Case Law Details
Anthony P Lewis Vs ITO (ITAT Mumbai)
ITAT Mumbai held that as per Section 56(2)(ix) of the Act money received as advance would be treated as income liable to tax in the hands of recipients under the head ‘Income from Other Sources’ provided such advance is forfeited and the negotiations do not resulted in transfer of the capital assets.
Facts- The Appellant at the relevant time was engaged in the business of dealing in buying and selling of land, real estate property and giving properties on a lease.
Reassessment proceedings were initiated against the Appellant u/s. 147 of the Act as notice u/s. 148 of the Act was issued and served upon the Appellant. Thereafter, notice u/s. 142(1) and 143(2) were issued and served on the Appellant. Vide order dated 30.03.2014, passed u/s. 143(3) read with Section 147 of the Act, AO computed income of the Appellant at INR 50,22,52,930/- after making addition of Long Term Capital Gains of INR 49,50,11,429/-, and addition of INR 70,60,000/- in connection with the advance of INR 51,00,000/- and INR 19,60,000/- received and retained by the Appellant as non-refundable advance relating to sale of properties.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- It is admitted position that the Agreement for Sale, dated 01/04/2008 is not a registered document. Further, nothing has been brought on record by the Assessing Officer to show that the Purchaser was willing to perform his part of contract. The Consent Terms were agreed upon only after the Appellant filed suit for seeking specific performance of the Agreement for Sale. Therefore, we hold that the transaction under consideration did not attract provisions of Section 53A of the TPA.
There being no transfer in terms of Section 2(47)(v) of the Act, the question of any capital gains arising in the hands of the Appellant does not arise. Accordingly, addition of INR 49,50,11,429/- on account of Long Term Capital Gains is deleted.
Held that according to Section 56(2)(ix) of the Act a sum of money received as advance during the course of negotiation for transfer of capital assets would be treated as income liable to tax in the hands of recipients under the head ‘Income from Other Sources’ provided such advance is forfeited and the negotiations do not resulted in transfer of the capital assets.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. By way of the present appeal the Appellant has challenged the order, dated 14.02.2020, passed by the Ld. Commissioner of Income Tax (Appeals)-32, Mumbai, [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2009-10, whereby the Ld. CIT(A) had dismissed the appeal filed by the Appellant against the Assessment Order, dated 30.03.2014, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
2. The Appellant has raised following grounds of appeal:
“(A) The CIT (A) erred in not appreciating that the reliance placed by him in the case of Rajesh Jhaveri Stock Broker Pvt. Ltd. reported in 500 ITR 1 (SC) was distinguishable in the facts of the present case. The impugned order has been passed on a mis-appreciation of the facts of the case and the legal provisions and is therefore liable to be set aside.
(B) The CIT(A) erred in upholding the order of the AO to reopen the present case, in as much as, all the primary and material facts for framing the assessment under Section 143(3) of the Act were before the CIT(A) and therefore there was no escapement of income as contemplated under the provisions of Section 147 of the Act. Further, the fact that the sale of property at Peddar road had not taken place. was before the Learned CIT(A). The reopening of assessment is therefore bad in law and needs to be set aside.
(C) The CIT(A) erred in upholding the order of the AO, in as much as, it is settled law that re-opening proceedings cannot be initiated to verify the same details and facts as produced discussed and decided upon at the time of the original assessment. There has to be tangible evidence to do the same and in the facts of the present case. There is a complete absence of tangible evidence to initiate reassessment proceedings.
(D) The CIT(A) erred in upholding the order of the AO. in as much as, the AO failed to appreciate that mere change in opinion does not constitute “reason to believe”. It is well settled that a mere change in opinion does not constitute “reason to believe” that income has escaped assessment. It has been repeatedly laid down that Section 147 of the Act does not permit fresh application of mind to the same issue so as to enable the AO to correct or revise his own or his predecessor’s considered opinion. The AO cannot take action under this Section merely because he happens to change his opinion or to hold an opinion different from that of his own or that of his predecessor on the same facts.
(E) The Learned C.I.T.(A), erred in confirming the order of the A.O. in taxing the alleged long-term capital gains of Rs. 49.50,11,429/- (Rupees Forty Nine Cores Fifty Lakhs Eleven Thousand Four Hundred Twenty Nine Only) received by the Appellant from the sale of property situated at Kiran Villa’, Peddar Road, Mumbai to M/s. Raja Ramdeo Enterprises, without appreciating the facts of the case.
(F) The CIT(A) erred in not appreciating that even though pursuant to the Bombay High Court decree dated 29th May,2008, the cheques of Rs.9,00,00,000 (Rupees Nine Crores only) each were given to M/s. Raja Ramdev Associates (Purchaser) one cheque of Rs. 4,00,00,000/-(Rupees Four Crores only) to M/s. Raja Ramdev Associates and another cheque of Rs. 5.00.00.000 (Rupees Five Crores only) to Ms/ Meera Homes, the same are all related entities and the said cheques were paid in respect of the same transaction. i.e.. purchase of property at Kiran Villa, Peddar Road. The impugned order has been passed without appreciating the facts of the case and is therefore liable to be set aside.
(G) The Learned C.I.T.(A), erred in confirming the order of the AO in calculating the Indexed Cost of acquisition on cost of Rs. 12,00,000/- whereas the figure appearing in the Balance sheet is of Rs. 21.05,400/. Therefore, the Indexation should have been calculated on a figure of Rs. 21.05.400/- and the impugned order has been passed on a mis appreciation of facts is liable to be set aside.
(H) The Learned C.I.T.(A), erred in not allowing the claim of deduction u/s. 54 of the Act for a property purchased at Rs. 5,87,14,000/- during the financial year 2008-09 relevant to A.Y. 2009-10 while determining the amount of Long Term Capital Gain of Rs. 49,50,11,429/-.
(I) The Learned C.I.T.(A), erred in confirming the order of the AO on addition of the advances received of Rs. 51,00,000 without appreciating the facts of the case that the above amounts were disputed and litigation proceedings were going on in respect thereof. The amount is liable to be refunded pending the decision of the Court. The same could not be therefore taxed in the hands of the Appellant.
(J) The Learned C.I.T.(A), erred in confirming the order of the AO on addition of the advances received of Rs. 19,60,000 without appreciating the facts of the case that the agreement is entered into but the same is not yet duly signed by all the parties to the agreement.
(K) The Learned C.I.T.(A), erred in confirming the order of the AO in not reducing the cost of Rs. 10.29,700/-, appearing on the stock of Inventory in Annexure III while treating the advance of Rs. 19,60,000/- received towards Versova property.
(L) The CIT(A) erred in not adjudicating the additional grounds raised before him by the Appellant on the ground that the same did not arise out of the order passed before AO, without appreciating that the powers of the CIT(A) are co-terminus with that of the AO and therefore additional grounds could be raised before him and the same needed to be adjudicated upon. The impugned order has been passed on a mis-appreciation of the facts and law nd is therefore liable to be set aside.
(M) The Learned C.I.T.(A), erred in confirming the order of AO in not accepting the nature of business of dealing in properties and treated the same as Investments made by the appellant.”
2.1. The Appellant has also raised the additional grounds of appeal:
“1. The Learned C.I.T.-(A) has erred in appreciating that even in proceedings where only an intimation has been issued under the provisions of section 143(1) of the Act, or no intimation has been issued, post filing the ROI as in the facts of the present case, yet the condition of „reason to believe‟ is a sine qua non for reopening an assessment which has not been fulfilled in the facts of the present case.”
By way of the above Additional Ground, Appellant has raised a legal plea and therefore, having heard both the sides on the issue of admission, we admit the additional ground in view of the judgment of the Hon’ble Supreme Court in the case National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax : [1198] 229 ITR 383 (SC).
3. The facts in brief, are that the Appellant at the relevant time was engaged in the business of dealing in buying and selling of land, real estate property and giving properties on a lease. The Assessee did not file return of income for the Assessment Year 2009-10. Therefore, notice under Section 142(1) of the Act was issued to the Appellant on 22.07.2011. In response, the Appellant filed return of income for the Assessment Year 200910 on 31.01.2012 declaring total income at INR 5,88,580/-.
3.1 On 18.06.2012, reassessment proceedings were initiated against the Appellant under Section 147 of the Act as notice under Section 148 of the Act was issued and served upon the Appellant. Vide letter, dated 25.06.2012, the Appellant adopted the return of income for the Assessment Year 2009-10 for on 31.01.2012 as the return filed in response to notice issued under Section 148 of the Act. A copy of the reasons recorded in writing for reopening the assessment for the Assessment Year 2009-10 was provided to the Appellant by the Assessing Officer vide letter dated 03.07.2012. Thereafter, notice under Section 142(1) and 143(2) were issued and served on the Appellant. Vide order dated 30.03.2014, passed under Section 143(3) read with Section 147 of the Act, the Assessing Officer computed income of the Appellant at INR 50,22,52,930/- after making addition of Long Term Capital Gains of INR 49,50,11,429/-, and addition of INR 70,60,000/- in connection with the advance of INR 51,00,000/- and INR 19,60,000/- received and retained by the Appellant as non-refundable advance relating to sale of properties.
4. Being aggrieved, the Appellant preferred appeal against the Assessment Order, dated 30.03.2014, before the CIT(A) which was dismissed, and therefore, the Appellant has preferred the present appeal on the grounds/additional ground reproduced in paragraph 2 to 2.1 above which are taken up hereinafter in seriatim.
Ground No. (A) to (D) along with Additional Ground No. 1
5. By way of Ground No. (A) to (D) the Appellant has challenged the jurisdiction of the Assessing Officer to frame assessment under Section 143(3) read with Section 147 of the Act.
5.1. We have considered the rival submissions and perused the material on record. On going through the reasons recorded in writing for reopening the assessment under Section 147 of the Act (placed at page 11 of the paper-book) we find that the Assessing Officer had received information that the Appellant had entered into Agreement for Sale, dated 01.04.2008, with M/s Raja Ramdev Enterprises, a partnership firm, for sale of property named ‘Kiran Villa’ being plot bearing C.S. No. 706-A, 3C admeasuring 1031 square meters and plot bearing C.S. No. 706-B, 3C admeasuring 751.5 square meters situated at Peddar Road, Mumbai–400026 along with the existing structures therein (hereinafter referred to as ‘the Property’) for total consideration of INR 50 Crores. However, in the return of income the Appellant had not offered to tax any capital gains income. In view of the aforesaid, the Assessing Officer formed a belief that income liable to tax has escaped assessment. It is admitted position that assessment under Section 143(3) of the Act was not framed on the Appellant for the Assessment Year 2009-10 prior to issuance of notice under Section 148 of the Act on 18.06.2012. Further, the notice under Section 148 of the Act was issued within a period of four years from the end of the relevant Assessment Year. Therefore, the requirement of the first proviso to Section 147 of the Act that there being failure on the part of assessee ‘to disclose fully and truly all material facts’ does not apply of the facts of the present case where initial return has been processed under section 143(1). Accordingly, the fact that the Appellant had disclosed all the primary facts does not advance the case of the Appellant. We note that the CIT(A) has dismissed the jurisdictional challenge mounted by the Appellant by placing reliance upon the judgment of the Hon’ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Private Limited :291 ITR 500 (SC) wherein it has been held as under:
“16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word “reason” in the phrase “reason to believe” would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is “reason to believe”, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC).
17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.
18. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.
19. Inevitable conclusion is that High Court has wrongly applied Adani Exports case (supra) which has no application to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act.” (Emphasis Supplied)
5.2. On perusal of above, it can be seen that the Hon’ble Supreme Court has held that in a case where intimation is issued to an assessee under Section 143(1) of the Act on processing of the return of income, the failure of the Assessing Officer to take steps under Section 143(3) of the Act would not render the Assessing Officer powerless as the Assessing Officer would be free to initiate proceedings under Section 147/148 of the Act provided the ingredients of Section 147 of the Act are fulfilled. At the stage of issue of notice, what is required to be considered is whether the Assessing Officer had the relevant material on which a reasonable person could have formed requisite belief that income has escaped assessment. Whether the materials would conclusively prove the escapement of income and/or whether the material is sufficient or not does not require consideration at that stage. In our view, in the facts and circumstances of the present case, the Assessing Officer had sufficient tangible material to form belief that income has escaped assessment for the Assessment Year 2009-10. Further, in our view, the provisions contained in Clause (b) of Explanation 2 to Section 147 of the Act would also get attracted in the case of the Appellant and income would be deemed to have escaped assessment. Thus, we hold that the order passed by CIT(A) on this issue does not suffer from any infirmity. Ground No. (A) to (D) as well as additional ground No. 1 raised by the Appellant are, therefore, dismissed.
Ground No. (E) to (H)
6. Ground No. (E) to (H) are directed against the addition of INR 49,50,11,429/- made by the Assessing Officer by holding the same to be capital gains.
6.1. Reassessment proceedings were initiated in the case of the Appellant as the Assessing Officer had formed a belief that income has escaped assessment as the Appellant had not offered to tax capital gains income arising from transfer of the Property.
6.2. The admitted facts are that the Appellant had entered into an Agreement for Sale, dated 01.04.2008, with M/s Raja Ramdev Enterprises (hereinafter referred to as ‘the Purchaser’) for the sale of the Property for a total consideration of INR 50 Crores. The Appellant received advance of INR 5 Crores on execution of the said Agreement for Sale. Subsequently, a suit for specific performance (Suit No. 1624 of 2008), was filed by the Purchaser against the Appellant before the Hon’ble Bombay High Court in relation to the aforesaid Agreement for Sale. A compromise was reached between Appellant and the Purchaser, resulting in drawing up of the consent terms, dated 28.05.2008 (hereinafter referred to as ‘the Consent Terms’). The Consent Terms were signed by Mr. Manoj Purohit on behalf of the Purchaser and Mr. Sanjay Punamiya on behalf of the Appellant. The Hon’ble Bombay High Court vide order, dated 29.05.2008, disposed off the aforesaid suit for specific performance on the basis of the aforesaid Consent Terms. What followed thereafter is under dispute.
6.3. The Learned Authorised Representative for the Appellant, taking us through the factual background, submitted that in compliance with the Consent Terms, dated 29.05.2008, (hereinafter referred to as the ‘Consent Terms’), the Purchaser was required to pay the balance consideration of INR 45 Crores to the Appellant by the way of 5 cheques of INR 9 Crores each. Though the said 5 cheques of INR 9 Crores, each, were received by the Appellant, they were immediately returned back at the request of the Purchaser and its sister concerns (i.e. M/s. Raja Ramdev Associates and M/s. Meera Homes) since they were facing financial difficulty. She vehemently contended that the balance consideration of INR 45 Crores was never actually received by the Appellant from the Purchaser. Supporting this she submitted that in the Balance Sheet as on 31.03.2009, the amount of INR 5.51 Crores and INR 45 Crores were shown as advance received towards sale of the Property. Further, the cheques of INR 4 Crores and INR 5 Crores, which were returned to the sister concerns i.e., Raja Ramdev Associates and M/s. Meera Homes respectively, along with an amount of INR 36 Crores was shown under the head ‘Loans and Advances’. After 2009, as the Purchaser was unable to repay the balance amount of INR 45 Crores, and the 5 Cheques of INR 9 Crores were returned, only an amount of INR 5.51 Crores was reflected as advance towards sale of Property. She submitted that since the balance consideration of INR 45 Crores was never actually received by the Appellant from the Purchaser, the Assessing Officer erred in taking the entire consideration of INR 50 Crores while computing the capital gains income in respect of the alleged transfer of the Property.
6.3.1. She further submitted that the Purchaser failed to make the payment of balance consideration and comply with the Consent Terms, and therefore, an Agreement for Cancellation of Sale, dated 20.09.2008 (hereinafter referred to as the ‘Cancellation Agreement’) was executed by the Appellant and the Purchaser. The Cancellation Agreement was placed before the Assessing Officer and the CIT(A), however, both declined to rely upon the same.
6.3.2. Relying upon the definition of the term ‘transfer’ contained in Section 2(47)(v) of the Act, she submitted that to constitute ‘transfer’ in terms of Section 2(47)(v) of the Act, the possession of the Property should have been taken or retained by the Purchaser in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (hereinafter referred to as ‘the TPA’). The Purchaser was never put into the possession of the Property in part performance of the Contract. Further, the Agreement for Sale was not a registered document. Therefore, the provisions of Section 53A of TPA were not attracted. In this regard, she relied upon the judgment of the Hon’ble Supreme Court in the case of Rambhau Namdeo Gajre vs. Narayan Bapuji Dhotra : (2004) 8 SCC 614, in the case of CIT vs. Balbir Singh Maini: (2017) 398 ITR 531 (SC) and Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana and Ors.: (2012) 340 ITR 1 (SC).
6.3.3. Inviting our attention to the application for admission of additional evidence, she pleaded that the additional evidence be admitted. She submitted that the Appellant has placed on record along with the aforesaid application copy of the Property Card issued/prepared by the Assistant Superintendent Cum City Survey Office No. 1/2, Mumbai which reflects that as on 31.03.2022 the name of the Appellant is shown as the owner of the Property. This clearly shows that the Agreement for sale was not registered and conveyance deed was never executed in favour of the Purchaser. She submitted that the Appellant was not able to file the additional evidence before the Assessing Officer/CIT(A) as on account of health issues of the Appellant, and passing away of his wife, the Appellant was not unable to take care of office work and keep up to date with filing returns or other tax related matters.
6.3.4. In view of the above, she submitted that the amount of INR 49,50,11,429/- cannot be taxed as Capital Gain in the hands of the Appellant as alleged by the Department.
6.4. Per Contra, the Learned Departmental Representative submitted inviting our attention to the conduct of the Appellant during the assessment proceedings submitted that the Cancellation Agreement was placed before the Assessing Officer just 4 days before the time barring of the assessment proceedings (i.e. on 27.03.2014). When confronted by the Assessing Officer regarding the delay in furnishing the Cancellation Agreement, the Appellant cited health conditions, demise of his wife and pendency of court cases in disputes with the tenants. The Ld. Departmental Representative submitted that the Appellant had changed his stand during the assessment proceedings to avoid tax liability and produced the alleged Cancellation Agreement as a matter of afterthought as till 27.03.2014 the Appellant had not even mentioned about Cancellation Agreement. Referring to the Agreement for Sale, she submitted that the Agreement for Sale did not provide any details of pending disputes with the tenants even though the Appellant had contended that he was tied up in disputes with the tenants. She also pointed out that the Appellant had expressed inability to produce the partner of the Purchaser-firm before the Assessing Officer. Referring to the observations of the Assessing Officer in paragraph 5.12 of the Assessment order, she submitted that the Assessing Officer had rightly rejected the Cancellation Agreement as the signature of Mr. Sanjay M Punamiya on the Agreement to Sale (at page 89 of the Paper-book) matched with the Consent Terms (at page 108 of the paper-book). However, the aforesaid signatures did not match with the signature available on the alleged Cancellation Agreement (at page 108 of the paper-book). The Cancellation Agreement was not registered and in any case, could not nullify a decree passed by the Hon’ble Bombay High Court.
6.4.1. The Ld. Departmental Representative drew our attention to Clause 35 of the Agreement for Sale (placed at page 85 of the paper-book) and contended that according to the said clause the Appellant was required to give 45 days’ termination notice to Purchaser. However, no such notice was given by the Appellant. She further submitted that no documents are placed on record to show any request having been made by the Purchaser to return the cheque amounts and/or to cancel the transaction. On the other hand, a public notice was issued by the Purchaser whereby the Purchaser had asserted that it continued to hold and possess the said Property in terms of Consent Decree, dated 29.05.2008, passed by the Hon’ble Bombay High Court. She reiterated that despite getting opportunities to corroborate the contentions raised by the Appellant, the Appellant failed to produce the partners of the Purchaser before the Assessing Officer.
6.4.2. Relying upon the Balance Sheet of the Appellant as on 31.03.2009, the Ld. Departmental Representative submitted that payment of INR 45 Crores was received by the Appellant. Further, the aforesaid amount was not returned to the Purchaser as has been contended on behalf of the Appellant. INR 40 Crores was given to M/s Raja Ramdev Associates and INR 5 Crores was given to M/s Meera Homes. In this regard, she relied upon the confirmation dated 26.06.2008 issued by the Appellant to the Purchaser (filed by the Ld. Authorised Representative for the Appellant during the course of hearing). She vehemently contended that the transaction of receipt of sale consideration of INR 45 Crores from the Purchaser was separate and distinct from the transaction of granting loans to the sister concerns of the Purchaser. Further, the nature of accounting treatment given by the Appellant in its books is not determinative of the actual nature of transactions entered into by the Appellant, more so when the books of the Appellant are unaudited.
6.4.3. The Ld. Departmental Representative opposed the admission of the additional evidence being copy of Property Card produced by the Appellant as additional evidence under Rule 29 of the Income tax (Appellate Tribunal) Rules, 1963, to substantiate that the ownership of the property is still lying with the Appellant. She submitted that the Appellant had failed to provide cogent reasons for not furnishing the aforesaid Property Card before Assessing Officer or the CIT(A). According to her, the non-submission becomes more glaring when considered in light of the fact that the Appellant was made aware of the reasons for reopening by the Assessing Officer vide letter dated 03.07.2012. Hence, she submitted the same may not be admitted at such a later stage.
6.4.4. In view of the above, she submitted that there was clearly transfer of Property in terms of Section 2(47)(i) of the Act. However, without prejudice to the above, she submitted that the provisions of Section 2(47)(v) of the Act were also attracted since the same did not require transfer of the Property. She submitted that the transaction between the Appellant and the Purchaser clearly fell under the definition of ‘transaction’ as contemplated in Section 2(47)(v) of the Act. In this regard, she placed reliance on the following decisions/judgments – CIT Vs. Harbour View : [2019) 102 taxmann.com 185(Kerala) and Jasbir Singh Sarkaria : 294 ITR 196 (AAR-New Delhi)/(2007) 164 taxman 108 (AAR- New Delhi)
6.4.5. As regards, judgment cited by the Ld. Authorised Representative for the Appellant, she submitted that the judgment of the Hon’ble Supreme Court in the case of Suraj Lamp and Industries Pvt. Ltd (supra) is not applicable to the case of the Appellant because the Hon’ble Supreme Court had dealt with transactions of nature of sales on the basis of general/special power of attorney and not transfer under the provisions of section 2(47) of the Act. In respect of the judgment of the Hon’ble Supreme Court in the case of Balbir Singh Maini (supra), she submitted that the same was distinguished by the Hon’ble Kerala High Court in the case CIT Vs. Harbour View : [2019] 102 taxmann.com 185(Kerala) cited by her during the course of the hearing.
6.5. In rejoinder, the Ld. Authorised Representative for the Appellant submitted that the Assessing Officer had rejected the Agreement for cancellation as being forged without getting the signatures of the parties verified common an expert. She submitted that the Cancellation Agreement was executed by the Appellant and the Purchaser out of free will and consent. She submitted that the signatures of the parties in the Cancellation Agreement were identified by the advocate and was identical to the signatures on the consent terms. In relation to the public notice dated 20.09.2012 on which reliance was placed by the Ld. Departmental Representative, she submitted that Appellant was not aware as to basis on which the Purchaser had issued such public notice. She explained that the aforesaid public notice incorrectly stated that the Agreement for Sale was executed by Mr. Manoj Motaji Purohit and Mr. Shyamsunder Radheshyam Agarwal, whereas the Agreement for Sale was executed by Mr. Manoj Motaji Purohit and Shri Sanjay Punamiya. Further, the said public notice incorrectly stated that the Purchaser in possession whereas Purchaser was never put in possession of the Property. She submitted that the Appellant at liberty to deal with the Property and that the statement in the public notice the Appellant had no right title or interest in the Property was manifestly wrong. The Assessing Officer and the CIT(A), relying upon the aforesaid public notice, incorrectly concluded that possession was given to the Purchaser without even confronting the Appellant with the same. She reiterated that there was no transfer as contemplated under Section 2(47) of the Act read with Section 53A of the TPA and hence, the computation of Long Term Capital Gains of INR 49,50,11,429/-and the addition thereof to the total income of the Appellant was erroneous and liable to be set aside.
6.6. We have considered the rival submission and taken into consideration the material on record including written submission filed by both the sides. The Assessing Officer rejected the aforesaid contention of the Appellant.
6.7. The pivotal issue that arises for consideration is whether the transactions undertaken between the Appellant and Purchaser resulted in ‘transfer’ of the Property from the Appellant to Purchaser in terms of Section 2(47) of the Act. In this regard, the Revenue has relied upon provisions of Section 2(47)(v) of the Act which read as under:
“2(47) Transfer in relation to a capital asset includes xx xx
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer o f Property Act, 1882”
6.8. Thus, in order to determine whether the transaction under consideration constituted ‘transfer’ in terms of Section 2(47)(v) of the Act we would be required to examine (a) whether the Appellant received the consideration, and (b) whether, the Purchaser was put in the possession of the Property.
6.9. It is admitted position that no conveyance or sale deed has been executed by the Appellant in favour of the Purchaser. The Appellant had entered into Agreement for Sale with the Purchaser whereby the Appellant had agreed to sell the Property to the Purchaser for lump sum consideration of INR 50 Crores. The Agreement for Sale was executed by the Appellant and Mr. Manoj Motaji Purohit and Mr. Sanjay Punamiya, authorized partners of the Purchaser-firm. The entire consideration was to be paid on or before the expiry of 12 months from the date of the Agreement for Sale (i.e. 01.04.2008). INR 5 Crores was paid by the Purchaser to the Appellant as advance on execution of Agreement for Sale. Clause 35 of the Agreement for Sale provided that in case the Purchaser failed to pay all/any of the installments by the due dates or commits breach of the terms of the Agreement, the Appellant was entitled to terminate the Agreement for Sale provided the Purchaser failed to remedy the breach within a period of 45 days of getting notice of breach from the Appellant in writing. However, in May 2008 the Purchaser filed a Suit for specific performance before the Hon’ble Bombay High Court (Suit No. 1624 of 2008). On 28.05.2008, Consent Terms were withdrawn between the parties. As per Clause 6 of the Consent Terms the Purchaser undertook to provide to the Appellant free of cost a Flat in the building to be constructed by the Purchaser of an area of 3000 Sq.ft. in addition to the consideration of INR 50 Crores agreed upon between the parties in the Agreement for Sale. The Purchaser agreed to pay INR 45 Crores by way of 5 cheques of INR 9 Crores each. Further, as per Clause 10 of the Consent Terms the Purchaser undertook to pay liquidated damages of INR 15,000/- per day in case of delay in payment. Annexure II and III to the Agreement for Sale contained list of tenants/occupants, whereas Annexure IV contained particular of dispute with tenants/occupants. As per Clause 11 of the Consent Terms, the Appellant confirmed that the Purchaser was put in to possession of the Property to the extent the same was occupied by the tenants/occupants referred to in the Agreement for Sale who would attorn to the Purchaser. The Appellant also confirmed that the Purchaser was given vacant possession of the Ground Floor premises admeasuring 120 Sq.ft. in building No. 11 of RCC structure and part of the basement area admeasuring about 750 Sq.ft. of which the Appellant had obtained possession from their respective tenants/occupants. Further, Clause 17 of the Consent Terms, provided for conveyance/transfer of the Property by way of sale to the Purchasers subject to fulfillment of conditions specified therein. The aforesaid Consent Terms were placed before the Hon’ble Bombay High Court and vide judgment, dated 29.05.2008, the suit for specific performance was disposed of in terms of the Consent Terms. As per Clause 18 of the Consent Terms, the parties agreed to accept the decree drawn up in terms of Consent Terms as a conveyance of the Property in favour of the Purchaser. As per Clause 20 of the Consent Terms the Purchaser agreed to lodge the decree drawn up for registration with the Sub-Registrar of Assurances, Mumbai, while as per Clause 21 of the Consent Terms, the Appellant undertook to attend the office of Sub-Registrar of Assurances, Mumbai to admit the execution of consent decree and complete the formalities for registration.
6.10. We note that as per the Consent Terms the Purchaser gave 5 cheques of INR 9 Crores each and, as is clear from the relevant abstract of statement of bank account placed by the Appellant at page 111 to 113 of the paper-book, amount of INR 9 Crores each was credited to the Bank account of the Appellant on 12.06.2008, 16.06.2008, 20.06.2008, 24.06.2008 and 27.06.2008. Thus, the consideration of INR 45 Crores was actually received by the Appellant and therefore, we reject the contention of the Appellant that the Purchaser had failed to make the payment of INR 45 Crores. Even the confirmation dated 26.06.2008, issued by the Appellant to M/s Raja Ramdev Enterprises stated that the Appellant had granted friendly loans to the Purchaser and its sister concerns. Accordingly, we accept the contention advanced by the Ld. Departmental Representative that the transaction of granting loans to the Purchaser and/or its sister concerns was a separate and distinct transaction from the transaction of receipt of balance consideration of INR 45 Crores. The balance sheet of the Appellant as on 31.03.2009 reflects that the payment of INR 45 Crores has been received from the Purchaser, and Loan & Advances aggregating to INR 45 Crores have been granted to the Purchaser and its sister concerns. The fact that in the subsequent years the Appellant chose not to retain the aforesaid amount of INR 45 Crores by netting off the aforesaid consideration received from the Purchaser with the amount of loans & advances granted to the Purchasers and its sister concerns in its books of accounts is of no consequence.
6.11. As regards issue of possession, we note that the Clause 4(b) of the Agreement For Sale did provide as under:
“The vendor declares as follows: “
(a) xx xx
(b) Subject to the Occupants and Tenants mentioned in Annexures II & III on the part of the said property the Vendor is in physical possession of the said property till he has granted license and right of entry as recorded herein. The Vendor shall not be responsible and or bound and liable to give vacant possession of said part of the said property occupied by occupants and tenants. The Purchasers shall not be entitled to demand vacant possession thereof or any part thereof from Vendor nor shall be entitled to administer requisition on the said ground nor the Purchasers shall be entitled to revoke modify cancel terminate or dispute the present Agreement or ask for reduction in consideration. Any such demand of Purchasers shall amount to breach of the terms of this Agreement. The Purchasers have entered into present Agreement fully knowing the rights of said occupants and tenants. The Vendor shall help and assist the Purchasers to obtain consent/NOC from said occupants/tenants”
6.12. On perusal of Clause 4(b) of the Agreement, it can be seen that the Appellant continued to in the physical possession of the Property till the Consent Terms were recorded and granted only license and right of entry to the Purchasers by way of the aforesaid Consent Terms. Further, on perusal of Clause 11 of the Consent Terms it emerges that it also dealt with handing over of only the constructive possession of limited area occupied by the tenants/occupants and a small portion of the area of the building. In our view, Clause 11 of the Consent Terms when read with Clause 4(b) of the Agreement for Sale, supports the contention of the Appellant that the Purchaser was not put in possession of the Property. There is nothing on record to support the contention of the Revenue that the Purchaser had possession of the Property. The provisions of Section 2(47)(v) of the Act defines transfer in relation to capital assets to include any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of the contract of the nature referred to in Section 53A of the TPA. Since in the facts of the present case we have concluded that the possession of the Property was not taken by the Purchaser, the provisions of Section 2(47)(v) of the Act are not attracted.
6.13. During the course of hearing, Ld. Departmental Representative had relied upon the decision of Authority of Advance Ruling in the case of Jasbir Singh Sarkaria (supra) to contend that the possession contemplated under Section 2(47)(v) of the Act need not be sole and exclusive possession and once the transaction of the nature referred to in Section 2(47)(v) had taken place, the actual date of taking physical possession need not be probed into by determining application of Section 2(47)(v) of the Act. On perusal of the aforesaid decision, we find that in that case the Authority for Advance Ruling had concluded that in terms of general power of attorney granted to the developer by the land owner, the developer was able to exercise control management and supervision over the property and therefore, the general power of attorney did not merely grant license to the developer to enter the land for doing preliminary acts in relation to development work. It is in this context, that the authorities for advance ruling held that the irrevocable general power of attorney executed by the owner in favour of developer permitted the developer to take possession in part performance of the contract for transfer of the land. Once the transaction of the nature referred to in Section 2(47)(v) of the Act had taken place on a particular date, the actual date of taking physical possession need not be probed into. It was enough if the transferee had, by virtue of that transaction, a right to enter upon and exercise the acts of possession effectively. In the case before us there is no document granting any irrevocable right to the Purchaser. Further, the Assessing Officer has not set up a case that the license granted by the Appellant to the Purchaser permitted the Purchaser to exercise control/management over the entire Property. The Assessing Officer had proceeded on incorrect understanding that the Purchaser was put in possession of the Property. In our view, decision was rendered in facts and circumstances different from those in the present case, and therefore, does advance the case of the Revenue in the facts and circumstances of the present case.
6.14. We note that the Ld. Authorised Representative for the Appellant had also relied upon the judgment in the case of CIT Vs. Balbir Singh Maini : [2017] 398 ITR 531 (SC) to contend that since Agreement for Sale is not registered the provisions of Section 53A of the TPA would not be attracted. The relevant extract of the aforesaid judgment of the Hon’ble Supreme Court read as under:
“19. It is also well-settled by this Court that the protection provided under Section 53A is only a shield, and can only be resorted to as a right of defence. Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra [2004] 8 SCC 614 , para 10. An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in Section 53A of the Transfer of Property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words “the contract, though required to be registered, has not been registered, or” in Section 53A of the 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908 Act have been amended, clarifying that unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument. Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus:
“17(1A). The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then they shall have no effect for the purposes of the said Section 53A.”
49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall— affect any immovable property comprised therein, or
confer any power to adopt, or
be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.”
20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a “transfer” of a capital asset under Section 2(47)(v) of the Act, there must be a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression “of the nature referred to in Section 53A” in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression “of the nature referred to in Section 53A”. This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression “of the nature referred to in Section 53A” would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no “transfer” can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question.” (Emphasis Supplied)
6.15. It is admitted position that the Agreement for Sale, dated 01/04/2008 is not a registered document. Further, nothing has been brought on record by the Assessing Officer to show that the Purchaser was willing to perform his part of contract. The Consent Terms were agreed upon only after the Appellant filed suit for seeking specific performance of the Agreement for Sale. Therefore, we hold that the transaction under consideration did not attract provisions of Section 53A of the TPA.
6.16. We also do not find any merit in the contention advanced on behalf of the Revenue that there was relinquishment of any right by the Appellant in the Property.
6.17. There being no transfer in terms of Section 2(47)(v) of the Act, the question of any capital gains arising in the hands of the Appellant does not arise. Accordingly, addition of INR 49,50,11,429/- on account of Long Term Capital Gains is deleted.
6.18. We note that while computing capital gains the Assessing Officer had taken into consideration the amount of INR 5 Crores paid by the Purchaser to the Appellant which has, admittedly, being retained by the Appellant. The Agreement to Sale has not resulted in transfer of the capital assets. During the course of hearing, it was contended on behalf of the Appellant the that amount of INR 5 Crores received by the Appellant was not liable to tax in the hands of the Appellant for the reason that (a) the amount was received prior to 01/04/2015 when the provisions of Section 56(2)(ix) of the Act came into effect, and (b) the Appellant had reinvested the amount in purchase of another immovable property situated at Plot No. 172 (Old No. 69), Ramrkishna Mission Road Khar, Mumbai – 400052 having CTS No. E/562 under Scheme No. IV of Santacruz Town Planning Scheme admeasuring about 668.9 Sq.mts. at INR 5,87,14,000/-.
6.19. Section 56(2)(ix) of the Act reads as follows:-
“56(2) in particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income tax under the head “Income from other sources”, namely:
xx xx
(ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if.-
(a) such sum is forfeited; and
(b) the negotiations do not result in transfer of such capital asset;”
6.20. According to Section 56(2)(ix) of the Act a sum of money received as advance during the course of negotiation for transfer of capital assets would be treated as income liable to tax in the hands of recipients under the head ‘Income from Other Sources’ provided such advance is forfeited and the negotiations do not resulted in transfer of the capital assets. Further, we find that the definition of ‘income’ under section 2(24) of the Act was also amended by the said Finance (No. 2) Act, 2014 (w.e.f. 01/04/2015) wherein sub-clause (xvii) has been added, which reads as under:-
“2(24) Income includes
xx xx
(xvii) any sum of money referred to in clause (ix) of subsection (2) of section 56;”
6.21. Therefore, we find merit in the contention advanced on behalf of the Appellant that prior to 01/04/2015, the amount received by the Appellant in relation to transfer of a capital asset and retained by the Appellant could not be brought to tax as income since Section 56(2)(ix) and Section 2(24)(xvii) came into effect from 01/04/2015 by virtue of enactment of vide Finance (No. 2) Act, 2014.
6.22. However, we find that as per Section 51 of the Act was in effect when the aforesaid advance of INR 5 Crores was received and retained by the Appellant. Proviso to Section 51 of the Act was inserted by Finance Act (No. 2) of 2014 with effect from 01/04/2015. Section 51 of the Act provides that the amount received and retained by an assessee on any previous occasion would be deducted from the cost for which such capital assets was purchased while computing the cost of acquisition of such capital assets. The text of Section 51 read as under:
“51. Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition
Provided that where any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such sum shall not be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition.”
6.23. Accordingly, the amount of INR 5 Crores would have to be reduced from the cost for which the Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted.
6.24. In view of paragraph 6.6. to 6.23 above, the occasion to deal with rest of the contentions/pleas raised by the Appellant/Revenue does not arise. The application for additional evidence filed by the Appellant is rejected as being infructuous. However, before parting we would like to observe that according to the Assessing Officer there was a consent decree passed by the Hon’ble Bombay High Court which continued to bind the parties and that the Cancellation Agreement, which was introduced by the Appellant just four days before the conclusion of the assessment proceedings, was not acceptable as a valid document. In response to specific query from the Bench in this regard, the Ld. Authorised Representative for the Appellant had stated under instructions that no consent decree has been drawn and that there were no pending dispute between the Appellant and the Purchaser in relation to the Property. The AR had relied upon the property card filed as additional evidence in support of her contentions. On perusal of record, we find that the Consent Order dated 29/05/2008, passed by the Hon’ble Bombay High Court has been misunderstood by the Assessing Officer to be consent decree. Whereas in the present case after passing of the Consent Order dated 29/05/2008, the parties thereto resiled from the terms and therefore, there was no consent decree.
Ground No. (I)
7. Ground No. (I) pertain to the addition of INR 51,00,000/- made by the Assessing Officer in relation to an earlier transaction related to the Property.
7.1. The facts relevant for adjudication are that the Appellant had received INR 51,00,000/- as advance in relation to the sale of the Property from one Mr. Tarunkumar Dhumavat in terms of Memorandum of Understanding, dated 16/11/2005 [placed at pages 124 to 144 of the paper-book]. The contention of the Appellant before the Assessing Officer was that the aforesaid Memorandum of Understanding, dated 16/11/2005, was neither stamped nor registered; that the deal was cancelled; and the amount is refundable. However, the Assessing Officer noted that the aforesaid Memorandum of Understanding did not contain description of the property and therefore, it could not be said that the amount of INR 51,00,000/- was received by the Appellant in relation to the sale of the Property. The Assessing Officer, thus, made addition of INR 51,00,000/- in the hands of the Appellant.
7.2. In appeal, the CIT(A) confirmed the aforesaid addition of INR 51,00,000/- vide order dated 14/02/2020 holding that the Appellant had failed to link the aforesaid amount of INR 51,00,000/- with the Property.
7.3. In appeal before us, both the sides reiterated their respective contentions/stands. We note that the Appellant claims that the amount of INR 51,00,000/- is refundable. However, since 2007 the same has been lying with the Appellant. There is no material on record to show that steps for recovery have been made by Mr. Tarunkumar Dhumavat. The Appellant had also entered into a subsequent transaction with the Purchaser for the Property which did not result in transfer. The Appellant claims to be the owner of the Property as on date. Clearly the amount of INR 51,00,000/- has been retained by the Appellant. Nothing prevented the Appellant from refunding the aforesaid amount. Further, in the Balance Sheets also the Appellant does not admit that amount of INR 51,00,000/- is payable/refundable to Mr. Tarunkumar Dhumavat as the aforesaid amount has been reflected against the name of the Property (i.e. ‘Peddar Road’) and not against name of Mr. Tarunkumar Dhumavat (so as to amount to admission of debt).
7.4. We have held that there is no transfer of the Property during the relevant previous year and therefore, the amount of INR 51,00,000/- cannot be brought to tax as income during the relevant previous year. The receipt of such an advance received and retained in relation to transaction of sale of Property has been brought to tax as ‘Income from Other Sources’ by way of an amendment to Section 56(2)(ix) of the Act made vide Finance (No. 2) Act, 2014 (effective from 01/04/2015). Further, the definition of ‘income’ under section 2(24) of the Act was also amended by the said Finance (No. 2) Act, 2014 (w.e.f. 01/04/2015) to include any sum of money referred to in Clause 56(2)(ix) of the Act. Therefore, prior to 01/04/2015, the amount of INR 51,00,000/- received by the Appellant for transfer of capital asset and retained by the Appellant could not have been brought to tax as income. However, as per Section 51 of the Act, the aforesaid amount of INR 51,00,000/- would have to be reduced from the cost for which the Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted.
Ground No. (3) & (K)
8. Ground No. (3) & (K) pertain to addition of INR 19,60,000/- made by the Assessing Officer in relation to Varsova Property.
8.1. The facts relevant for adjudication are that the Appellant had received INR 19,60,000/- as advance in relation to the sale of the Varsova Property during the previous year relevant to the Assessment Year 2005-06. The contention of the Appellant before the Assessing Officer was that the relevant agreement was not duly signed by all the parties and the full amount of consideration was not received. Therefore, the transaction could not be completed. According to the Appellant, the amount represented refundable advance and therefore, was not liable to tax as income in the hands of the Appellant. However, the Assessing Officer was not convinced as he concluded that even after expiry of more than four years the amount was still standing as advance received and was no longer refundable as the recovery has become time barred. Therefore, the Assessing Officer made the addition of INR 19,60,000/- in the hands of the Appellant.
8.2. In appeal, the CIT(A) confirmed the aforesaid addition of INR 19,60,000/- vide order dated 14/02/2020.
8.3. In appeal before us, both the sides reiterated their respective contentions/stands. Again we note that, since Assessment Year 2005-06 amount of INR 19,60,000/- has been lying with the Appellant; there is no material on record to show that steps for recovery by the other party; and in the Balance Sheets also the Appellant does not admit that amount of INR 19,60,000/- is payable/refundable to any specific party as the aforesaid amount has been reflected against the name of the property (i.e. ‘Varsova’). Nothing prevented the Appellant to refund the amount over these years. Therefore, we concur with the authorities below that the amount of INR 19,60,000/- has been received and retained by the Appellant. Though the aforesaid amount is not liable to tax in income in the hands of the Appellant during the relevant previous year, however, the aforesaid amount of INR 19,60,000/- would have to be reduced from the cost for which the Varsova Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted.
Ground No. (L) & (M)
Ground No. (L) is directed against the order of CIT(A) declining to adjudicate additional ground raised by the Appellant.
Whereas Ground No. (M) is directed against the order of CIT(A) rejecting the contention of the Appellant that the properties were held as the investment by the Appellant. Both the aforesaid grounds are disposed off as being infructuous in view of adjudication of grounds (E) to (K) above.
Ground No.( N)
10. Ground No. (N) is disposed of as being general in nature.
In the result, the present appeal by the Assessee is partly allowed.
Order pronounced on 06.07.2023.
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