Subsequently directly deal with the saler cannot rule out the role of Coordinator and coordinator also affected by the transaction under IT Act

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “D” NEW DELHI

BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA

ITA No. 4888/Del/2010

Asstt.Yr: 2007-08

Kirti Realtors Pvt. Ltd.

(Now merged with

M/s AEZ Infratech Pvt. Ltd.)

C/o Dr. Ravi Gupta,

D-10. Kailash Colony,

New Delhi-110048.

PAN/GIR No. AACCK2036M

(Appellant)

Vs.

ITO, Ward 5(3),

New Delhi.

(Respondent)

                                              Appellant by: Sh. Ravi Gupta Adv. &

Sh. Rajesh Jain CA

Respondent by: Shri N.K. CHAND Sr. DR

O R D E R

PER R.P. TOLANI, J.M:

This is assessee’s appeal against CIT (A)’s order dated 14-9-2010 relating to A.Y. 2007-08. Following effective grounds are raised :

“1. That the Ld. CIT(Appeals) has erred in law and on facts in holding that the AO was justified in making an addition of  Rs. 27,71,500/- by invoking the provision of section 69C of the Income Tax Act, 1961.

2. That the Ld. CIT(Appeals) has erred in holding that the appellant has failed to establish nexus between the advance paid by the appellant to Sh. Jagdish Beniwal and the cash payments made to the land owners.

3. That the Ld. CIT(Appeals) has erred in relying upon the statement of Sh. Jagdish Beniwal which was recorded behind the back of the appellant and no opportunity of cross examination was afforded.”

2. Leaned counsel for the assessee stated brief facts as under:

The assessee company is engaged in the business of real estate. During this year it purchased some land in district Alwar (Rajasthan) through Shri Jagdish Beniwal, who used to coordinate in purchases between the assessee company and the sellers of the lands, being local farmers. In the course thereof, assessee advanced a sum of Rs. 88,55,000/- to Shri Jagdish Beniwal with the directions to of and on deliver the part amounts to these farmers/ sellers of the lands. The land being situated in rural areas, the sellers/ farmers insisted for cash payments, which were thus given by Shri Jagdish Beniwal out of the imprest account so advanced by the assessee through bank a/c. Shri Jagdish Beniwal disbursed the amount of Rs. 27,71,500/- by way of cash, which is questioned by AO during the course of assessment proceedings. AO issued summons u/a 131 to Shri Jagdish Beniwal to attend on 16-12-2009, as he had fallen ill, Shri Jagdish Beniwal could not attend. However, the assessee’s CA Sh. Tarun Kandhari appeared before AO and explained the nature of imprest account of Rs. 88,55,000/- paid to Shri Jagdish Beniwal for coordination of purchase of lands in Alwar. AO, however, held that the assessee had failed to explain this amount of advances and made the impugned addition as unexplained expenditure u/s 69C.

2.1. Aggrieved, assessee preferred first appeal, where following submissions were made:

(i) During the relevant previous year the appellant purchased certain land at District Alwar, Rajasthan.

(ii) Complete details of the transactions were duly furnished before the ld. AO

(iii) Copies of registered sale deeds of the lands in question were also submitted before the ld. AO during the assessment proceedings.

(iv) The details of payments made for acquisition of land, were also duly submitted before the ld. AO and the same were also depicted in the copies of the registered sale deeds submitted before the ld. AO during the assessment proceedings.

(v) The appellant paid Rs. 88,55,000 by cheque to Mr. Jagdish Beniwal who made cash payments amounting to Rs. 27,71,500 out of the withdrawals made by him from the above said amount of Rs. 88,55,000. In support o the above copy of bank statement of Mr. Jagdish Beniwal was also submitted before the ld. AO

(vi) AO failed to appreciate the nature of imprest account and payments out of it and insisted for the presence of Mr. Jagdish Beniwal, although when assessee had debit balance against him in books of accounts.

(vii) Mr. Jagdish Beniwal could not appear before the ld. AO due to his illness, affidavit to this effect has been filed by the appellant. The ld. AO not only totally ignored the affidavit filed by the appellant but also failed to verify that the cash payments made by Mr. Jagdish Beniwal is only out of the withdrawals from his bank account.

(viii) Copy of ledger account of Mr. Jagdish Beniwal in the books of appellant along with copy of bank statement as well as Mr. Jagdish Beniwal were filed before the ld. AO along with copies of registered sale deeds. The ld. AO made no attempt to appreciate this evidence and verify the genuineness of the transaction AO arbitrarily made the addition of Rs. 27,71,500 as payments made outside the books of accounts by invoking the provisions of section 69C of the IT Act, although when they were out of imprest account maintained by assessee.

(ix) Copies of relevant extracts of bank statement of Mr. Jagdish Beniwal along with statement of cash flow was also filed.

2.2. CIT(A) called a remand report from AO in this behalf. AO recorded the statement of Mr. Jagdish Beniwal and submitted a remand report by following observations:

“In this connection, it is to inform you that as desired by your good self Shri Jagdish Beniwal was summoned on 09-06-2010 to record his statement so as to collect necessary information with respect to his background, his business/ professional activities and the circumstances in which he was appointed by the appellant company to act on his behalf. A photocopy of the statement of Shri Jagdish Beniwal recorded u/s 131 of the I.T. Act, 1961 is enclosed for your kind perusal/ consideration. It is worth mentioning there that as per the statement given by Shri Jagdish Beniwal, it has been claimed by him that he came into contact with M/s Kirti Realtors Pvt. Ltd. when the assessee company approached him for purchase of land belonging to his wife and paid an amount of Rs. Sixty lacs for the same. It is also stated by him that thereafter the company asked him to arrange for purchase of contiguous land measuring about a hundred bighas s a result of which advances were given to the farmers by Shri Beniwal out of the funds received from the company from time to time, the amount of such payments and the persons to whom the payments were made could not be recollected by him in lieu of which’Katchacha Receipts” were issued. The whose exercise was done by Shri Beniwal without receiving any commission/ consideration from the assessee company which is quite intriguing. It has also been claimed by Shri Beniwal that after making farmers to sell their land to the company and paying advances for the purpose, the company directly dealt with the farmers and got the registry done in its name without his further involvement. As such the facts stated by Shri Beniwal do not establish that the payments made by him had any relation whatsoever with the process of purchasing land by the assessee company. Nor any evidences to this effect has been filed by Shri Beniwal substantiating the claim of the company or his own claim. The assessee company despite being afforded many opportunities during the course of assessment as evident from the assessment order could not establish the nexus between payments being made by Shri Beniwal to the farmers. The situation remains the same after considering the statements of Shri Beniwal.”

2.3. A copy of remand report was supplied to assessee to which a rejoinder was filed by the assessee, inter alia, in following terms:

“4. The Ld. AO has neither gone into the details of the payment made by the appellant to Mr. Jagdish Beniwal nor the payment made by Mr. Jagdish Beniwal to the farmers for purchase of their land.

5. In last para at page one of the remand report, the Ld. AO has wrongly mentioned that the facts stated by Mr. Jagdish Beniwal do not establish that the payments made by him had any relation whatsoever with the process of purchasing land by the assessee company despite the fact that in reply to Q 5 (at page 3 of the statement) and Q 7 (at page 4 of the statement), it has been categorically admitted by Mr. Jagdish Beniwal that he payments made to the farmers is out of the withdrawals made by him out of the same advance which has been received by him from the assessee company.

6. In last para at page one of the remand report, the Ld. AO has again wrongly mentioned that the no evidence has been filed by Mr. Jagdish Beniwal substantiating the claim of the company or his own claim.

7. Complete details of the payments made to the farmers by Mr. Jagdish Beniwal were furnished during assessment proceedings by Mr. Jagdish Beniwal along with copy of his bank statement and the same were also depicted in the copies of the registered sale deeds submitted before the Ld. AO. However, one fails to understand the observations made by the Ld. AO in this context.

8. On page two of the remand report, in the concluding para, the Ld. AO has again wrongly observed that the assessee company could not establish the nexus between payments being made by Mr. Jagdish Beniwal to the farmers.

9. Mr. Beniwal has clearly informed to the Ld. AO, during remand proceedings, that he has entered into an agreement with the assessee company for acquisition of farmers land and after that agreement he was paid total Rs. 81,00,000/- which was deposited by him in his bank account with Punjab National Bank at Shivaji Park Alwar. All the payments to the farmers were made after withdrawing the money from this account.

10. The Ld. AO has failed to look into the details of payments made by the appellant to Mr. Jagdish Beniwal and the payment made by Mr. Jagdish Beniwal to the farmers for purchase of their land and therefore reached to a wrong conclusion as was done during assessment proceedings.”

2.4. CIT(A), however, rejecting the submissions made on behalf of assessee, confirmed the order of AO. Aggrieved, assessee is before us.

3. Learned counsel for the assessee contends as under:

(i) Mr. Jagdish Beniwal has himself accepted his relationship with the assessee company

(ii) Mr. Beniwal has not denied the disbursement to the farmers/ sellers out of the imprest account. This reply in statement “he could not recollect”, does not mean that he denied such payment out of imprest a/c.

(iii) The land transactions in question coordinated through Mr. Beniwal has been completed and converted into proper sale transactions and such sale deeds have been executed. The evidence has not been considered by CIT(A).

(iv) The statement of Mr. Beniwal was recorded by AO behind the back of the assessee and if it was proposed by AO to treat that statement against the assessee in that case, opportunity of crossexamination of Mr. Beniwal should have been afforded to the assessee.

(v) AO in his remand report has himself accepted that Mr. Beniwal claimed to the effect that he persuaded farmers to sell their land to the company and made advances for the purpose and coordinated. This statement of Mr. Beniwal itself signifies that he corroborat ed the assessee’s version that for entering into agreement to sell and before execution of registered deed Mr. Beniwal was coordinating the activities of arranging such purchases.

(vi) It has not been disputed that assessee gave a sum of Rs. 88,55,000/- by way of imprest advances to Mr. Beniwal.

3.1. Learned counsel pleads that both the lower authorities have erred in appreciating the correct facts that it was assessee’s own money which was disbursed by Mr. Beniwal on its behalf to the sellers of the land. The addition may be deleted.

4. Learned DR relied on the orders of authorities below. We have heard rival contentions and gone through the entire material available on record. The remand report submitted by AO does not deny the fact that Mr. Jagdish Beniwal was acting as a coordinator for facilitating the purchase of pieces of lands in Alwar for and on behalf of the assessee. It has also not been denied that assessee did not give advance imprest money to him. Mr. Jagdish Beniwal has accepted that he used to assist assessee and thereafter the assessee was dealing with farmers directly. This does not rule out his role as a coordinator till the conveyances were registered. In his statement he has himself accepted having received an amount of Rs. 60,00,000/- from assessee and about the cash disbursement on pertinent question, . he has only stated that he could not recollected at that time; this cannot be inferred to be denial of transaction with assessee . It has also not been disputed that Mr. Jagdish Beniwal’s statement was recorded by AO in remand proceedings behind the back of the assessee. If the same was proposed to be used against assessee as implying to be denying its stand, in that case principle of natural justice demanded offering the witness for cross-examination of the assessee. The assessee was under prima facie impression that he had not denied the transactions. In the entirety of facts and circumstances, in our considered view, interest of justice will be served if the issue in question is restored back to the file of AO to decide the same afresh after allowing the assessee cross-examination of Mr. Jagdish Beniwal and affording an opportunity of being heard to the assessee. We order accordingly.

6. In the result, assessee’s appeal stands allowed for statistical purposes.

Order pronounced in open court on 13-02-2012.

                                                           Sd/-                                        Sd/-

                                                  (B.C. MEENA)                      (R.P. TOLANI)

                                        ACCOUNTANT MEMBER      JUDICIAL MEMBER

Dated: 13-02-2012.

MP

Copy to :

1. Assessee

2. AO

3. CIT

4. CIT(A)

5. DR