Case Law Details
Bharat Enterprises Vs ACIT (ITAT Mumbai)
I find that the facts of the case indicate that the assessee had claimed as other income, a sum of Rs.19,87,500/- received from a buyer who had booked the flat. Further, since there was irregular payment from the buyer, the assessee had forfeited the sum of Rs.19,87,500/- and offered the same as income. However, in the meanwhile, the said person had filed a suit. There is no doubt about the existence of the suit. In the remand report, the Assessing Officer has also submitted that the said person has categorically claimed that he has not acquiesced in the forfeiture of the sums. In this background, there is no question of treatment of the said amount as assessee’s income. This amount received against the book of flat can be added in the hands of the assessee only if there is a cessation of liability. On the facts and circumstances of the case, by no stretch of imagination, it can be said that there is a cessation of liability. The Revenue authorities cannot take refuge on the mistaken offering of income by the assessee which has been cogently rebutted during the course of assessment. It is also well settled that the Revenue authority should not take advantage of the ignorance of the assessee. Accordingly, in the background of the aforesaid discussion, I hold that the said amount deserves to be excluded from the income and the Assessing Officer is directed accordingly.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) dated 14.6.2017 and pertains to the assessment year 2010-11.
2. The two issues raised are as under:
- On the facts and circumstances of the case, and in Law, the CIT(A) erred in not reducing the income of Rs.19,87,500/- offered to tax by the assessee on account of forfeiture of EMD outwards the purchase of flat:
- On the facts and circumstances of the case, and in Law, the CIT(A) erred in disallowing Rs.59,922/- towards credit card expenses.
3. At the outset, it is noted that there is a delay of 97 days in filing the appeal. The reasonable cause for delay in filing of the appeal has been attributed to the ailment of the Managing Director of the partner. The documents relating to the ailment have also been produced by the ld. Counsel of the assessee and perusing the record. the detail in filding the appeal is condoned.
4. Brief facts of the case are as under:
In this case, the Assessing Officer noted that the assessee firm had shown during the year the other income of Rs.19,87,500/-. However, the assessee filed letter dated 17.08.2012, the content of which as noted by the Assessing Officer read as under:
Detail of other income: Mrs. Becharlal Patel had booked a flat in our building but failed to make the payments regularly as and when called for so we had to cancel his booking of flat but he was intended in taking back his money and hence we have taken this amount as income, but now we draw your kind attention that it should be reduced from our total income as he has filed a suit against us in civil court and we have to repay his amount along with interest, so this income will not be liable for taxation hence we request you to kindly reduce this income from Profit & loss a/c., and accordingly, return of income should be reduced to that extend.”
5. However, the Assessing Officer did not accept the above on the ground that the assessee firm has not filed any copies of litigation and the decision of Civil Court to substantiate its claim. When the matter went to the ld. Commissioner of Income Tax (Appeals), he noted the facts and the additional evidence in this regard as under:
In this ground of appeal, vide letter dated 20/05/2014 the assessee has claimed that the Assessing Officer has erred in not reducing its income by a sum of Rs.19,87,500/- which was declared as ‘Other Income’ by the assessee in its return of income. It was claimed that the Other Income credited to the Profit & Loss Account consisted of an entry recorded by the assessee on account of forfeiture of earnest money. It was mentioned that one Shri Becharlal Patel had earlier booked a flat No.701 in the ‘Legacy’ Project of the assessee. This consideration for this flat was Rs.42,75,000/- and Shri Becharlal Patel had paid a sum of Rs.19,87,500/- to the assessee on various dates during the financial year 2004-05, However Shri Becharlal Patel failed to make subsequent payments as on one called for and accordingly the assessee cancelled the booking of the flat in financial year 2009-10 and shifted the amount of Rs.19,87,500/- from the head of “advanced for flat booking” to “Other Incomes”. The assessee claimed that this was an unilateral act on the part of the assessee without any corresponding discharge of the liability by Shri Becharlal Patel. It was claimed that Shri Becharlal Patel had filed a legal suit against the assessee in the City Civil Court, Bombay on 27/04/2010. The assessee has claimed that during the course of the assessment proceedings it had filed a letter dated 17/12/2012 with the Assessing Officer informing him about the above facts and requesting that this amount of Rs.19,87,500/- should be allowed to be reduced from the taxable Income of the assessee. It was mentioned that the time for filing a revised return for AY 2010-11 had expired by that time and the assessee also filed an affidavit mentioning the above facts before the Assessing Officer. In the appellate proceedings the assessee has claimed that it is not appropriate to deny a legally valid claim of the assessee merely because the copy of the suits documents could not be produced by it before the AO. The assessee also relied upon the decision of the Supreme Court in the case of Goetze India Ltd vs. CIT (2006) 284 ITR 323 in this regard besides other decisions. The assessee has further claimed that the impugned amount of Rs.19,87,500/- is only a Journal entry and that there was no transaction with Shri Becharlal Patel during the course of the previous year under consideration. It was claimed that an accounting entry cannot result in either accrued or generation of an income. It was also claimed that the amount was received in financial year 2004 05 and it was received as an advance. Therefore it is claimed that the same cannot be treated as income in the previous year 2009-10. It was also claimed that this amount has not accrued to the assessee as income as a civil suit is pending before the Court. The assessee also filed the copy of the Suit documents as an additional evidence.
6. The ld. Commissioner of Income Tax (Appeals) asked for the remand from the Assessing Officer. In the remand report, the Assessing Officer has informed that Shri Becharlal Patel had confirmed to the Assessing Officer that he had made an advance of Rs.19,87,500/- to the assessee and that the assessee has not allotted any flat to him. He also denied having acquiesced in the forfeiture of the said amount. However, the Assessing Officer relied upon the Assessing Officer. In these facts, the ld. Commissioner of Income Tax (Appeals) considered the issue. He concluded as under:
In view of the above facts, it is held that the assessee has not given the true picture concerning the amount of Rs. 19,87,500/-. It is seen from the Court documents that the assessee has vehemently denied that this money belonged to Shri Becharlal R Patel. On ‘he contrary the assessee has claimed inter-alia that the money may have been received by it or retained by it in satisfaction of its claims on Shri Punjalal R Patel, the brother of Shri Becharlal R Patel. The assessee cannot blow hot and cold at the same time. The assessee cannot claim before the Court that the amount does not belong to Shri Becharlal R Patel and simultaneously the assessee cannot claim in the income tax proceedings that the money is required to be given back to Shri Becharlal R Patel. Further the assessee has not given copies of the statements filed by it in the Court which may throw more light in this matter. Nor has the assessee produced any books of account or correspondence file. In view of the above, it is held that the assessee has not proved that the amount of Rs. 19,87,500/- related to the forfeiture of deposit made tor flat number 701 by Shri Becharlal R Patel only.
7. Against the above order, the assessee is in appeal before the ITAT.
8. I have heard both the counsel and perused the records. The ld. Counsel of the assessee submitted that the assessee has mistakenly offered the sum received on account of flat booking as other income on account of forfeiture. During the course of assessment itself, the assessee has informed the Assessing Officer about the filing of the case by the prospective buyer. All the evidence relating to the suit was produced before the ld. Commissioner of Income Tax (Appeals). The same were also remanded to the Assessing Officer. The Assessing Officer has also accepted the suit and the fact that the said buyer has denied that he acquiesced to the forfeiture. Hence, the ld. Counsel of the assessee pleaded that the afore-said sum erroneously offered as income should be excluded.
9. Per contra, the ld. Departmental Representative submitted that since the assessee has offered the same into income, and matter is before a court, the assessee can be assessed for the current year for the sum involved and if and when the assessee is ordered by the Court to pay the sum along with the interest, the same can be allowed as expenditure.
10. Upon careful consideration, I find that the facts of the case indicate that the assessee had claimed as other income, a sum of Rs.19,87,500/- received from a buyer who had booked the flat. Further, since there was irregular payment from the buyer, the assessee had forfeited the sum of Rs.19,87,500/- and offered the same as income. However, in the meanwhile, the said person had filed a suit. There is no doubt about the existence of the suit. In the remand report, the Assessing Officer has also submitted that the said person has categorically claimed that he has not acquiesced in the forfeiture of the sums. In this background, there is no question of treatment of the said amount as assessee’s income. This amount received against the book of flat can be added in the hands of the assessee only if there is a cessation of liability. On the facts and circumstances of the case, by no stretch of imagination, it can be said that there is a cessation of liability. The Revenue authorities cannot take refuge on the mistaken offering of income by the assessee which has been cogently rebutted during the course of assessment. It is also well settled that the Revenue authority should not take advantage of the ignorance of the assessee. Accordingly, in the background of the aforesaid discussion, I hold that the said amount deserves to be excluded from the income and the Assessing Officer is directed accordingly.
11. The next issue pertains to 50% disallowance of credit card expenses of Rs.1,19,843/- on account of personal use, etc. The Assessing Officer has disallowed the same in the absence of detail regarding the details and business necessity of the said expenditure. The ld. Commissioner of Income Tax (Appeals) has upheld the same by holding that the assessee has not given any details of the credit card expenses in the appellate proceedings, nor he has made any argument on this issue. Before the ITAT also, the ld. Counsel of the assessee did not make any cogent submissions. Accordingly, I do not find any infirmity in the order of the authorities below. Hence, I uphold the same.
12. In the result, this appeal by the assessee is partly allowed.
Order pronounced in the open court on 02.04.2018
