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Income Tax Appellate Tribunal, BENGALURU BENCH, BENGALURU
Before: SHRI CHANDRA POOJARI, AM & SMT. BEENA PILLAI , JM
Per CHANDRA POOJARI, AM:
This appeal filed by the assessee is directed against the order of the CIT(A) Bengaluru-6 dated 25/11/2019 and pertains to assessment year 2015-16.
The assessee has raised the following grounds of appeal:
1. The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The ld. CIT(A) erred in upholding the addition of Rs.21,11,00,000/- made by invoking the provisions of section 56(2)(ix) of the Act in respect of the amounts shown as a liability to M/s. Metrocorp and M/s.Metrocorp Infrastructure Ltd., in the financial statements of the appellant for the year under appeal on facts and circumstances of the appellant’s case.
3. The ld. CIT(A) failed to appreciate that the aforesaid liabilities shown by the appellant to M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd., were still subsisting and the same was also confirmed by the said parties in course of the enquiries conducted in the remand proceedings before the Assessing Officer and therefore, the impugned addition sustained was opposed to law and facts of the appellant’s case.
4. The ld. CIT(A) erred in holding that there was a virtual forfeiture of the said amounts by the appellant on account of the fact that the aforesaid advances were not refundable in terms of the procurement agreement dated 10/02/2006 and because M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd. had not taken any steps for recovery of the said amounts. 5. The ld. CIT(A) ought to have appreciated that there had to be an actual forfeiture for attracting the provisions of section 56(2)(ix) of the Act and there was no justification to take a view that the appellant had forfeited the said amounts during the year under appeal and therefore, the application of the provisions of section 56(2)(ix) of the Act was misconceived and the impugned addition made ought to have been deleted. 6. The ld. CIT(A) further failed to appreciate that the provisions of section 56(2)(ix) of the Act were also not applicable since the aforesaid amounts received by the appellant in terms of the procurement agreement dated 10/02/2006 was not received in respect of the transactions relating to the transfer of a capital asset and the finding that neither M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd., nor the appellant were trading in land is patently erroneous since the appellant is engaged in real estate business and the purpose for which M/s. Metrocorp and M/s. Metro Infrastructure Ltd., were acquiring the lands was not relevant to judge the applicability of the provisions of section 56(2)(ix) in the hands of the appellant and hence, the impugned addition made by invoking the provisions of section 56(2)(ix) of the Act was unjustified and misconceived and the impugned addition made ought to have been deleted. 7. The ld. CIT(A) is not justified in holding that the ratio of the judgment of the Supreme Court in the case of T.V. Sundaram Iyengar and Sons reported in 222 ITR 344(SC) was applicable to the facts of the appellant’s case without appreciating that the said judgment was distinguishable since the amounts were written back by the said assessee and it was claimed that the same was not taxable as it was a capital receipt at the point of receipt whereas in the appellant’s case, the amounts were never written back and continued to remain as a liability and thus, the reliance placed on the said judgment of the Supreme Court was misplaced.
Without prejudice to the right to seek waiver with the CCIT/DG, the appellant denies himself liable to be charged to interest u/s.234A, 234B and 234C of the Act, which under the facts and in the circumstances o the appellant’s case and the levy deserves to be cancelled.
For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
The facts of the case are that the assessee filed his return of income for the assessment year 2015-16 returning an income of Rs.25,74,540/- under the heads ‘income from business and profession, capital gains and other sources”. The assessment was completed u/s. 143(3) of the Act. While framing the assessment, the AO observed that the assessee had received advances of Rs.21,89,22,200/- as on 31/03/2015 from the following parties: 1. Metro Corp Rs.19,62,00,000/- 2. Metro Corp Infrastructure Limited Rs. 1,00,00,000/- 3. Raju F Rs. 65,00,000/- 4. Balaji & Co. Rs. 40,00,000/- 5. Chandramohan Grover Rs. 13,22,200/- 6. Kavith Shenoy Rs. 9,00,000/- Total Rs.21,89,22,200/- The AO enquired from the assessee regarding the outstanding amounts in the name of Metro Corp and M/s. Metro Corp Infrastructure Ltd. It was stated that the assessee received money from Metro Corp vide agreement dated 10/02/2006 for procuring lands at Dodaballapur and Chikkaballapur. The project being developed by M/s. Metro Corp ran into litigation and no further advance could be given to the assessee for land procurement as per the agreement. It was also stated that the assessee was willing to fulfil his obligations under the agreement on receipt of the M/s. Metro Corp. It was submitted that the assessee had not claimed any deduction of expenditure in relation to the advance which remained a liability in his books. Similar is the position of M/s. Metro Corp Infrastructure Ltd.
3.1 The AO observed that as per the contents of the agreement the assessee is not required to refund the advance money received and the question of performing the obligation does not arise when the other party is not traceable as per the address stated by the assessee and assessee himself could not locate the Metro Corporation and Metro Corp Infrastructure Ltd. The amount is payable only as per books and not in real terms. It is also pertinent to mention that though sum was received in 2007, till date the negotiations have not resulted in transfer of capital asset and the assessee could not produce/trace the other party and as such the AO considered that such sum was forfeited. According to the AO there is no evidence of any recovery suit filed by the creditors and the creditors are not traceable which signified that the claim over the amount paid to the assessee was forfeited by them. According to the AO, the assessee had no intention to repay the creditors and under such circumstances, the assessee diverted the funds to acquire fixed assets and investments. The AO found that as per loan and advances schedule assessee had given advances only to an extent of Rs.5,53,81,059/- and thus bulk of amount received from Metro Corporation was invested in individual name of assessee and unless the assessee has changed the categorization of receipt to be his own and not longer to be creditors, the assessee would not have used it for acquisition of assets/investments in his own name. Thus, the AO added the advances received
M/s. Metro Corp and M/s. Metro Corp Infrastructure Ltd. totaling Rs.21,11,00,000/- to the income of the assessee by invoking the provisions of Section 56(2)(ix) of the I.T. Act.
On appeal, the CIT(A) observed that the terms of the procurement agreement dated 10/02/2006 and in particular clause IX thereof categorically provide that the promoters would not be entitled to a refund of the moneys advanced and could only claim set off of the amounts against future land procurements. According to the CIT(A), the above parties have not filed any suit against the assessee for recovery of advances given to him for land procurement even though clause X of the procurement agreement gives the parties the right to sue each other for specific performance of the agreement. The Ld. CIT(A) observed that out of the amount of Rs.21,11,00,000/- received from M/s. Metro Corp and Metro Corp Infrastructure Ltd., only an amount of Rs.5,53,81,059/- was given by the assessee as advances. The bulk of the amount so received has been invested in fixed assets and investments in the assessee’s name. The CIT(A) rejected the argument of the assessee that the advances were given for procurement of land which was stock-in- trade and not a capital asset since neither the promoters nor the assessee were trading in parcels of land but these lands were being acquired for the purpose of construction of buildings/townships thereon, hence the land sought to be acquired was a capital asset and on transfer from the land owners to the assessee /promoter, the land-owner would have earned capital gains. Regarding application of provisions of section 56(2), he observed that sub-clause(ix) of section 56(2)
(ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital assesse if, (a) Such sum is forfeited; and (b) The negotiations do not result in transfer of such capital asset.
4.1 The CIT(A) observed that though the assessee claimed that he is liable to return these advances but the facts of the case indicate that there has been virtual forfeiture of the amount as the promoters have made no attempt to recover the same. According to the CIT(A) these advances were in the nature of trade advances and not having returned the same and having utilized them for making investments in his own name, these amounts had acquired the nature of income in the hands of the assessee. The CIT(A) relied on the judgment of the Supreme Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons (222 ITR 344). Before the CIT(A), the assessee placed reliance on the judgment of ITAT, Mumbai in the case of Nilesh Janardhan Thakur vs. ITO (168 ITD 143) where the advances were given for procurement of land and were subsequently not returned. The Tribunal upheld the assessee’s claim on the grounds that the AO had wrongly applied the provisions of section 56(2)(vi) to the case. In the case of Nilesh Janardhan Thakur, the promoters of the project had filed a suit for recovery of the advances given and hence the liability of the assessee to return the same was established whereas in the present case, no such suit was filed. In view of the above, the CIT(A) sustained the addition made by the AO.
Against this, the assessee is in appeal before us. The Ld. AR submitted that a sum of Rs.19,62,00,000/- was received as an advance for procurement of lands from M/s. Metrocorp pursuant to an agreement dated 10/02/2006. M/s. Metrocorp advanced a sum of Rs.85 lakhs on the date of agreement and further sums over a period of time aggregating to Rs.19,62,00,000/-The Ld. AR submitted that the last payment was received from M/s. Metrocorp on 07/08/2007 with almost the entire advance being received before 31/03/2007 and further that all amounts were received only by way of account payee cheque. The Ld. AR submitted that due to various reasons including litigations pertaining to the project being developed by Metrocorp the said firm could not pay any further advance to the assessee to procure the lands and as such, the amount received by him was treated as an advance for procurement of lands. The Ld. AR submitted that the assessee was willing to fulfil his obligation under the agreement on receipt of the balance amount from M/s. Metrocorp and the amounts paid by Metrocorp to him was also confirmed by them by authenticating the statement of account of the said firm in the books of the assessee. It was submitted that the assessee confirmed that he did not claim any expenditure or deduction in relation to the advance received from M/s. Metrocorp towards procurement of lands in the present or in any earlier years and that the said advance remained a liability in his books pending performance of his obligation under the agreement.
5.1 The Ld. AR further submitted that the advances of Rs.20,11,00,000/- and Rs.1,00,00,000/- received from M/s. Metrocorp and M/s. Metrocorp Infrastructure
Ltd. respectively was for the procurement of land towards the projects proposed to be developed by the said concerns. It was submitted that after payment of some amounts towards procurement of lands, the said parties discontinued to pay the further amounts for various reasons including certain internal disputes regarding the management of their concerns and other factors. Out of the advances received as above, the assessee made initial payments towards procurement of lands to several parties aggregating to Rs.5,53,81,059/- which is shown under loans and advances in the financial statements as on 31/03/2015.
5.2 Further, the Ld. AR submitted that the provision of section 56(2)(ix) of the Income Tax Act 1961 invoked by the AO to make the disputed additions to th income of the assessee are not applicable to case of the assessee. The Ld. AR submitted that the additions made to the income of the assessee by invoking the provisions of 56(2)(ix) suffers from lack of jurisdiction as the said section per se do not apply and cannot be invoked in the case of the assessee for the following reasons: i) Section 56(2)(ix) of the Income Tax Act 1961 which was inserted with effect from 01/04/2015 y amendment made in the Finance (No. 2) bill, 2014, read as follows: any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if, - (Emphasis supplied) (a) such sum is forfeited; and (b) the negotiations do not result in transfer of such capital asset; Thus, it is abundantly clear from reading of the provision itself as above that the sum of money received as an advance or otherwise should have been in the course 8 of negotiations for the transfer of capital asset. According to the Ld. AR, It is a well settled principle of interpretation supported by a catena of judicial decisions including that of the Apex Court that the intention of the legislature in is to be strictly gathered from the language of the provision particularly where the language is plain and unambiguous. The Ld. AR relied on the following decisions in this regard 1. Smt.Tarulata Sharadas Vs CIT (1977) 108 ITR 345(SC) 2. CIT Vs Calcutta Knitwears (2014) 362 ITR 673 (SC) 3. Indian Bank Associations and Ors. Vs Devkala Consultancy Services and Ors (2CC1) 267 ITR 179 (SC) 4. Nathuram Agarwal Vs State of Madhya Pradesh (1999) 8 SCC 667 (SC) 5. Tata Consultancy Services Vs State of Andhra Pradesh (2004) 271 ITR 401(sc) According to the Ld. AR, the above principle is even more applicable in this case as the addition was made in the case of assessee by invoking the deeming provision to tax a receipt as an income, where the wordings of the provisions being invoked have to be construed strictly. The Ld. AR submitted that a proviso was inserted in Section 51 of the Income Tax Act which dealt with money, received in respect of Negotiations in relation to a “Capital Asset" by the Finance(No. 2) Act, 2014 simultaneously with the insertion of section 56(2)(ix), there by further confirming the analogy that the provisions of section 56(2)(ix) would apply to the advances received in relation to a "Capital Asset" and not "stock in Trade".
5.3 Further, the Ld. AR submitted that a reading of the agreement entered into dated 10/02/2006 between Adishree Properties a Proprietary Concern of Ravi Shankar Shetty (Appellant) and M/s. Metrocorp, which has been taken as a basis for making additions, would reveal the following important facts: a) That the procurer/coordinator i.e., M/s. Adishree Properties, a Proprietary Concern of Ravi Shankar Shetty (Appellant),is in the business of building and selling of iand, having a expertise in identification of land, ascertaining their suitability of land or commercial exploitation etc. (Refer Page 2of the Agreement). b) That the Promoter/Purchaser M/s. Metrocorp is in the business of promotion of modern township, residential, industrial and commercial complexes etc., and had approached the Appellant to facilitate the procurement of lands in furtherance of its Business objectives (Refer page 1 of the Agreement).
As is discernible from the agreement, the Ld. AR submitted that the amounts advanced by the Promoter/Purchaser M/s. Metrocorp to M/s. Adishree Properties a Proprietary concern of Ravi Shankar Shetty (Appellant) was to identify, procure and acquire lands which would constitute “Stock in Trade” in hands of the promoter/coordinator and will also be regarded as an advance towards the procurement/acquisition of lands as “Stock in trade” in furtherance of the business of the proprietary concern of the assessee M/s. Adishree Properties. In other words, the advance given and advance taken are for the purpose of and in relation to procurement/acquisition of lands as “Stock in Trade”.
5.4 The Ld. AR further submitted that as the advances received are in the course of negotiations for transfer of “Stock in Trade” and not a Capital Asset” both in the hands of the payer i.e., M/s.Metrocorp and the payee i.e., the recipient M/s. Adishree Properties Proprietary Concern of Ravi Shankar Shetty (Appellant), the provisions of section 56(2) (ix) are not applicable to the facts of the assessee’s case.
5.5 The Ld. AR submitted that the assessee had received letters from M/s Metrocorp and from M/s. Metrocorp Infrastructure Ltd. in which the following facts have been clearly stated and confirmed : a) That M/s Metrocorp and M/s Metrocorp Infrastructure Ltd has not advanced further monies to Sri. Ravi Shetty, proprietor of Adishree properties (Appellant) towards the aforesaid procurement agreement, as a result of which he is yet to fulfil his obligations under the agreement. b) That the amounts already paid bv M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd to Ravi S Shetty (Appellant) has been shown as advance in the books of the said entities . The Ld. AR submitted that these letters are critical evidence in support of the assessee’ss claim and goes into the root of the matter on which the addition was made.
5.6 The ld. AR submitted that the Assessing Officer in Para 1 of the Remand Report stated that the assessee had not responded to the e-mail communication dated 28/11/2017 by furnishing confirmation regarding amounts received from M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd. and therefore had not utilized the opportunity of furnishing the same in the gap of one month between the date of e- mail communication and the date of the order. It was submitted that this averment of the Assessing Officer was factually incorrect as the assessee had responded immediately to the e-mail vide his submission dated 02/12/2017 and 20/12/2017 on the subject matter of additions. It was submitted that there as no murmur of impending additions made by the Assessing Officer and no show cause notice was issued on the assessee based on his submissions and consequently, the assessee was under the bona fide belief that the confirmations filed by the assessee and the explanations given by the assessee were in order and accepted by the Assessing Officer.
5.7 The Ld. AR submitted that the Assessing Officer had herself affirmed the fact that Sri Rathan Kumar the Additional Director of M/s. Metrocorp Infrastructure Ltd. and Manager of M/s. Metrocorp had attended the summons u/s. 131 and furnished statements and confirmations regarding advances of Rs.20,11,00,000/- given by M/s. Metrocorp and Rs.1,00,00,000/- from M/s. Metrocorp Infrastructure Ltd. which proves beyond doubt that not only the said concerns were represented by a designated official but also that the confirmation of balances of the advances given to the assessee were produced.
5.8 The Ld. AR further submitted that in para 3 of the Remand Report, the Assessing Officer has reproduced statements made by Sri Rathan Kumar for and on behalf of M/s. Metrocorp Infrastructure Ltd. and M/s. Metrocorp. In para 1 of the same, the Assessing Officer had confirmed that Sri Rathan Kumar was unable to furnish the financial statement of M/s. Metrocorp for the years in which the advances were given to the assessee and it was further stated that only ledger accounts were provided showing bank accounts transactions for which bank statements were not produced. In this regard, it was stated that the assessee had furnished a letter dated 29/01/2019 which clearly showed that the assertion made by the Assessing Officer is factually incorrect as copies of financial statements of M/s. Metrocorp for the year in which the advances were given were available on record. Regarding Sri Rathan Kumar not being able to produce the bank statements of M/s. Metrocorp, it was stated that Sri Rathan Kumar had joined the group only from 31/08/2016. The Ld. AR submitted that the evidence of the advances received by the assessee from the parties through banking channels was clearly established by the assessee in the ledger statements produced before the Assessing Officer. According to the Ld. AR, the averment of the Assessing Officer that necessary supporting evidence for Rs.110 crores investment in M/s. Metrocorp was not provided is incorrect as audited financial statements of M/s. Metrocorp for the year ending 31/03/2008 clearly showed investment from an international investor M/s. Pramerica. The Ld. AR submitted that the averment of the AO that M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd. had not completed a single project is of no consequence as the assessee was in no way responsible for the completion of projects by the said concerns. It was submitted that the financials of M/s. Metrocorp Infrastructure Ltd. for year ended 31/03/2009 clearly showed that an amount of Rs.76,78,24,728/- was incurred as project cost for project ‘Nirvana’ and the non submission of any documents pertaining to the project was in no way due to the fault of the assessee.
5.9 The Ld. AR submitted that M/s Metrocorp had filed its return of income for the A.Y. 2007-08 and A.Y. 2008-09 and M/s. Metrocorp Infrastructure Ltd. had filed its return of income for the A.Y. 2009-10 and assessments of both the concerns were completed u/s. 143(3) of the I.T. Act. The Ld. AR submitted that the financials of M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd. reflected the advances. The Ld. AR submitted that the nature of lands being procured was held as business asset i.e. ‘Stock in Trade’ by the assessee and quoted from procurement agreement as follows: i) Whereas the Procurer/Co-ordinator is in the business of buying and selling of land, undertaking joint development agreements and his having expertise n identification of land, verifying the marketability of title, suitability of the land for commercial exploitation and negotiation with the land owners. ii) Whereas the Prompter/Purchaser herein being engaged in the promotion of modern townships, residential, industrial and commercial building complexes etc. have been on the lookout for an ideally located compact and contagious block of lands for the promotion and development of a modern township consisting of residential, industrial and commercial sites together with all modern facilities, amenities and infrastructure.
The Ld. AR submitted that the procurement agreement showed that the assessee was in the business of buying and selling of lands. Thus, it was clear that the nature of asset was procured for the purchaser and being acquired by the assessee as part of his ‘Stock in Trade’ and not a capital asset.
5.9.1 Regarding answers to Question 21 and Question 22 of the statement recorded from Mr. Rathan Kumar in the remand report, the Ld. AR submitted that the Assessing Officer had not reproduced certain important aspects of the sworn statement of Mr. Rathan Kumar as follows: Answer to Question 12, Shri Rathan Kumar has clearly stated that the advances were to the appellant to procure land for its project ‘Nirvana’. The said project located at Sadahalli Village, Devanahalli Taluk, Bangalore Rural District.
Answer to Question 17, Sri Rathan Kumar has clearly stated that the services of Adishree Properties were employed because of their expertise in coordinating, procuring and acquiring lands and ancillary activities of negotiating with Land Owners, identification of land and its marketability.
Answer to Question 22 Sri Rathan Kumar has clearly stated that M/s. Metrocorp have not taken any legal action against Adishree Properties. Since we have no further advanced that remainder amount as per Procurement Agreement dated 10/02/2006.
5.9.2 The Ld. AR submitted that the judgment of the Apex Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons dated 11 September, 1996 is distinguishable on facts of the present case. The Ld. AR submitted that the representative of M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd. had clearly stated that no legal action could be taken against the assessee since further advances were not given to the assessee to enable him to fulfil his obligation under the Procurement Agreement.
5.9.2 It was further submitted by the Ld. AR that in the case of the assessee, the following points need to be emphasized and placed on record. a) That the sum of money received by the Appellant was not for the transfer of any capital asset owned or held by him but only for the procurement of the land from others. b) That the advances received for procurement have not been forfeited by the appellant as on that date. c) That the negotiations for transfer of the lands to be procured by the Appellant cannot be said to have been concluded as the Appellant had to receive further monies towards procurement to perform his obligations under the procurement agreement, which fact has also been confirmed by the representative of the Company which had given such advances in his recorded in answer to Question No. 22 of the remand report. 15 As can be seen from the above, it was submitted that none of the conditions for invoking the provisions of section 56(2)(ix) are applicable to the appellant’s case and hence the additions made by the Assessing Officer by invoking the aforesaid provisions of section 56(2)(ix) of the I.T. Act lacks jurisdictions and has been made without the force of law. The above contention is without prejudice to the contention already taken that the negotiations between the Appellant and the Concerns M/s. Metrocorp and M/s. Metrocorp Infrastructure Ltd. which paid the advance to him was for acquiring lands which formed part of stock-in-trade and not for the purpose of acquisition of capital assets. The Ld. AR submitted that the provisions of section 56(2)(ix) was introduced into the Income Tax Act by Finance Act, 2014 by amendment to section 56 of the Income Tax Act. Simultaneously with the insertion of section 56(2)(ix) a proviso was inserted in section 51 of the I.T. Act in effect to provide that in the event any advance received in the course of transfer of capital asset has been included as income u/s. 56(2)(ix), the same need not reduced from the cost of asset. In other words, it was submitted that section 56(2)(ix) was introduced to fix the point of taxability of the amount receive and forfeited in the negotiation of transfer of a capital asset which was not taxable u/s. 51 but only deferred to a future date by allowing the advance forfeited to be reduced from the cost of the asset. Thus, based on the above submissions, the Ld. AR prayed that the addition may be deleted and the appeal of the assessee allowed.
The Ld. DR on the other hand submitted that the amounts of Rs.20,11,00,000/- and Rs.1,00,00,000/- given by Metrocorp and Metrocorp Infrastructure Ltd., respectively to the assessee for procurement of land was not returned to these parties is not in dispute. The Ld. DR submitted that the assessee claimed that these advances remained a liability in his books and he may have to return the same at some further date, particularly if these concerns face liquidation proceedings. The AO has noted that only an amount of Rs.5,53,81,059/- has been given by the assessee as advances and balance invested in fixed assets and investments in the assessee’s name. The Ld. DR submitted that the advances were in the nature of trade advances and not having returned the same and having utilized them for making investments in his own name, these amounts had acquired the nature of income in the hands of the assessee. According to the Ld. DR the assessee claimed that he is liable to return these advances but the facts of the case indicate that there has been virtual forfeiture of the amount as the promoters have made no attempt to recover the same and in the present case, no suit was filed. In view of the above, the Ld. DR submitted that the CIT(A) was justified in upholding the additions made by the AO.
We have heard the rival submissions and perused the relevant records. The main issue herein is with regard to invoking of provisions of section 56(2)(ix) of the I.T. Act in respect of liability shown in the name of M/s. Metro Corp at Rs.20.11 crores and M/s. Metro Infrastructure Ltd. at Rs.1 crore. In the financial statement for the year under consideration, this amount was treated by the AO as income of CIT(A). This amount has been received by the assessee from M/s. Metro Corporation vide agreement dated 10/02/2006. The assessee is in the business of buying and selling of land. He is in the real estate business. M/s. Metro Corp approached the assessee to facilitate the procurement of land for their business. Similarly, Metro Corp Infrastructure Ltd. advanced money to the assessee amounting to Rs.1 crore in the month of April, 2008. These amounts are stated as outstanding in the balance sheet of the assessee from year to year and also in the financial year ending 31/03/2015 relevant to the assessment year 2015-16. During the course of assessment, on enquiry by the AO, the assessee furnished the confirmation letters from the parties which are as follows:
METROCORP [Narasimha Towers, 46/2,3rd floor,Fourth Cross, Malleshwaram Bangalore 560003] 14/11/2018 To The Assistant Commissioner of Income Tax Circle 6(3)(1), Bangalore Sir, Subject: Confirmation of amount paid to Sri Ravi Shankar Shetty,Proprietor of M/s. Adishree Properties This is to confirm that Metrocorp Infrastructure Limitedhad paid an advance of Rs.1,00,00,000/- (Rupees One Crore only) to Mr. Ravi Shankar Shetty, Proprietor, Adishree Properties No. 89, 1st Floor, 15th Main, RMV Extension 560 080 , in the month of April 2008. The said advances were made towards procurement of land. We confirm that we have not advanced further moneys to Shri Ravi Shankar Shetty towards the aforesaid procurement of land, as a result of which, he is yet to fulfill his obligations under the agreement. The amount paid to Sri Ravi Shankar Shetty has been shown as an advance to Metrocorp’s books 18