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TMI Blog2011 (3) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the said memorandum of understanding, the assessee had agreed to sell a piece of land admeasuring 56869 sq. yards for a total consideration of Rs. 8.25 crores, out of which an amount of Rs. 1.71 crores was paid to the assessee on or before the date of memorandum of understanding. The said amount to the extent of Rs. 20 lakhs was paid to the assessee by cheque and the balance amount of Rs. 1.51 crores was paid in cash. A survey under section 133A of the Act was carried out at the premises of M/s. Harasiddha Developers on December 16, 2003, during the course of which the payer confirmed the payment of Rs. 1.51 crores made to the assessee in cash. Thereafter, a notice under section 153A read with section 153C was issued by the Assessing Officer to the assessee on July 27, 2006, in response to which a return was filed by the assessee on December 8, 2006 declaring its total income at "nil". In their statement recorded by Investigation Wing, Thane, Shri Suraj Panmar, accepted on behalf of the assessee having received a sum of Rs. 1.51 crores in cash against the transaction of land as per the memorandum of understanding. He, however, stated that the said transaction as originally ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 crores was paid as 'earnest money' on the execution of the said memorandum of understanding. The break-up of the earnest money received by the appellant was as under : (i) Rs. 20,00,000 by two cheques of Rs. 10 lakhs each both dated November 27, 2003. (ii) Rs. 1,51,00,000 by cash. Total Rs. 1,71,00,000. (iii) As per the said memorandum of understanding dated November 27, 2003, the appellant was expected to perform a series of obligations (as laid down under clause VIII/page 6 and clause IX/page 7 of the memorandum of understanding) and only then the subsequent instalment of consideration was due to the appellant from the said M/s. Harsiddha Developers. (iv) The instalments of consideration due to the appellant against the appellant suitably discharging a series of obligations as laid down under the said memorandum of understanding dated November 27, 2003 were as under : Sr. No. Instalments of consideration Obligation to be performed by the appellant as per memorandum of understanding dated November 27, 2003 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the purchaser was entitled to terminate the agreement and seek refund of the amounts paid along with interest (clause No. x.15). Accordingly, it is submitted that there was no 'sale' or 'transfer' of the said land under the above referred memorandum of understanding dated November 27, 2003 to M/s. Harsiddha Developers and the amount received by the appellant as 'earnest money' was in the nature of an advance only. The learned Assessing Officer is in agreement on this issue. Subsequently, disputes arose the 'title' of the said land. One Yakub Mainuddin Varekar with 4 others claimed to be owners of the said land and disputed the title of the parties from whom the appellant had derived title. A suit was filed in the Thane court by the said Yakub Mainuddin Varekar and others. Accordingly, the appellant failed to complete the first obligation of providing 'title' to the said property. Copy of the suit papers are enclosed at pages 2 to 25. Further, due to diverse reasons the D. P. Road could not be constructed as promised. As ULC obligations were not complied with the plans could not be processed by the Thane Municipal Corporation. In short, the appellant miserably failed in perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence was therefore 'unaccounted cash'. No section of the Income-tax Act, 1961 has been quoted by the learned Assessing Officer to explain as to how such a huge addition is made under law." 4. The above submissions made by the assessee in writing were forwarded by the learned Commissioner of Income-tax (Appeals) to the Assessing Officer seeking the latter's opinion. In his remand report dated October 17, 2007 submitted to the learned Commissioner of Income-tax (Appeals), the following comments were offered by the Assessing Officer : "During the course of search under section 132 of the Income-tax Act, in the premises of advocate Vishwas Kulkarni on September 9, 2004, a memorandum of understanding dated November 27, 2003 was found and seized. As per the said memorandum of understanding, the assessee was to sell and transfer a plot of land at Kavesar, Dist. Thane to M/s. Harsiddha Developers for a consideration of Rs. 8.25 crores. A sum of Rs. 1.71 crores was received by the assessee from M/s. Harsiddha Developers, as earnest money and the balance was to be received in instalments on completion of certain conditions. This sum of Rs. 1.71 crores was received partly by cash of Rs. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was confronted by the learned Commissioner of Income-tax (Appeals) to the assessee, the following counter comments were offered on behalf of the assessee : "In the above referred remand report the learned Assessing Officer has confirmed the following crucial facts : (i) That a sum of Rs. 1.71 crores was received by the assessee from M/s. Harsiddha Developers as earnest money and the balance was to be received in instalments on completion of certain conditions (paragraph 1/page 1 of the remand report). (ii) That the addition has been made under section 69A of the Income-tax Act (last line page 1 of the remand report). As submitted vide the earlier written submission dated August 28, 2007, the amount in question was received by the appellant as earnest money towards the proposed sale of land. The learned Assessing Officer has also confirmed this to be true vide the remand report dated October 17, 2007. Under the memorandum of understanding dated November 27, 2003, a copy of which was seized during the course of search action on advocate Shri Vishwas Kulkarni, the terms of the proposed sale of land at village Kavesar, Taluka and Dist. Thane were agreed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to the total income of the assessee on account of receipt of unaccounted cash. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue has preferred this appeal before the Tribunal. 7. The learned Departmental representative submitted that while deleting the addition made by the Assessing Officer on account of receipt of unaccounted money, the learned Commissioner of Income-tax (Appeals) has gone by the date of transfer of the land, which is actually not relevant. He contended that the amount of Rs. 1.51 crores received by the assessee was on money and the same has to be taxed in the year of receipt irrespective of the date of transfer of the land. He submitted that the refund of the said amount as claimed by the assessee was not established on evidence and the nature of the said amount being on money received by the assessee, the same was rightly added by the Assessing Officer to its total income in the year under consideration on receipt basis. 8. Learned counsel for the assessee took us through the relevant clauses of the memorandum of understanding to point out that the assessee was entitled to receive the subsequent payments subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it was held by the hon'ble Bombay High Court that the entire profit on sale of land was accrued to the assessee in the latter year and not in the year under consideration. To the similar effect is the decision of the hon'ble Gujarat High Court in the case of Ashaland Corpn. (supra), wherein it was held that the amount received as earnest money and advance received towards transaction would not, by itself, partake of the character of taxable income as the transfer of land was taken place only in the subsequent year. In the present case, it is not in dispute that the transfer of land by the assessee had not taken place in the year under consideration and this being so, we hold respectfully following the judgment of the hon'ble Bombay High Court in the case of Hasmukhlal M. Parikh (supra) and the hon'ble Gujarat High Court in the case of Ashaland Corpn. (supra), that the amount of Rs. 1.51 crores received by the assessee as earnest money or advance could not be treated as its income in the year under consideration. We, therefore, uphold the impugned order of the learned Commissioner of Income-tax (Appeals) deleting the addition of the said amount made by the Assessing Officer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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