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2021 (4) TMI 1189 - AT - Income TaxDisallowance being brokerage paid - HELD THAT - Disallowance was made based on the conclusion drawn by the Assessing Officer on the first time of disallowance of loans, forfeits the earnest money deposit. There is evidence of payment and services. No enquiries were made by the Assessing Officer. No adverse evidence is collected. Inference was drawn without any basis. The said payment was made for the purpose of business. In view of the above discussion and consistent with the view taken by us in the previous disallowance, we uphold the order of the ld. CIT(Appeals) and dismiss this ground of Revenue. Loss on purchase of land or earnest money paid - HELD THAT - We find that the Assessing Officer in this case has not made any enquiry or investigation, based on which he has come to the abovestated conclusions- Nobody was examined. No questions were asked to third parties. No information was called for from third parties. There is no evidence collected against the claim of the assessee. In our view, there is no contradiction between the versions of agreements for sale and the submissions made by the assessee- firm to the arbitrator that the assessee- firm was desirous to develop the plots of land for earning profit and that there were fall in prices of properties. No adverse inference can be drawn. Before arbitrator, ld. Counsel stated that the assessee entered into the agreement with the hope they will be able to arrange a partner who will finance and that they tried to arrange finances for this deal. There is no evidence to controvert this submission. The arbitrator has given a finding of fact that the value of the property declined between the period 04. 01.2013 to 18. 02. 2013. The Assessing Officer has not found any evidence to controvert these findings of the arbitrator. Genuineness of this agreement to sale cannot be disputed by the Assessing Officer unless he examined the sellers of the land and unless he collects evidence to show that these are manipulated agreements which are arranged in connivance with other parties, for financial gain of the assessee and others involve in the events. This observation cannot lead into a conclusion that the agreements are bogus. The fact that agreements were entered into, amounts were paid and the fact that these advances or earnest money was forfeited by the seller is not controverted with evidence by the Assessing Officer. The undisputed fact is that the assessee is engaged in the business of real estate and that these payments were made in the course of business and that the earnest money was forfeited resulting into business loss of the assessee. Such loss is allowable as a deduction as held in JWALA PRASAD RADHA KISHAN VERSUS COMMISSIONER OF INCOME-TAX, UTTAR PRADESH. 1970 (7) TMI 10 - ALLAHABAD HIGH COURT , Inden Bislers 1972 (9) TMI 28 - MADRAS HIGH COURT and Kishangunge Madira Sangh 1986 (9) TMI 45 - RAJASTHAN HIGH COURT Addition of commission - HELD THAT - As the persons who received the commission confirmed the same and submitted their income tax details, (ii) income-tax details demonstrated that these commission agents have disclosed the amount in question as their income by filing the return of income. Nothing is brought on record by the Assessing Officer to dislodge the claim of the assessee or to show that the money paid as commission has come back to the assessee. Thereafter the ld. CIT(Appeals) relied on the judgment of the Hon ble Jurisdictional High Court in the case of Alpha Hydronics Pvt. Limited 2014 (11) TMI 1156 - CALCUTTA HIGH COURT and allowed the claim of the assessee. We find no infirmity in the order of the ld. CIT(Appeals). Capital gain declared u/ s 45 (4) - transaction of retirement of partners - partners who contributed the land in the partnership at the time of jointing the firm took it back at the time of retirement at the same value - HELD THAT - We find that the assessee has suo motu offered to tax the amount of gain that arose on this transaction of retirement of partners under the head long-term capital gains . It is not a case where the assessee claims that the partners of the assessee- firm retired and consequent to settlement of accounts these retiring partners had withdrawn such land from the firm. The ld. Counsel for the assessee states that the land contributed to the assessee-firm by the partners at the time of formation of the firm had withdrawn by the partners at the time of retirement from the firm. This cannot be a case of settlement of accounts on retirement. It is not a case where retiring partners are merely releasing or relinquishing all their rights and interest in the firm on retirement and receiving the value of one s interest in the firm. No such documentary evidence was produced before us or before the lower authorities. No relief can be granted to the assessee in the absence of any details. This issue requires investigation into fresh facts which are not on record. Hence this additional ground cannot be admitted. Under these circumstances, we dismiss this ground of Cross Objection.
Issues Involved:
1. Delay in filing the appeal by the Revenue. 2. Disallowance of ?9,92,00,000/- as a bogus loss. 3. Disallowance of ?17,10,000/- as commission expenditure. 4. Taxability of ?22,28,28,000/- under the head "long-term capital gains" or "income from business". 5. Cross Objection by the assessee regarding the taxability of capital gains under section 45(4). Detailed Analysis: 1. Delay in Filing the Appeal: The Revenue filed the appeal with a delay of 52 days. The delay was justified by citing the extension and relaxation provided by the Taxation and Other Laws (Relaxation and Management of Certain Provisions) Act, 2020, due to the Covid-19 pandemic. The Tribunal condoned the delay as the assessee did not object. 2. Disallowance of ?9,92,00,000/-: The assessee, a real estate partnership firm, entered agreements to purchase land but failed to pay the balance consideration, resulting in the forfeiture of ?9,92,00,000/- as earnest money. The Assessing Officer disallowed the loss, suspecting the transactions were not bona fide business activities. However, the Tribunal found that the Assessing Officer did not conduct any enquiry or collect evidence to support this conclusion. The Tribunal upheld the CIT(A)’s decision to allow the loss, citing that the transactions were genuine and the forfeiture was a business loss. 3. Disallowance of ?17,10,000/- as Commission Expenditure: The commission was paid for facilitating arbitration related to the forfeited advance. The Assessing Officer disallowed it, considering it bogus. The Tribunal noted that the commission payments were confirmed by the recipients, who also disclosed these amounts in their income tax returns. No adverse evidence was collected against the assessee. The Tribunal upheld the CIT(A)’s decision to allow the commission expenditure. 4. Taxability of ?22,28,28,000/-: The Assessing Officer taxed the amount as business income, while the CIT(A) treated it as long-term capital gains. The Tribunal upheld the CIT(A)’s decision, confirming that the amount should be taxed under the head of long-term capital gains and not as business income. 5. Cross Objection by the Assessee: The assessee argued that the capital gain declared under section 45(4) was not taxable as the partners took back the land at the same value they contributed. The Tribunal found that the assessee had offered the gain to tax as long-term capital gains and there was no documentary evidence to support the claim that it was a mere settlement of accounts. The Tribunal dismissed the Cross Objection, stating that the issue required fresh investigation into facts not on record. Conclusion: The Tribunal dismissed the Revenue’s appeal and the assessee’s Cross Objection, upholding the CIT(A)’s decisions on all contested issues. The Tribunal confirmed the genuineness of the transactions and the correctness of the tax treatment applied by the CIT(A).
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