TaxTMI 
TaxTMI 
2024 (11) TMI 1192
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....ssessee 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 the other hand claims it to be a genuine transaction. Therefore, the appeals relating to the two assessees were taken up together for hearing and are being dealt with by this common consolidated order. 4. Both the parties were heard at length; orders of the Revenue Authorities below were gone through, and the various documents referred to during the course of hearing were considered. 5. The background leading to the present appeals is that during the impugned year M/s. Nikshal Properties Pvt.....
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....et 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 Pvt. Ltd. to justify the cost of land purchased by it from M/s. Nikshal Properties Pvt. Ltd. for Rs.44 crores in the light of the Directors of M/s. Nikshal Properties Pvt. Ltd. stating that the value of the land was only Rs.8 crores, and Rs.44 crores was only an accommodation entry provided, and that M/s. Nikshal Properties Pvt. Ltd. was a conduit in the transaction. The assessee filed due reply denying what was stated by the Directors of M/s. Nikshal Properties Pvt. Ltd. The Assessing Of....
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.... 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 accommodation entry provided by it to M/s. Ardor Overseas Pvt Ltd. be taxed, was rejected. (ii) In the case of M/s. Ardor Overseas Pvt. Ltd., (a) the reduction in cost of land effected by the Assessing Officer by Rs. 36 crores was confirmed by the ld. CIT(A); (b) the addition of Rs.8 crores of loan received from Matrix International was deleted by the ld. CIT(A); (c) the disallowance of interest paid to Matrix International was confirmed by the ld. CIT(A), and (d) the disallow....
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....ainst '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 Neeraj Sharad Chandra Merchant and Shri Dharmesh Ishvarbhai Patni. Their statements recorded were made part of the assessment order as Annexure A1 and A2, but what the two Directors stated finds no mention in the assessment order. The same, we find, was noted by the Assessing Officer of M/s. Ardor Overseas Pvt. Ltd., who has reproduced their statements in his assessment order w....
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....nother 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 purchased from the members of the Sakar Co-operative Housing Society Ltd on 27.01.2014 for Rs.8,50,03,785/- and sold the same very next day on 28.01.2014 for Rs.44,34,65,750/- which was against all human probabilities, for the price of the land appreciating 5 times in a single day from Rs.8 crores to Rs.44 crores. The other unusual fact which he pointed out was that the sal....
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....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. reveals that when asked as to what did he know about M/s. Nikshal Properties Pvt. Ltd he stated to have purchased M/s. Nikshal Properties Pvt. Ltd. from Shri Ajit Santogi in 2010-11 and having appointed Shri Niraj Merchant and Shri Paresh Haribhai Pandya as the Directors; that he also stated that on behalf of the M/s. Nikshal Properties Pvt. Ltd., Chintan Shah and Jigar Shah ....
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.... 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 told that his company required an 'Entry Provider company and had assigned him to find such company. Hence, he contacted Hitesh Panchal and Niraj Merchant of 'NPPL' and had informed them that 'Ardor Overseas P. Ltd.' required an 'Entry Provider company. So they discussed on what terms and conditions would they work ahead. - Shri Chi....
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....ional, 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. from the Sakar Co-operative Housing Society Ltd. for Rs.8.50 crores was sold within 4 days to M/s. Ardor Overseas Pvt. Ltd. for Rs.44 crores. The Directors of M/s. Nikshal Properties Pvt. Ltd., in their statements recorded on oath to the Assessing Officer of M/s. Nikshal Properties Pvt. Ltd., stated the entire transaction of purchase and sa....
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....verseas 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 Overseas Pvt. Ltd. and M/s. 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. These parties were not....
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....he 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 aspect of addition made u/s 68 of the Act of income from undisclosed sources, of the amount allegedly returned to M/s. Ardor Overseas Pvt. Ltd. by M/s. Nikshal Properties Pvt. Ltd. through M/s. Matrix International as unsecured loans amounting to Rs.44 crores. The AO, we find, having noted necessary adjustment in this regard to have b....
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....allowance 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 of plots were inflated by amount of Rs.36,13,01,242/-. 2. Both the lower authorities have reduced the cost of plots after relying on the assessment order of Nikshal Properties Pvt. Ltd. from whom the plots were purchased by the Appellant at Rs.44,34,65,750/-. 3. Both the lower authorities have failed to appreci....
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.... 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 ITA No. 2812/Ahd/2017 in the case of assessee Ardor Overseas Pvt Ltd. 39. The ground Nos. 1 to 5 raised by the Revenue read as under:- "(1) That the ld. CIT(A) has erred in law and/or on facts in falling to uphold that entire sum of Rs. 44,34,65,750/- is rightly disallowed u/s ....
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....s 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) has grossly erred in law and on facts of the case in not appreciating the facts that if the Appellant was allegedly involved in providing accommodation entry, gross receipts /receipts on account of such accommodation entry could not ha....