TMI Blog2016 (5) TMI 1488X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was deliberately not fulfilled by any of the parties. There was nothing to show on record to that effect in this particular case. All these aspect was taken into account by CIT (A), therefore, the CIT (A) has rightly given a finding in favour of the assessee - I.T.A .No.-3861/DEL/2009 - - - Dated:- 20-5-2016 - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE, JUDICIAL MEMBER For the Appellant : Sh. Raman Kant Garg, Sr. DR For the Respondent : Sh. Ved Jain, CA ORDER ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the Revenue against the order dated 24/06/2009 passed by CIT (A) XVI, New Delhi. 2. The grounds of appeal are as follows:- 1. On the facts and circumstances of the case as well as in law, the Ld. CIT (A) has erred in deleting the addition of ₹ 50,00,000/- made on account of disallowance of loss on forfeiture of earnest money(forfeiture of shop) without appreciating all the facts of the case as brought out, very clearly and elaborately, in the assessment order. Such facts/reasons, inter alia includes: i. Abnormal mature of entire series of transaction beginning with the agreement to sell dated 26/12/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the Aerens Group of companies engaged in the business of real estate and has since been renamed as Aerens Jai Realty Pvt. Ltd.) where the assessee company undertook to purchase land measuring approximately 16 Acres at Village Rasalu, Tehsil Distt Panipat (Haryana) for a sum of ₹ 4 Crore. The assessee company paid a sum of ₹ 1 Crore as earnest money and undertook to pay the balance consideration of ₹ 3 Crore on or before 31.01.2006. In terms of clause 3 of the said Agreement to Sell it was laid down that time is the essence of this Agreement and that on failure by the assessee to pay the sale consideration the vendor shall forfeit the full earnest money received under this Agreement and the assessee company shall have no objection to it.. d) 28.01.2016: A letter dated 28/01/2006 was addressed by the Vendor company to the assessee company in the following terms:- Please refer to our Agreement to sell dated 26/12/2005. You are requested to pay us the balance amount of ₹ 300 lac on or before 31.01.2006. Time is of the essence of this Agreement. Therefore, you are requested to kindly make the payment immediately. e) 15.02.2006: The vendor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company came to know about the offer for sale of the said land by the vendor through Newspaper advertisements given by M/s Aerens Group , the Director of the vendor company categorically denied (in response to question no. 7) having put up any advertisement inviting offers to purchase the land. In response to the question no. 8 seeking to know the purpose for which the said land was proposed to be purchased, it was replied by Sh. Vinod Garg that the company was purchasing the land for the purpose of either developing it or selling it for the purpose of earning some income. Considering that the assessee company had a share capital of ₹ 1,00,000/- and neither any reserves (as on 1/4/2005) nor any other liquid assets, the assessee company was asked to explain as to how it proposed to arrange a sum of ₹ 4 Crore within the short period of one month (between 26/12/2005 and 31/01/2006, the date by which the payment was required to be made to the vendor) and the efforts made to come up with funds. It was replied vide answer to question no. 13 that some unsecured loans were received .as per books accounts . However, on examination of the details of loans and the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of the loss has been described as loss on forfeiture of shop . It was sought to be explained that the loss was described as such in the P L account on account of Clerical mistake . 7. The A.O, therefore, disallowed the loss of ₹ 50,00,000/- as claimed by the assessee on account of forfeiture of earnest money. 8. The assessee filed appeal before the CIT (A). The CIT (A) held that the A.O was not justified in disallowing the loss claimed by the assessee on account of forfeiture of advance merely on suspicion without bringing any concrete evidence on record. The CIT (A) also observed that there was no irregularity in the claim of the assessee and the transaction entered by the assessee is a genuine transaction and is allowable as revenue expenditure in the hands of the appellant. The CIT (A) finally held that the assessee company was engaged in the business of Real Estate and sale and purchase of land since its inception and thus deleted the disallowance of forfeiture loss of ₹ 50,00,000/- made by the Assessing Officer. 9. The Ld. DR submitted that the forfeiture of the contract agreement were just an attempt of the assessee to run away from the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a genuine transaction. Merely by saying that the transaction is not genuine cannot result in a just and proper transaction in the eyes of law being held as not a genuine transaction. When the parties agreed to certain terms and conditions in a contract, the same are binding on the parties and it is not for the A.O. to say otherwise. One has to look into the aspect that under certain circumstances, if the parties cannot fulfill the terms of the agreement, the agreement provides certain mechanism to save the party who will suffer from the monetary loss. The genuineness of the agreement cannot be doubted by the Assessing Officer by simply giving one general statement to that effect. The Assessing Officer has to make out through the terms and conditions of the contract between the parties and the circumstantial evidences that the agreement was deliberately not fulfilled by any of the parties. There was nothing to show on record to that effect in this particular case. All these aspect was taken into account by CIT (A), therefore, the CIT (A) has rightly given a finding in favour of the assessee. In view of the above discussion, we do not find any necessity to interfere into factual find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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