HARMEL SINGH,PARWANOO vs. INCOME TAX OFFICER, WARD PARWANOO, PARWANOO
आयकर अपीलीय अिधकरण,चीगढ़ ायपीठ,चीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
‘SMC BENCH’, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
आयकरअपीलसं./ITA No.70/CHD/2025
िनधारणवष / Assessment Year : 2012-13
Harmel Singh,
Mella Property near Kasauli
Chouwk, Sector 2, Shimla
National Highway,
Parwanoo.
बनाम
The ITO,
Ward
Parwanoo.
Himachal Pradesh.
थायीलेखासं./PAN NO. ABNPD1482P
अपीलाथ/Appellant
थ/Respondent
( PHYSICAL HEARING )
िनधा रतीकीओरसे/Assessee by : Sh. Parikshit Aggarwal, C.A. &
Ms. Shruti Khandewal, Advocate
राज कीओरसे/ Revenue by :Sh. Vivek Vardhan, Addl. CIT (Sr. DR)
सुनवाईकीतारीख/Date of Hearing
:
28-05-2025
उदघोषणाकीतारीख/Date of Pronouncement
:
21-08-2025
आदेश/Order
The present appeal has been preferred by the assessee against the order dated 07-11-2024 passed by the Ld. Commissioner of Income
Tax,
National
Faceless
Appeal
Centre
(NFAC),
Delhi[hereinafter referred to as ‘CIT(A)’], for the Assessment Year
2012-13. 2. The Assessee in this appeal is aggrieved of the order of the Ld. CIT(A) in confirming the addition made by the Assessing
70-Chd-2025
Harmel Singh, Parwanoo.
2
Officer (in short, “the AO”) of Rs. 36,95,000/- into the income of the assessee.
3. The assessee has taken five grounds of appeal.
4. Ground No.1 is general in nature.
5. Vide Ground No. 2, the Assessee has agitated against the action of the CIT(A) in confirming the addition of Rs. 35,00,000/- made by the Assessing Officer ( in short, ‘ the AO”) by treating the advances received from the customers as income of the Assessee.
6. The brief facts of the case relevant to the issues are that the Assessee is an individual and is in the business of development of property. The Assessee developed several properties and plots for sale purposes. The Assessee received advances against the said properties from the various customers. However, due to the several reasons, some of the contracts did not mature and the sale deeds could not be executed. The Assessee refunded the amount to the customers in respect of such properties. However, there was no dispute in relation to the several other properties in which the sale deeds were executed and the advances were adjusted towards sale consideration.
70-Chd-2025
Harmel Singh, Parwanoo.
3
5. The Assessing Officer, however, noted that the Assessee had received huge advances from various parties. He further observed that the Assessee could not prove the genuineness of the transactions and treated the entire amount of advances received form customers as income of the assessee and made the addition of the said amount into the income of the Assessee.
5.1
The Ld. CIT(A), however, considering the evidences and submissions furnished by the Assessee and have called remand report from the Ld. AO, noted that the advances received from the several customers were either resulted to the sale transactions of properties, or refunded to the customers in cases in which the sale deeds could not be executed. He, therefore, gave benefit to the Assessee in respect of the advances which were either adjusted towards sale consideration of properties or were refunded to the customers. He further observed that the remaining advances were not refunded to the customers and that there was sufficient time passed and therefore, it was case of forfeiture of such advances.
Though, the Ld. counsel pleaded before him that there was a litigation in respect of said advances; Ld. CIT(A, however, observed that since the time period of around 13 years had passed at the time of filing of the appeal of the Assessee before him, and there was creditors shown in the books and that it was highly
70-Chd-2025
Harmel Singh, Parwanoo.
4
improbable that these advances would be refunded by the Assessee.
He, therefore, treated such remaining advances which were not refunded by the Assessee to the customers, as income of the assessee and confirmed the addition to the extent of Rs. 35,00,000/-
Before this Tribunal, Ld. counsel has submitted that even through Ld. CIT(A) has treated the remaining advances received by the Assessee as a forfeiture of the amount, yet, such advances received by the assessee as earnest money for sale of property, as per the law in force for the assessment year under consideration, could not be treated as income of the Assessee. He invited our attention to section 51 of the Income Tax Act as in force for the assessment year under consideration i.e. 2012-13. As per the said provisions, the amount of earnest money received in respect of a capital asset has been forfeited, the said amount of earnest money shall be deducted from the cost for which the asset was acquired or the Written Down Value or fair Market Value, as the case may be, in computing the cost of acquisition at the time of computing the capital gains on sale of such capital asset. 6.2. I am not convinced with the above contention of the Ld. AR of the assessee. The aforesaid provisions of section 51 of the Act
70-Chd-2025
Harmel Singh, Parwanoo.
5
are applicable in case of capital asset not on stock in trade. The plots in question, regarding which the assessee had received the earnest money were stock in trade of the assessee, therefore the assessee can not be given benefit of the provisions of section 51 of the Act.
6.3
However, the aforesaid amount of earnest money received by the assessee can neither be added u/s 68 of the Act as the source of the same is duly established on the record. So far as the observation of the Ld. CIT(A) that the assessee had not returned back/refunded the said amount to the customers even after passing 13 years is concerned, may it be so, but the addition on account of cessation of liability can not be made in the year of receipt but in the year in which the liability has ceased to exist. It is not on record as to whether the assessee has refunded the said amount in subsequent years or not. Therefore, no addition is warranted in the assessment year under consideration on this count also as there was no cessation of liability of this amount in the year under consideration.
Even, there is no forfeiture of this amount in the year under consideration hence the provisions of section 56(2) (ix) which provides for treating the amount of forfeiture of earnest money as income from other sources, will also be not applicable for the year
70-Chd-2025
Harmel Singh, Parwanoo.
6
under consideration. However, this issue can be examined by the AO in subsequent years.
6.4. Therefore, the impugned addition made/sustained by the lower authorities is not justified for the assessment year under consideration. The impugned addition is, accordingly, ordered to be deleted.
7. In the result, the appeal of the assessee is allowed.
Order pronounced on 21-08-2025 (SANJAY GARG)
Judicial Member
आदेशकीितिलिपअ(ेिषत/ Copy of the order forwarded to :
1. अपीलाथ/ The Appellant
2. थ/ The Respondent
3. आयकरआयु)/ CIT
4. िवभागीयितिनिध, आयकरअपीलीयआिधकरण, च-ीगढ़/ DR, ITAT,
CHANDIGARH
5. गाडफाईल/ Guard File
////
आदेशानुसार/ By order,
सहायकपंजीकार/