2014 (6) TMI 1073 - HC - Income Tax

Applicability of Section 28 (iv) - Assessee received payment by various cheques for assigning development rights, balance sum was not received in terms of the Memorandum of Understanding, but did not make any payment, it did not come forward to complete the transaction either - Assessee did not show this amount of as income - HELD THAT - The circumstances in which the Memorandum of Understanding was executed, the sum received have been noted. The property in question was shown as reserved in the development plan by Kalyan Dombivali Municipal Corporation. There were several efforts made to have these properties released. Memorandum of Understanding was not withdrawn nor cancelled. In such circumstances, the Assessee continues to acknowledge the sum received and stated that it was a liability towards M/s. Highland Realities Pvt Ltd from the time the Memorandum of Understanding executed. It was thus of the view that it was obliged to return it. In these circumstances, both the Commissioner as well as the Tribunal found that Section 28(iv) will have no application. We do not find that a larger controversy or question needs to be gone into and based on the contentions raised by Mr. Malhotra. The correctness of the view taken in the case of Ahuja 2007 (5) TMI 257 - ITAT BOMBAY-I need not be considered in the circumstances, which have been noted in paragraph no.9 of the order passed by the Tribunal and equally by the CIT (Appeals). Hence, we are of the opinion that the findings of fact cannot be termed as perverse.

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal dismissing the Appeal of the revenue.
2. Applicability of Section 28(iv) of the Income Tax Act, 1961.
3. Disallowance of claimed transaction by the Assessing Officer.
4. Interpretation of Memorandum of Understanding and liability towards M/s. Highland Realities Pvt Ltd.
5. Application of Section 28(iv) in the case.

Analysis:
1. The Appeal challenged the order of the Income Tax Appellate Tribunal dismissing the revenue's Appeal. The appellant argued that the concurrent finding of fact was termed as perverse, raising substantial questions of law. The issue of the applicability of Section 28(iv) of the Income Tax Act, 1961 was highlighted, emphasizing that the Assessing Officer's conclusion should not have been brushed aside. The Tribunal's reliance on its own order in a different case was contested as misplaced.

2. The Assessee, a Private Limited Company, explained its acquisition of development rights and payments made to various parties, including M/s Highland Realities Pvt Ltd. The Assessee received a sum from M/s Highland Realities Pvt Ltd, with a balance payment reflected in the audited balance-sheet. Memorandum of Understandings were executed for assigning development rights, but the full payment was not received. The department doubted the Assessee's treatment of the sum received and alleged non-compliance with tax laws.

3. The Commissioner of Income Tax (Appeals) found that the circumstances surrounding the Memorandum of Understanding and payments received did not warrant the straight application of Section 28(iv). Despite challenges in producing records and obtaining complete information, the Memorandum of Understanding remained valid. Both the Commissioner and the Tribunal concluded that Section 28(iv) did not apply in this case.

4. The Tribunal held that no substantial question of law needed further examination based on the contentions raised. The findings of fact were considered not perverse and were supported by the material presented before the Commissioner and Tribunal. The Appeal was dismissed, with no costs awarded.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the reasoning behind the decision of the Bombay High Court.