M/S. CONDOR DEVELOPERS PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), BANGALORE

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;

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 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.”

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.

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 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 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 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.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 03rd February, 2023.