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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-20, Mumbai [in short CIT(A)], in appeal No. CIT(A)-20/The Income Tax Officer-9(1)(2)/IT-18/2013-14 dated 02.12.2015. The Assessment was framed by the Income Tax Officer, Ward-9(1)(2), Mumbai (in short ‘ITO') for the A.Y. 2010-11 vide order dated 11.03.2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making addition of ₹ 75 lacs on account of land. For this assessee has raised the following ground No.1: -
“1. The Ld. CIT(A) erred in confirming the addition of ₹ 75,00,000/- on account of sale transaction of land.”
Briefly stated facts are that the assessee is a Private Limited Company engaged in the business of builder and developers. The assessee entered into agreement for purchase land bearing survey No. 44 Hissa No. 5/1 and 10/1 and Survey No. 39 Hisa No. 5 at Village Mauje Valiv, Taluka Bassein, Dist. Thane, Vide Agreement dated 24/11/2008 from Shri Bhikamchand Bhawarlal Sisodia (Acting as the constituted attorney of owners of plot of land viz 1) Mr. Abdul Kalam Mohammed Islam Shaikh 2) Mr. Salman Abdul Karim Khan and 3) Mr. Mohammed Umar Tajmmul Hussain Khan and out of the total sale consideration of ₹ 1.25 crore, the assessee paid a sum of ₹ 25 lacs. The assessee started construction activity on this plot and shows work in progress in FY 2008- 09 at ₹ 1,73,146/- which includes plot expenses of ₹ 67,02,675/-. In financial year 2009-10 the assessee continue construction activity further incurred expenditure of ₹ 1,09,77,176/-. Subsequently, in June 2009 the assessee received a notice from Punjab National Bank with respect to recovery proceedings initiated by the Bank with Debt Recovery Tribunal (DRT). In the notice it was mentioned that out of three pieces of land purchased by assessee 2 pieces were already mortgaged with the Bank prior to the year 2007. Accordingly, the assessee refused to make further payment of sale consideration and contacted Shri Bhikamchand Bhanwerlal Sisodia (BBS) to cancel the deal and return this amount of ₹ 25 lacs already paid by the assessee. Shri BBS, the constitute attorney of the owners refused to cancel the deal and agree to reduce the purchase cost of land by ₹ 25 lacs and revised purchase price of ₹ 1 crore and ₹ 25 lacs is already paid and therefore ₹ 75 lacs is balanced and proposed to arrange the purchaser for the said land. Finally, BBS arrange for sale of companies land for a sum of ₹ 233.70 lacs. In this agreement, the assessee was liable for payment of ₹ 75 lacs to lump sum investment on behalf of BBS towards payment of balance purchase of land and in lieu of this the company executed the power of attorney for sale of unencumbered land in favour of Laxmi Investment Pvt. Ltd., who in turn executed a deed of conveyance dated 19.06.2009 on behalf of assessee company in favour of PK hospitality service Pvt. Ltd. for a sum of ₹ 1 crore out of ₹ 25 lacs was paid to the assessee company and balance of 75 lacs was paid to Laxmi Investment Pvt. Ltd. by PK hospitality Serviced Pvt. Ltd.. For the unencumbered land bearing Survey No. 44, Hissa No. 10/1 and survey No. 44, Hissa No. 1/1, the assessee company executed the power of attorney in favour of BBS for sale and accordingly BBS sold the unencumbered land to PK Hospitality Services Pvt. Ltd. by executing a deed of conveyance dated 22-08-2009 for a sum of ₹ 54 lacs. The assessee sold constructed portion to Laxmi Investment Pvt. Ltd. for a sum of ₹ 2.33 crores. The assessee claimed 75 lacs as liability paid to Laxmi Investment towards purchase of land. But the AO was not convinced with the submissions of the assessee and he added the sum as income of the assessee on account of unrecorded sale price of the plot of the land by observing as under:-
“9.1 It appears from the submission made by the assessee, as summarized above, that it has revised the liability for purchase of land from Rs.25 lac to Rs. 1 crore during the year. in this regard, it is stated that there is no provision under the I.T. Act to revise the earlier year liability upwardly. Further, the assessee has not furnished any details to explain that the said prior period liability of Rs. 25 lac has actually crystallized during the year. Thus, the assessee's contention of enhancement of liability for purchase of land made in the last year is not in accordance with provision of the I.T. Act. Hence, the contention made by the assessee in this regard is rejected.
9.2 As regards, the payment of Rs. 7 Iakh to M/s Laxmi Investment by PKHSPL, the assessee has contended to have made payment to M/S Laxmi Investment on behalf of BBS towards payment of balance purchase price of land as per revised cost of land at Rs. 1 crore. However, no documentary evidence has been furnished by the assessee for revision/reduction of purchase price from Rs. 1.25 crore to Rs. 1 crore. Further, the assessee has not furnished any evidence to explain that the said Rs. 75 lakh paid to M/s Laxmi investment has been accounted for by the original land owner viz. Abdul Kalam Mohammed Islam Shaikh & Others. Therefore, the contention of the asset is not tenable in view of the facts of the case.”
Aggrieved, assessee preferred the appeal before CIT(A).
The CIT(A) also confirmed the addition by observing that the assessee has not furnished any evidence to explain that the sum of ₹ 75 lacs paid to Laxmi Investment has been accounted for by the original land owner. For this he observed in Para 4.7 as under: -
“4.7 The assessee vide letter dated 06.02.2013 furnished a detailed submission. The submission of the assessee were considered while framing the assessment order. The Ld. A.O. has noted that the assessee was following mercantile system of accounting. It had recognized in its books for A.Yr. 2009-10 liability for purchase of land to be Rs.25 lacs. The A.O. has also discussed about revision of liability for purchase of land in books from Rs.25 lacs to 1 crore. However, since no evidence was filed before the A.O. in this regard the A.O. was constrained to reject the submission of the assessee. The A.O. also noted that the assessee had claimed that payment of Rs. 75 lacs was made to MIs. Laxmi Investment by P.K. Hospitality Services P. Ltd. on behalf of the appellant, however in absence of documentary evidence the Ld. A.O. rejected the claim of the assessee. The A.O. noted that the appellant had not furnished any evidence to explain that the said sums paid to M/s. Laxmi Investment has been accounted for by the original land owners i.e. Abdul Kalam Mohammed Islam Shaikh and Others. Ongoing through the above facts it is clear that assessee has failed to establish through proper evidence that liability of Rs. 75 lacs towards purchase of Land crystalised during the year. During the appellate proceeding also no evidence has been filed to establish that the liability arose during the year. In view of this discussion there is no cause to interfere within the additions made by the AO and the addition made is upheld. Accordingly, the grounds of appeal in this regard are allowed.”
Aggrieved, now assessee is in second appeal before Tribunal.
Before us, the learned Counsel for the assessee relied on the deed of conveyance dated 25.11.2008 (which is enclosed at pages 5 to 14 and translated copy at pages 15 to 28) and the relevant clause d 3 clearly states that the Laxmi Investment has been appointed as constitute attorney vide power of attorney dated 01.07.2007 and agreed a sum of ₹ 1.25 crores for payment of this land vide clause 3 of the conveyance deed which reads as under:-
“3. The aforesaid non agriculture industrial land at village Valiv bearing survey No. 44 Hissa No. 5/1 area 0-31-2 Hector Are, Survey No. 44 Hissa No. 10/1, area 0-66-6 Hector Are Survey No. 39 Hissa No. 5 part Area 0-76-5 Hector Are is agreed to be sold by the party giving execution to party giving execution to party receiving in execution for a total sum of ₹ 1,25,00,000/- [Rupees one crore twenty five lac only] and the vendor hereby admit having received the said sum and in witness whereof while executing this agreement, or before that the purchaser has paid to the vendor a total sum of ₹ 1,25,00,000/- [Rupees one crore twenty five lac only] and the vendor hereby admit having received the same and hereby discharge and release the purchaser form the said liability.”
The learned Counsel for the assessee further took us through the deed of conveyance dated 19th June 2009 entered into between assessee company and constitute attorney of Laxmi Investment and also mentioned the actual owner of land vide clause b at page 36 of assessee’s paper book which reads as under:-
“b) The said 1) Mr. Abdul Kalam Mohammed Islam Shaikh 2) Mr. Salman Abdul Karim Khan and 3) Mr. Mohammed Umar Tajmmul Hussain Khan appointed Shri Khushal Sinh Kakhat Sinh Medtia the proprietor and owner of M/s Laxmi the absolute powers to deal and dispose off the said property more particularly described in the first Schedule hereto written.”
Further, he drew our attention to payment of ₹ 1 crores vide clause e of the conveyance deed dated 19th June 2009 which reads as under:-
“e) By a resolution dated 15/06/09 of its Board of Directors, the vendors has resolved to see, transfer and Convey in favour of the purchasers the said Property and accordingly, the vendors under an agreement dated 25th May 2009 has agreed to sell, convey and transfer to the purchasers and the Purchasers have agreed to purchase and acquire a portion of the total holding of the Vendors, i.e. the said property more particularly detailed in the first Schedule hereunder written, at or for the total lump sum price of ₹ 1,00,00,000/- (Rupees one crore only) in fee simple and the inheritance thereof in possession free from any encumbrances whatsoever and on the other terms and conditions recorded therein.”
Finally, he drew our attention to the receipt of ₹ 1crore by lump sum investment from assessee and the relevant part of conveyance deed dated 19th June 2009 which reads as under:-
“RECEIVED the day and year first hereinabove written of and from the within named Purchasers the sum of ₹ 25,00,000/- (Rupees Twenty Five Lacs Only) by cheque No. 385172 dated 19.06.2009 drawn on the Federal Bank Ltd. Andheri in favour of M/s Bhavik Townshhip & Infrastructure Pvt. Ltd and for the sum of ₹ 75,00,000/- (Rupees Seventy Five Lacs) only by cheque No. 385173 dated 19.06.2009 drawn on the federal bank ltd Andheri (W) in favour of M/s Laxmi Investments being the full and final consideration money as within mentioned to be paid by them ₹ 1,00,00,000/- we say received.”
In view of these facts the learned Counsel for the assessee stated that these details are available before the AO i.e. Conveyance deed dated 19th June 2009 and Conveyance deed dated 25.11.2008. Even the director of the assessee company Shree Hemant B Shah has affirmed the same facts vide affidavit dated 29.09.2009 before the AO.
On the other hand, the learned Sr. DR heavily relied on the assessment order and the order of CIT(A).
We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the DRT matter was not showing signs of abating. Therefore, board decided to approach the BBS and cancel the agreement. BBS refused to cancel the sale deed rather he agreed to reduce the purchase cost of the land by ₹ 25,00,000/- in view of DRT matter i.e. reducing the price of land from 125 lacs to ₹ 100 lacs. The assessee has already paid ₹ 25 lacs. Hence, the balance payable is ₹ 75 lacs. After some negotiations, BBS on his own proposed to arrange for sale of company's land for Rs. 154 lacs to one P K Hospitality Services Pvt. Ltd. (PKHSPL) and Constructed area to Laxmi Investments for a sum of Rs.233.70 lacs. The Assessee accept the proposal vide resolution dated 12.06.2009. BBS informed the company to firstly execute a POA for sale of unencumbered land bearing survey no.39, Hissa No.5 in favour of Laxmi Investments who will execute conveyance in favour of PKHSPL for a Sum of ₹ 100 lacs. He further informed that though desired by the company PKHSPL would not pay him i.e. BBS RS.75 lacs since he would not party of the deed. But PKHSPL will pay the same to Laxmi Investments on his behalf. Thus assessee will received only RS.25 lacs and will get discharge from its liability towards purchase of land. Accordingly, assessee executed POA in name of Laxmi Investments, who, in turn execute Deed of Conveyance dated 19/06/2009 in favour of P.K. Hospitality Services P. Ltd. for a consideration of Rs. 1,00,00,000/-. It Is noticed from the said deed of conveyance that out of sale consideration of Rs.1,00,00,000/- the assessee has received Rs.25,00,000/- vide cheque No.385173 dated 19/0612009 and Laxmi Investments has received the balance amount of Rs.75,00,000/- vide cheque No.385173 dated 19/06/2009. The assessee sold the balance plot of land bearing Survey No.44 & Hissa No. 5/1 & 10/1 and area (H.R.P) 0-31-2 & 0-06-06, through its constituted Attorney BSS to P.K. Hospitality Services P. Ltd vide Deed of Conveyance dated 22/09/2009 for a consideration of Rs. 54,00,000/-. The constructed area on the said plot of land was sold to M/s Laxmi Constructions for a consideration of Rs.2,33,70,000/- vide contract dated NIL. Accordingly, the total sale consideration of Rs.3,12,70,000/- credited on account of sales. In view of these facts, we are of the view that this liability of ₹ 75 lacs has accrued and assessee has rightly claimed this amount as deduction and we allow the same. This issue of assessee’s appeal is allowed.
In the result, the appeal assessee is allowed.
Order pronounced in the open court on 11-05-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 11.05.2018 kao kI ga[- .