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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. 1020/Bang/2022 Assessment Year : 2018-19 M/s. Condor Developers The Deputy Pvt. Ltd., Commissioner of No. 40, Old Kanakpura Income Tax, Main Road, Central Circle – Basvangudi, 1(1), Bangalore – 560 004. Vs. Bangalore. PAN: AABCH6554Q APPELLANT RESPONDENT : Shri Siddesh Nagaraj Assessee by Gaddi, CA : Shri K. Sankar Ganesh, Revenue by JCIT DR ITAT Date of Hearing : 31-01-2023 Date of Pronouncement : 03-02-2023 ORDER PER ANIKESH BANERJEE, JUDICIAL MEMBER The appeal of the assessee was filed against the order of the Ld. Commissioner of Income Tax (Appeals)-11, Bangalore {in brevity the CIT(A)} by order dated 22.08.2022, order passed u/s. 250 of the Income Tax Act, 1961 (in brevity the Act) for A.Y. 2018-19. The impugned order was emanated from the order of the Ld. DCIT, Central Circle -1(1), Bangalore, order passed u/s. 143(3) r.w.s. 153D of the Act, by order dated 27.12.2019.
Page 2 of 8 ITA No.1020/Bang/2022 2. The assessee filed a condonation petition for 4 days delay. The delay is negligible. So, with the consent of the AR, the delay is condoned.
The assessee has taken the following grounds: “1. The Order of the Deputy Commissioner of Income Tax Central Circle - 1(1) Bangalore, as upheld by Commissioner of Income Tax (Appeals) - 11, Bangalore, [`CIT(A)] to the extent prejudicial to the Appellant is bad in law and on facts; against the provisions of the Income-tax, Act, 1961 ['the Act'] and weight of evidence and probabilities of the case; 2. The order lacks jurisdiction and therefore liable to be quashed in its entirety; 3. The Learned CIT(A) and AO have erred in law and on facts in not appreciating that there is no forfeiture of advance towards sale of property and therefore provisions of section 56(2)(ix) of the Act are not applicable to the facts in the present case; 4. The Learned CIT(A) has erred in law and on facts in not considering additional evidence and further erred in upholding the addition merely on the basis of statements made under section 132(4) of the Act; 5. The Learned CIT(A) /AO has erred in law and on facts in not appreciating that the purchaser has, vide their confirmation, not waived the amount advanced to the Appellant Company. 6. The Learned CIT(A) /AO has erred in law and on facts in not appreciating that the Appellant Company has continued to disclosed the subject amount in the balance sheet as a liability. 7. The order of the Learned CIT(A) is bad in law as the same is based on perverse observations which are against the facts of the case and has further erred in imposing conditions which are not prevalent in the provisions of the Act; 8. The impugned adjustment being merely based on presumption and surmises, is to be deleted;
Page 3 of 8 ITA No.1020/Bang/2022
The Learned AO has erred in law and on facts in ignoring submissions of the Appellant in support of the claim; 10. The AO has erred in law and on facts in initiating penalty based on the above erroneous addition to the returned income; 11. The Learned AO has erred in law and on facts in levying interest under the section 234A / B / C of the Act. (Total tax effect common for the above grounds: Rs. 1,51,78,800/-) On the basis of above grounds and other grounds which may be urged at the time of hearing with the consent of the Honourable Tribunal, it is prayed that the order passed under section 143(3) r.w.s 153D, to the extent it is against the Appellant, be quashed and relief sought be granted.” 4. Tersely we advert fact of the case. The assessee is a developer and real estate agent. The assessment was completed with the addition amount of Rs.3,62,00,000/- in the total income of the assessee u/s. 56(2)(ix) of the Act. The assessee has taken advance against the procurement of land from party, M/s. Sobha Developers Ltd., the amount of Rs. 3 Crores and received advance for sale of property situated in KR puram, from M/s. Elyon Developers Pvt. Ltd. amount of Rs. 62 Lakhs more than 8 years ago. A statement U/s 132(4) is recorded from the Managing Director of the assessee in which has admitted that both the amounts are forfeited for AY 2018-19. Due to the financial constraint, the assessee was unable to return the advance amount. During the assessment and appeal, the assessee never retracted the statement made by the Managing Director of the assessee before the revenue authority but in the appeal the assessee pressed that the section which is implemented by the
Page 4 of 8 ITA No.1020/Bang/2022 AO is section 52(2)(ix) is not a correct provision for the assessee related to the advance for procurement of land & advance against sale of land. Also, the assessee’s plea that both the amounts are never to be realised by assessee and reflected in the balance sheet as non-current liability. The CIT(A) after considering the assessee’s plea upheld the order of the AO. Being aggrieved the assessee filed an appeal before us. 5. The Ld. Counsel for the assessee submitted the written statement and that the case law compilation which are kept in the record. The Counsel first invited our attention in the order of CIT(A), para nos. 4.13 and 4.14 which are reproduced as below. “4.13 In view of' above, the reliance of the AO in the case under consideration on the statement of the appellant is validly made and does not call for any interference. The reliance of the appellant on CBDT Instruction No. 286/2/2003 dt. 10/03/2003 does not help as there is nothing to show that the MD was forced to confess undisclosed income. The disclosure was voluntary and on the basis of documents confronted to him. The decisions relied upon by the appellant are also found to be inapplicable as the same were rendered on different facts and ratio of the decision does not apply to the facts of the case under consideration. The decisions rendered by the Supreme Court and High Courts always need to be read keeping in mind the question of law which was sought to be answered and a line here and a line there cannot be picked up and applied to other situations. 4.14 The fact of forfeiture of amount as repeatedly admitted in the statements recorded over a period of time spreading over more than 3 months, reveals the correct state of affairs. Mere claim of the appellant that the amount is shown as payable in its books of account does not help as the same is done to evade payment of tax. Similarly, the amount being shown as outstanding in the books of the other party to the agreement also does not make any difference as that does not impact the tax liability of said party. In the case under consideration, the other parties had accepted the forfeiture as their fate and they had not filed any suit for recovery and thereafter the
Page 5 of 8 ITA No.1020/Bang/2022 debt has become time barred for them although they might still be showing the amount as outstanding in their books. So no remedy is available to those other parties. The argument of the appellant that forfeiture cannot be done without the order of the court, is also devoid- of any merit. There is no such law and this is upon the other party to move to the court within time if it feels that the forfeiture was incorrect. In the present case, as discussed supra, no such action has been taken by the opposite parties.” 6. In argument, the counsel has placed that the assessee never offered the amount in profit and loss account and amount is clearly reflected in the balance sheet as the non-current liability. The financial statement of the assessee is annexed in APB pages 18 to 30 The AR further invited our attention in the confirmation of both the parties in page nos. 17 and 31 of APB where the parties had confirmed about their payment and balances against the advance paid to the assessee. Also the agreement with M/s. Sobha Developers was placed in APB pages 32 to 37. 7. The Counsel argued that the AO implemented section 56(2)(ix) which is wrong one and not correctly implemented for the assessee. But in factual matrix the huge amount of the credit balance is reflected in the assessee’s books which was received more than 8 years. The AR relied on the order of Coordinate Bench in case of Shri Ravi Shankar Shetty vs. ACIT in ITA No. 28/Bang/2020 by order dated 08/09/2020. By observing the order of the coordinate bench, the advance amount was received for the procurement of assets. The entire amount was accounted for as liability. But in factually
Page 6 of 8 ITA No.1020/Bang/2022 examination the said case is not similar with the assessee related the acceptance of forfeiture by managing director of the company. We find no relevancy with fact of the asseessee in relating to referred judgment.
The DR vehemently argued and relied on the order of the revenue authorities. As per the DR, the assessee is continuing the balance for several years. No such evidence was placed by the assessee that the managing director of the assessee had retracted, the statements made before the revenue authority.
We heard the rival submissions and perused the documents available The managing director of the company had accepted that the advance amount is forfeited by statement before the revenue authorities. The managing director had never retracted the statement made before the revenue authority. The AR was unable to show any such documents about the retraction of the managing director before the bench. On other hand, the assessee company is continuing the balance of advance in the balance sheet as liability. The AR of the assessee was able to submit these documents as evidence before the bench. In factual matrix, the advance amount was never be forfeited or adjusted in the capital account of the assessee. There is clear contradiction in recorded statement and books of accounts of assessee related adjustment advance amount. But only point is being unanswered by the rival parties whether these two amounts are reflected in the books of accounts of respective parties. The parties, M/s. Sobha Developers Ltd. and M/s. Elyon Developers Pvt. Ltd. are
Page 7 of 8 ITA No.1020/Bang/2022 the company. There was no examination of these parties who has paid this amount to the assessee and also there is no verification of the books of accounts of those parties with reference to this amount. In our opinion, it is appropriate to remit the issue in dispute to the file of CIT(A) to carry out necessary enquiry and putting the admission made by assessee Director to the concerned parties to this effect and to reconsider the issue accordingly. The assessee relied on various case laws which are kept on record and those case laws are not applicable to the facts of the present case as there was specific admission by the assessee during the course of recording the statement u/s. 132(4) of the IT Act. Needless to say that the assessee should get reasonable opportunity of being heard during the set aside proceedings. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 03rd February, 2023.
Sd/- Sd/- (CHANDRA POOJARI) (ANIKESH BANERJEE) Accountant Member Judicial Member Bangalore, Dated, the 03rd February, 2023. /MS /
Page 8 of 8 ITA No.1020/Bang/2022 Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order
Assistant Registrar, ITAT, Bangalore