DCIT CENT. CIR.-1, THANE V. M/s. SHIV SAI DEVELOPERS, THANE

ITA 1366/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7917 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: SUBODH L RATNAPARKHI
• Keywords: Capital asset
• Section: 143(3); 133A; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI N.V. VASUDEV AN, JM I.T.A.NO. 1366/MUM/2008 ASSESSMENT YEAR : 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1, THANE. VS. M/S. SHIV SAI DEVELOPERS, 202, ARIHANT BLDG., AGYANI LANE, TEMBHI NAKA, THANE (W). PAN: AAZFS 2974 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D. SONGATE RESPONDENT BY : SHRI SUBODH L. RATNAPARKHI O R D E R PER P.M. JAGTAP, AM : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, THANE, DATE D 20.11.2007, WHEREBY HE DELETED THE ADDITION OF RS. 1.51 CRORES MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF UNACCOUNTED CA SH RECEIVED ON LAND TRANSACTION. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS CARRYING ON BUSINESS AS BUILDERS AND DEVELOPERS. A SEARCH A ND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CONDUCTED, INTER ALIA, IN THE CA SE OF ONE SHRI VISHWAS KULKARNI, ADVOCATE. DURING THE COURSE OF SEARCH, ONE MEMORAND UM OF UNDERSTANDING DATED 27/11/2003 ENTERED INTO BETWEEN THE ASSESSEE AS ASS IGNERS AND M/S. HARASIDDHA DEVELOPERS, AS ASSIGNEE, WAS FOUND AND SEIZED FROM THE PREMISES OF SHRI VISHWAS KULKARNI. AS PER THE SAID MEMORANDUM OF UNDERSTANDI NG, THE ASSESSEE HAD AGREED TO SELL A PIECE OF LAND ADMEASURING 56869 SQ .YARDS FOR A TOTAL CONSIDERATION OF RS.8.25 CRORES, OUT OF WHICH AN AMOUNT OF RS. 1. 71 CRORES WAS PAID TO THE ASSESSEE ON OR BEFORE THE DATE OF MEMORANDUM OF UND ERSTANDING. THE SAID ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 2 AMOUNT TO THE EXTENT OF RS. 20 LAKHS WAS PAID TO TH E ASSESSEE BY CHEQUE AND THE BALANCE AMOUNT OF RS. 1.51 CRORES WAS PAID IN CASH. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF M/S. HARASIDDHA DEVELOPERS ON 16.12.2003, DURING THE COURSE OF WHICH THE PAYER C ONFIRMED THE PAYMENT OF RS. 1.51 CRORES MADE TO THE ASSESSEE IN CASH. THEREAFT ER, A NOTICE UNDER SECTION 153A READ WITH SECTION 153C WAS ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE ON 27.7.2006, IN RESPONSE TO WHICH A RETURN WAS FILED BY THE ASSESSEE ON 8.12.2006 DECLARING ITS TOTAL INCOME AT NIL. IN THEIR STAT EMENT RECORDED BY INVESTIGATION WING, THANE, SHRI SURAJ PARMAR, ACCEPTED ON BEHALF OF THE ASSESSEE HAVING RECEIVED A SUM OF RS. 1.51 CRORES IN CASH AGAINST T HE TRANSACTION OF LAND AS PER THE MEMORANDUM OF UNDERSTANDING. HE, HOWEVER, STATED THAT THE SAID TRANSACTION AS ORIGINALLY AGREED WAS SUBSEQUENTLY CANCELLED DUE TO SOME PROBLEMS AND THE AMOUNT OF RS. 1.51 CRORES RECEIVED IN CASH WAS REFU NDED TO THE PARTY. THE ASSESSING OFFICER DID NOT ACCEPT THIS STATEMENT OF THE ASSESSEE OF HAVING REFUNDED THE CASH OF RS. 1.51 CRORES AS THE ASSESSEE COULD N OT GIVE EVEN THE EXACT DATE ON WHICH THE AMOUNT WAS REPAID. THE ASSESSING OFFICER ALSO NOTED THAT NEITHER THE RECEIPT OF THE SAID CASH NOR THE REFUND THEREOF WAS RECORDED IN THE BOOKS OF ACCOUNT OF EITHER OF THE TWO PARTIES. HE FOUND THA T THE EXPLANATION GIVEN BY THE ASSESSEE IN THIS REGARD WAS EVASIVE. HE HELD THAT THERE WAS THUS NO PROOF EITHER WITH THE ASSESSEE OR M/S. HARSIDDHA DEVELOPERS EXCE PT THE STATEMENT MADE BY THEM TO PROVE THAT THE CASH OF RS. 1.51 CRORES WAS ACTUALLY REFUNDED. HE FOUND THAT THERE WAS, HOWEVER, A PROOF IN THE FORM OF MEM ORANDUM OF UNDERSTANDING EVIDENCING THE RECEIPT OF CASH OF RS.1.51 CRORES BY THE ASSESSEE AGAINST THE TRANSACTION OF LAND AND SINCE THE SAID AMOUNT WAS N OT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ADDITION OF RS. 1.51 C RORES WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF RECEIPT OF UNACCOUNTED CASH IN THE ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 3 ASSESSMENT COMPLETED U/S.153C READ WITH SECTION 143 (3) VIDE AN ORDER DATED 29.12.2006. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFIC ER UNDER SECTION 153C READ WITH SECTION 143(3) , AN APPEAL WAS FILED BY T HE ASSESSEE BEFORE THE LEARNED CIT(A) CHALLENGING THE ADDITION OF RS. 1.51 CRORES MADE THEREIN TO ITS TOTAL INCOME ON ACCOUNT OF RECEIPT OF UNACCOUNTED CASH. DURING T HE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A), FOLLOWING SU BMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE: THE BASIC FACTS PERTAINING TO THE PROPOSED SALE OF THE LAND PLOT AT VILLAGE KAVESAR, TALUKA & DIST. THANE TO ONE M/S. HARSIDDHA DEVELOPERS OF MUMBAI AS BORNE OUT BY THE SEIZED MOU DT. 27.11.03 WERE AS UN DER: (I) THE AREA OF THE LAND TO BE SOLD WAS ABOUT 56869 SQ. YARS EQUIVALENT TO 4755550 SQ.MTRS. AND THE LAND WAS SITUATED AT S.NO. 169 & 170 (PT) AT VILLAGE KAESAR, TAL. & DIST. THANE. (II) THE CONSIDERATION FOR SALE OF LAND WAS FIXED AT RS. 1,451/- PER SQ. YARDS. ACCORDINGLY, THE TOTAL CONSIDERATION AS PER THE MOU WAS ABOUT 8.25 CRORES. A SUM OF RS. 1.71 CRORES WAS PAID AS EARNE ST MONEY ON THE EXECUTION OF THE SAID MOU. THE BREAKUP OF THE EARNE ST MONEY RECEIVED BY THE APPELLANT WAS AS UNDER: (I) RS. 20,00,000/- BY TWO CHEQUES OF RS. 10 LAKHS EACH BOTH DTD.27.11.03 (II) RS. 1,51,00,000/- BY CASH ------------------------------- --- TOTAL RS. 1,71,00,000/- ============= (III) AS PER THE SAID MOU DTD.27.11.03, THE APPELLANT WAS EXPECTED TO PERFORM A SERIES OF OBLIGATIONS (AS LAID DOWN UNDER CLAUSE VIII/PG. NO.6 & CLAUSE IX/PG. NO.7 OF THE MOU) AND ONLY THEN THE SUBSEQUENT INSTALLMENT OF CONSIDERATION WAS DUE TO THE APPELLA NT FROM THE SAID M/S.HARSIDDHA DEVELOPERS. (IV) THE INSTALLMENTS OF CONSIDERATION DUE TO THE APPELL ANT AGAINST THE APPELLANT SUITABLY DISCHARGING A SERIES OF OBLIGATI ONS AS LAID DOWN UNDER THE SAID MOU DATED 27.11.03 WERE AS UNDER: SR.NO. INSTALLMENTS OF CONSIDERATION OBLIGATION TO BE PERFORMED B THE APPELLANT AS PER MOU DT.27.11.03 (I) 1,63,00,000/- (I) MAKE OUT COMPLETE MARKET ABLE TITLE WITH TITLE CERTIFICATE FROM ADVOCATE. (II) SURVEY THE LAND DEMARCATE THE BOUNDARIES, AFFIX BOUNDARY STONES AND ASCERTAIN ACTUAL PHYSICAL AREA BY DILR. (III) AT THEIR OWN COST CONSTRUCT THE ACCESS ROAD AND OBTAIN RIGHT OF WAY. (II) 1,05,00,000/- (I) ENTER INTO A FORMAL DEVE LOPMENT ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 4 AGREEMENT WITH M/S. HARSIDDHA DEVELOPERS. (II) FORWARD ALL ORIGINAL TITLE DEEDS IN RESPECT OF THE SAID LAND. (III) OBTAIN FROM THE PARTY FROM WHOM THE APPELLANT HAD DERIVED TITLE THEIR CONSENT AND CONFIRMATION TO THE TRANSACTION OF SALE TO M/S. HARSIDDHA DEVELOPERS ALONGWITH POWER OF ATTORNEY AND OTHER CONFIRMATIONS. (IV) GRANT TO PURCHASER IRREVOCABLE LICENSE TO ENTER UPON THE SAID PROPERTY AND TO COMMENCE THE DEVELOPMENT WORK. (V) GRANT IRREVOCABLE POWER OF ATTORNEY TO THE PURCHASERS (VI) TO OBTAIN DOCUMENTED RIGHT OF WAY FROM ONE M/S. SHANAN DEVELOPERS. (VII) CONSTRUCT THE 40 M54. ACCESS ROAD. THE BALANCE INSTALLMENT WERE DUE TO EXPIRY OF A PAR TICULAR NO. OF DAYS FRO THE INSTALLMENT LISTED AT (II) ABOVE. (V) IT IS THUS CLEARS FROM PLAIN READING OF THE MOOU DT . 27.11.03 THAT THE TRANSACTION IN QUESTION WAS A PROPOSED TRANSACTION FOR SALE OF A PLOT OF LAND WITH ONLY EARNEST MONEY BEING RECEIVED AND THE BALANCE AMOUNTS DUE ONLY ON THE APPELLANT SUCCESSFULLY COMPLETING T HE OBLIGATIONS IMPOSED UPON HIM UNDER THE SAID MOU. (VI) THE IMPORTANT POINTS THAT EMERGE OUT OF THE ABOVE D ISCUSSION ARE (A) THAT THE TRANSACTION WAS A PROPOSED TRANSACTION FOR SALE OF LAND (B) THAT, THE POSSESSION OF LAND WAS NOT HANDED OVER TO THE PURCHASER (C) THAT, THE APPELLANT AS THE SELLER WAS EXPECTED TO SUCCESSFULLY PERFORM A SERIES OF OBLIGATION (D) THAT, IN CASE THE APPELLANT FAILED TO FULFILL ITS O BLIGATIONS, THEN THE PURCHASER WAS ENTITLED TO TERMINATE THE AGREEMENT AND SEEK REFUND OF THE AMOUNTS PAID ALONG WITH INTEREST (CLAUSE NO.X.15) ACCORDINGLY, IT IS SUBMITTED THAT THERE WAS NO SAL E OR TRANSFER OF THE SAID LAND UNDER THE ABOVE REFERRED MOU DT.27.11.03 TO M/S. HARSIDDHA DEVELOPERS AND THE AMOUNT RECEIVED BY THE APPELLANT AS EARNEST MONEY WAS IN THE NATURE OF AN ADVANCE ONLY. THE LD . A.O. IS IN AGREEMENT ON THIS ISSUE. SUBSEQUENTLY, DISPUTES AROSE THE TITLE OF THE SAI D LAND . ONE YAKUB MAINUDDIN VAREKAR WITH 4 OTHERS CLAIMED TO BE OWNERS OF THE S AID LAND AND DISPUTED THE TITLE OF THE PARTIES FROM WHOM THE APPELLANT HAD DERIVED TITLE. A SUIT WAS FILED IN THE THANE COURT BY THE SAID YAKUB MAINUDDIN VAREKAR AND OTHERS. ACCORDINGLY, THE APPELLANT FAILED TO COMPLETE THE FIRST OBLIGATION O F PROVIDING TITLE TO THE SAID PROPERTY. COPY OF THE SUIT PAPERS ARE ENCLOSED AT PG. NO.S 2 TO 25. FURTHER, DUE TO DIVERSE REASONS THE D.P. ROAD COULD NOT BE CONST RUCTED AS PROMISED. AS ULC OBLIGATIONS WERE NOT COMPLIED WITH THE PLANS COULD NO BE PROCESSED BY THE THANE MUNICIPAL CORPORATION. IN SHORT, THE APPELLANT MIS ERABLY FAILED IN PERFORMING THE OBLIGATIONS UNDERTAKEN VIDE THE MOU DT.27.11.03. M/S. HARSIDDHA DEVELOPERS THEREFORE SOUGHT TO TERMI NATE THE AGREEMENT AND CALLED UPON THE APPELLANT TO REFUND HE SUM OF RS. 1 .71 CRORES PAID AS EARNEST MONEY. THE APPELLANT REFUNDED RS. 1.51 CRORES IN CA SH ON VARIOUS DATES AND RS. 20 LAKHS WAS LYING IN BALANCE WITH THE APPELLANT. C OPIES OF CORRESPONDENCE BETWEEN THE TWO PARTIES ARE ENCLOSED AT PG.NO.S 26 TO 28. THEREAFTER ON 18.6.04 ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 5 A NEW AGREEMENT WAS NEGOTIATED BY THE APPELLANT WIT H M/S. HARSIDDHA DEVELOPERS ON FRESH TERMS AND CONDITIONS. THE AREA OF LAND UNDER SALE WAS REDUCED FROM 47550 SQ. MTRS. TO 36420 SQ. MTRS. OB LIGATIONS WHICH WERE TO BE EARLIER FULFILLED BY THE APPELLANT UNDER THE MOU DT .27.11.03 WERE REDUCED AND PASSED ON TO M/S. HARSIDDHA DEVELOPERS. THE CONSIDE RATION FOR SALE OF LAND WAS ALSO REDUCED TO 3,09,00,000/-. THE MARKET VALUE O F LAND AS PER THE READY RECKONER MAINTAINED BY STAMP DUTY AUTHORITIES ON T HAT DAY WAS RS.2,96,23,210/- I.E. LESS THAN THE CONSIDERATION AMOUNT. THE SUM OF RS.20,00,000/- RETAINED WITH THE APPELLANT WAS ADJUSTED AGAINST THE ABOVE CONSID ERATION AND BALANCE PAYMENT MADE TO THE APPELLANT. A COPY OF THE AGREEMENT DT. 18.6.04 WITH M/S.HARSIDDHA DEVELOPERS IS ENCLOSED AT PG. NOS 29 TO 55. A PARTNER OF THE APPELLANT FIRM, SHRI SURAJ R. PARM AR WAS EXAMINED ON THIS ISSUE BY THE INVESTIGATION WING OF THE THANE INCOME TAX D EPARTMENT ON 29.9.04. SHRI SURAJ R. PARMAR HAS EXPLAINED THE ABOVE ISSUES BRIE FLY VIDE HIS ABOVE STATEMENT. THE RELEVANT PORTION OF THE STATEMENT HAS BEEN REPR ODUCED AT PG.NO.2 AND 3 OF THE ASST. ORDER. A COPY OF THE SAID STATEMENT IS EN CLOSED AT PG. NOS 56 TO 58. IT EMERGES FROM THE STATEMENT OF SHRI SURAJ R. PARM AR, PARTNER THAT OUT OF THE EARNEST MONEY OF RS.1.71 CRORES, ONLY THE AMOUNT RE CEIVED THROUGH BANKING CHANNELS I.E. RS.20 LAKHS WAS FOUND TO BE RECORDED IN THE BOOKS AND THE SUM OF RS.1.51 CRORES RECEIVED IN CASH AND REPAID THEREAFT ER WAS NOT ENTERED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT FOR THE REASON T HAT THE BOOKS OF ACCOUNTS WERE NOT UPDATED. THE LD.A.O. HAS MADE ADDITION OF RS.1.51 CRORES FOR THE REASON THAT THOUGH UNDISPUTEDLY THE SAID AMOUNT WAS RECEIVED BY THE AP PELLANT FROM M/S. HARSIDDHA DEVELOPERS THE SAME WAS NOT ENTERED IN THE BOOKS OF ACCOUNTS AND HENCE WAS THEREFORE UNACCOUNTED CASH. NO SECTION OF THE INC OME TAX ACT, 1961 HAS BEEN QUOTED BY THE LD.A.O. TO EXPLAIN AS TO HOW SUCH A HUGE ADDITION IS MADE UNDER LAW. 4. THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE IN WR ITING WERE FORWARDED BY THE LEARNED CIT(A) TO THE ASSESSING OFFICER SEEK ING THE LATTERS OPINION. IN HIS REMAND REPORT DATED 17.10.2007 SUBMITTED TO THE LEA RNED CIT(A), THE FOLLOWING COMMENTS WERE OFFERED BY THE ASSESSING OFFICER: DURING THE COURSE OF SEARCH U/S.132 OF THE IT ACT, IN THE PREMISES OF ADVOCATE VISHWAS KULKARNI ON 09.09.04, AN MOU DATED 27.11.03 WAS FOUND AND SEIZED. AS PER THE SAID MOU, THE ASSESSEE WAS TO SELL AND TRAN SFER A PLOT OF LAND AT KAVESAR, DIST. THANE TO M/S. HARSIDDHA DEVELOPERS FOR A CONS IDERATION OF RS. 8.25 CRORES. A SUM OF RS.1.71 CRORES WAS RECEIVED BY THE ASSESSE E FROM M/S.HARSIDDHA DEVELOPERS, AS EARNEST MONEY AND THE BALANCE WAS TO BE RECEIVED IN INSTALLMENTS ON COMPLETION OF CERTAIN CONDITIONS. THIS SUM OF RS .1.71 CRORES WAS RECEIVED PARTLY BY CASH OF RS.1.51 CRORES AND PARTLY BY CHEQ UES OF RS.20 LAKHS. THIS FACT WAS CONFIRMED BY SHRI SURAJ PARMAR AND SH RI JAGDISH KHETWANI, PARNERS OF THE ASSESSEE FIRM. IN THIS RESPECT, STATEMENT O F SHRI SURAJ PARMAR WAS RECORDED BY INVESTIGATION WING, THANE, IN WHICH HE HAS STATED THAT THIS CASH OF RS. 1.51 CRORES WAS REFUNDED BACK TO M/S. HARSIDDHA DEVELOPERS ON VARIOUS DATES. HOWEVER, ON CONFRONTING THAT THE RECEIPT OF THIS CASH AND REFUND THEREOF HAS NOT BEEN REFLECTED IN THE BOOKS OF ACCOUNTS, S HRI PARMAR IN ANSWER TO Q.NO. 10 HAS ADMITTED THAT BOOKS OF ACCOUNTS ARE NOT UPTO DATE. ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 6 DURING THE CURSE OF ASSESSMENT PROCEEDINGS ALSO THE ASSESSEE HAD FAILED TO PRODUCE EVIDENCE REGARDING REPAYMENT OF SO-CALLED C ASH. BY NOT RECORDING THESE TRANSACTIONS IN THE BOOKS OF ACCOUNTS IT IS CLEAR T HAT THE ASSESSEES INTENTION WAS TO KEEP THIS MONEY OUTSIDE THE BOOKS OF ACCOUNTS AN D THEREBY EVADE THE TAXES. THE ASSESSEE HAS NOT EVEN SUBMITTED ANY CONFIRMATIO N LETTER FROM M/S. HARSIDDHA DEVELOPERS REGARDING THE RECEIPT OF CASH OF RS. 1.51 CRORES. BEFORE THE APPELLATE AUTHORITIES, THE ASSESSEE HAS TAKEN A PLEA THAT WHAT CAN BE BROUGHT TO TAX IS THE INCOME OF THE ASSESSEE. ALL R ECEIPTS OF FUNDS ARE NOT INCOME WHICH IS LIABLE FOR LEVY OF TAX. THE ASSE SSEE HAS ALSO QUOTED SE.C69A AND HAS STATE THAT ALTHOUGH IT IS NOT MENTIONED IN THE ASSESSMENT ORDER, THE ADDITION IS PROBABLY MADE U/S.69A. IN THIS CONTEXT, THIS IS TO SUBMIT THAT THE RECEIPT OF RS. 1.51 CRORES BY WAY OF CASH HAS NOT B EEN SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS. THUS, IT IS FOUND TO BE OWNE R OF THIS MONEY WHICH IS ALSO ONE OF THE REQUIREMENTS OF THE ADDITION TO BE MADE UNDER SECTION 69A OF THE I.T.ACT. THE FACT THAT THE ASSESSEE HAS FAILED TO P RODUCE EVIDENCE REGARDING REFUND OF THE AMOUNT TO M/S. HARSIDDHA DEVELOPERS R EFLECTS THAT THE AMOUNT IS STILL LYING WITH THE ASSESSEE. FURTHER, THIS GIVES CREDENCE TO THE BELIEF THAT EVEN THOUGH THE AMOUNT S STATED AS EARNEST MONEY IN TH E SAID MO, IT IS ACTUALLY NOTHING BUT IN THE NATURE OF ON MONEY I.E. UNACCO UNTED INCOME, SINCE THE SAME HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS. OT HERWISE, THE ASSESSEE WOULD HAVE RECORDED THE SAME IN ITS REGULAR BOOKS. THUS, THE A.O. HAS RIGHTLY TAXED THIS RECEIPT OF RS.1.51 CRORES IN THE HANDS OF THE ASSES SEE. 5. WHEN THE REMAND REPORT SUBMITTED BY THE ASSESSIN G OFFICER WAS CONFRONTED BY THE LEARNED CIT(A) TO THE ASSESSEE, T HE FOLLOWING COUNTER COMMENTS WERE OFFERED ON BEHALF OF THE ASSESSEE: IN THE ABOVE REFERRED REMAND REPORT THE LD.A.O. HA S CONFIRMED THE FOLLOWING CRUCIAL FACTS:- (I) THAT A SUM OF RS. 1.71 CRORES WAS RECEIVED BY THE A SSESSEE FROM M/S. HARSIDDHA DEVELOPERS AS EARNEST MONEY AN THE BALANC E WAS TO BE RECEIVED IN INSTALLMENTS ON COMPLETION OF CERTAIN C ONDITIONS (PARA 1/PAGE NO.1 OF THE REMAND REPORT) (II) THAT THE ADDITION HAS BEEN MADE U/S.69A OF THE I.T. ACT (LAST LINE PAGE NO.1 OF THE REMAND REPORT) AS SUBMITTED VIDE THE EARLIER WRITTEN SUBMISSION DT .28.8.07, THE AMOUNT IN QUESTION WAS RECEIVED BY THE APPELLANT AS EARNEST M ONEY TOWARDS THE PROPOSED SALE OF LAND. THE LD.A.O.HAS ALSO CONFIRMED THIS TO BE TRUE VIDE THE REMAND REPORT DT.17.10.07. UNDER THE MOU DT.27.11.03, A COPY OF W HICH WAS SEIZED DURING THE COURSE OF SEARCH ACTION ON ADVOCATE SHRI VISHWAS KU LKARNI, THE TERMS OF THE PROPOSED SALE F LAND AT VILLAGE KAVESWAR, TALUKA AN D DIST. THANE WERE AGREED UPON BETWEEN BOTH THE PARTIES. THE CLAUSES IMPORTAN T TO DECIDE THE LIABILITY TOWARDS TAX ON EXECUTION OF THE SAID MOU AND RECEIP T OF EARNEST MONEY OF RS.1.71 CRORES ARE CONTAINED IN THE SAID MOU. THESE IMPORTANT CLAUSES/FACTS ARE : (A) THAT THE TRANSACTION NOTED IN THE MOU WAS A PROPOSE D TRANSACTION FOR SALE F LAND (THE LD.A.O. HAS CONFIRMED THIS IN THE REMAND REPORT) (B) THAT, THE POSSESSION F LAND WAS NOT HANDED OVER TO THE PURCHASER ON EXECUTION OF THE SAID MOU AND RECEIPT F RS. 1.71 CR.AS EARNEST MONEY (PARA IX.4 PAGE NO.8 OF THE MOU) ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 7 (C) THAT, THE APPELLANT AS WELL AS THE SELLER WERE EXPE CTED TO SUCCESSFULLY PERFORM A SERIES OF OBLIGATIONS (PARA VIII, IX PAGE NO.6 & 7 OF THE MOU) (D) THAT, IN CASE THE APPELLANT FAILED TO FULFILL ITS O BLIGATIONS, THEN THE PURCHASER WAS ENTITLED TO TERMINATE THE AGREEMENT A ND SEEK REFUND OF THE AMOUNTS PAID ALONG WITH INTEREST ( PARA X 15 OF THE MOU) IN VIEW OF THE ABOVE FACTS, IT IS HUMBLY SUBMITTED THAT AS PER THE TERMS OF THE SEIZED MOU THERE WAS NO SALE OR TRANSFER OF THE SAID LAND TO M/S. HARSIDDHA DEVELOPERS AND THE AMOUNT RECEIVED B Y THE APPELLANT AS EARNEST MONEY WAS IN THE NATURE OF AN ADVANCE ONL Y. 6. AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE REMAND REPORT SUBMITTED BY THE ASSESS ING OFFICER AND THE MATERIAL AVAILABLE ION RECORD, THE LEARNED CIT(A) HELD THAT THE AMOUNT OF RS. 1.51 CRORES WAS RECEIVED BY THE ASSESSEE AS EARNEST MONEY OR AD VANCE AGAINST THE TRANSACTION OF LAND AND ALTHOUGH THE REFUND OF THE SAID AMOUNT AS CLAIMED BY THE ASSESSEE WAS NOT ESTABLISHED ON EVIDENCE, THE SAID AMOUNT R ECEIVED AS ADVANCE COULD NOT BE TREATED AS INCOME OF THE ASSESSEE IN THE YEAR UN DER CONSIDERATION SINCE THERE WAS NO TRANSFER OF LAND IN THAT YEAR. HE HELD THAT THE SAID AMOUNT AT BEST COULD BE TREATED AS PART OF SALE CONSIDERATION, OVER AND ABOVE, WHAT WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING PROFITS/GAINS AT THE TIME OF TRANSFER OF LAND BY THE ASSESSEE. HE, THERE FORE, DELETED THE ADDITION OF RS. 1.51 CRORES MADE BY THE ASSESSING OFFICER TO THE TO TAL INCOME OF THE ASSESSEE ON ACCOUNT OF RECEIPT OF UNACCOUNTED CASH. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFOR E THE TRIBUNAL. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT WHILE DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCO UNT OF RECEIPT OF UNACCOUNTED MONEY, THE LEARNED CIT(A) HAS GONE BY THE DATE OF T RANSFER OF THE LAND, WHICH IS ACTUALLY NOT RELEVANT. HE CONTENDED THAT THE AMOUNT OF RS. 1.51 CRORES RECEIVED BY THE ASSESSEE WAS ON MONEY AND THE SAME HAS TO BE TA XED IN THE YEAR OF RECEIPT IRRESPECTIVE OF THE DATE OF TRANSFER OF THE LAND. H E SUBMITTED THAT THE REFUND OF ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 8 THE SAID AMOUNT AS CLAIMED BY THE ASSESSEE WAS NOT ESTABLISHED ON EVIDENCE AND THE NATURE OF THE SAID AMOUNT BEING ON MONEY RECEIV ED BY THE ASSESSEE, THE SAME WAS RIGHTLY ADDED BY THE ASSESSING OFFICER TO ITS T OTAL INCOME IN THE YEAR UNDER CONSIDERATION ON RECEIPT BASIS. 8. THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THR OUGH THE RELEVANT CLAUSES OF THE MEMORANDUM OF UNDERSTANDING TO POINT OUT THA T THE ASSESSEE WAS ENTITLED TO RECEIVE THE SUBSEQUENT PAYMENTS SUBJECT TO CERTA IN CONDITIONS. HE SUBMITTED THAT THE ASSESSEE, HOWEVER, COULD NOT SATISFY THE S AID CONDITIONS FULLY WHICH RESULTED IN CANCELLATION OF THE TRANSACTION OF LAND AS ORIGINALLY ENTERED INTO. HE SUBMITTED THAT THE AMOUNT OF RS.1.51 CRORES RECEIVE D BY THE ASSESSEE IN CASH AS ADVANCE, THEREFORE, WAS RETURMED BACK TO THE PARTY AND THE SAME PARTY HAD ALSO ACKNOWLEDGED THE RECEIPT THEREOF. HE CONTENDED THA T THE SAID AMOUNT OF RS. 1.51 CRORES, IN ANY CASE, WAS RECEIVED BY THE ASSESSEE I N CASH AS EARNEST MONEY OR ADVANCE, WHICH COULD NOT BE TREATED AS INCOME OF TH E ASSESSEE AS RIGHTLY HELD BY THE LEARNED CIT(A). IN SUPPORT OF THIS CONTENTION, HE RELIED, INTER ALIA, ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF HASMUKLAL M. PARIKH VS. CIT (37 ITR 359)(BOM) AND THAT OF THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. ASHALAND CORPORATION (133 ITR 55)(GUJ.). 9. IN THE REJOINDER, THE LEANED DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE AMOUNT OF RS. 1.51 CRORES RECEIVED BY THE ASSES SEE IN CASH WAS NEITHER ENTERED IN ITS BOOKS OF ACCOUNT NOR DEPOSITED IN IT S BANK ACCOUNT. HE CONTENDED THAT THE SAID AMOUNT THUS WAS PURELY IN THE NATURE OF ON MONEY RECEIVED BY THE ASSESSEE AND THE SAME WAS CHARGEABLE TO TAX AS ITS INCOME OF THE YEAR UNDER CONSIDERATION ON RECEIPT BASIS. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT EVEN THOUGH THE AMOUNT OF RS.1.51 CRORES WAS RECEIVED BY THE ASSESSEE IN CASH AND THE SAME W AS NEITHER RECORDED IN ITS ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 9 BOOKS OF ACCOUNT NOR WAS THERE ANY EVIDENCE TO SHOW THE REFUND THEREOF TO THE PARTY EXCEPT THE SELF-SERVING STATEMENT MADE BY THE ASSESSEE AND THE SAID PARTY, THE FACT WHICH REMAINS TO BE SEEN IS THAT THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE AGAINST THE TRANSACTION OF LAND AS PER THE MEMORANDUM OF UNDERSTANDING FOUND IN THE COURSE OF SEARCH. THERE WAS THUS A CO NCLUSIVE EVIDENCE IN THE FORM OF MEMORANDUM OF UNDERSTANDING TO SHOW THAT THE AMO UNT OF RS. 1.51 CRORES WAS RECEIVED BY THE ASSESSEE IN CASH AS EARNEST MONEY OR ADVANCE AGAINST THE TRANSACTION OF LAND. IN THE CASE OF HASMUKHLAL M. PARIKH (SUPRA), CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE EARNEST MONE Y WAS RECEIVED BY THE ASSESSEE AGAINST THE TRANSACTION OF SALE OF LAND IN THE RELEVANT YEAR BUT THE SALE DEED WAS EXECUTED IN THE LATTER YEAR AND IT WAS HEL D BY THE HONBLE BOMBAY HIGH COURT THAT THE ENTIRE PROFIT ON SALE OF LAND WAS AC CRUED TO THE ASSESSEE IN THE LATTER YEAR AND NOT IN THE YEAR UNDER CONSIDERATION . TO THE SIMILAR EFFECT IS THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT V. ASHALAND CORPORATION(SUPRA), WHEREIN IT WAS HELD THAT THE AM OUNT RECEIVED AS EARNEST MONEY AND ADVANCE RECEIVED TOWARDS TRANSACTION WOUL D NOT, BY ITSELF, PAR TAKE THE CHARACTER OF TAXABLE INCOME AS THE TRANSFER OF LAND WAS TAKEN PLACE ONLY IN THE SUBSEQUENT YEAR. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE TRANSFER OF LAND BY THE ASSESSEE HAD NOT TAKEN PLACE IN THE YEAR UND ER CONSIDERATION AND THIS BEING SO, WE HOLD RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HASMUKHLAL M. PARIKH (SUPRA) AND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. ASHALAND CORPORATION (SUPRA) TH AT THE AMOUNT OF RS. 1.51 CRORES RECEIVED BY THE ASSESSEE AS EARNEST MONEY OR ADVANCE COULD NOT BE TREATED AS ITS INCOME IN THE YEAR UNDER CONSIDERATION. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION O F THE SAID AMOUNT MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESS EE AND DISMISS THIS APPEAL FILED BY THE REVENUE. ITA NO.1366/M/2008 M/S.`SHIV SAI DEVELOPERS 10 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF MARCH, 2011. SD. SD. (N.V.VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE ______ MARCH, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE DCIT, CENT. CIRCLE-1, THANE 3. THE CIT-II, THANE 4. THE CIT(A)-I, THANE 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI