TMI Blog2022 (7) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from different customers - the action of the CIT(A) for sustaining the addition to the extent of Rs. 4,89,744/- in respect of above noted customers is wholly unjustified and liable to be reversed. Addition on account of flat customers - HELD THAT:- The consideration for receipt of business advance stands proved. The action of the CIT(A) thus cannot be faulted. Addition on account of 'other liabilities' payable to banks as shown in the financial statement of the assessee on the ground that such liability was not confirmed from the respective banks - Assessee contends that the liability shown against the banks are not actual or real liabilities but on account of journal entry passed by increasing the book overdraft and reducing the corresponding creditors liability and has made additions in respect of above liability on the ground that respective banks have not confirmed the above stated liabilities owing to wrong appreciation of these facts - CIT-A deleted the addition - HELD THAT:- CIT(A) has failed to determine the bona fides of the liabilities and has hurriedly relied upon the narrative canvassed on behalf of the assessee and that too, without waiting for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2009 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2008-09. 2. Briefly stated, the assessee is engaged in the business activity as real estate developers and dealing therein. The assessee filed return of income for Assessment Year 2007-08 in question which was subjected to scrutiny assessment under Section 143(3) of the Act. In the course of assessment proceedings, the Assessing Officer inter alia found that the outstanding liabilities towards various banks, i.e., Bank of Baroda, Indian Overseas Bank and Punjab National Bank are overstated to the extent of Rs. 4,44,12,989/-. The Assessing Officer accordingly added the said amount to the total income of the assessee holding the same to be bogus liability shown by the assessee to reduce the taxable profits of the company. The Assessing Officer further observed that the assessee has shown an amount of Rs. 13,46,880/- as receipts under dispute appearing under the head other liabilities . The Assessing Officer alleged that such liability has ceased to exist and consequently added the aforesaid sum to the total income. The Assessing Officer next observed that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in a shopping mall finally allotted and credit given for advance received. 4.1. Grounds of appeal raised by the Revenue is also reproduced hereunder: 1. Whether on the facts the Circumstances of the case, Ld. CIT(A) was correct in deleting the addition of Rs. 4,44,12,989/- on account of other liability? 2. Whether on the facts the circumstances of the case, Ld. CIT(A) was correct in deleting the addition of Rs. 2,46,880/- on account of cessation of liability ignoring the fact the assessee has not filed any confirmation in respect of these liability either before the AO or CIT(A)? (3) Whether on the facts the circumstances of the case, Ld. CIT(A) was correct in deleting the addition of Rs. 12,92,241/- on account of advance received from Sh. Jagdish Kumar Sh. Avanish Kumar ignoring the fact that the identity, genuineness creditworthiness of these two customer were proved either before the AO or the CIT(A). 5. When the matter was called for hearing, the Ld. counsel for the assessee adverted to the grounds of appeal of the assessee and pointed out that first issue concerns addition of Rs. 1.40 crore made by the Assessing Officer under Section 68 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for sale of flat. The CIT(A) sustained the addition to the extent of Rs. 4,89,744/- out of the aforesaid amount which is not justified in the facts and the circumstances of the assessee. The Ld. Counsel pointed out that the Revenue has also challenged the action of the CIT(A) for an amount of Rs. 12,92,241/- out of the remaining relief granted by the CIT(A). In the mater, the Ld. counsel submitted that the sale agreement was ultimately executed with all the customers in question. The copy of flat booking agreement etc. were adverted and it was pointed out that the advance received against the sale of flat was in the ordinary course of real estate business and is backed by clinching documents in corroboration. It was thus submitted that the CIT(A) was not justified in denying the relief to the extent of Rs. 4,89,744/- to the assessee. By the same token, it was claimed that the appeal of the Revenue challenging the relief to the extent of Rs. 12,92,241/- is without any sound basis. It was thus submitted that Ground No. 3 of the Revenue appeal is integrally connected to corresponding Ground No. 3 of the appeal of the assessee. 7. As regards Ground No. 1 of the Revenue's app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el thus submitted that grievance raised by way of Ground No. 2 in the revenue appeal is also not justified. 9. Ld. DR for the Revenue relied upon the order of the CIT(A) insofar as appeal of the assessee is concerned. However, in order to challenge reliefs granted by the CIT(A). The Ld. DR for the Revenue relied upon the process of reasoning adopted by the Assessing Officer. 10. We have carefully considered the rival submissions and perused the assessment order as well as first appellate order. The matter referred to and relied upon has also been looked into in terms of Rule 18 of the Income Tax (Appellate Tribunal) Rules. We now proceed to examine various issues raised herein. 11. Ground No. 1 of the appeal of the assessee is general in nature. 12. Ground No. 2 concerns addition of Rs. 1.40 crore received from Shri Ashok Kumar Verma under Section 68 of the Act. It is the case of the assessee that the amount was received in pursuance of collaboration agreement dated 21.08.2008 to pursue certain business interest in the form of 35% share in 'Harsha K3C Mall Cinema Karnal'. An amount of Rs. 1.25 lakhs were claimed to have been received directly from Shri Ashok Ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/- and deleted the rest. In its cross appeal, the Revenue has also challenged the part deletion to the extent of Rs. 12,92,241/- out of advances receipts from various customers. The tabulated party-wise position is reproduced hereunder: S.No Name of buyer Amount of addition made by AO (Rs.) Amount of addition deleted by CIT(A) (Rs.) Amount of addition sustained by CIT(A) (Rs.) Assessee s appeal before ITAT Revenue s appeal before ITAT (i) Jagdish Kumar 15,74,983 15,74,983 - - 5,51,243 (ii) Shahid 7,86,783 7,05,039 81,744 81,744 - (iii) Ashutosh Awashti 1,20,000 - 1,20,000 1,20,000 - (iv) Sandeep Chaudhry 7,86,903 7,86,903 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is claimed to have been received from customer Mr. Rajeev Kumar. Flat booking agreement dated 09.10.2006 supports the receipt of advance against booking of flat in Harsha City Mall. In the circumstances, the aforesaid amount cannot be treated as unexplained. 13.3. In view of the factual position noted above, the action of the CIT(A) for sustaining the addition to the extent of Rs. 4,89,744/- in respect of above noted customers is wholly unjustified and liable to be reversed. 13.4. Ground No. 3 of the assessee's appeal is allowed. 14. The Revenue has also challenged the reversal of addition on account of flat customers Mr. Jagdish Kumar Rs. 5,51,243/- and Mr. Avinash Kumar Rs. 7,41,000/- aggregating to Rs. 12,92,241/- as per Ground No. 3 of its appeal. 14.1. The CIT(A) has deleted the addition in respect of these two parties for the reasons noted below. Finding :- I have considered the assessment order as well as the submission of the Ld. AR. The Ld. AR submitted that during the year under consideration of Rs. 5,51,241/- was received from Sh. Jagdish. The Ld. AR has filed the copy of agreement between Jagdish Kumar and the appellant, the application form filled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that respective banks have not confirmed the above stated liabilities owing to wrong appreciation of these facts. The assessee contends that the liabilities being book overdraft and not the real liability, could not have been confirmed by the bank. 15.2. The CIT(A) in the first appeal while granting the relief has discussed the issue as under: Finding:- During the appellate proceedings the Ld. AR stated that these liabilities are on a/c of bank overdraft on a/c of issuance of cheques to various parties for purchase of construction material, against anticipated recoveries in the Escrow Account from buyers of properties. The AR stated that the Assessing Officer did not provide him the adequate opportunity, as the query pertaining to the issue was raised just one week before the passing of the order. The Ld. AR submitted the bank reconciliation statements in the paper book pages 17 to 19. These being the additional evidence were sent to the Assessing Officer for his comments on admissibility as well as merit vide letter No. DEL/CIT(A)-XXVII/R-R/A-P No. 445/2012-13/42 dated May, 2012 the copy of which was delivered to the office of Addl. CIT, Range-12, New Delhi on 21/05/2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is concerned the Ld. AR has furnished the confirmation of Indian Overseas Bank. With respect to Punjab National Bank it is submitted by the Ld. AR vide letter dated 16/03/2016 that these are liabilities of Escrow Account of Punjab National Bank. It is submitted that due to recession in market, investor has not given money to the company that is why project could not be completed and held up and company has returned material to the respective supplier and settled the account by returning the material to them and received the cheques back. Copy of respective accounts are enclosed. It was further submitted by the AR that even if the account is not settled with the parties with respect to PNB Escrow account the same would still remain the liability of the appellant company towards bank for the AY 2007-08. Whether the account is settled or not, is not going to change of nature of transaction. The contention of the Ld. AR is accepted as the appellant company has made payment which are reversed in the subsequent year. The same cannot be treated as income of any year. With respect to Bank of Baroda the AR stated that the bank was not cooperating and since the liability is genuine i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it is not shown as to how the liability has been discharged by payment or reversal of entry in creditors account. No confirmation of creditors is placed either. The date of actual payment through banking channel is not reflected. Similar is the case in respect of liabilities linked to Punjab National Bank amounting to Rs. 3,71,79,369/-. The reconciliation statement does not show the date of discharge of liability in any manner. It was cursorily claimed that the material received were returned to the creditors in discharge of liabilities. However, no evidence is available on record to justify the narratives so made. 16.3. In these factual backdrop, the CIT(A), in our view, has not examined the issue in right perspective. The CIT(A) has failed to determine the bona fides of the liabilities and has hurriedly relied upon the narrative canvassed on behalf of the assessee and that too, without waiting for any verification report of the Assessing Officer. The bank reconciliation statement claimed to have been referred by the CIT(A) does not prove stand of the assessee towards discharge of liabilities or bona fide of outstanding liability in any manner. We are thus unable to see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. filed a civil suit, against the appellant to perform its part of the contract i.e. handing over the possession of the property, as per the contract. It is contended by the Ld. AR, that M/s. Techsoft Global Pvt. Ltd. failed to performits part of the contract and did not pay the money to the appellant, as per the terms and conditions provided in the contract. However, since the dispute was pending in a court of law the payment of Rs. 11 lacs, received from M/s. Techsoft Global Pvt. Ltd. was being reflected as liability in the balance sheet of the appellant. In the last, it was contended by the Ld. AR that the civil suit filed by M/s. Techsoft Global Pvt. Ltd. for recovery of the advance of Rs. 11 lacs, as token money, given to the appellant was decided in favour of the appellant by the court decree dated 16/08/2011. The appellant earned right to forfeit the amount. So the liability ceased to exist in the financial year 2011-12 and the same is assessable as income in the AY 2012-13. This implies, that the liability was very much in existence in the AY 2007-08 which is before me, therefore same cannot be assessed in this year. Consequently the addition of Rs. 13,46,880/- on a/c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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