9911796707
TMI Blog2022 (7) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... s maintained by assessee in the previous year relevant to the assessment year concerned and assessee not required to explain the credits which are not appearing in his books of accounts - assessee not required to explain the credits appearing in the books of accounts of some other party u/s 68. In the present case, assessee has already explained the credits an amount of Rs.57.11 lakhs which is appearing in its books of accounts for which CIT(A) have no quarrel and he has accepted to that extent. He has sustained the addition over and above Rs.57.11 lakhs, which has appeared in the books of accounts of the creditors. CIT(A) not justified in sustaining addition which is not appearing in the books of accounts of the assessee and which is appearing in the books of accounts of the creditors. Accordingly, we delete the addition of Rs.17.64 lakhs also sustained by the Ld. CIT(A). Addition of unproved loans - HELD THAT:- As these entries are wrongly posted to the account of Rajendra Runwal, Bangalore and only a clerical mistake cropped up while maintaining the books of accounts of the assessee. The assessee produced a copy of ledger account and also confirmation letters which are kept on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be charged to tax as there was accrual of income. Where an assessee does not have any legal enforceable claim on the amount so received, the basis of taxability cannot be receipt basis. Even if the assessee treated it as income in its books of accounts, it is not material where the income is not accrued to the assessee to tax the same on receipt basis. The conduct of the assessee in treating an income in a particular manner is a material fact whether income had accrued or not. Although the conduct of the assessee is relevant whether income had accrued or not, yet the ipse dixit of the assessee cannot be the last word. What had accrued must be considered from the point of view of the probability of improbability of accrual in realistic manner. The amount if it is received without entitlement to receive the same, it has to be held that there was no accrual of income to the assessee as the necessary events for accrual of income has not materialized. In the present case in our opinion it is to be held that the income will accrue to the assessee only when the assessee acquires right to receive that income by completion of project undertaken by the assessee and by simply receiving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing to the assessee and to tax the only net income arise out of this transaction This ground of appeal of assessee is partly allowed for statistical purposes. Net income on sale deed of said property - HELD THAT:- As there was no execution of absolute sale deed in this case, as such, we direct the AO to tax the net income from this transaction only on actual registration of sale deed of said property. In our opinion, since there was no registered sale deed was executed in the case of 3 acres and 8 guntas there is only registered sale agreement and execution of GPA along with handing over of possession of property. Thus, after receiving entire sales consideration and execution of sale deed, it is to be considered as a transfer and the gain on this account to be brought to tax in that assessment year only. However, the lower authorities have been brought to tax the gain by in this assessment year under consideration which is incorrect. This part of the ground of appeal of the assessee is allowed. Addition on protective basis - HELD THAT:- The contract between the assessee and M/s. Shobha Developers has not materialized and it is subject matter of litigation before arbitration and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come tax authorities under this sub-section shall not be disclosed to any person or any authority or the Appellate Tribunal." 3.2 In view of the above retrospective amendment, we are inclined to hold that the assessee is precluded from challenging the validity of invoking jurisdiction u/s 153A of the Act. Accordingly, this ground of assessee is dismissed. 4. Next ground in assessee's appeal in ITA No.108/Bang/2012 is with regard to sustaining addition of Rs.17.64 lakhs in respect of unproved debts in the case of Shri Raghunatha (Chaitanya Properties) out of Rs.57.11 lakhs. 4.1 The revenue is also in appeal before us on this issue in ITA No.108/Bang/2012 is with regard to the deletion of Rs.39.47 lakhs out of Rs.57.11 lakhs made by the AO towards unproved credits. 4.2 Facts of the case are that assessee shown an amount of Rs.57.11 lakhs as payable to Shri Raghunatha of Chaitanya Properties. The assessee furnished confirmation from Shri Raghunatha, which shows an amount of Rs.74.75 lakhs is due from assessee. Since there is a difference between confirmation filed from Shri Raghunatha and amount shown by assessee I.e. (Rs.74.75 lakhs - Rs.57.11 lakhs) at Rs.17.64 lakhs that amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, the addition of Rs.39.47 lakhs and the addition to be sustained. In our opinion, there is no merit in this argument of the Ld. A.R. There is no dispute that the confirmation given by Mr. Raghunatha of Chaitanya Properties shows an amount of Rs.74.75 lakhs. The Ld. CIT(A) deleted the addition of Rs.57.11 lakhs and treated only Rs.17.64 lakhs (Rs.74.75 lakhs - Rs.57.11 lakhs), which is over and above the amount shown by assessee in his books of accounts as unexplained credit. Primarily, u/s 68 of the Act, assessee has to explain any credits found in the books of accounts maintained by assessee in the previous year relevant to the assessment year concerned and assessee not required to explain the credits which are not appearing in his books of accounts. In other words, the assessee not required to explain the credits appearing in the books of accounts of some other party u/s 68 of the Act. In the present case, assessee has already explained the credits an amount of Rs.57.11 lakhs which is appearing in its books of accounts for which Ld. CIT(A) have no quarrel and he has accepted to that extent. He has sustained the addition over and above Rs.57.11 lakhs, which has appeared in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to Mr. Rajendra as per assessee's books as on 31.3.2006 is shown as Rs.2.26 crores instead of Rs.1.75 crores due to wrong credit entry being passed in Rajendra's account in respect of some other parties account to whom flats were sold during the year. According to the Ld. A.R., the Ld. CIT(A) mentions that the same can only come as sale proceeds and not as a liability without appreciating the fact that the credit appearing in the account of Rajendra is on account of difference in group accounts. Thus, it is requested that difference in group accounts cannot be recorded as bogus credits in the facts of the case. Hence, addition confirmed to the tune of Rs.51 lakhs to be deleted. 5.2 The Ld. D.R. relied on the order of Ld. CIT(A). 5.3 We have heard the rival submissions and perused the materials available on record. It was brought to our notice that the following entries were wrongly shown as received from Mr. Rajendra Runwal instead of other parties. a) 11.3.2006 - Rs.43 lakhs b) 16.3.2006 - Rs.5 lakhs c) 18.3.2006 - Rs.3 lakhs Total - Rs.51 lakhs 5.4 Thus, there is excess credit in the name of Shri Rajendra Runwal. According to the assessee, these amounts were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... X Rs.15 lakhs + 16 ½ /40 XRs.15 lakhs). Accordingly, M/s. Sapphire Infrastructure had shown in their books a sum of Rs. 67,50,000/- as receivable. The A.O. noticed these aspects and had compared the outstanding shown by the assessee of Rs. 3,76,90,750/- and the receivable amount shown by M/s. Sapphire of Rs.67,50,000/- and added a sum of Rs.3,09,40,750/- as unaccounted sale proceeds. 6.2 The Ld. A.R. has argued that as per the sale deed itself, the total amount is reflected and when there is documentary evidence to show the exact amount at which it was sold, no credence should have been given to the oral statement made by Sri. Kuppendra Reddy. It was also argued that they wanted to cross examine Sri. Kuppendra Reddy through their advocates Sri. A. Shankar and that did not materialize as on the appointed date either Sri. Kuppendra Reddy did not turn up or for whatever reasons the cross examination did not materialize. It was also argued that the A.O was not correct in mentioning that Sri. A. Shankar did not come for cross examination on the appointed day as they have submitted a letter immediately to the A.O regarding the non-appearance of Sri. Kuppendra Reddy. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05- 06 dated 14.07.2005 for Rs.28,58,000/-. Besides the same, on 14.07.2005 the assessee has accounted Rs. 20,00,000/- receipt of land developmental expenses received to develop the land as per the advice of M/s. Sapphire. However, the assessee was willing to settle at Rs. 6lakhs per acre as per one of the sheet of paper submitted before the appellate authority. This shows a settlement amount of Rs.34,42,500/- besides sale consideration of 21,03,20,000/- for 22 acres 37 1/2 guntas of land at the rate of Rs. 6 lakhs per acre. Similarly, the assessee had offered a further sum of Rs.9,52,000/-besides sale consideration of Rs.3,58,000/- towards 6 acres 14 guntas converted agricultural land, which again works out to Rs. 6 lakhs per acre. In effect, the assessee was willing to settle for a further sum of Rs.34,42,500/-towards 22 acres 37 1/2 guntas and Rs.9,52,000/- in addition to the documented sale consideration of Rs.28,50,000/- for 6 acres 14 guntas. However, the copy of the ledger account shows settlement of sum of Rs.20 lakhs only on the same date i.e. 14.07.2005. In all probability, this should be in addition to the documented sale consideration for these 2 lands only. Though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,52,000/- Total 21,37,500/- 55,07,000/- Less: accounted in books of the appellant on 14.07.2005 under the head land developmental expenses received as per advice of M/s. Sapphire (journal entry only) NIL 20,00,000/- Balance initially proposed to be treated as unaccounted 21,37,500/- 35,07,000/- Less: Accounted in the case of Sri. A. Venkataramana 1,50.000/- 19,37,500/- 6,62,500/- 4,50,000/- BALANCE 50,000/- 23,94,500/- 6.4 Similarly, the settlement amount of Rs.55,07,000/- is accounted only to the extent of Rs.31,12,500/- thus not accounting a sum of Rs.23,94,500/-(Rs.55,07,000 - Rs.31,12,500). Also in view of arithmetical error a sum of Rs.19,37,500/- only is accounted in respect of document No.6938 instead of Rs.19,87,500/- thus not accounting Rs. 50,000/-. Hence a sum of Rs.24,44,500/(Rs.50,000/- + Rs.23,94,500/-) is confirmed in place of Rs.3,09,40,750/- added by the A.O. In holding so, the following aspects are considered. (i) Sri. M. Krishna one of the Directors had confirmed that they had sold the land at a cost of Rs. 5 to 6 lakhs per acre. (ii) The documents indicate sale value of less than Rs.6 lakhs per acre. (iii) Sri. Kuppendra Reddy's ora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of statements recorded and for cross examination of Mr. Kuppendra Reddy and other directors of the company which was not provided by the assessing officer. The assessee had argued that as per the sale deed itself the total amount is reflected and when there is a documentary evidence to show the exact amount, no credence should be given to oral statement and had furnished various details in this regard. The learned assessing officer merely based on the statement held that the amount due was only Rs. 67,50,000/- and the balance amount of Rs. 3,09,40,750/- was brought to tax. The officer failed to take cognizance of the legal notice issued by M/s. Sapphire and the assessee's reply to the said notice. 6.6 It is submitted that out of the income offered to tax, Rs. 1,31,78,000/- was towards land registered to M/s. Sapphire, Rs. 32,00,000/- towards lands sold to Mr. Venkataramana and Rs. 20,00,000/- towards settlement deeds. The CIT(A) accepted the submissions made by the assessee that the oral statement made has no evidentiary value as it is not supported by any documents. The department cannot rely on the statement recorded form Mr. Kuppendra Reddy ignoring the registered documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The amount adjusted of Rs.5,61,18,750/- for 37 Acres 17 Guntas works out to Rs.15 Lakh /Acre which authenticates statement of Shri Kuppendra Reddy that their company has purchased lands at Rs.15 Lakh/Acre. The Ld. CIT(A) failed to appreciate that mere and casual denial by the assessee company that they have not received Rs.15 Lakh/Acre shall not wash away the truth and facts brought away by the assessing officer during assessment on the basis of:- i) -Sworn statement of Shri. Kuppendra Reddy Director of Sapphire Infrastructure (P) Ltd. ii) Amount received from Sapphire Infrastructure (P) Ltd iii) The Manner how the amount was adjusted towards lands purchased the area of lands registered and the amount adjusted on various dates. iv) Financial Statements 6.8 The Ld. D.R. further stated that the Ld. CIT(A) over looked the vital and relevant fact that the assessee's books of accounts did not reflect a*+ real and true picture of sale of lands. The Ld. CIT(A) ignored the reliable evidence on record that assessee has accounted a lower figure than the actual sale consideration which was correctly accounted/adjusted in the books of M/s. Sapphire Infrastructure Pvt. Ltd. The Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale deed, he has gone by the oral statement of Mr. Kuppendra Reddy for which also no opportunity of cross examination of him has been provided by AO in respect of specific request by assessee's side. As held by Hon'ble Supreme Court in the case of Kishinchand Chellaram Vs. CIT 125 ITR 713 (SC), wherein it was held that "evidence collected from the witness cannot be considered without giving an opportunity of cross examination to the assessee". In the aforesaid case the Hon'ble Supreme Court held as under:- "Held, reversing the decision of the High Court, (i) on the facts, that the two letters dated February 18, 1955 , and March 9, 1957 did not constitute any material evidence which the Tribunal could take into account for the purpose of arriving at the finding that the sum of Rs.1,07,350 was remitted by the assessee from Madras, and if these two letters were eliminated, there was no material evidence at all which could support its finding. The statements of managers in those two letters were based on hearsay, as in the absence of evidence, it could not be taken that he must have been in charge of the Madras office on October 16, 1946, so as to have personal knowledge. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cut short the process of taking oral evidence by merely having the examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross-examination and reexamination, if necessary. 9. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse parties. We have also examined the records and we find that this Shri Sukla was examined by a number of officers. The Assistant Director of Investigation examined him on August 4, 1987, and in reply to question No. 2 in that deposition he confirmed that he was a dealer in lubricating oil since 1977. In reply to question No. 3, he confirmed having been assessed to income-tax. Again, in reply to question No. 4, he explained that he used to purchase lubricating oil from different garages as well as through various brokers. Such lubricating oil was processed by him in his factory for sale. All payments were received by him th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y found to be unreliable and requiring to be rejected. Therefore, in the interest of justice for both the parties, the assessee and the Revenue, it is necessary for us to direct the Tribunal to remand the case to the Assessing Officer for reconsidering the whole matter in the light of the observations made by us in the foregoing and redo the assessment accordingly. All opportunities should be given to the assessee in order to lead any evidence that the assessee may feel necessary to rebut the case against him. As a result we decline to answer the question." 6.11 The Delhi Tribunal in Vijay Kumar Aggarwal v. ACIT 2017 (5) TMI 1354 held that it is clear that the presumption of facts u/s 292C of the Act is not a mandatory or compulsory presumption but a discretionary presumption. Since, the word used in the said Section is "may be" and not "shall". Secondly, such a presumption is rebuttable presumption and not a conclusive presumption because it is a presumption of fact not a presumption of law. In the present case, the assessee from the very beginning stated that the documents found during the course of search did not belong to him. Therefore, the addition made by the AO is only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition on the reason that there was no cross examination of parties concerned and also AO relying on only oral statement of Shri Kuppendra Reddy to make this addition deleted. Accordingly, the ground of assessee's appeal is allowed and revenue's appeal is dismissed. 7. Next ground in revenue's appeal is with regard to the deletion of addition of Rs.68 lakhs in respect of unproved loans in the name of Venkataramana without giving opportunity to the AO as required under Rule 46A of the I.T. Rules, 1962. 7.1 Facts of the case are that the assessee received Rs.1 crore vide cheque No.693548 dated 23.6.2005 drawn of Corporation Bank, Koramangala Branch, Bangalore from one Mr. Venkata Ramana. The said amount has been deposited into assessee's account No.1337 with Vijaya Bank, Infantry Road branch, Bangalore. The assessee adjusted Rs.32 lakhs and shown balance amount of Rs.68 lakhs as outstanding as on 31.3.2006 payable to Shri Venkata Ramana. Shri Venkata Ramana was an authorized representative of Sapphire Infrastructure company in whose name the properties were registered. This amount of outstanding of Rs.68 lakhs is treated as unexplained income of the assessee by AO. The same was del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no.693548 dated 23.6.2005 drawn on Corporation Bank, Koramangala bank, Bangalore and same was deposited into assessee's bank account No.1337, Vijaya Bank, Infantry Road, Bangalore and out of this Rs.32 lakhs has been adjusted towards sale of property and balance shown as credits in the name of Venkata Ramana. These facts have not been doubted by the AO. If he has any doubt regarding the genuineness of these credits, he could have issued summons to the concerned party before making such addition. He has not carried out necessary enquiry and Shri Venkata Ramana was the representative of Sapphire Infrastructure company. The Ld. CIT(A) at first appellate stage considered confirmation letter from that party, and to delete the addition. The assessee vide its letter dated 23.11.2011 filed before the Ld. CIT(A) confirmed that these details/information being submitted are the ones which were already filed/submitted during the search, post search and assessment proceedings and no new details/information being filed. As such the evidence furnished by the assessee before Ld. CIT(A) cannot be considered as an additional evidence and on that basis the addition is deleted. Being so, we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad acknowledgements for having given a sum of Rs.15 lakhs to Sri. Krishna Reddy and Sri Jagadish. This payment was made for a purpose of JDA. The assessee had filed a copy of the JDA with Sri. Krishna Reddy and Others and no further details were furnished. According to the A.O. a further sum of Rs.8,45,000/- was paid on 18.05.2006 to Sri. Krishna Reddy. The A.O. observed that the above sum of Rs.23,45,000/- paid towards the JDA is not reflected in the balance sheet of the appellant. The A.0 proposed to treat it has unexplained investment and in reply thereof the assessee stated that the JDA did not materialize and the amount was not received back and the same is reflected in the balance sheet. Not accepting the assessee's reply, the A.0 added the same as undisclosed investment. 9.2 The ld. D.R. submitted that Ld. CIT(A) wrongly deleted the addition of Rs.23.45 lakhs which was made by AO on account of unaccounted investments that which may be sustained as the transaction was not accounted in the balance sheet of the assessee and AO is rightly taxed it as unaccounted investments. 9.3 The Ld. A.R. submitted that the assessee had entered into a JDA with Mr. C Krishna Reddy, Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and made addition of Rs.23.45 lakhs. The Ld. CIT(A) after considering entire facts and circumstances of the case deleted the addition of Rs.23.45 lakhs. We do not find any infirmity in the order of Ld. CIT(A) and this ground of revenue is rejected. 10. Next ground in revenue's appeal in ITA No.203/Bang/2012 is with regard to deletion of addition of Rs.7 crores on account of nomination fees from R. Nataraj (M/s. Shobha). 10.1. Facts of the case are that the assessee had entered into an MOU with M/s. Shobha Developers for acquisition of 75 acres of land at Mullur & Chikkabellandur for M/s. Shobha Developers. The assessee acted as a confirming party for sale of land bearing 3 sy. nos. in all measuring about 18 acres 7 guntas and 20 guntas of karab land by Sri. D.K. Sharma for a total consideration of Rs.4,52,00,000 to Sri. R.B. Nataraj, nominee of M/s Shobha Developers. This land was sold vide sale deed dated 17.11.2006. In connection with this transaction the assessee had entered into a nomination agreement on 17.11.2006 with Sri. R.B. Nataraj and in pursuance thereof had received 7 crores from Sri. R.B. Nataraj, in consideration of nomination of all the rights acquired by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreed conditions. It was also pointed out that M/s Shobha Developers had accepted only Rs.18,88,87,750 as sale consideration and had asked for returning the balance amount of Rs.34,19,92,250 out of Rs.53 crores received by them. Not accepting the appellant's contention that only a part of the contract was performed and income had not accrued to them in view of M/s Shobha's claim for returning about Rs.34.20 crores, the AO held that nomination rights of entire Rs.7 crores is assessable to tax. The AO rejected the appellant's further contention that Rs.5.50 crores out of Rs.7 crores were transferred to M/s E-City Developers and then to Mr. D K Sharma who had paid tax on the above sum. The AO also rejected the appellant's contention that only the surplus could be taxed and in view of payment of tax by Mr. D K Sharma taxing Rs.7 Crores would amount to taxing the same amount twice. 10.3. Ld. D.R. submitted that this transaction of Rs.7 crores cannot be viewed in isolation and Ld. CIT(A) not justified that AO is free to assess the income on completed contract or partial completion contract method. Accordingly, he relied on the order of AO. 10.4 On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the value of the lands transferred to them and that the balance of Rs. 34.19 crores is repayable to them. Thus the impugned sum of Rs. 7 crores needs to be returned to M/s Sobha and hence the overall effect is that the transaction will only result in a loss to the assessee. The learned CIT(A) agreed to the contentions made and after considering the submissions made, has given a clear finding in page 36 and 37 of the order that no income arose when the assessee received the said amount and the transaction cannot be viewed in isolation as the MOU was for arranging agricultural land of 75 acres and thus deleted the addition made in this regard. Further the department has filed an appeal for having deleted the addition made in this regard, considering the fact that the overall transaction with M/s. Sobha was under dispute and the impugned sum of Rs. 7 crores need to be returned to M/s. Sobha and hence by no stretch of imagination it can be added as income of the assessee. Thus, it is prayed that the appeal filed by the department in this regard be dismissed. 10.5 We have heard the rival submissions and perused the materials available on record. The assessee received an amount of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments for the lands exceeding 3 acres until the terms of the MoU was complied by getting the said Valley Zone land converted into residential and/or transformation zone c) For the land measuring 22 Acres 17 Guntas in Chikkabellandur Village, which are in agricultural zone and non conjoint, we are not liable to make any payment until the said lands were converted to residential and/or transformation zone and the gaps between the lands were also conveyed to us or our nominee. d) For the lands measuring 16 acres 36.5 Guntas registered, between the supplemental agreement dated 17.11.2006 and the Understanding dated 23.6.2007, we are liable to make a payment of Rs.10,72,25,250/- calculated @ Rs.63,40,000/- per acre. e) The remaining extent of land measuring 4 acres 20.5 Guntas registered subsequent to the understanding dated 23.6.2007, we are liable to make payment of Rs.4,96,37,500/- calculated @ Rs.1,10,00,000/- per acre. 27. Though, we were liable to make payment of a sum of Rs.18,88,87,750/- only, as per your requests and being induced by your promises and representations and relying on the same, we have in good faith and in the interest of the transaction already paid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,58,50,000/ - per acre amounting to Rs.63.40 lakhs per acre. The sale deed in respect of Survey No.75/2, 76/1, 76/3 and 80/2 in al l measuring 1 Acre 35.75 Guntas were registered in our favour by way of a single sale deed dated 30.4.2007 registered in the office of the Sub-Registrar, Varthur Village as document No.646/07-08. Hence as on 30.4.2007 we are liable to make payment of a sum of Rs.63.40 lakhs per acre totally amounting to Rs.1,20,06,375/ -. However, we have on the date of registration of the sale deed made payment of Rs.2,20,37,500/ - i.e. an amount of Rs.1,00,31,125/ -has been paid in excess of the sum agreed upon. In fact , we had made payment of nearly double of the amount required to be paid as on that date. The balance if any would be paid by us on completion of al l your obligations under the MOU dated 19.6.2006 and the Supplemental Agreement dated 17.11.2006. Until then it cannot be contended by you or by the owners of these lands that full consideration has been paid. You have been from the beginning making false claims as regards the settlement of various litigations and withdrawal of the suits. However, till now we have not seen any of your promises bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot yielded any returns and is lying idle, in fact the same amounts if used elsewhere would have yielded tremendous returns to us and your inaction has resulted in our losing the opportunity in our business 32. Please note that we had formulated plans and developmental activities on the basis of your promises and representations that 75 acres of conjoined land would be conveyed in a time bound manner. However, on account of the various delays which have been caused by you we have not been able to make use of either of the land which are conveyed to us nor have we been able to develop the land since most of the lands are not abutting each other and scattered thus blocking the funds of our company to the extent of about Rs.53.00 crores. This tremendous amount of loss which are caused on day-today on account of your inaction and on account of disinterest shown by you in completing the transaction. Please note that you along with your Directors would be personally liable for any of losses that are caused to us. We hope that you comply with your obligations at the earliest and amicable resolve the matter. 10.7 In view of this, in our opinion, the Ld. CIT(A) justified in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed drawing of the land clearly indicating all Sy. nos. and sub nos. shall be mentioned and (vi) the land should fall in residential and transformation zone in the CDP. 10.9 Further, the conditions included obtaining NOCs from the concerned authorities regarding land reform cases, removal of High tension lines, obtaining NOC from BDA, sorting out the ADLR problems regarding survey disputes and the issue of public notices and settlement of civil disputes regarding Hindu Succession Act, Minors' claims, Partition related issues, issues relating to Specific Performance had there been any earlier contracts etc. It was argued that only some portions of the agreed areas were registered in the name of the nominees of M/s Shobha Developers. It was stated that copies of the sale deeds were produced for verification of the AO. It was claimed that they had received certain amount as advance in respect of this transact ion and part of the same was given to the land owners. As only part of the lands were procured and registered in favour of the nominees of M/s Shobha and, the rest were pending they have considered the amount received as advances in view of nonperformance of the agreed cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of the stock-in-trade only when the constructed apartments were sold and not at the time when the development agreement was entered into. Moreover, in the development agreement, the assessee has not agreed for sale of the entire constructed property on the land, the assessee has agreed only to a portion of the constructed property for sale for the purpose of recovery of the cost of construction and margin of the developer. The assessee has executed all the sale deeds for transfer of the constructed apartments in favour of the end-user/purchaser, therefore the transfer of the proportionate land took place only when the assessee transferred the constructed property by way of sale deeds and offered the business income which was accepted by the Department. In any case, when the assessee has retained the portion of the land being proportionate to the constructed area to be retained by the assessee, then there is no question of transfer of the entire land to the developer. In view of the above discussion, orders of the lower authorities are set aside, qua this issue and the AO is directed to tax the capital gain arising from the conversion of the land and building into stock-in-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be brought to tax during the year under consideration.- CIT vs. Hindustan Housing &. Land Development Trust Ltd. (1986) 58 CTR (SC) 179 : (1986) 161 ITR 524 (SC) relied on. Conclusion Where the entire amount payable under the agreement was in dispute, no part of it could be brought to tax in the hands of assessee, even if the part payment is actually received." (iii) Bhavesh Estates (India) Pvt. Ltd., Vs. ITO, 1 DTR 366 (Mum. - Trib.), wherein the Tribunal held as under:- "Assessee had entered into the development agreement with AB (SC). The FSI on the said plot was revised, but the project could not be completed. Therefore, no interest was paid by the owner to the assessee company on its deposit at the rate of 12 per cent per annum. It is undisputed fact that the assessee had paid the amount of Rs. 99.90 lakhs as on 31st March, 2003, but no interest was paid to the assessee because the project was legally not feasible and due to legal restriction the whole amount invested might not have been realized in the said project. Accordingly, the owner did not make any payment to the assessee. Under the facts and circumstances, the assessee cannot be subjected to be taxed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income to the assessee as the necessary events for accrual of income has not materialized. In the present case in our opinion it is to be held that the income will accrue to the assessee only when the assessee acquires right to receive that income by completion of project undertaken by the assessee and by simply receiving the amount from the parties itself cannot be treated as income of the assessee. It is only advance received by assessee which is nothing but liability and cannot be treated as income of the assessee in these asst. years. 10.14 In view of the above, we are of the opinion that the lower authorities are not justified in taxing an amount of Rs.7 crores as accrued income in the hands of the assessee. The same is deleted and this ground of the appeal of the assessee is allowed. 11. Next ground in revenue's appeal in ITA No.203/Bang/2012 is regarding deletion of addition of Rs.70 lakhs and Rs.30 lakhs received towards sale consideration. 11.1. Facts of the case are that during the year, Sri D. Nanda Kumar one of the Directors of the assessee had sold land measuring 32 guntas (+1 gunta karab land) in Sy. No. 64/3 and 1 acre 8 guntas (+1 gunta karab land) in Sy. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to the transaction with M/s. Shobha Developers is to be computed either on completed contract method or when al l the terms and conditions in respect of specified lands are fulfilled in parts it is to be assessed on percentage completion method. In this transaction neither of the two are fulfilled it is held that income did not accrue on the sale of these properties pending various terms of the contract to be fulfilled. However, it was noticed that these transactions though had not reflected for the year ending 31.03.2007, it was shown in the overall sum received from M/s. Shobha Developers as on 31.03.2008 amounting to Rs.52,59,80,000/- and hence it is held that no income arose on these transactions for the year ending 31.03.2007. Against this, revenue is in appeal before us. 11.2 The Ld. D.R. submitted that Ld. CIT(A) ought to have sustained this addition and he has erred in holding that income or loss cannot be assessed at this stage as transaction is under litigation and he also submitted that the sale consideration of Rs.30 lakhs is not included in the overall sum of Rs.52,59,80,000/-. The Ld. CIT(A) not justified in not sustaining additions even though the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein assessee received an amount of Rs.52,59,80,000/- and we have already held that this condition laid down in MOU has not been fulfilled and there is a pending litigation between the parties as discussed in immediate earlier ground with regard to deletion of addition of Rs.7 crores. On similar lines, we are of the opinion that Ld. CIT(A) is justified in deleting the addition of Rs.1 crore. Thus, we confirm the order of Ld. CIT(A) on this issue. 12. Next ground in ITA No.203/Bang/2012 in revenue's appeal is with regard to deletion of Rs.1.05 crores. Facts of the case are that the AO called for details from M/s Shobha Developers regarding various payments made by the nominees for acquiring land for which the assessee had entered into MOU with M/s Shobha Developers. The AO observed that the entire consideration paid by M/s Shobha Developers was treated in the books as advances. The AO observed that Smt. Rajyalakshmi had sold a property at Sy no.68 at Mullur Village, Varthur, Hobli measuring 1 acre 19 guntas and 4 guntas of Karab land to Sri R B Nataraj vide sale deed dated 28.12.2006 for a total consideration of Rs.37,50,000. In respect of this sale-there was a nomination agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s Shobha Developers through Shri R B Nataraj. The company whose name is appearing in the nomination agreement was claimed to be non existing by the director whose name was appearing as Shri Karthik Krishna and the second company in whose account the pay order has been encashed has received for business transaction i.e purchase of woven fabrics. The AO asked M/s Shobha Developers to clarify the transactions and they denied having any business transaction with M/s Klene Packs or M/s Jyothika Polypacks or M/s Sonica Plastics. They had reiterated that the payment was made on account of nomination agreement which was duly signed and the copy was produced by them. They had also given a copy of the bank statements where these payments were realized. The AO requested the assessee to clarify their position. Both Smt. Rajyalakshmi and Shri Karthik Krishna denied to have signed the nomination deed or having knowledge of the company called M/s Klene Pak or about the payments. The assessee had treated all these payments as advance in their books and subsequent transactions being closed i.e at the end of the MOU to treat all these payments as expenses to offer only the net proceeds to tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rs.45 Iakhs were shown as paid to the assessee's accounts on 27.12.2006 under the head "issued in favour of Klene Pack Ltd towards the settlement agreement for land in Chikabellandur and Mullur (5A, 37.5G) (4A 10 G) and Mullur (1A 19G) as per NOC SBL/LGL1/284/2006 dated 27.12.2006. It is also seen from the assessee's ledger account in the name of M/s Shobha Developers which is submitted for the period from 01.04.2007 to 31.03.2008wherein the assessee has brought into their books all the previous year's transactions. The assessee has accounted under the head "by Smt Rajyalakshmi (Sy 68 (1 acre 19 guntas)) being the amount paid by M/s Shobha Developers to M/s Klene Pack on 27.12.2006 (Previous year transaction brought to books)". Since the above amount is shown by the appellant as part of the overall receipt amounting to Rs.52,59,80,000 as on 31.03.2008 and is separately held that the income arising on the transaction from M/s Shobha Developers is to be assessed either on completed contract method or when part of the contract is completed complying all the conditions of the contract, on percentage completion method, it is held that the AO shall take into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of overall receipt, the same shall be taken into account when the income actually arises in subsequent years. The department has filed an appeal for having deleted the additions made in this regard. It is submitted that the Commissioner after considering all the documents on record has given a clear finding that the amounts cannot be added as income and the transaction cannot be viewed in isolation. Thus considering the facts and circumstances of the case, it is prayed that the appeal filed by the department in this regard be dismissed. 12.5 We have heard both the parties and perused the materials available on record. The contention of the assessee is that this amount is part and parcel of the consideration received from M/s. Shobha Developers Ltd. at Rs.55,22,68,346/- up to the end of 31.3.2007 and closing balance of Rs.44,18,75,596/- includes these two amounts of Rs.60 lakhs and Rs.45 lakhs as on 27.12.2006. This was accounted by assessee in the financial year 2007-08 under the head "by Smt. Rajyalakshmi (Survey no.68)(1acre 19 guntas) being amount paid by M/s. Shobha Developers to M/s. Klene Pack on 27.12.2006 (previous year transaction brought to books)" both the amounts Rs.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Shobha. It is also observed by the A.0 that the sale proceeds of the land that was transferred by Sri. D.K. Sharma to M/s. Shobha Developers nominee has been offered to tax in the hands of the AOP M/s. -Ever Glades. The land in question in this case is stated to be sold by Sri. Nanda Kumar on behalf of the company to Smt. Rajalakshmi. The A.O. observed that the appellant was nowhere responsible as to how the land was held by Smt. Rajalakshmi and to whom she finally sold. The A.O has also mentioned the conditions in the MOU wherein it was stipulated that Z 1.585 crores per acre was to be the sale consideration. A.O. held that the completion of the terms of MOU could not be treated as the completion of the sale of the land individually and the tax is to be computed at that stage when the transfer took place. It was also observed by the A.O that the appellant had not furnished the details of the cost since as per the books the details furnished was regarding 3 Sy nos. 64/2, 65/2 & 66/2 consolidated. It is observed by the A.O that though cost of 21,05,68,326/- is claimed, the breakup of Sy. No. wise detail of the cost was not given and hence treated the entire sale consideration as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were further transferred to the nominee of M/s Sobha for a consideration of Rs.1,08,62,500/-. The learned assessing officer had contended that sale consideration by the assessee to Smt. Rajyalakshmi is taxable as income of the assessee since the role of the assessee is only of a facilitator for procurement of land to M/s. Sobha. The assessee had submitted that the sale of land was part of the overall transaction with M/s Sobha and that the entire transaction with M/s Sobha Developers is under tremendous litigation. The department is in complete knowledge of the fact that the transactions with M/s. Sobha are under litigation and that M/s. Sobha have demanded back Rs. 34.19 crores which they had paid as part of overall advance of about Rs. 53 crores. The assessee had further submitted that once the transaction materializes the real income would arise and that the income would be declared on actuals by the assessee. In fact there was a loss from the impugned transaction as the total cost of the land was Rs. 1,05,68,326/- wherein the same was transferred for Rs. 98,55,245/-. The learned Commissioner rejected the contention made by the assessee that no income arises unless the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-. Since this transaction is part of the total transaction with M/s. Shobha Developers, this cannot be taxed in the hands of assessee isolated as the transaction with M/s. Shobha Developers is under litigation. Being so, the addition cannot be made on this count. Accordingly, this ground of appeal of the assessee is allowed. 14.6 The revenue is also in appeal before us in ITA No.204/Bang/2012 with regard to computation of cost of land at Rs.40 lakhs per acre based on fresh evidence without providing opportunity of hearing to the assessee. As we have held in assessee's appeal that this is the part of transaction with M/s. Shobha Developers no income to be taxed in the hands of the assessee in assessment year under consideration. Further, we note that the cost of land in the hands of the assessee to be at Rs.1,05,68,326/- as discussed in earlier para and the adoption of value of the said land at Rs.40 lakhs per acre by taking the average price as discussed by Ld. CIT(A) in para 6.1.3 have no basis. Accordingly, this ground of appeal of the revenue has become infructuous and dismissed. 15. Next ground No.5 in assessee's appeal in ITA No.109/Bang/2012 is with regard to confirming a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of Rs.26 lakhs for 26 guntas. In respect of the balance, consideration of 21.34 crores was already received but the registration was not over. It is also observed by the A.O that in respect of Sy. No. 18 Chikkawodeyarapura there was no land appearing in the books after the sale agreement of the said Sy. No. The A.O. did not accept the appellant's arguments that the land was not sold and if that were to be so, land should have been continued to be shown as an asset which has not been done. The A.0 held that since the GPA is already given, the transaction is completed and hence treated the entire sale consideration of 21.60 crores as sale proceeds liable for tax. However, the total cost shown by the appellant regarding this transaction was 290,87,667/- which includes the cost of the land of 281,87,667/-. In addition to this, the appellant had shown developmental expenditure of Rs.9.25 lakhs which is aced to have been made by cash. The A.O held that the appellant violated the provisions of section 40A(3) of the Act and allowed expenditure of only Rs.72,62,667/- disallowing a sum of Rs.29,25,000/- from Rs.81,87,667/- Deducting this sum from the total sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 40A(3) of the Act and disallowed the same. However, the A.0 reduced it from the cost of the land of Rs.81,87,667/- rather than from the total cost of Rs.90,87,667/-. The A.O made 2 mistakes, one in stating that the developmental expenditure as Rs.9.25 lakhs wherein it should have been only Rs.9 lakhs (Rs.90,87,667/- minus Rs.81,87,667/-) and other in reducing Rs. 9.25 lakhs from the cost of the land being Rs.81,87,667/- rather than reducing a from the total cost claimed of Rs. 90,87,667/-. Correcting these 2 mistakes the allowable cost works out to Rs.81,87,667/- which is as under: Total cost debited Rs.90,87,667/- Developmental expenditure claimed disallowed u/s 40A(3) for having spent in cash Rs. 9,00,000/- Cost of the land Rs.81,87,667/- 15.4 Hence, the income being profit on the sale of the above said land is directed to be computed at Rs.78,12,333/- (Rs.1,60,00,000/- minus Rs.81,87,667/-) instead of Rs.87,37,333/- computed by the AO. The addition is confirmed to the extent of Rs.78,12,333/- as against Rs.87,37,333/- made by the A.O. Against this assessee is in appeal before us. 15.5 The Ld. A.R. submitted that the transaction of the land sold in Sy. No. 18 has 2 limb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of equity and justice. 15.6 The Ld. D.R. relied on the order of AO 15.7 We have heard both the parties and perused the materials available on record. The contention of the Ld. A.R. is that this issue has two limbs. The first one pertains to sale of 26 guntas at Chikkawodeyrapura to Smt. Rajya Lakshmi for a consideration of Rs.26 lakhs. Other one pertains to amount of Rs.1.34 crores received from Smt. Rajya Lakshmi as advance for sale of property measuring 3 acres 8 guntas at Chikkawodeyrapura. The same has been shown as liability in the books of accounts of the assessee. According to assessee, there was no transfer of capital asset in this case. We noticed that the assessee has not executed sale deed dated 27.7.2007 in respect of 26 guntas sold at Rs.26 lakhs. On the other hand, it has been executed by Sri C. Narasimha Murthy vide registered sale deed dated 27.7.2007 for a consideration of Rs.26 lakhs. The contention of the Ld. D.R. is that Sri C.N. Murthy was the representative of the assessee since the assessee could not buy the agricultural land in its own name, it has been bought in the name of Sri C.N. Murthy. Before the A.O., the assessee has accepted that it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as a transfer and the gain on this account to be brought to tax in that assessment year only. However, the lower authorities have been brought to tax the gain by in this assessment year under consideration which is incorrect. This part of the ground of appeal of the assessee is allowed. 16. The revenue in ITA No.204/Bang/2012 is in appeal before deletion of addition of Rs.3,09,40,750/- made on protective basis. As discussed in earlier assessment year 2006-07, the Ld. CIT(A) deleted the addition made on protective basis of Rs.3,09,40,750/-. Against this revenue is in appeal before us. 16.1 Ld. D.R. submitted that the substantive addition has been made in assessment year 2006-07 and protective assessment year has been made in assessment year 2008-09 the Ld. CIT(A) deleted both which is against the law. 16.2 We have heard the rival submissions and perused the materials available on record. We have given findings in assessment year 2006-07 in para 6.9 &6.14that addition is not based on any seized material and on the basis of oral statement given by Kuppendra Reddy for which an opportunity of cross examination has not been given to the assessee as such the sustentative additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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