The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the reduction of land cost citing an inflated sale price and a lack of evidence to support the legitimacy of the transaction.
Ardor Overseas Pvt. Ltd.,the appellant-assessee, was involved in a land transaction with Nikshal Properties Pvt. Ltd. during the assessment year 2014-15. Nikshal Properties sold the land to the assessee for Rs. 44 crores, though it had originally purchased the land for Rs. 8 crores just a few days prior.
M/s. Nikshal Properties claimed that the transaction was an accommodation entry, with the inflated sale price intended to create a bogus capital gain, while the actual value was only Rs. 8 crores. The funds were alleged to have been routed back to the assessee through intermediary entities, with M/s. Nikshal Properties earning a commission. The assessee, however, maintained that the transaction was genuine.
During the assessment, the Assessing Officer (AO) reduced the cost of the land from Rs. 44 crores to Rs. 8 crores based on M/s. Nikshal Properties directors’ statements that the transaction was inflated. The AO also added Rs. 8 crores to the assessee’s income under Section 68 of the Act, treating a loan from Matrix International—used in the transaction—as unexplained. Additionally, the AO disallowed interest paid on the loan, part of which had been capitalized as the cost of land.
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On appeal, the Commissioner of Income Tax ( Appeals ) [CIT(A)] confirmed the reduction of the land’s cost by Rs. 36 crores.
The tribunal confirmed the reduction in the cost of land by ₹36 crores as sanctioned by the CIT(A). It stressed that the transaction involved a rapid buy-sell within four days at a significantly inflated price, which raised serious concerns about its authenticity.
The directors of M/s. Nikshal Properties reiterated, under oath, that the transaction was merely an accommodation entry for the assessee. Furthermore, it was highlighted that the sale consideration was paid prior to the actual purchase, indicating that the financial structure was manipulated.
The bench noted that the assessee had not contested these admissions effectively, failing to provide any evidence to counter the claims made by the directors of M/s. Nikshal Properties. This lack of rebuttal established that the land purchase was artificially inflated and served to disguise the true nature of the transaction.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The two member bench comprising T.R Senthil Kumar (Judicial Member) and Annapurna Gupta(Accountant Member) upheld the CIT(A)’s decision to reduce the recorded cost of land to ₹8.5 crores, affirming that the entire arrangement was structured to create a facade of legitimate transactions while enabling the assessee to inflate asset values unjustifiably.
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