TaxTMI 
TaxTMI 
2018 (10) TMI 491
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....crutiny and the assessment was completed on 31.12.2008 u/s. 143(3) of the Act at an income of Rs. 21,64,74,438/- thereby making additions and disallowances aggregating to Rs. 15,35,62,500/-. As observed in the assessment order, the assessee company purchased agricultural land measuring 75.10 Bigha, from farmers at Jaipur for Rs. 4,71 ,24,562/-. Subsequently, on 08.02.2005, the assessee entered into a development collaboration agreement with M/s Omaxe Ltd. with a condition that the assessee will get one plot (900 sq. yds.) per Bigha of land developed by Omaxe. In the agreement, there were some time limitations for completion of the project. But, before the expiry of the time limitation and completion of the project, the appellant transferred one plot of land to M/s. Supreme Ceramics Pvt. Ltd. on 04.05.2005 and some other plots which the assessee was supposed to receive from Omaxe on completion of the project, to nine other parties. The assessee sold the plot in advance on the basis of collaboration agreement with Omexe, before actually receiving the plots. Subsequently, there was delay in implementation of the project and complexities in getting the necessary approval. The purchaser....
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....he Revenue should be allowed. 5. None is present on behalf of the assessee despite sufficient notices sent to the assessee. A perusal of order sheet reveals that all the modes of service of notices were exhausted and thereafter the last notice for hearing has been served by affixture through the department. The affixture report is available on record. We, therefore, have no option but to decide the appeal of the Revenue exparte qua assessee. The findings reached by the AO in the assessment order read as under : 5.0 The Assessee has entered in to basically four set of documents with each party. Agreement of Sale (dated 04.05. 2005). Arbitration Agreement (30.07.2005), Arbitration Award (31.08.2005) and Buy Back Agreement (09.09.2005). The assessee was asked to provide copies of these four set in respect of each party. The assessee was forther asked to produce the Originals of these documents for the purpose of verification. 5.1 Details of documents submitted: The assessee was persistently through different letters and note sheet entries was requested to furnish copies of the documents on the basis of which the loss was being claimed because these documents were ....
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....inning from 21.11.2008, 27.11.2008 , 4.12.2008 and close of proceedings on 17.12.2008. In none of the written submissions the assessee has explained the circumstances which are preventing assessee from production of original documents. The assessee in letter dated 29.12.2008 stated that there was no need of such agreement but no reply was given as to where the original documents of the assessee are lying and what is preventing the assessee from production of the same. Doubts about Genuineness of Documents produced: The photocopies produced by the assessee are unreliable because of the following reasons: 5.4 Difference in position of Signature of Parties: (a) In the course of assessment proceedings copies of agreements in respect of the following parties were obtained: (i) Sat yam Ferro Tech Ltd (ii) Shivam Iron & Steel Co. Ltd. (iii) Gangeshwari Metals Pvt. Ltd. (iv) Essance Investment & Finance consultant P Ltd. On comparison of the documents sent by the parties with the similar documents submitted by the assessee, the first difference noted was that at the bottom of each page, assessee and representative of t....
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....arties would show only one witness where as documents submitted by the assessee would show two witnesses. This would prove that the argument of the assessee above is not correct because even if the photocopy is taken at an earlier occasion the buyer will ensure that at least copy is complete in all respects. (c ) Notarisation: The documents furnished by the assessee are mostly notarised by Archana Sharma, Notary Public But none of the documents submitted by the parties directly are notarised. The assessee in reply dated 11.12.2008 again advanced the same reason that the Assessee got its copy notarised where as the buyer kept it like that without notarisation. 6.3 The above said alleged notarised of documents was put to Mrs. Archana Sharma, Notary Public for verification whether she has notarised these documents. In her statement dated 10.12.2008, she deposed that original documents must be shown to her before she could verify her signatures on photocopy. The assessee failed to furnish original documents which could be put to Mrs. Archana Sharma. Thus, even the notarization could not be cross verified without original being produced. It was further also stated by t....
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....transaction because a series of stamp paper is forming a particular patter. Advance paid in cash and no transaction in bank: 7.1. It may be noted that the transaction with all the ten parties sarted with a cash of Rs. 5,00,000/- as advance, in no case cheque was paid so that any credibility could be attributed to the transaction. It is further surprising that in May, 2005, there was agreement of sale with cash as advance and the agreement was to be honoured by July 2005 and in between 4th May, 2005 ands 31.07.2005. When the agreement was to be executed, there was no banking transaction. There was no exchange f cheque which was deposited in bank by the assessee, it goes against the theory of assessee that Real Estate market was volatile and it was protecting its interests. The agreement to sell only talks about post dated cheques which were returned so quickly when alleged dispute arose. The arrangement is such that right from beginning of transaction on 4th May 2005 till February 2006, there is no banking transaction which could lend credence to transaction. The first banking transaction is on 24.02.2006 when the cheque of settled amount was encashed from the Bank....
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.... by the aforesaid parties suggest that only those parties have been selected as buyers which could due to operational losses /carry forward business losses, absorb huge amounts of gains. It may be mentioned all the respective parties have shown these receipts as Business Income and after setting of it with the current operational losses or carry forward losses, no tax liability has arisen. None of the parties has shown it to be Capital Gain despite the fact that the profit is arising out of capital transaction. It can not be true that all the buyers were also buying the land as stock in trade. The interest of the other party in taking the gain was that in few parties' case, the Balance sheet was reflecting negative net worth and such an arrangement supporting the balance sheet was in their business interest at no expense of tax. The assessee company has gone all over the country in Shopping of Loss from the above parties by way of the aforesaid transaction. 10.0 The nature of transaction as above is such that the assessee company has entered into transaction of sale of the product (developed land) which has not come in to existence. The agreement to sell a contingent p....
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....ienable right to receive developed area from Omaxe such right emanating from contract can not be further alienated. The assessee did not have any intention of such sale but since knew that the arrangement is being made to reduce its tax liability, therefore, confidently entered in to a paper transaction which was only with an intention to reduce tax liability. Transaction with Prime Quality Constructions Pvt. Ltd. 13.1 The assessee company initially stated that the documents in respect of Prime Quality Construction are not traceable but in reply dated 11.12.2008 the photocopies of documents were produced. It is worthwhile to mention that the assessee was confronted that Prime Quality in letter dated 28.11.2008 denied any Agreement having been executed. Prime Quality confirmed the transaction in its own terms that two individuals Sourav Malhotra (for her mother Neelam Malhotra) and Gaurav Nayyar were the persons who transacted with MEK for purchase of plotted area. The advance payment of Rs. Five lakhs was made by these persons after allegedly withdrawing amounts from their individual bank accounts and not from the company Prime Quality Constructions Pvt. Ltd . No ....
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....e truth. The assessee has in none of the case provided original papers. 13.5 In both the above cases even though the photocopies of agreements executed by the buyers have been produced but these are not beyond any doubts in view of factual inconsistencies as mentioned above. The assessee is claiming business loss on these documents; the assessee must prove transaction beyond reasonable doubt. Transaction with Supreme Ceramics Limited 14.1 The version of the assessee company regarding transaction with this buyer is akin to all the remaining nine parties, i.e. on 04.05.2005 there was agreement of sale for 12150 sq. yds of developed land, there was dispute and Arbitration Agreement (30.07.2005), Arbitration Award and finally Buy Back agreement on 06.09.2005. In all though the proceedings the assessee company maintained that the documents in respect of Supreme Ceramics are not traceable. Not even Photocopies were produced . In final reply dated 11.12.2008 also the assessee maintained a position that the original documents are not traceable and thus can not be produced. 14.2 Supreme Ceramics in letter dated 02.12.2008 submitted one important departure....
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....see is generating paper agreements of Sale and purchase the way it suits its taxation management. These are the documents which were submitted in a parallel proceedings before Income Tax Department. 14.6 . It is worthwhile to mention that statement of Sh. S. Bhattacharya, Director, of the assessee company was also recorded 15.06.2007 by Addl. DIT, Ghaziabad on 15.06.2007 (copy enclosed) and the following extracts are relevant in present context: (a) Q.3 Please produce copy of agreement? The copy of agreement is produced and filed in the submission dated 13/06/2017. Q.4 What was the exact transaction? Our company agreed to sell 13.5 Bighas of agricl. Land on Jaipur-Ajmer High way to M/s Supreme ceramics ltd. In the month of April @ Rs. 9.00 lacs Bigha. The agreement was already executed on 4/5/2005 for a total consideration of Rs. 121.50 lacs. (b) Q. 9. When you are in real estate business & bought so much land why did you sale the land to Supreme Ceramics Ltd. There was a notification by Jaipur Development Authority about drastic increase in the conversion charges from Agriculture to Non agriculture Land. Since I anticipated no ....
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....d copy of POA executed in favour of Omaxe dated 8th February 2005. 14.8 The transaction with Supreme Ceramics becomes paper transaction, because the assessee can not enter in to transfer of the same land to Collaboration and there after to Supreme Ceramics Ltd. Any illegal activity and any such agreement which is against law can not be taken cognisance in any proceedings. The effect of such transaction is also to be ignored and any loss arising by selling and buying back will be Loss not allowable as a business loss. The assessee company is exercising fiduciary control over the parties and agreements are generated on paper without there being any real transaction. Conclusion: 15.1 The case of the assessee is finally concluded by it in letter dated 17.12.2008 which inter alia takes the following arguments: (a) All the ten parties have confirmed the transactions, it is evident from their respective income tax records/ Audited accounts. The same transaction can not be taxed twice. (b ) The decision of selling to ten parties was taken by the assessee since Omaxe was not sticking to the time lines and the assessee had already entered in to Sa....
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....e has raised nine more parties. The transaction with the remaining parties is an after thought. (q,} In so far as confirmation by all the parties is concerned it has been established above that the transaction did suit both the parties and, therefore, it is being held that the transaction is only a paper transaction and not a real transaction. The transaction has started in Banking Channel only after the payment of buy back was to be started because, these payments were the pillars of the transaction of loss. It can not be lost sight that prior to this there is no banking transaction. The transaction with Supreme Ceramics is in different format. And in the statement dated 15.06.2007, the Director had confirmed only transactions with two to three parties, where as by that time money has started going back to these parties from the bank account. The assessee company at that time was not in a position to face further enquiry, therefore, avoided by saying an evasive reply. 11.3 In view of the aforesaid discussion the following additions are being made to the taxable income of the assessee company and ten transactions are categorised into the following three: ....
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.... rather, the same were notorized. The Notary, on enquiry also admitted to have no entry in her notary register. This enquiry result, keeping in view the nature of documents filed, in our opinion, goes to strengthen the objection of the AO regarding the authenticity and genuineness of the agreements. The ld. CIT(A) appears to have discarded the objections of the AO simply saying that had the AO any doubt on the agreements, he could have obtain the same from the office of registrar of properties. However, once the agreements were admittedly not registered with Registrar of properties, we fail to understand, how such documents/agreements could be obtained from the officer of Registrar of property. We, therefore, do not support this finding of the ld. CIT(A). 7. On perusal of the facts narrated by the AO, the whole series of facts go to doubt the transactions. The assessee enters into a collaboration agreement with M/s. Omaxe Ltd on 08.02.2005, as noted above for development of assessee's land. In this agreement, there were some time limitations for completion of the project. But, before the expiry of the time limitation and completion of the project, the appellant transferred one p....