade in the books of the other member i.e. Friends Development Corporation, no adverse view has been taken by the department in their case. Here in this case, the total re-valuation of project land was Rs. 125.72 Crores as per the audited financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses against unsecured loans claimed to have been paid by the assessee of Rs. 3,85,000/- to Geeta Charan and Rs. 3,84,665/-paid to M/s B.R. Associates, even though there is no increase in secured or unsecured loans during the year. 3. The brief facts and background of the matter are that the assessee firm is engaged in the business of trading in land plots and development rights. For the year under consideration i.e. A.Y. 2018-19, the assessee firm had filed its return of income declaring total income of Rs. 8,72,88,8880/-. Later, the case was selected for complete scrutiny under the E-assessment scheme, 2019 and assessment order was passed u/s. 143(3) on 23.06.2021 assessing total income at Rs. 60,97,96,550/-. Initially, the assessee firm had negotiated for purchase/acquisition of rights, title and interest in a piece of land at Kolshet, Thane from Pasari family and Irani family, along with the rights of several other claimants in the said land. As the assessee firm was incapable of developing the same alone, it offered to develop the said land jointly with the Dosti Group in Mumbai. Accordingly, an Agreement of Association of Persons and Establishments of Undertaking dt. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 crores from its capital account and a sum of Rs. 68.17 crores is introduced by another member - M/s. Friends Development Corporation as capital contribution to AOP. 10. Before the Ld. AO, assessee had explained the aforesaid facts, however, the ld. AO rejected all the contentions of the assessee holding that - a) During the process of revaluation and reversal, development rights and land is transferred from DDA to Partners and from one partner to another without getting registered through instrument. The accounting gimmick was played to reduce tax liability by transferring entries by denying real income. b) In agreement, ownership of property was not transferred from seller to DDA and on revaluation, ownership of AOP assets is transferred by Darshan to Dosti. The transaction is in fact sale consideration between the partners. The transfer of property was camouflaged to save capital gains and stamp duty and to reduce tax liability under Income Tax Act and is a 'colourable device' used by the assessee in the deal. c) The assessee firm has routed its undisclosed money through such artificial entries in the books of AOP M/s. D. D. Associates and created increase of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of Rs. 52,17,38,000/- in the capital account of the assessee which is a member in that AOP. Therefore, it is firmly held that the assessee firm has routed its undisclosed money through such artificially entries in the books of the AOP m/s D.D. Associates and created increase of its capital by Rs. 52,17,38,000/- and introduced the same amount of Rs. 52,17,38,000/- by crediting the capital accounts of its partners namely Jagdish Khetwani, Shri Naresh Khetwani and Shri Suresh Mehta. Accordingly, the amount of Rs. 52,17,38,000/- is treated as undisclosed income credited in the books of the assessee and same is charged to Income Tax under section 68 of the IT Act. Penalty proceeding u/s 271AAC is initiated on this addition." 13. The ld. CIT (A) held that Section 68 is not applicable because here in this case AOP M/s. DD Associates had re-valued its assets and accordingly, credited into creditor's profit and loss account. The assessee's accounts have been credited of Rs. 52,87,38,000/- which was subsequently credited to each partner's capital account in their profit sharing ratio. This, assessee has duly explained alongwith relevant documentary evidences like bank statement, led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en contended on behalf of the assessee that in so far as the onus u/s. 68 of the Act, the assessee firm has discharged its onus regarding the nature and source of alleged amount of Rs. 52,17,38,000/-being the amount of credit given by AOP in its books of account on account of revaluation considering the changed PSR by furnishing following ample documents in which no defects have been pointed out by the Id. Assessing Officer, like, copy of AOP deed of DD Associates as amended from time to time; Ledger account of assessee in books of DD Associates;; Ledger account of DD Associates in the books of assessee; Ledger account of partner of assessee in the books of assessee; Financial Statements of DD Associates. 17. With respect to various allegation of the AO that the transaction was an accounting gimmick and colorable device with an intention to reduce tax, it has been submitted as under: (a) The land was originally conveyed in the name of AOP in 2014. Thereafter, there is no change in the ownership of land in as much as the AOP continues to be the owner of the land and project being developed. Therefore, the contention of the ld. Assessing Officer that the development rights and lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital by Rs. 52,17,38,000/- and introduced the same amount of Rs. 52,17,38,000/- by crediting the capital accounts of its partners namely Jagdish Khetwani, Naresh Khetwani and Suresh Mehta is a bald observation without any cogent or corroborative evidence against the assessee firm. The Id. Assessing Officer has not even brought on record any evidence to establish as to how the amount credited to the account of assessee firm in the books of the AOP were the undisclosed money routed by the assessee. 18. We are in complete agreement with the rebuttal of the assessee and the observation and finding of the AO has no basis either under the accounting system or under the law. Here, the issue which has been raised by the Ld. Assessing Officer is that the net amount credited of Rs. 52,17,38,000/- to the member of AOP being assessee firm on account of revaluation exercise considering the PSR pertaining to the assessee firm is nothing but sale of asset between partners and that the capital gain is avoided by such accounting gimmicks. Further, he has alleged that the assessee firm has introduced its undisclosed income in the process and has failed to prove the genuineness of the transaction f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn hands. Even otherwise also there is no sale or transfer of any assets warranting liability to tax as it is only a revaluation of stock in trade to recognize in the books of accounts and the present value does not trigger in tax liability either in the hands of joint venture AOP from any of its members. It has also been brought on record and also noted in the CIT(A) order that credit of small share of re-valuation of stock-in-trade in the books of the other member i.e. Friends Development Corporation, no adverse view has been taken by the department in their case. Here in this case, the total re-valuation of project land was Rs. 125.72 Crores as per the audited financial statement of M/s. DD Associates-AOP and the share of the assessee till 31/03/2017 was Rs. 46.50 which was brought down to 5% at the year ending 31/03/2018. The gain equivalent to 41.50% to which assessee was entitled to is recognized by AOP by crediting to the capital account by such amount and pressing equivalent debit to the capital account of the other member of the AOP. It was for this reason that the profit and loss share alleged was increased by 41.1%. There is no sale consideration as inferred by the ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties and maintained that the expenditure was incurred for business purposes only and is fully allowable as revenue expenditure and furnished invoices for the above expenditure. I am of the opinion that the AO could have verified the expenses from the invoices furnished and decide on the authenticity. In the absence of this, I am of the view that the Rs. 7,69,655/- which has been disallowed on account of brokerage commission expenses is allowable in the absence of any adverse findings by the AO and the assessee having deducted TDS and furnishing the details and invoices of brokerage paid. Accordingly, the addition of Rs, 7,69,655/- is hereby deleted. Ground of appeal 4 stands allowed." 24. On perusal of the facts and material brought on record, once there is a finding of the fact that the brokerage has been paid for the specific purpose and the amounts have been paid through cheques and TDS has been deducted and without any adverse material, we do not find any infirmity in the order of the ld. CIT (A) deleting the addition. Accordingly, this ground raised by the Revenue is dismissed. 25. In the result, appeal of the Revenue is dismissed. Order pronounced on 28th February, 2025.< ..... X X X X Extracts X X X X X X X X Extracts X X X X
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