2013 (10) TMI 918 - AT - Income Tax

Amount received on account of boundary dispute land to be included in sale consideration of land for computation of tax purpose - Consideration amount received is Rs.11,86,83,483/- and the balance amount of Rs.4,13,16,517/- is the deposit received relating to another transaction of land i.e. boundary dispute land Held that - Contention of the assessee cannot be ignored particularly when the assessee categorically stated that it was following the procedure of accounting profit on sale of land in the year in which actual conveyance made but only at the instance of department, the assessee recognized the transaction of sale of land relating to the land situated in Survey No.41 of village Oshiwara and paid the taxes accordingly to buy peace and to avoid litigation as agreed to by the department. Deposit received for the boundary dispute land cannot be bought to tax in the year under consideration as the consent terms and conditions itself were approved by the Hon ble Apex Court vide its order dated 23.10.2008. Therefore, any deposit received by the assessee relating to the said boundary dispute land , cannot be assessed to tax in the assessment year under consideration i.e. in the assessment year 2007-08. The assessee has given break up of the amount of Rs.11,86,83,483/- arrived at for the NDZ land and we observe that the AO doubted the said calculation merely on suspicion and ignoring the fact on record placed by the assessee before the authorities below merely to bring the said amount of Rs.4,13,16,517/- to tax in the assessment year under consideration though the said amount has been shown by the assessee in its books of account as deposit. The assessee has rightly contended that the said deposit of Rs.4,13,16,517/- cannot be considered as payment for the purchase price of the land as the land was to be demarcated and rates were to be determined as per agreed consent terms - Addition of Rs.4,13,16,517/- received by assessee from SDC, as sale consideration in the assessment year under consideration is not justified Decided in favor of Assessee. Requirement of revised return, when the claim already made in the original return has not been allowed by the AO Held that - AO could not refuse to consider the correct facts when the claim of the assessee is already on record and assessee claimed wrong amount by making incorrect bifurcation. AO is bound to consider the claim of the assessee correctly as per law and on the basis of documents produced before him in respect of a claim made in the return. It is not a new claim which was made by the assessee. Hence, the reliance placed on the decision of Hon ble Apex Court in the case of Goetze India Ltd 2006 (3) TMI 75 - SUPREME Court by AO and not considering correct claim was not justified on the ground that the said claim could be made only by way of revised return because it was not a new claim. That the AO has to consider the correct amount to be allowed as deduction while making the assessment on the basis of evidence as may be furnished before him. Hence, in view of above facts, assessee was not required to file revised return Decided in favor of Assessee.

Summary

Issues Involved:
1. Addition of Rs. 4,13,16,517/- to declared value of sales.
2. Nature of deposit amount of Rs. 4,13,16,517/- received from Samartha Development Corporation.
3. Deduction under Section 80G of Rs. 25,87,000/- instead of Rs. 31,36,000/-.

Detailed Analysis:

1. Addition of Rs. 4,13,16,517/- to Declared Value of Sales:

The assessee, a Private Limited Company engaged in trading and development of land, purchased approximately 723 acres of land in Oshiwara Village. Out of this, 224 acres were under "No Development Zone" (NDZ) and leased to Pankaj CHS Ltd. (PCHS) with a right to convert it to freehold land. PCHS transferred development rights to Samarth Development Corporation (SDC). The assessee received Rs. 3 crores and Rs. 9 crores from SDC during the financial years 2005-06 and 2006-07, shown as deposits. The AO stated that these deposits should be shown as sale proceeds after full consideration.

The AO added Rs. 4,13,16,517/- to the declared value of sales, concluding that the entire amount of Rs. 16 crores received from SDC was non-refundable and should be treated as trading receipts. The AO doubted the sanctity of the 1981 agreement with PCHS, suggesting it was more to protect the land from Urban Land Development Ceiling. The AO also noted that PCHS had not paid any rent as per the agreement, implying the agreement was never executed in spirit.

2. Nature of Deposit Amount of Rs. 4,13,16,517/- Received from Samartha Development Corporation:

The assessee contended that Rs. 4,13,16,517/- was towards another land under boundary dispute with the Government of Maharashtra and MHADA. The AO rejected this, stating there was no written agreement for this claim and the entire amount should be treated as sale consideration for the NDZ land. The AO's conclusion was based on the fact that the assessee had not substantiated the trading receipts properly and the agreement's terms were not followed.

The CIT(A) upheld the AO's decision, stating that the entire amount received was non-refundable and related to the NDZ land, not the disputed land. The CIT(A) found no cogent basis for the bifurcation of the amount and considered it an afterthought by the assessee.

3. Deduction under Section 80G of Rs. 25,87,000/- Instead of Rs. 31,36,000/-:

The assessee claimed a deduction of Rs. 25,87,000/- under Section 80G but later submitted receipts for Rs. 31,36,000/-. The AO did not accept this claim, stating the assessee should have filed a revised return. The CIT(A) confirmed the AO's decision.

The Tribunal observed that the AO should consider the correct claim based on the evidence provided, as it was not a new claim but a correction of the amount. The Tribunal set aside the orders of the authorities below and directed the AO to allow the claim based on the evidence furnished.

Conclusion:

The Tribunal allowed the appeal in part, reversing the addition of Rs. 4,13,16,517/- and directing the AO to reconsider the deduction under Section 80G based on the evidence provided by the assessee. The Tribunal found that the authorities below had acted on suspicion and presumption without substantial evidence to support their conclusions.