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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S. SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the assessee emanates from the order of CIT(Appeals), Pune-5, Pune dated 20.11.2017 for the assessment year 2013- 14 as per following grounds of appeal:
“1. The learned CIT(A) erred in law and on facts in confirming the addition of refundable advances of Rs.50,00,000/- as business income. 2. The appellant craves leave to amend or alter any of the grounds of appeal or add to the same, if deemed necessary.”
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The facts of this case appears in the order of CIT(Appeals) which are as
follows:
“5. Ground No.2, the Appellant agitates the action of the AO in treating the advances of Rs. 50,00,000/- as business Income. 5.1 The issue finds mention at Para 4 of the Assessment order.' The AO observed that, the Assessee had purchased a plot of land at Wagholi on 27.12.1997 with two others viz., Shri. Bharat Chandanmal Kothari and Shri. Surendra Sohanraj Oswal for Rs.26,74,500/- wherein the Assessee had 1/3rd share in land and therefore, her share of cost was Rs.8,91,500/-. The Assessee along with the other co-owners entered into a Joint Venture Agreement with M/s. Suyog Development Corporation Ltd on 16.12.2009.· The AO states that the stamp duty valuation of the entire property on 16.12.2009 was Rs.2,02,21,110/- whereas, the Assessee's share in the stamp duty valuation was Rs.67,40,670/-. The Assessee received a consideration of Rs.4,58,68,673/- from her JV partner till 31.03.2013. The Assessing Officer gives the details of this consideration received by the Assessee as under:
Sr. A.Y. Consideration received No. 1 2010-11 47,00,000/- 2 2011-12 3,00,000/- 3 2012-13 50,71,403/- 4 2013-14 3,57,97,270/-
5.2 The Assessing Officer also observed/hat the Assessee had also offered a receipts of only Rs.4,08,68,673/- to tax, whereas, Rs. 50,00,000/- received by the Assessee during A.V.2010-11 and 2011- 12 had not been offered to tax on the plea that Rs.20,00,000/- was an interest free deposit as per the JV Agreement with M/s.Suyog Development Corporation and Rs.30,00,000/- was an additional interest free advance given by the JV partner. The Assessing Officer states that both these amounts have been taken to the Balance Sheet without offering the same to tax. 5.3 The Appellant has computed the Capital Gains for A.Y. 2010-11 on account of the JV Agreement after claiming Index Cost of acquisition of Rs.17,02,199/- as a deduction against cost of acquisition of Rs.8,91,500/-. The Assessee claimed a Capital Gain of Rs.50,38,171/- for A.Y.2010-11 for which she has also claimed a deduction of Rs.21,93,054/- u/s.54F of the I.T. Act and accordingly, Net Capital Gain of Rs.28,45,117/- was offered to tax by her during A.Y.2010-11. The Assessing Officer opined that, as per the provisions of Sec. 51 of the I. T. Act, the Assessee should have offered to tax an amount of Rs.3,91,28,303/- for A.Y.2013-14 as against Rs.3,41,28,303/- offered to tax by her. On being queried the AR of the Assessee stated that, Rs.50,00,000/- was an advance/additional advance received by the Assessee from the JV partner and therefore, not taxable. The Assessing Officer states that as per the JV Agreement, the receipts receivable by the Assessee till 31.03.2013 were more than the actual receipt of Rs.4,58,68,673/- worked out by the Assessee. The Assessing Officer has
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reproduced the relevant portion of the notice u/s.142(1) dated 19.11.2015 in the Assessment order which is not been repeated here for the sake of brevity.' Suffice it to say that, the Assessee contended that, her JV partner had shown Rs.20,00,000/- as an advance and Rs.30,00,000/- as additional advance in her Books and on the basis of this Rs.50,00,000/- received by her was not taxable. 5.4 The AO states that it was an ad mitted fact that, the Assessee had given her land for development to the JV Partner and was in receipt of percentage of her share of sale consideration received on account of sale of flats sold by the JV partner. The AO also notes that in a normal situation, the Assessee would be tax according to the dues to be received by the Assessee as per the Joint Venture Agreement. The AO notes that, the payment due to the Assessee from the JV partner on the basis of receipt of sales proceeds as on 31.03.2013 as per the JV agreement was more than Rs.4,58,68,673/- received by her. The Assessee and her JV Partner could not prove this fact to be incorrect. The Assessing Officer also observed that, the consideration paid by the JV partner to two other co-owners of the land holding equal share in land was also not uniform. He therefore, opined that, it was very clear that the payments were not strictly in accordance with the terms of the JV Agreement. Under these circumstances, according to the Assessing Officer, the entire receipt of the Assessee, received from the JV Partner partook the nature of taxable receipt, irrespective of the nomenclature of the payment /receipts in the Books of the JV partner and the Assessee. The AO held that, merely because the Assessee and her JV partner had shown the receipts/payment as advance in their respective Books could not be, a legitimate reasons for excluding the receipts from the taxable receipts. He opined, in this manner any Assessee could differ his tax liability at his sweet Will by having an arrangement with the Joint Venture Partner by merely changing the nomenclature of the payment. Holding that this was not as per the intention of the legislature, the Assessing Officer stated that there was no merit in the Assessee's contention. Reproducing See. 51 of the I.T. Act, the Assessing Officer held that, for taxing Capital gains the actual receipt of sale consideration was not necessary. Nevertheless, to be judicious, the Assessing Officer gave the Assessee this benefit and allowance of Rs. 67,40,670/- had already been given out of the Total receipts. While computing the Capital Gains, keeping in view the ratios of provisions of See. 51 of the I.T. Act, the Assessing Officer held that, the advance and additional advance received of Rs. 50,00,000/- was obviously a part of Rs.67,40,670/- allowed to the Assessee .. Any receipt in excess of Rs.67,40,670/- needed to be taxed in the hands of the Assessee as her business Income irrespective of nomenclature given to the receipt. The Assessing Officer states that till 31.03.2013, the Assessee had received Rs.4,58,68,673/- which was less than the amount that she should have received as per the JV Agreement. Of this Rs.67,40,670/- was offered to tax while computing the Capital Gains for A.Y.2010-11. The Assessing Officer held that, the Assessee should have therefore, offered receipts of Rs.3,91,28,303/-(Rs.4,58,68,673 - Rs.67,40,370/-) to tax for the year under consideration against Rs.3,41,28,303/- offered by her. In view of these facts, the Assessing Officer held .that there was suppression of receipts to the tune of Rs.50,00,000/- and tax the same in the year under consideration. In absence of any satisfactory explanation from the Assessee, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the I.T. Act.
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Thereafter, the assessee took the matter before the ld. CIT(A) and
detailed written submission was made before the First Appellate Authority.
The relevant parts are reproduced below:
“Assessee along with Bharat C. Kothari & Surendra S. Oswal has entered in Joint Development Agreement (JDA) with Suyog Development Corporation Ltd. (Suyog) on 16.12.2009. As per JDA Assessee received 11% of Sale Receipts from Suyog after commencement of Construction ( as per page 9 of Agreement referred as Annexure-1) Assessee has also paid Long Term Capital Gain (LTCG) in FY 2009-10 (AY 2010-11) on Stamp Duty Value of Rs. 67,40,370/- after deducting cost of land (Refer Annexure 2 i.e. lndex ii & Annexure 3 i.e. Copy of Income Tax Return along with computation of Total Income, Capital Account & Balance Sheet). Assessee has received Rs. 20,00,000/- as Refundable Deposit to be refunded after completion of project as per JDA (Refer Annexure 1 & 4) and Rs. 30,00,000/- as Refundable Advance in FY 2009-10 & FY 2010- 11 i.e. before commencement of Project (Refer Annexure 4 i.e. Confirmation Letter from Suyog & Relevant Schedules of Balance Sheet of Suyog for FY 2011-12 & FY 2012-13). Above mentioned Amount of Rs.20,00,000/- & Rs. 30,00,000/- were shown continuously as liability in Balance Sheet of Assessee till FY 2016-17 (Refer Annexure 5 i.e. Balance Sheet as at 31/03/2011 & 31/03/2012) and Annexure 6 i.e. Copy of Income Tax Return along with Computation of Total Income, Profit & loss Account and Balance Sheet of AY 2013-14(FY 2012-13). We are also attaching reply given to Assessing Authority at the time of Assessment of AY 2013-14 (Refer Annexure 7). Reply to Para 4.6 & 4.7 of Assessment order As per JDA Assessee is entitled to 11% of Sale Receipts after amount received by Suyog. Assessee has received upto 31/03/2013 (11% of Sale Receipt) Rs.4,08,68,673/- (-) Stamp Duty value of Land on which LTCG is paid in AY 2010-11 Rs.67,40,370/- Profit shown in A.Y.2013-14 ( F.Y.2012-13) Besides this Assessee has received Rs.50,00,000/- as refundable deposit and advance as mentioned above to be refunded after completion of project which is not taxable in section 51 as mentioned in Para 4.6 and 4.7 of Assessment order.”
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The ld. CIT(A) after considering the assessment order, facts of the case
and the written submissions of the assessee upheld the addition made by the
Assessing Officer as per reasons in his order which is on record.
At the time of hearing, ld. AR of the assessee vehemently argued that
the amount of Rs.50,00,000/- were received as refundable advances and it
cannot be taxed as ‘business income’. In support of his contention, the ld. AR
placed before us, in the paper book, the confirmation from Suyog
Development Corporation Ltd. of deposit and Advances given and extract from
Balance Sheet of Suyog Developers which are placed in page 2 and 3 of the
paper book. The arguments of the ld. AR was wherein in the books of
account, assessee has disclosed the amount ‘as advance” and persons from
whom advances have been taken, they have also given confirmation which is
placed before Revenue Authority that the amount is in the nature of advance,
then within no purview of taxing statutes, it can be taxed as ‘business
income’.
On the other hand, Ld. DR for the Revenue placed strong reliance on
the findings of Sub-ordinate Authorities.
We have heard the rival contentions and analysed the facts and
circumstances of the case and perused the materials on record. We find that
in the paper book filed before us, the concerned company i.e. Suyog
Development Corporation Ltd. has given confirmation in the name of assessee
that amount of Rs.50,00,000/- is interest free deposit given to the assessee
by the Company and in the corresponding page break up is also given. We
would make the two documents placed in the paper book as part of the order
annexed as Annexure 1 and Annexure-2.
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Annexure -1
7 ITA No.380 /PUN/2018 A.Y.2013-14
Annexure-2
The ld. DR was confronted with these documents and he could not
bring any other material or evidence on record which can controvert these
facts on record. We find that the assessee in her books maintained the
amount as deposits/advances received. Similarly persons from whom
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advances have been taken, they have also given confirmation to the extent that amounts were given as deposits/advances and have made same treatment in their books of accounts.
In such circumstances, addition in the hands of the assessee is not warranted. In view of the aforesaid discussion and examination of the facts and circumstances, we set aside the order of CIT(Appeals) and allowed the appeal of the assessee.
In the result appeal of the assessee is allowed. 10.
Order pronounced on 20th day of December, 2018.
Sd/- Sd/- R.S. SYAL PARTHA SARATHI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 20th December, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals), Pune-5, Pune. 4. The Pr. CIT, Pune-4, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
9 ITA No.380 /PUN/2018 A.Y.2013-14
Date 1 Draft dictated on 20.12.2018 Sr.PS/PS 2 Draft placed before author 20.12.2018 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved AM/JM by second Member 5 Approved draft comes to Sr.PS/PS the Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order