2015 (2) TMI 244 - AT - Income Tax

Advance for the sale of property - income receipt in current year - Held that - Receipt of ₹ 20 lakhs as on 14.11.2005 pertains to A.Y. 2006-07 and not to A.Y. 2007-08. In case, assessee could not furnish evidence of return of cash that can only go against assessee to certain extent, but amount received as on 14.11.2005 cannot be the income in A.Y. 2007-08, just because cash component was not accounted for as noted by A.O. Looking at any way, amount of ₹ 20 lakhs cannot be brought to tax in the hands of assessee as (a) he is not owner of the property (b) he was not trading in the said property (c) it is not received in the year under consideration. Therefore, we are unable to uphold the order of the authorities. Allowing the grounds raised by assessee, we delete the addition of ₹ 20 lakhs made in the hands of assessee. - Decided in favour of assessee.

Summary

Issues:
Assessment of sum received in advance for property sale in assessee's hands for A.Y. 2007-08.
Assessment of income for A.Y. 2007-08 for sum received in the previous year relevant to A.Y. 2006-07.

Analysis:
1. The appellant, an individual and Director of a construction company, was assessed for receiving Rs. 20 lakhs in advance for a property sale. The agreement for sale was found during a search operation and subsequently canceled. The Assessing Officer (A.O.) treated the Rs. 20 lakhs as the appellant's income for A.Y. 2007-08.
2. The appellant contended before the Ld. CIT(A) that the property belonged to a different company and the agreement was canceled, with the amount returned. The Ld. CIT(A) upheld the assessment citing the original agreement and lack of evidence of cancellation.
3. The Tribunal noted the agreement for the property sale at Rs. 1.2 crores but assessed only Rs. 1 crore in the company's hands and Rs. 20 lakhs in the appellant's hands. The Tribunal found discrepancies in the assessment and lack of evidence supporting the Rs. 20 lakhs as the appellant's income.
4. The Tribunal emphasized that the amount received in advance pertained to A.Y. 2006-07 and could not be taxed in A.Y. 2007-08. It concluded that the appellant, not being the property owner or trader, and the amount not being received in the relevant year, the addition of Rs. 20 lakhs in the appellant's hands was unjustified.
5. Ultimately, the Tribunal allowed the appeal, deleting the Rs. 20 lakhs addition in the appellant's assessment for A.Y. 2007-08. The judgment highlighted the importance of proper evidence and timing in determining taxable income, ensuring fairness in tax assessments.