ITO 8(1)(4), MUMBAI vs. AVIS MOTORS P. LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार PER Rajendra A.M.- लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order,dtd.05/04/2010 of the CIT (A)-16,Mumbai the assessing officer(AO) has filed the present appeal.Assessee-company filed its return of income on 30/10/ 2007, declaring total income at rupees NIL.The AO completed the assessment,u/s.143(3) of the Act, on 4/12/ 2009,determining the income of the assessee at Rs. 4.80 crores.

2.Effective ground of appeal is about deleting the addition of Rs.4.79 crores on account of sale proceeds received on account of sale of a premises.During the assessment proceedings, the AO found that the assessee had purchased an immovable property located at Andheri- Kurla Road from Jet Airways Private Limited(JET)as per purchase agreement dated 17/07/ 2006 for a total consideration of Rs. 12.16 crores,that the assessee had entered into another agreement for sale on 22/06/2006with Harshil Haren Choksey(HHC) and Bhupinder Singh (BS)and Manisha Choksey(MC),that the assessee had not disclosed any profit on the sale of first floor of the building nor had it shown the receipt of Rs.5 crores in its balance sheet.The AO issued a show cause notice to explain as to why the advance amount received from HHC(Rs.2.71crores),BS(Rs.1.77 crores) and MC(Rs.30lakhs) respectively were not recorded in the books of accounts and were directly credited in the books of accounts of the directors of the company.He further asked as to why the sale consideration received from the above mentioned parties(Rs.4.79crores)should not be treated as income on sale of the first floor of the premises.After considering the submissions made by the assessee,the AO concluded that sale proceeds of Rs. 4.79 crores were not recorded in the books of accounts of the company, that same were recorded in the personal account of the directors. He observed that the assessee had claimed the termination of sale agreement,that it had not submitted any copy of the said agreement during the assessment proceedings,that it was business income of the assessee.Finally,he made an addition of Rs.4,80,60,000/-to the total income of the assessee.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the first appellate authority(FAA).Before him,it was argued that the assessee had entered into MOU with JET, that it also entered into an agreement for sale of first floor of the building to be constructed after taking the possession of the property with three persons,that the sale agreement for first floor was made even before the possession was taken,that in September,2007 the agreement for sale deed dated to 22/06/2006 was terminated by both the parties,that advances received

5422/10-Avis from HHC,BS and MC was repaid,that the evidence demonstrating the repayment was made available to the AO, hat the agreement cancelling the purchase deed was submitted to the AO, that the agreement dated 22/6/2006 was not a sale deed but was an agreement to sale the premises mentioned therein on fulfilling of certain conditions,that it had not given possession of the first floor to the buyers, that by mistake the amount from the purchaser of the first floor was shown in the names of the directors of the assessee. 3.1After considering the submission of the assessee and the assessment order, the FAA held that agreement of sale dated 22/6/2006 was entered between the assessee and the three buyers for the sale of first floor of the building to be constructed for sale consideration of Rs. 5 crores, that the assessee had received Rs. 4.80 crores in advance,that the sum in question was shown in the personal account of the directors, that the property was purchased by the assessee on 17/07/2006 four total sale consideration of Rs.12.16 crores,that the assessee had admitted that by mistake the advance received was taken to the accounts of the directors in place of showing the same in the books of accounts of the company, that the sale agreement dated 22/6/2006 was terminated by the agreement made on 17/09/2007,that the amount received in advance was refunded back to the buyers, that the assessee had proved the genuineness of the transaction by submitting the confirmation of the purchases,that the agreement of June 2006 was made without having the possession of the land and building by the assessee,that the AO had not disputed the genuineness of the transaction of Rs. 4.80 crores,that the advance received by the assessee could not be treated as income because the assessee was not in possession of the land. Finally, he deleted the addition made by the AO. 4.During the course of hearing before us,the Departmental Representative(DR) stated that assessee had not shown the income in its books of accounts received from the purchasers of first floor,that there was no justification for showing the advance in the hands of the directors,that the assessee had received a sum of Rs.4.80 Crores in June,2006 but same was not shown in the return,that the AO was justified in making the addition.The Authorised Representative(AR)contended that the assessee had returned back the money to the purchaser of the first floor of the building to be constructed,that the technical mistake of showing the income in the hands of the directors was explained to the AO,that to obtain the loan from the bank the assessee had shown the advance in the books of accounts of the directors, that the sale had not taken place in June 2006. 5.We have heard the rival submissions and perused the material before us.We find that the undisputed facts of the case are that the assessee had entered into memoranda of understanding with JET for purchase of a property for Rs. 12.61 crores,that the agreement between the assessee and JET was entered into in July 2007,that before getting the possession of the property the assessee had entered into an agreement with three purchasers on 22/ 06/ 2006,that as per said agreement the assessee agreed to hand over the first floor of the property to the buyers,that the purchase agreement between the assessee and Jet Airways was cancelled in September 2007, that the assessee had paid JET Rs. 12.61 crores in the month of July,2006, that the assessee had returned the money to HHC,BS and MC after the agreement with JET was cancelled.We are of the opinion that money received by the assessee from three persons was advance only.The assessee had not shown the advance in its books of accounts is also a fact. But,for that reason,it cannot be held that taxable income had accrued to or it was received by it.The assessee had made payments to the JET.Thus,the advance received from the buyers of the first floor of the property was paid for purchasing the property,In our opinion,the FAA was justified in holding that the advance received by the assessee could not be treated its income.Therefore,confirming his order,we decide the effective ground of appeal against the AO.

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