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TMI Blog2014 (11) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... m M/s Alokik Township Corporation. (b) Assessment of Rs. 1,40,27,025/- assessed as unaccounted cash receipts on sale of plots. (c) Validity of interest charged u/s 234B and 234C of the Act. (d) Validity of initiation of penalty proceedings u/s 271(1)(c) of the Act. 3. The facts relating to the case are stated in brief. The assessee herein is a partnership firm and is carrying on the business as builder and developer. It carries on its business activities in Mumbai and Jaipur. The partners are Shri Dixant Sharma and Shri Prashant Sharma. The revenue carried out search and seizure operations in the hands of GHP Group of cases on 18-01-2007. A survey operation was also conducted at the business premises of the assessee herein located at Jaipur. The impugned assessment has been completed on the basis of documents impounded and the statement taken during the course of search/survey operations. 4. The first issue relates to the addition of Rs. 3.00 crores received from Alokik Town Corporation. From the documents 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 crore as income in their hands would show that the impugned advance is not refundable. However, since the advance of Rs. 1.00 crore was paid in pursuance of MOU entered with the assessee, the Ld CIT(A) held that the same is assessable in the hands of the assessee herein on substantive basis. Further, since the Ld CIT(A) had taken the view that the advance amount of Rs. 3.00 crores was never intended to be repaid, he took the view that the entire advance amount is assessable in the hands of the assessee and accordingly enhanced the addition to Rs. 3.00 crores. The Ld CIT(A) drew support for his decision from the fact that M/s ATC had carried out only 2% of the work. The Ld CIT(A) also took the support of the decision rendered by Hon'ble Supreme Court in the cases of Durga Prasad More (82 ITR 540) and Sumati Dayal Vs. CIT (214 ITR 801) and held that the submissions made by the assessee are against human probabilities. 6. We have heard the parties on this 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 Rs. 3.00 crores from M/s ATC. The question that arises is about the nature of the receipt of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a sum of Rs. 3 crores (Rupees Three Crores only) to the owner by way of refundable advance against the deal, however Developer has already paid a sum of Rs. 3.00 crores at the time of signing this deed, details as per Annexure B. The advance amount thus received will be returned by the owner to the developer within 30 days from the date of completion of infrastructure development work at site." In the MOU, the term "Developer" refers to M/s ATC and the term "Owner" refers to the assessee herein. Further, it is provided in clause 18 that the MOU shall stand cancelled if the approval from the competent authority is not received within one year and in that event, the assessee herein is liable to refund the advance amount of Rs. 3.00 crores to M/s ATC alongwith all other expenses incurred by M/s ATC. The same condition is reiterated in clause 21(a) also. Clause 22 specifies the Profit sharing ratio. Annexure B of the agreement gives the details of payments of advance amount of Rs. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities have not brought anything on record to show that the above said amount is not refundable at all. As stated earlier, they have not giving any finding with regard to the purpose for which the above said amount was paid by M/s ATC. Hence, in our view, it may not be proper to take a view that the impugned advance is not refundable at all. Once it is accepted that the assessee is liable to refund Rs. 3.00 crores, the next question that arises is whether the same is exigible to tax or not. We notice that it was not the case of the tax authorities that the same is assessable to tax as unexplained cash credit in terms of sec. 68 of the Act, since there is no whisper about the same and further they have accepted that genuineness of receipt of Rs. 3.00 crores from M/s ATC. Hence the 'refundable advance' of Rs. 3.00 crores received by the assessee 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. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad booked two plots at the rate of Rs. 3200/- per sq. yard. Accordingly, the AO came to the conclusion that the assessee has sold the plots @ Rs. 3,200/- per Sq. yard and further it has received 30% of the sale consideration by way of cash and the same has not been accounted. 14. The assessee submitted before the AO that it had received only advances from the prospective buyers and the sale of plots were agreed to be executed only after the receipt of approval from the Local authority. It further submitted that the "50%" mentioned in the chart was a typographical mistake. With regard to the split up of 70% and 30%, the assessee submitted that the same was noted in a loose sheet, which had also contained many other scribbling and hence no importance should be given to the same. It submitted that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers. He submitted that the other noting made in that paper does not fit in the ratio of 70:30. He further submitted that the assessing officer did not conduct any enquiry in this regard with any of the prospective buyers of the plot to substantiate his conclusions. The Ld A.R further submitted that the said document was not in the hand writing of the partners/employees of the assessee and further it does not contain signature of anybody. Accordingly he submitted that it was a dumb document and the AO was not justified in placing reliance on a dumb document. He further submitted that most of the bookings have been cancelled by the customers and the assessee has refunded the advance amount to them by way of cheque in the subsequent years. He submitted that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified in presuming that the assessee had received 30% of sale consideration as advance in the form of cash without accounting for the same. Further, the AO was not justified in presuming that the said advance would constitue income in the hands of the assessee, in view of the fact that the assessee did not sell any plot during the year under consideration. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming this addition. Accordingly, we set aside the order of Ld CIT(A) on this issue also and direct the AO to delete the said addition. 21. The next issue relates to the validity of charging interest u/s 234B and 234C of the Act. Since charging of interest is consequential in nature, we do not 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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