Failure of Real Estate Company to Establish Genuineness of Advance Justifies Rs. 90 Lakh Addition u/s 68: ITAT [Read Order]

In a recent ruling, theIncome Tax Appellate Tribunal (ITAT), Delhi Bench, has upheld an addition of Rs. 90 lakh under Section 68 of the Income Tax Act, 1961, holding that the real estate company could not establish the genuineness of the amount said to have been received as an advance for the sale of land.

The matter arose from the assessee, Best City Projects India Pvt. Ltd., which was subjected to a search and seizure operation under Section 132. Following the search, proceedings under Section 153A were initiated after obtaining the mandatory prior approval under Section 153D of the Income Tax Act.

In the initial assessment, the Assessing Officer (AO) added ₹90 lakh as unexplained cash credit under Section 68, rejecting the company's claim that the funds were a genuine advance for a 10-acre land sale agreement with Greencity Buildtech Ltd. (paying entity).

READ MORE: Consolidated ApprovalWithout Proper Scrutiny u/s 153D Invalidates Search Assessments: ITAT

The Commissioner of Income Tax (Appeals) (CIT(A)) dismissed the initial appeal, prompting the Tribunal to remand the matter, directing the assessee to establish the creditworthiness of the paying entity. The AO issued notices to the entity’s directors, which were uncomplied with. Consequently, the AO upheld the ₹90 lakh addition considering a lack of genuine evidence, confirmed by the CIT(A), leading to the present appeal.

The appellant argued that the amount was a genuine advance and that the assessment made after remand was invalid because no fresh statutory approval under Section 153D had been obtained. They challenged the Rs. 90 lakh addition under Section 68, contending that the authorities ignored evidence and treated a genuine land sale advance as unexplained based on mere presumption.

On the other hand, the revenue, represented by Ms. Rajinder Kaur, contended that there was no statutory requirement to obtain any approval under Section 153D by the AO during the remand proceedings. The Revenue relied heavily on the Punjab and Haryana High Court ruling in Osho Forge Ltd. v. CIT, which held that remand directions do not require a new assumption of jurisdiction under Section 153A.

READ MORE: Lack of Valid Approvalunder Section 153D: ITAT quashes Income Tax Assessment

After considering the matter, the tribunal comprising Anubhav Sharma (Judicial Member) and Amitabh Shukla (Accountant Member) dismissed the additional ground raised by the assessee on the issue of non-availability of any approval under section 153.

The bench observed that a fresh approval under Section 153D was not necessary where the original approval had not been set aside. Referring to Osho Forge Ltd., the tribunal noted that "Section 153D of the Act is only applicable for passing an assessment order or re-assessment order. There is no requirement under Section 153D for prior approval for complying with the remand directions.”

It was also noted that despite specific remand directions, the assessee didn’t produce confirmations or secure compliance from Greencity Buildtech Ltd. or its directors, and hence failed to prove the genuineness of the credit as required by Section 68.

Accordingly, the appeal was dismissed.

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