TMI Blog2014 (11) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... immediate implication so far taxation is concerned - the assessee is liable to refund the advance amount in terms of MOU - The addition of balance amount is also liable to be deleted, since the MOU was genuine one and also a refundable advance – thus, the order of the CIT(A) is set aside and the AO is directed to delete the addition of ₹ 3.00 crores pertaining to the advance amount received from M/s ATC. Assessment of unaccounted cash received on sale of plots – Held that:- The AO has drawn certain inferences on the chart found during the course of survey - the assessee has shown that the computation made by the AO, if followed in some other cases, would give the selling rate of ₹ 3,950/- and ₹ 4000/- per Sq. yard - the AO has reached conclusions about the selling rate of plots only on surmises and conjectures without bringing any credible evidence on record – assessee rightly contended that mere receipt of advance would not give rise to any income element - the assessee had proposed to execute sale agreements only in the subsequent years after the receipt of necessary approvals, meaning thereby the assessee has received only advances during the year, which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s impounded, one Memorandum of Understanding (MOU) dated 10-09-2005 entered between the assessee and M/s Alokik Township Corporation ( ATC ) was found. As per the MOU, M/s ATC would develop the agricultural land owned by the assessee at Village Rajawas in the District of Jaipur. The said project was named Eden Garden Project , which consisted of development a mini Township with housing plots and construction of Villas. In pursuance of the MOU, M/s ATC paid ₹ 3.00 crores to the assessee in instalments during the financial year 2005-06. It was further noticed that the assessee had received a sum of ₹ 2.00 crores by way of cheque and the balance amount of ₹ 1.00 crore was recceived by way of cash. The amount received by way of cheque was accounted for in the books and the amount received by way of cash was not accounted for. Both the partners of the assessee firm agreed to offer a sum of ₹ 50.00 lakhs each in their respective hands. Such offer was also made in the revised computation of statement filed in their personal assessments. However, the AO took the view that the assessee herein is entitled to the amount of ₹ 1.00 crore, since it was received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue and perused the record. We notice that there is no dispute with regard to the fact that the assessee had received the sum of ₹ 3.00 crores from M/s ATC. The question that arises is about the nature of the receipt of the above said amount. The AO has taken the view that the unaccounted advance amount of ₹ 1.00 crore is assessable as income. However, the Ld CIT(A) has taken the view that the MOU is only a facade and the advance amount of ₹ 3.00 crores was never intended to be repaid and hence the entire amount is assessable as income of the assessee. 7. There should not be any dispute that the tax authorities can assess any amount, only if it falls within the four corners of the Income tax Act. Hence all receipts cannot automatically be assessed to tax. It is well settled proposition that the Capital receipts are not taxable unless it is specifically authorized under the Act. For example, the provisions relating to Capital gains authorizes assessment of Capital receipts arising on sale of specified Capital assets. Similarly Cash credits are assessable as income u/s 68 of the Act, if the assessee fails to discharge the primary burden of proof placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure B of the agreement gives the details of payments of advance amount of ₹ 3.00 crores. 9. From the perusal of various clauses of MOU, we do not find anything to suspect the genuineness of the agreement. The fact that the assessee owned lands in the villages near Jaipur is not disputed. The fact that the assessee has received ₹ 3.00 crores from ATC is also not disputed. Various clauses referred by is in the preceding paragraph would show that the parties have taken precaution to preserve their respective rights and the said clauses establish the genuiness of the MOU. Hence, we are unable to agree with the view taken by Ld CIT(A) that the MOU was only a facade prepared to give the colour of refundable advance to the impugned receipt of ₹ 3.00 crores. If we assume for a moment that the view taken by Ld CIT(A) is correct, then the question that arises is Why the assessee was paid a sum of ₹ 3.00 crores by M/s ATC?. We do not find any answer for this question in the order passed by Ld CIT(A). 10. Another important point we notice is that the fact of receipt of advance amount of ₹ 1.00 crore by way of cash came to be noticed by the tax authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee constitutes capital receipt in the hands of the assessee, which is not liable to tax under any of the provisions of the Act. Further, a perusal of the MOU would show that it was a case of Joint development of land belonging to the assessee and there is no evidence to show that the assessee has parted with the land in favour of M/s ATC. Hence, the question of Capital gains also, in our view, would not arise. 12. The only ground on which the AO has assessed the amount of ₹ 1.00 crore as income of the assessee is that the same was not accounted in the books of the assessee. Even though the AO has assessed the amount of ₹ 1.00 crore has unaccounted receipt, he has failed to refer to any of the provisions of the Act under which the same is assessable or to show any authority for his decision. In our view non accounting of capital receipt, which is otherwise not taxable in pursuance of the provisions of the Act, may not have any immediate implication so far taxation is concerned. Even otherwise, we have held that the assessee is liable to refund the advance amount in terms of MOU. Accordingly, we are unable to sustain the view taken by the tax authorities in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said loose paper might have been left in the office by one of the customers. With regard to the letter written by Shri Navneet Jhavar, the assessee submitted that the said buyer had booked the plots through an agent and the impugned letter was written in connection with the dispute between him and the agent. It was further submitted that the assessee ultimately did not sell the plots to him and it had refunded the advance to him. Accordingly, the assessee contended before the AO that it had duly accounted the advance receipts in its books of account and nothing was concealed. The assessee gave the details of advances received on booking of plots as under:- Assessment year 2006-07 - ₹ 3,27,29,726/- Assessment year 2007-08 - ₹ 4,93,82,247/- The assessee further submitted that the AO was not correct in presuming that all the agreements have not been executed at the rate of ₹ 2,240/- per Sq. yard. The assessee submitted that there were cases where the sale agreements were entered for higher or lower amounts also. Accordingly, the assessee contended that there is no question of estimating any On money in respect of booking of plots. 15. However, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the mere receipt of advance would not give rise to any income element. He submitted that the profit element would arise only on sale of plots. On the contrary, the Ld D.R placed reliance on the order passed by Ld CIT(A) and the facts narrated in the written submission furnished by her. 18. We find merit in the contentions of the Ld A.R. First of all, we notice that the assessing officer has drawn certain inferences on the chart found during the course of survey. The AO did not make any attempt to conduct enquiries with any of the prospective buyers to ascertain the true position. On the basis of said inferences and by taking two instances, the AO has concluded that the assessee was selling plots @ ₹ 3,200/- per Sq. yard. Before us, the assessee has shown that the computation made by the AO, if followed in some other cases, would give the selling rate of ₹ 3,950/- and ₹ 4000/- per Sq. yard. With regard to the ratio of 70% and 30%, we examined the relevant sheet attached as Annexure C to the assessment order. Though there is a reference to the ratio of 70:30 with the corresponding amount of ₹ 2,240/- and ₹ 960/-, yet other noting made therein does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot find it necessary to adjudicate this issue. 22. The next issue relates to the validity of initiation of penalty proceedings u/s 271(1)(c) of the Act. This ground also requires no adjudication, since the penalty proceedings would take its own legal course. 23. We shall now take up the appeal filed for assessment year 2007-08. The only effective ground taken in this year is the addition of unaccounted receipts representing alleged receipt of 30% of sale consideration in cash. We have dealt with an identical issue in the preceding paragraphs in AY 2006-07 and have deleted the identical addition made in that year for the detailed reasons given above. Consistent with the view taken in AY 2006-07, we hold that the addition of ₹ 2,11,63,821/- made by the AO in this year is not justified. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the impugned addition. 24. The other grounds relate to the validity of charging interest u/s 234B and 234C of the Act and the validity of initiation of penalty proceedings. We do not find it necessary to address these two grounds. 25. In the result, both the appeals filed by the assessee are all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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