2023 (2) TMI 167 - AT - Income Tax

Addition u/s 56(2)(ix) - assessee has taken advance against the procurement of land from party and received advance for sale of property - A statement U/s 132(4) is recorded from the Managing Director of the assessee in which has admitted that both the amounts are forfeited for AY 2018-19 - assessee s plea that both the amounts are never to be realised by assessee and reflected in the balance sheet as non-current liability - HELD THAT - The managing director of the company had accepted that the advance amount is forfeited by statement before the revenue authorities. The managing director had never retracted the statement made before the revenue authority. AR was unable to show any such documents about the retraction of the managing director before the bench. On other hand, the assessee company is continuing the balance of advance in the balance sheet as liability. Assessee was able to submit these documents as evidence before the bench. In factual matrix, the advance amount was never be forfeited or adjusted in the capital account of the assessee. There is clear contradiction in recorded statement and books of accounts of assessee related adjustment advance amount. But only point is being unanswered by the rival parties whether these two amounts are reflected in the books of accounts of respective parties. The parties, M/s. Sobha Developers Ltd. and M/s. Elyon Developers Pvt. Ltd. are the company. There was no examination of these parties who has paid this amount to the assessee and also there is no verification of the books of accounts of those parties with reference to this amount. In our opinion, it is appropriate to remit the issue in dispute to the file of CIT(A) to carry out necessary enquiry and putting the admission made by assessee Director to the concerned parties to this effect and to reconsider the issue accordingly. The assessee relied on various case laws which are kept on record and those case laws are not applicable to the facts of the present case as there was specific admission by the assessee during the course of recording the statement u/s. 132(4) of the IT Act. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Application of section 56(2)(ix) of the Income Tax Act.
3. Forfeiture of advance amounts and its impact on tax liability.
4. Consideration of additional evidence by the authorities.
5. Appeal against penalty and interest levied.
6. Remittal of the issue to the CIT(A) for further enquiry.

Condonation of Delay:
The assessee filed a condonation petition for a 4-day delay, which was deemed negligible and condoned with the consent of the AR.

Application of Section 56(2)(ix):
The case involved the addition of an amount under section 56(2)(ix) of the Income Tax Act to the total income of the assessee, relating to advances received for land procurement and property sale. The Managing Director admitted in a statement that both amounts were forfeited, leading to a financial constraint for the assessee. The assessee contested the application of this section, arguing that the amounts were non-current liabilities and should not be subject to forfeiture.

Forfeiture of Advance Amounts:
The CIT(A) upheld the AO's order based on the Managing Director's admission of forfeiture, despite the assessee's plea that the amounts were reflected as liabilities in the balance sheet. The AR presented financial statements and confirmations from involved parties to support the contention that the amounts were not realized and were accounted for as liabilities.

Consideration of Additional Evidence:
The authorities did not consider additional evidence presented by the assessee and relied on the Managing Director's statement under section 132(4) of the Act. The AR argued against the validity of this reliance and cited relevant case laws.

Appeal Against Penalty and Interest:
The appeal included grounds against penalty initiation and interest levied by the AO based on the disputed addition to the returned income.

Remittal for Further Enquiry:
The ITAT remitted the issue to the CIT(A) for necessary inquiry, emphasizing the contradiction between the recorded statement and the books of accounts regarding the adjustment of advance amounts. The parties who paid the advances were not examined, and their books of accounts were not verified, leading to the decision to reconsider the issue after conducting a thorough investigation.

The judgment addressed the delay in filing the appeal, the application of section 56(2)(ix) of the Income Tax Act concerning forfeited advance amounts, the consideration of additional evidence, and the appeal against penalty and interest. The ITAT remitted the matter to the CIT(A) for further inquiry to resolve discrepancies and ensure a fair assessment based on a comprehensive examination of the facts.