TMI Blog2016 (10) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of being heard to the assessee. - Decided in favour of assessee for statistical purpose. - I.TA No. 3643/Mum/2014 - - - Dated:- 31-8-2016 - SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER For The Appellant : Shri Jayesh Dadia For The Respondent : Shri Airiju Jaikaran ORDER PER C.N. PRASAD, JM: This appeal is filed by the assessee against the order of the Ld. CIT(A)-35, Mumbai dated 14.2.2014 pertaining to assessment year 2005-06 arising out of the order passed u/s. 144 of the Act by the Assessing Officer. 2. The assessee has raised the following grounds in its appeal: 1. The Ld. CIT(A) has erred in law and on the facts of the case in taxing ₹ 52,50,000/- as undisclosed income. The action is unjustified and unwarranted and the addition is made more on allegation than on evidence. 2. Without prejudice to the above, the Ld. CIT(A) has erred in law and on the facts of the case in giving findings that there is transfer of land, accordingly capital gain has arisen and income is subject to tax under the head capital gains. The action is unjustified and unwarranted as there is no transfer of land. 3. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax, Mumbai dated 17.2.2010 forwarding the above order of High Court and directed to conduct necessary verification in respect of Shri Ghanshyam H Patadia. To first verify the veracity of the claim of the plaintiffs the assessee was issued notice u/s.133(6) dated 18.3.2010 with permission of the Commissioner of Income-Tax- 25, Mumbai to furnish following details. (1) Nature of business carried out by you. (2) Details and addresses of all concerns in which you are a proprietor, partner or Director etc. (3) Copy of Return for A. Y. 05-06 along with all annexures. (4) Copy of the sale agreement as above along with details of receipt of sale proceeds. (5) Details of alI your bank accounts. 5. However the assessee failed to file any reply before the prescribed date and hence the case was reopened by issue of notice u/s.148 dated 29.3.2010 recording the following reasons. The Hon ble High Court, Bombay vide order dated 1.11.2007 in the matter Suit No.2763 of 2007 in the case of Prashant Navnitbhai Parekh and another (Plaintiff) Vs. Ghanshyambhai Harjivandas Patadia and others (Defendants) has directed to investigate and pursue appropriate action against responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has entered into an agreement for sale of land on 21.3.2005 with the buyer. Later on deed of cancellation was entered into on 10.2.206 with the buyer. Both assessee and the buyer disputed with regard to the agreement for selling and buying land. The Ld. CIT(A) was also of the view that since the deed of cancellation signed by both the parties mentioned that the buyer had enjoyed physical possession of the property from the date of agreement till the date of deed of cancellation, he was of the view that the assessee might have received the payment as there is a transfer right to cancellation therefore he sustained the contention of the Assessing Officer that there is a transfer and the assessee has received the payment. 9. The Ld. Counsel for the assessee submits that: i) the assessee had never handed over the physical possession of the property. ii) The assessee stated that impugned land transfer under consideration has been compulsorily acquired by Government under the Salt Section. iii) The total sale consideration was not received by the assessee . iv) The provisions of Sec. 53A of the Transfer of Property Act could not said to have been fulfilled, no tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be able to reclaim the deposit. Typically, if the seller terminates the deal, the earnest money will be returned to the buyer. When the buyer is responsible for retracting the offer, the seller will usually be awarded the money. For the above the assessee has also admitted that the amount received is in terms of earnest money which the assessing officer has also confirmed from the petition filed by the purchaser (Mr.Prashant Naveet Parekh) in the Bombay High Court in which the purchaser has claimed that he has paid the earnest money of ₹ 50,00,000/- from para. d Page no 3 of the petition .The assessing officer in his Remand Report dated 29th May, 2012 has also considered the amount received by the assessee is in terms of earnest money. From the above points it can be concluded that the amount of ₹ 50,00,000/- (received in cash) is considered as an earnest money and not as a sale consideration against the transfer of land as per the Article of Agreement Out of the total consideration of ₹ 52,50,000/-, amount of ₹ 50,00,000/- is received as an earnest money as specified above. The remaining balance of ₹ 2,50,000/- was not received by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006. c) FIR has been lodged against Mr. Prashant Naveet Parekh dated 12th February 2006 FIR No. 55/06, Year 2006, Kandivali Police station (Mumbai). d) The above plot land has been compulsorily acquired by the Government of India with New Survey No. 378 under Salt Section. e) The proposed buyer has also filed a suit against the seller for the refund of the earnest money of ₹ 50,00,000/- together with the interest at the rate of 18% per annum as specified in the petition filed by the buyer (para. d page no 3) f) The case is still pending for in Bombay High Court for its final Order. For your ready reference we submit an important law on commercial principles: The Act has got to be interpreted according to commercial principles and the understanding of practical businessmen.- (1965) 57 ITR 306 (SC) Cocanada Radhaswami Bank Ltd. In computing profits or losses for purpose of income tax, commercial principles or practices commonly used by accountants must be observed and applied. Thus, in working out capital gains or losses, the principles that have to be applied are those which are a part of commercial practice or those to which an ordinary man of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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