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2019 (5) TMI 1713 - AT - Income TaxAddition on account of forfeiture of advance - colorful device to adjust the capital gains - AO was of the strong belief that the forfeiture has the character of capital expenditure and accordingly made the addition - HELD THAT:- There is no dispute that the forfeiture of ₹ 3.50 crores claimed by the assessee as revenue expenditure has been treated by the Assessing Officer as capital expenditure. This conclusively establishes the genuineness of the transaction and therefore, cannot be accepted as a colourable device. Whether the write off is a capital expenditure and revenue expenditure ? - There is no dispute that the advance for the purchase of property given to HDIL was given in the year 2004. As per the agreement the assessee had to pay the balance amount of ₹ 8.15 crores within three years from the date of agreement. The deal could not be materialized due to the inability of the assessee to pay balance sum of money. Assessing Officer cannot step into the shoes of the assessee so as to hold that when the funds were available why the balance sum of money was not paid. As mentioned elsewhere by treating the forfeiture as a capital expenditure, the Assessing Officer himself has accepted the transaction of adjustment and its write off / forfeiture subsequently. As decided in REKHI LAMBA REALTORS [2010 (12) TMI 1319 - ITAT MUMBAI] loss due to the forfeiture of the earnest money deposited cannot be a capital loss. The earnest money deposit was made by the assessee was not for acquiring of any capital asset for investment of business assets but it was deposit for the business of the assessee i.e. the sale and purchase of land. Accordingly, the forfeiture of earnest money in the case in hand is a business expenditure. Therefore, we set aside the orders of the lower authorities and the claim of the assessee is allowed
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