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Judgment
PER MANISH AGARWAL, AM:
This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A) in short], dated 03.06.2024 in Appeal No. NFAC/2013-14/10258001 arising out of the order passed u/s 147 of the Income Tax Act, 1961 (the Act, in short) dated 22.05.2023 for Assessment Year 2014-15.
Brief facts of the case are that assessee is a Chartered Accountant by profession and filed his return of income on 31.03.2015 declaring total income of Rs.31,18,120/-. Based on the information that assessee had sold shares of the company M/s Hill Drop Resorts Pvt. Ltd. and had received a sum of Rs.2,33,60,000/-which was not offered for tax, proceedings u/s 148A were initiated to reopen the case of the assessee and order u/s 148A(d) of the Act was passed wherein it is alleged that during the year under appeal, the assessee has received the consideration from sale of shares shown as advance and since assessee has failed to prove the genuineness of transaction, therefore, satisfaction was recorded for escapement of income u/s 68 of the Act to the extent amount received during the year under appeal. During the re-assessment proceeding, in reply to show notice issued, assessee has filed copy of computation, balance sheet, bank statements, copy of agreement of share transactions, copy of FIR filed against the buyers, copy of Delhi High Court Mediation Centre notices etc. However, Assessing Officer has failed to appreciate the same and by holding the sum of Rs.2,33,60,000/- received during the year under appeal as unaccounted money of the assessee, addition was made u/s 69A r.w.s 115BBE of the Act.
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) who vide order dated 03.06.2024 allowed the appeal of the assessee.
Against the said order, the Revenue is in appeal by taking following ground of appeal:
“The Ld. CIT(A) erred in law and on fact of the case in deleting the addition of Rs.2,33,60,000/- on account to unexplained unaccounted money in the form of advance payment during the Financial Year 2013-14 (A.Y.2014-15). BL Aggarwal has not incorporated that transfer neither in the books of the company nor in the personal books in order to evade income tax. As per agreement Sh. BL Aggarwal having in possession of shares 11,500 amounting to Rs.2,33,60,000/- and the same has not been brought to tax.”
The sole effective ground of appeal of the Revenue is with respect to the deletion of addition made at Rs.2,33,60,000/- by holding the same as unexplained unaccounted money of the assessee u/s 69A of the Act.
Before us, Ld. SR. DR vehemently supported the order of the AO and submits that during the year under appeal, assessee has credits in his bank account claimed as sale consideration from the sale of shares, however, no capital gain was declared and it was claimed that the said amount was advance. Ld. Sr. DR AR submits that as per the ledger account submitted by the assessee, this amount was shown as the advance received against the sale of shares of Hilldop Resorts Pvt. Ltd. however in the return of income filed for subsequent assessment years, no such advance was shown by the assessee, therefore, the Ld. Sr. DR submits that the AO has rightly treated with this amount as unexplained money of the assessee and, he requested for restoration of the additions so made.
On the other hand, the Ld. AR for the assessee submits that assessee had entered into an agreement of sale for his 11,500 shares of M/s Hildrop Resorts Pvt. Ltd. for a total sum of Rs. 6,06,06,495/- and received Rs.1,06,00,000/- as advance in Financial Year 2012-13 and further received Rs.2,33,60,000/- in the year under appeal. Since, the total sale consideration was not received, therefore, the amounts so received were treated as advanced by the assessee. Thereafter, due to serious disputes between the parties, a FIR was filed by the assessee against the buyers before the Economic Offence Wing (EOW) of Delhi Police and till date matter is pending before the Delhi High Court Mediation Centre. Since, that the transactions of sale of shares has not been completed yet, assessee has treated the amounts received as advance in his books of account. The Ld. AR submits that Ld. CIT(A) appreciated these fact and deleted the additions and, therefore, requested to confirm the order of the Ld. CIT(A).
Heard the parties and perused the material available on record. In the instant case, proceedings u/s 147 were initiated on the satisfaction that assessee has received a sum of Rs.2,33,60,000/- for which the genuineness of the transactions is not proved. Further in the order passed u/s 148A(d), AO alleges that the assessee has failed to establish the conditions provided u/s 68 of the Act and, accordingly satisfaction was recorded for the escapement of income of Rs.2,33,60,000/- u/s 68 of the Act. However, from the perusal of the assessment order, it is observed that the AO has made the additions u/s 69 by holding the same as unexplained money though the satisfaction was recorded for reopening for escapement of income u/s 68 of the Act. It is further observed that since beginning of the proceedings, claim of the assessee was that he has received advance against the proposed sale of shares and funds so received are duly recorded in the books of accounts, thus it cannot be held as unexplained money. Similar transactions were carried out by the spouse of the assessee Smt. Sarita Aggarwal wherein the fact of advance received was not doubted return declared in the return of income filed was accepted. The Ld. CIT(A) after appreciating these facts has deleted the addition made by the AO. The relevant findings as contained in para 6.3 to 6.11 of the order are reproduced herein below:
“6.3The main issue in the appeal is that information for A.Y. 2014-15 was forwarded that Sh. Pawan Singhal through his company M/s Singhal Propbuild Pvt. Ltd. (AALCS4976K) has entered into an agreement dated 12.11.2013 with Sh. B.L Agarwal, Smt. Sarita Aggarwal, Sh. Sumeet Aggarwal, Sh. Punet Aggarwal & B.L Aggarwal (HUF) through its karta. B. L Aggarwal, all resident of C-161, East of Kailash, New Delhi & Shareholders of M/s Hill Drop Resorts Pvt. Ltd. (AAACT4866C) for the purchase of land in favour of the company M/s Singhal Propbuild Pvt. Ltd. measuring 254 kanaal 8 marla in the revenue estate of village Sehsola, Tehsil Tauru, Distt. Mewat by virtue of transfer of shares of the company M/s Hill Drop Resort Pvt. Ltd. Rs.5270.13/per share for the total sum of Rs.25,44,00,000/-. However, BL Aggarwal has not incorporated that transfer neither in the books of the company nor in the personal books in order to evade income tax. As per agreement Sh. BL Aggarwal having in possession of shares 11,500 amounting to Rs. 6,06,09,025/- and the same is required to be brought under the tax.
6.4During the course of assessment proceedings the assessing officer has noted that:
(a)In this regard it is stated that Assessee has not furnished any cogent evidences to show that the advance payment received during AY 2013-14 has been recorded in the subsequent assessment years upto 31.03.2023. Assessee produced only ledger of B.L. Aggarwal showing under the head "on account of advance received against sale of Hill drop share" in the books of B L Aggarwal up to 31.3.2022, without any valid proof of financial statements/reports. On verification of ITR filed by the assessee for AY 2014-15, no such advances are shown as "Advances against sale of Hill drop Shares." Return of income for AYS 2015-16 upto A.Y. 2022-23 has been verified from system, however, no such advances are shown in ITRs and no audited financial statements are reflected in system for these assessment years. Therefore, the claim of assessee is not valid. Assesseee himself has accepted to have received Rs. 2.33,60,000/-during the year as part payment, which itself is not reflected in his books.
b)The assessee has contended that the transaction in question are currently disputed and unresolved, as all the payees involved are actively pursuing litigation at various levels. There are cases pending in EOW Delhi, as well as proceedings at Delhi High Court's Samadhan where all parties are seeking refund and settlement and also submitted copies of relevant documents. However, these proceedings are not related to income-tax proceedings.
6.5Further the assessing officer has noted that "It further proves that advances received against sale of Hilldrop Resorts Ltd is nothing but his unaccounted money. The fact is that assessee has received Rs.2,33,60,000/- in A.Y. 2014-15. But it has not been accounted in his books neither during the year nor in subsequent years. Hence advance money received of Rs 2,33,60,000/- is unexplained money of the assessee for A.У. 2014-15.
6.6The appellant in his reply during the appellate proceedings has submitted that " The ledger entries classified under "on account of advance received against the sale of Hill drop share" in B. L. Aggarwal's records till the date of this submission, stand as substantial and credible evidence. These entries clearly depict the accurate documentation of advance payments received during Assessment Year (AY) 2013-14 & AY 2014-15, with meticulous recording in subsequent years. It is important to emphasize our consistent practice of transparently reflecting these advances, commencing from AY 2013-14. Furthermore, in AY 2022-2023, we have diligently incorporated them in the balance sheets submitted for thorough scrutiny during the income tax investigation."
6.7Further the appellant has submitted that "The assessment order mentions the appellant's contention that the transactions in question are currently disputed and unresolved, with all payees actively pursuing litigation at various levels. We have diligently provided copies of relevant documents, showcasing the ongoing cases in the EOW Delhi and the proceedings at Delhi High Court's Samadhan, focusing on refund and settlement matters. However, it is disconcerting that the AO, in rendering the assessment, seems to have overlooked the intricate details of the ongoing legal disputes."
6.8The appellant has submitted the following documents during the course of appellate proceedings
1.A notice from Delhi High Court Mediation & Conciliation Centre, indicating that the dispute regarding the agreement in question is being mediated and settled.
2.A copy of an email received from Delhi High Court Mediation and Conciliation Centre regarding the ongoing settlement discussions.
3.Copy of FIR Filled with Delhi Police EOW
6.9Giving the details of the deal the appellant submitted that: Babu Lal Aggarwal (referred to as the "appellant") is a shereholder in a company called M/s Hilldrop Resorts Pvt Ltd. On 19-10-2012, the appellant and other shareholders (referred to as the "sellers") of M/s Hilldrop Resorts Pvt Lid entered into a share transfer agreement (Enclosed as Annex-4) with M/s Juhi infrastructure Pvt Ltd (referred to as the "buyer"). The purpose of this agreement was to sell all the shares of M/s Hilidrop Resorts Pvt Ltd.
Subsequently, on 12-11-2013, in response to a request from M/s Juhi Infrastructure Pvt Ltd (the original buyer), all the shareholders transferred the same agreement to Singhal Probuild Pvt Ltd (the new buyer, associated with M/s Juhi Infrastructure). (Enclosed as Anex-4).
Taking into account that the agreement encompassed the transfer of the entire shareholdings of all shareholders, which included 11,500 shares of Babu Lal Aggarwal valued at Rs. 6,06,06,495/-, it is notable that only partial payments were received up to FY 31-03-2013 and FY 31-03-2014. Moreover, these payments were not in multiples of shares but rather in round figures. As of the current submission date, the appellant has not received the full amount as stipulated in the agreement.
It is clear that the advanced payments have been documented as "Advance against sale of Hilldrop Shares." (A copy of the ledger account in the appellant's books, covering the period from AY 2013-14 to AY 2022-23, is also attached for verification of how this advance was treated). (Annex-5) The intention, as per the agreement's terms, was for the transfer to take place only after the full receipt of the agreed-upon consideration. Consequently, partial transfers of shares were not feasible to avoid triggering capital gains tax. Therefore, the calculation of capital gains would only come into play upon the sale of the entire shareholdings and the complete receipt of the agreed consideration. However, it does not seem to be the case in this particular situation.
6.10Appellant has further submitted Moreover, we would like to bring to your attention a significant inconsistency in the Department's treatment of a parallel case involving the appellant's wife, SARITA AGGARWAL. Despite 100% similarities in facts and evidence, the Department, in an Order dated 30-05-2023 with DIN & Order No: ITBA/AST/S/147/2023-24/1053330408(1), took a divergent view. In her case, the returned income was accepted with no addition, acknowledging our views, submissions, and evidence, which are identical to those presented in the current case. This disparate approach to identical circumstances raises concerns about the consistency and impartiality of the assessment process.
6.11The contention of the appellant is found to be correct. The appellant has filed documentary evidences to show that the share transfer agreement with M/s Juhi Infrastructure Pvt. Ltd (the original buyer) and Singhal Probuild Pvt. Ltd. (the new buyer, associated with M/s Juhi Infrastructure) is under dispute. The appellant has filed copy of notice from Delhi High Court Mediation & Conciliation center, and copy of FIR filed with Delhi Police Economic Offences Wing. As the matter of share transfer has not reached its finality thus capital gains cannot be computed on an issue which is under dispute. The appellant has also provided a copy of assessment order passed in the case of Sarita Aggrawal with similar facts in which the department has taken an entirely divergent view and has accepted the returned income without making any addition. In view of the above the assessing officer is at fault in making addition on an issue which is under litigation. Thus the addition made of Rs. 2,33,60,000/- is directed to be deleted and grounds of appeal of the appellant are allowed.”
Before us, the Revenue has failed to controvert his finding of Ld. CIT(A) more particularly when the assessee in terms of the agreement has received part of the sales consideration agreed between the parties and due to disputes, final payment was not received nor transfer of share has taken place which is an admitted fact. Further the advance so received against the sales of shares is duly recorded in the regular books of accounts and source thereof has not been doubted by the AO, therefore, no addition could be made u/s 69A of the Act. Accordingly, we find no error in the order of ld. CIT(A) which is hereby confirmed. Only ground of appeal raised by Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.