TMI Blog2014 (4) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for the assessment year - the real question is not whether income is received on accrual basis or on receipt basis, but, it is whether actually there was an income at all - If no income is likely to arise in the hands of the assessee, there is no fun in estimating income hypothetically on the basis of accrual concept - before the completion of assessment and before the expiry of time available for filing of revised return, the assessee observed the wrong statement made in the original return regarding the quantum of income and revised the return by stating the correct income liable for taxation - It had come to the knowledge of the assessee that he was not going to earn that much of income stated in the original return filed by him - the revision made by the assessee is justified - thus, the CIT(A) is justified in deleting the income from the income assessed by the AO – Decided against Revenue. Disallowance of expenses – Held that:- The business carried on by the assessee is as a facilitator for locating and aggregating land for builders and developers - Even though the agreement with M/s Mayflower Inno Reality Private Limited was vitiated later on, the expenses of Rs. 68,40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completing the assessment, a revised return was filed by the assessee on 28.8.2010 admitting a reduced income of Rs. 34,24,530/-. The income shown in the revised return was reduced for the reason that the assessee had excluded an income of Rs. 3,11,67,002/- from his business income, which amount related to the transaction with M/s Mayflower Inno Reality Private Limited. The assessee filed the revised return for the purpose of excluding the amount of Rs. 3,11,67,002/- for the reason that the sale agreement entered into between the assessee and M/s Mayflower Inno Reality Private Limited has been frustrated and the agreement was not materialized in accordance with the terms of the agreement. Later on, the agreement itself was cancelled by a supplementary agreement dated 24.11.2010. The original agreement was executed on 18.6.2008. The assessee had received advance from M/s Mayflower Inno Reality Private Limited. It was in these circumstances and on the basis of the agreement dated 18.6.2008 that the assessee had in his original return disclosed a profit of Rs. 3,11,67,002/- attributable to the agreement entered into with M/s Mayflower Inno Reality Private Limited. But, once the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase and the amount which the property developer agreed to pay as the sales. But, in fact, neither there was any purchase of land nor was any sale of land. The land was only identified and sourced on behalf of the property developer. It is after realizing this error that the return was revised and therefore, Assessing Officer ought to have acted upon the revised return of income filed by the assessee. 5. The Commissioner of Income Tax (Appeals), on verifying the facts of the case in a detailed manner, found that M/s Mayflower Inno Reality Private Limited has terminated the agreement and has asked for compensation and damages from the assessee in addition to the return of advance money. He observed that the Assessing Officer has not brought on record any sale agreement or power of attorney executed by the assessee in the name of M/s Mayflower Inno Reality Private Limited to state that the land was handed over to the company and the sale proceeds were received by the assessee. There was a survey in this case. The Commissioner of Income Tax (Appeals) observed that even during the course of survey, there seems to be no document seized showing when the sale transaction occurred betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ji P. Jacob, the learned Additional Commissioner of Income Tax, appearing for the Revenue, contended that filing of a revised return is directly governed by the provisions of law stated in Section 139(5). Section 139(5) provides for filing of a revised return only if any of the two conditions are satisfied. Those conditions are that the assessee must discover any omission or any wrong statement in the original return filed before the Assessing Officer. Either there must be an omission or there must be a wrong statement, or both. In the present case, there is no case of any omission. As far as the impugned previous year is concerned, the agreement entered into between the assessee and M/s Mayflower Inno Reality Private Limited was very much in force. The assessee had sourced 13.2 acres against total extent of 52 acres, which shows that during the previous year relevant to assessment year under appeal, the assessee was executing his obligations in the light of the agreement and subsequent cancellation of the agreement was made only on 24.11.2010, well after the closure of the previous year and, in such circumstances, it would not have been possible to the assessee to anticipate the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r wrong statement as construed in Section 139(5). The Court observed that the reason was not bonafide as well. Therefore, accordingly held that the revised return was not valid. 10. The learned Additional Commissioner of Income Tax again relied on an order of ITAT, Chennai Bench A , rendered in the case of M/s Beacon Maritime Carriers P. Ltd. v. The Deputy Commissioner of Income Tax in I.T.A. No. 2414/Mds/2003 dated 8th June, 2007. 11. Shri V. Jagadisan, the learned Chartered Accountant, appearing for the assessee, on the other hand, submitted that the assessee had in fact made the wrong statement in the original return filed by him. The assessee had estimated profit from transaction arising from the agreement entered into with M/s Mayflower Inno Reality Private Limited. It was on the basis of that presumption that assessee had disclosed a profit of Rs. 3,11,67,002/-. In fact, no purchase or sale of land was made and no actual transaction was entered into and finally the whole agreement was terminated and the assessee had no opportunity at all to earn any profit out of the agreement entered into with M/s Mayflower Inno Reality Private Limited. When this fact was very much know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court held that the subsequent agreement had altered the rate of commission in a way as to make the income which really accrued to the assessee different from what had been entered in the books of accounts. This was not a case of a gift by the assessee to the managed companies of a portion of income which had already accrued, but an agreement to receive a lesser remuneration that what had been agreed upon. The assessee had in fact received only the lesser amount in spite of the entries in the account books and this lesser amount alone was taxable. The Court observed that income-tax is a levy on income. Though the Income-tax Act takes into account two points of time at which liability to tax is attracted, namely, the accrual of income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income , which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is well aware of the fact that the agreement is not going to be executed or if it is going to be terminated on the other hand and as such, the assessee is not going to earn any income from the agreement. In the present case, the assessee already had this knowledge before completing the assessment and at the time of filing the revised return, therefore, at the first instance in the original return, even if the assessee had estimated profit out of the agreement entered into with M/s Mayflower Inno Reality Private Limited, immediately after understanding that the agreement would not be executed, he filed the revised return restating the correct income. Even though the formal termination agreement was executed later on, the assessee was very well aware before the completion of assessment that the income stated in the original return was wrong. In that way, the original computation of income filed by the assessee was wrong statement . When that is so, the case of the assessee is covered by Section 139(5) which enables him to file a revised return to state the real income available in hands, for the purpose of assessment for the impugned assessment year. As Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not mean that the corresponding expenditure incurred by the assessee on such cancelled agreements were not expenses incurred for the purpose of business. Therefore, even if an agreement is cancelled later on, the nature of expenditure incurred remained the same. What is spent is spent. When the expenses are incurred for the purpose of business, it has to be allowed as an expenditure irrespective of the income or loss from the particular agreement. 20. Therefore, we set aside the order of Commissioner of Income Tax (Appeals) disallowing the expenditure to the extent of Rs. 68,40,000/-. The Assessing Officer is directed to allow the said amount as deductible expenditure while computing the income of the assessee. 21. The next ground raised by the assessee in the crossobjection is that the assessee being assessed with share from his AOP, he should be given the benefit of rebate in tax. This argument of the assessee is just and proper in law. An assessee having been assessed for his share from HUF as well, is entitled for the rebate in tax. Accordingly, we direct the Assessing Officer to give the assessee the benefit of rebate in tax while concluding his assessment. 22. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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