Sri. Ravi Shankar Shetty, Bangalore V. Assistant Commissioner Of Income Tax, Circle- 6(3)(1), Bangalore

ITA 28/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5383 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-09-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 09-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Capital asset; Source of fund; Cost of acquisition; Fair market value; Corroborative evidences; Capital receipt; Liquidation; Capital Gains
• Section: 131; 56; 15; 143(3); 56(2); 234B; 250; 13; 22; 20

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BE NCH, BENGALURU BEFORE SHRI CHANDRA POOJARI, AM & SMT. BEENA PILLAI , JM ITA NO. 28 /BANG/2020 ASSESSMENT YEAR: 2015 - 16 SHRI RAVI SHANKAR SHETTY, #289, 1 ST FLOOR, 15 TH MAIN, RMV EXTENSION, BENGALURU - 560 080. [PAN:ASUPS 9568B] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 6(3)(1) , BENGALURU (ASSESSEE - APP ELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI V. SRINIVASAN, ADV. REVENUE BY SHRI PRADEEP KUMAR, CIT(DR) D ATE OF HEARING 02 /0 9 /2020 DATE OF PRONOUNCEMENT 08 / 0 9 /20 20 O R D E R PER CHANDRA POOJARI, AM: TH IS APPEAL FI LED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) BENGALURU - 6 DATED 25/11/2019 AND PERTAINS TO ASSESSMENT YEAR 2015 - 16. 2. T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF T H E CASE. 2. THE LD. CI T(A) ERRED IN UPHOLDING THE ADDITION OF RS.21,11,00,000/ - MADE BY INVOKING THE PROVISIONS OF SECTION 56(2)(IX) OF THE ACT I N RESPECT OF THE AMOUNTS SHOWN AS A LIABILITY TO M/S. METROCORP AND M/S.METROCORP INFRASTRUCTURE LTD., IN THE FINANCIAL STATEMENTS OF THE APPELLANT FOR THE YEAR UNDER APPEAL ON FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. I.T.A. NO. 28/BANG/2020 2 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AFORESAID LIABILITIES SHOWN BY THE APPELLANT TO M/S. METROCORP AND M/S. METROCORP INFRASTRUCTURE LTD., WERE STILL SUBSISTING AND THE SAME WAS ALSO CONFIRMED BY THE SAID PARTIES IN COURSE OF THE ENQUIRIES CONDUCTED IN THE REMAND PROCEEDINGS BEFORE THE ASSESSING OFFICER AND THEREFORE, THE IMPUGNED ADDITION SUSTAINED WAS OPPOSED TO LAW AND FACTS OF THE APPELLANTS CASE. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THERE WAS A VIRTUAL FORFEITURE OF THE SAID AMOUNTS BY THE APPELLANT ON ACCOUNT OF THE FACT THAT THE AFORESAID ADVANCES WERE NOT REFUNDABLE IN TERMS OF THE PROCUREMENT AGREEMENT DATED 10/02/2006 AND BECAUSE M/S. ME TROCORP AND M/S. METROCORP INFRASTRUCTURE LTD. HAD NOT TAKEN ANY STEPS FOR RECOVERY OF THE SAID AMOUNTS. 5. THE LD. CIT(A) OUGHT TO HAVE APP R ECIAT E D THAT THERE HAD TO BE AN ACTUAL FORFEITURE FOR ATTRACTING THE PROVISIONS OF SECTION 56(2)(IX) OF THE ACT A ND THERE WAS NO JUSTIFICATION TO TAKE A VIEW THAT THE APPELLANT HAD FORFEITED THE SAID AMOUNTS DURING THE YEAR UNDER APPEAL AND THEREFORE, THE APPLICATION OF THE PROVISIONS OF SECTION 56(2)(IX) OF THE ACT WAS MISCONCEIVED AND THE IMPUGNED ADDITION MADE OUG HT TO HAVE BEEN DELETED. 6. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 56(2)(IX) OF THE ACT WERE ALSO NOT APPLICABLE SINCE THE AFORESAID AMOUNTS RECEIVED BY THE APPELLANT IN TERMS OF THE PROCUREMENT AGREEMENT DATED 10/02/2 006 WAS NOT RECEIVED IN RESPECT OF THE TRANSACTIONS RELATING TO THE TRANSFER OF A CAPITAL ASSET AND THE FINDING THAT NEITHER M/S. METROCORP AND M/S. METROCORP INFRASTRUCTURE LTD., NOR THE APPELLANT WERE TRADING IN LAND IS PATENTLY ERRONEOUS SINCE THE APPEL LANT IS ENGAGED IN REAL ESTATE BUSINESS AND THE PURPOSE FOR WHICH M/S. METROCORP AND M/S. METRO INFRASTRUCTURE LTD., WERE ACQUIRING THE LANDS WAS NOT RELEVANT TO JUDGE THE APPLICABILITY OF THE PROVISIONS OF SECTION 56(2)(IX) IN THE HANDS OF THE APPELLANT A ND HENCE, THE IMPUGNED ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 56(2)(IX) OF THE ACT WAS UNJUSTIFIED AND MISCONCEIVED AND THE IMPUGNED ADDITION MADE OUGHT TO HAVE BEEN DELETED. 7. THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE RATIO OF TH E JUDGMENT OF THE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR AND SONS REPORTED IN 222 ITR 344(SC) WAS APPLICABLE TO THE FACTS OF THE APPELLANTS CASE WITHOUT APPRECIATING THAT THE SAID JUDGMENT WAS DISTINGUISHABLE SINCE THE AMOUNTS WERE WRITTEN BAC K BY THE SAID ASSESSEE AND IT WAS CLAIMED THAT THE SAME WAS NOT TAXABLE AS IT WAS A CAPITAL RECEIPT AT THE POINT OF RECEIPT WHEREAS IN THE APPELLANTS CASE, THE AMOUNTS WERE NEVER WRITTEN BACK AND CONTINUED TO REMAIN AS A LIABILITY AND THUS, THE RELIANCE PLACE D ON THE SAID JUDGMENT OF THE SUPREME COURT WAS MISPLACED. I.T.A. NO. 28/BANG/2020 3 8. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE CCIT/DG, THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST U/S.234A, 234B AND 234C OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES O THE APPELLANTS CASE AND THE LEVY DESERVES TO BE CANCELLED. 9. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARIN G OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015 - 16 RETURN ING AN INCOME OF RS.25,74,540/ - UNDER THE HEADS INCOME FROM BUSINESS AND PROFESSION, C APITAL GAINS AND OTHER SOURCES . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. WHILE FRAMING THE ASSESSMENT, THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED ADV ANCES OF RS.21,89,22,200/ - AS ON 31/03/2015 FROM THE FOLLOWING PARTIES: 1. METRO CORP RS.19,62,00,000/ - 2. METRO CORP INFRASTRUCTURE LIMITED RS. 1,00,00,000/ - 3. RAJU F RS. 65,00,000/ - 4. B A LAJI & CO. RS. 40,00,000/ - 5. CHANDRAMOHAN GROVER RS. 13,22,200/ - 6. KAVITH SHENOY RS. 9,00,000/ - TOTAL RS.21,89,22,200/ - THE AO ENQUIRED FROM THE ASSESSEE REGARDING THE OUTSTANDING AMOUNTS IN THE NAME OF METRO CORP AND M/S. METRO CORP INFRASTRUCTURE LTD. IT WAS STATED THAT THE ASSESSEE RECEIVED MONEY FROM METRO CORP VIDE AGREEMENT DATED 10/02/2006 FOR PROCURING LANDS AT DODABALLAPUR AND CHIKKABALLAPUR. THE PROJECT BEING DEVELOPED BY M/S. METRO CORP RAN INTO LITIGATION AND NO FURTHER ADVANCE COULD BE GIVEN TO THE ASSESSEE FOR LAND PROCUREMENT AS PER THE AGREEMENT. IT WAS ALSO STATED THAT THE ASSESSEE WAS WILLING TO FULFIL HIS OBLIGATIONS UNDER THE AGREEMENT ON RECEIPT OF THE I.T.A. NO. 28/BANG/2020 4 BALANCE AMOUNT FROM M/S. METRO CORP. IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION OF EXPENDITURE IN RELATION TO THE ADVANCE WHICH REMAINED A LIABILITY IN HIS BOOKS. SIMILAR IS THE POSITION OF M/S. METRO CORP INFRASTRUCTURE LTD. 3.1 THE AO OBSERVED THAT AS PER THE CONTENTS OF THE AGREEMENT T HE ASSESSEE IS NOT REQUIRED TO REFUND THE ADVANCE MONEY RECEIVED AND THE QUESTION OF PERFORMING THE OBLIGATION DOES NOT ARISE WHEN THE OTHER PARTY IS NOT TRACEABLE AS PER THE ADDRESS STATED BY THE ASSESSEE AND ASSESSEE HIMSELF COULD NOT LOCATE THE METRO CORPORATION AND METRO CORP INFRASTRUCTURE LTD. THE AMOUNT IS PAYABLE ONLY AS PER BO OKS AND NOT IN REAL TERMS. IT IS ALSO PERTINENT TO MENTION THAT THOUGH SUM WAS RECEIVED IN 2007, TILL DATE THE NEGOTIATIONS HAVE NOT RESULTED IN TRANSFER OF CAPITAL ASSET AND THE ASSESSEE COULD NOT PRODUCE/TRACE THE OTHER PARTY AND AS SUCH THE AO CONSIDER ED THAT SUCH SUM WAS FORFEITED. ACCORDING TO THE AO THERE IS NO EVIDENCE OF ANY RECOVERY SUIT FILED BY THE CREDITORS AND THE CREDITORS ARE NOT TRACEABLE WHICH SIGNIFIED THAT THE CLAIM OVER THE AMOUNT PAID TO THE ASSESSEE WAS FORFEITED BY THEM. ACCORDING TO THE AO, THE ASSESSEE HAD NO INTENTION TO REPAY THE CREDITORS AND UNDER SUCH CIRCUMSTANCES, THE ASSESSEE DIVERTED THE FUNDS TO ACQUIRE FIXED ASSETS AND INVESTMENTS. THE AO FOUND THAT AS PER LOAN AND ADVAN C ES SCHEDULE ASSESSEE HAD GIVEN ADVANCES ONLY TO AN EXTENT OF RS.5,53,81,059/ - AND THUS BULK OF AMOUNT RECEIVED FROM METRO CORPORATION WAS INVESTED IN INDIVIDUAL NAME OF ASSESSEE AND UNLESS THE ASSESSEE HAS CHANGED THE CATEGORIZATION OF RECEIPT TO BE HIS OWN AND NOT LONGER TO BE CREDITORS, THE ASSESSEE WOULD NOT HAVE USED IT FOR ACQUISITION OF ASSETS/INVESTMENTS IN HIS O WN NAME. THUS, THE AO ADDED THE ADVANCES RECEIVED I.T.A. NO. 28/BANG/2020 5 FROM M/S. METRO CORP AND M/S. METRO CORP INFRASTRUCTURE LTD. TOTALING RS.21,11,00,000/ - TO THE INCOME OF THE ASSESSEE BY INVOKING THE PRO VISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT. 4. ON APPEAL, THE CIT(A) OBSERVED THAT THE TERMS OF THE PROCUREMENT AGREEMENT DATED 10/02/2006 AND IN PARTICULAR CLAUSE IX THEREOF CATEGORICALLY PROVIDE TH AT THE PROMOTERS WOULD NOT BE ENTITLED TO A REFUND OF THE MONEYS ADVANCED AND COULD ONLY CLAIM SET OFF OF THE AMOUNTS AGAINST FUTURE LAND PROCUREMENTS. ACCORDING TO THE CIT(A), THE ABOVE PARTIES HAVE NOT FILED ANY SUIT AGAINST THE ASSESSEE FOR RECOVERY OF ADVANCES GIVEN TO HIM FOR LAND PROCUREMENT EVEN THOU GH CLAUSE X OF THE PROCUREMENT AGREEMENT GIVES THE PARTIES THE RIGHT TO SUE EACH OTHER FOR SPECIFIC PERFORMANCE OF THE AGREEMENT. THE LD. CIT(A) OBSERVED THAT OUT OF THE AMOUNT OF RS.21,11,00,000/ - RECEIVED FROM M/S. METRO CORP AND METRO CORP INFRASTRUCTU RE LTD., ONLY AN AMOUNT OF RS.5,53,81,059/ - WAS GIVEN BY THE ASSESSEE AS ADVANCES. THE BULK OF THE AMOUNT SO RECEIVED HAS BEEN INVESTED IN FIXED ASSETS AND INVESTMENTS IN THE ASSESSEES NAME. THE CIT(A) REJECTED THE ARGUMENT OF THE ASSESSEE THAT THE ADVANC ES WERE GIVEN FOR PROCUREMENT OF LAND WHICH WAS STOCK - IN - TRADE AND NOT A CAPITAL ASSET SINCE NEITHER THE PROMOTERS NOR THE ASSESSEE WERE TRADING IN PARCELS OF LAND BUT THESE LANDS WERE BEING ACQUIRED FOR THE PURPOSE OF CONSTRUCTION OF BUILDINGS/TOWNSHIPS T HEREON, HENCE THE LAND SOUGHT TO BE ACQUIRED WAS A CAPITAL ASSET AND ON TRANSFER FROM THE LAND OWNERS TO THE ASSESSEE /PROMOTER, THE LAND - OWNER WOULD HAVE EARNED CAPITAL GAINS. REGARDING APPLICATION OF PROVISIONS OF SECTION 56(2), HE OBSERVED THAT SUB - CLA USE(IX) OF SECTION 56(2) I.T.A. NO. 28/BANG/2020 6 PROVIDES THAT CERTAIN INCOMES ARE TO BE INCLUDED UNDER THE HEAD INCOME FROM OTHER SOURCES: (IX) ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF NEGOTIATIONS FOR TRANSFER OF A CAPITAL ASSESSE IF, (A) SUCH SUM IS FORFEITED; AND (B) THE NEGOTIATIONS DO NOT RESULT IN TRANSFER OF SUCH CAPITAL ASSET. 4. 1 THE CIT(A) OBSERVED THAT THOUGH THE ASSESSEE CLAIMED THAT HE IS LIABLE TO RETURN THESE ADVANCES BUT THE FACTS OF THE CASE INDICATE THAT THERE HAS BEEN VIRTUAL FORFEITURE OF THE AMOUNT AS THE PROMOTERS HAVE MADE NO ATTEMPT TO RECOVER THE SAME. ACCORDING TO THE CIT(A) THESE ADVANCES WERE IN THE NATURE OF TRADE ADVANCES AND NOT HAVING RETURNED THE SAME AND HAVING UTILIZED THEM FOR MAKING INVESTMENTS IN HIS OWN NAME, THESE AM OUNTS HAD ACQUIRED THE NATURE OF INCOME IN THE HANDS OF THE ASSESSEE. THE CIT(A) RELIED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS (222 ITR 344). BEFORE THE CIT(A), THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF ITAT, MUMBAI IN THE CASE OF NILESH JANARDHAN THAKUR VS. ITO (168 ITD 143) WHERE THE ADVANCES WERE GIVEN FOR PROCUREMENT OF LAND AND WERE SUBSEQUENTLY NOT RETURNED. THE TRIBUNAL UPHELD THE ASSESSEES CLAIM ON THE GROUNDS THAT THE AO HAD WRONGLY APPLIED THE PROVISIONS OF SECTION 56(2)(VI) TO THE CASE. IN THE CASE OF NILESH JANARDHAN THAKUR, THE PROMOTERS OF THE PROJECT HAD FILED A SUIT FOR RECOVERY OF THE ADVANCES GIVEN AND HENCE THE LIABILITY OF THE ASSESSEE TO RETURN THE SAME WAS ESTABLISHED WHEREAS IN THE PRESENT CASE, NO SUCH SUIT WAS FILED. IN VIEW OF THE ABOVE, THE CIT(A) SUSTAINED THE ADDITION MADE BY THE AO. I.T.A. NO. 28/BANG/2020 7 5. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT A SUM OF RS.19,62,00,000/ - WAS RECEIVED AS AN ADVANCE FOR PROCUREMENT OF LANDS FROM M/S. METROCORP PURSUANT TO AN AGREEMENT DATED 10/02/2006. M/S. METROCORP ADVANCED A SUM OF RS.85 LAKHS ON THE DATE OF AGREEMENT AND FURTHER SUMS OVER A PERIOD OF TIME AGGREGATING TO RS.19,62,00,000/ - THE LD. AR SUBMITTED THAT THE L AST PAYMENT WAS RECEIVED FROM M/S. METROCORP ON 07/08/2007 WITH ALMOST THE ENTIRE ADVANCE BEING RECEIVED BEFORE 31/03/2007 AND FURTHER THAT ALL AMOUNTS WERE RECEIVED ONLY BY WAY OF ACCOUNT PAYEE CHEQUE. THE LD. AR SUBMITTED THAT DUE TO VARIOUS REASONS INC LUDING LITIGATIONS PERTAINING TO THE PROJECT BEING DEVELOPED BY METROCORP THE SAID FIRM COULD NOT PAY ANY FURTHER ADVANCE TO THE ASSESSEE TO PROCURE THE LANDS AND AS SUCH, THE AMOUNT RECEIVED BY HIM WAS TREATED AS AN ADVANCE FOR PROCUREMENT OF LANDS. THE LD. AR SUBMITTED THAT THE ASSESSEE WAS WILLING TO FULFIL HIS OBLIGATION UNDER THE AGREEMENT ON RECEIPT OF THE BALANCE AMOUNT FROM M/S. METROCORP AND THE AMOUNTS PAID BY METROCORP TO HIM WAS ALSO CONFIRMED BY THEM BY AUTHENTICATING THE STATEMENT OF ACCOUNT OF THE SAID FIRM IN THE BOOKS OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE CONFIRMED THAT HE DID NOT CLAIM ANY EXPENDITURE OR DEDUCTION IN RELATION TO THE ADVANCE RECEIVED FROM M/S. METROCORP TOWARDS PROCUREMENT OF LANDS IN THE PRESENT OR IN ANY EA RLIER YEARS AND THAT THE SAID ADVANCE REMAINED A LIABILITY IN HIS BOOKS PENDING PERFORMANCE OF HIS OBLIGATION UNDER THE AGREEMENT. 5.1 T HE LD. AR FURTHER SUBMITTED THAT THE ADVANCES OF RS.20,11,00,000/ - AND RS.1,00,00,000/ - RECEIVED FROM M/S. METROCORP A ND M/S. METROCORP INFRASTRUCTURE I.T.A. NO. 28/BANG/2020 8 LTD. RE S PECTIVELY WAS FOR THE PROCUREMENT OF LAND TOWARDS THE PROJECTS PROPOSED TO BE DEVELOPED BY THE SAID CONCERNS. IT WAS SUBMITTED THAT AFTER PAYMENT OF SOME AMOUNTS TOWARDS PROCUREMENT OF LANDS, THE SAID PARTIES DISCO NTINUED TO PAY THE FURTHER AMOUNTS FOR VARIOUS REASONS INCLUDING CERTAIN INTERNAL DISPUTES REGARDING THE MANAGEMENT OF THEIR CONCERNS AND OTHER FACTORS. OUT OF THE ADVANCES RECEIVED AS ABOVE, THE ASSESSEE MADE INITIAL PAYMENTS TOWARDS PROCUREMENT OF LANDS TO SEVERAL PARTIES AGGREGATING TO RS.5,53,81,059/ - WHICH IS SHOWN UNDER LOANS AND ADVANCES IN THE FINANCIAL STATEMENTS AS ON 31/03/2015. 5.2 FURTHER, THE LD. AR SUBMITTED THAT THE PROVISION OF SECTION 56(2)(IX) OF THE INCOME TAX ACT 1961 INVOKED BY THE AO TO MAKE THE DISPUTED ADDITIONS TO TH INCOME OF THE ASSESSEE ARE NOT APPLICABLE TO CASE OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ADDITIONS MADE TO THE INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF 56(2)(IX) SUFFERS FROM LACK OF JURISDIC TION AS THE SAID SECTION PER SE DO NOT APPLY AND CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE FOR THE FOLLOWING REASONS: I) SECTION 56(2)(IX) OF THE INCOME TAX ACT 1961 WHICH WAS INSERTED WITH EFFECT FROM 01/04/2015 Y AMENDMENT MADE IN THE FINANCE (NO. 2) BILL, 2014, READ AS FOLLOWS: ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF NEGOTIATIONS FOR TRANSFER OF A CAPITAL ASSET, IF, - (EMPHASIS SUPPLIED) (A) SUCH SUM IS FORFEITED; AND ( B) THE NEGOTIATIONS DO NOT RESULT IN TRANSFER OF SUCH CAPITAL ASSET; THUS, I T IS ABUNDANTLY CLEAR FROM READING OF THE PROVISION ITSELF AS ABOVE THAT THE SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHER WISE SHOULD HAVE BEEN IN THE COURSE I.T.A. NO. 28/BANG/2020 9 OF N EGOTIATIONS FOR THE TRANSFER OF CAPITAL ASSET . ACCORDING TO THE LD. AR, IT IS A WELL SETTLED PRINCIPLE OF INTERPRETATION SUPPORTED BY A CATENA OF J UDICIAL DECISIONS INCLUDING THAT OF THE APEX COURT THAT THE INTENTION OF THE L EGISLATURE IN IS TO BE STRICTLY GATHERED FROM THE LANGUAGE OF THE PROVISION PART ICULARLY WHERE THE LANGUAGE IS PLAIN AND UNAMBIGUOUS . THE LD. AR RELIED ON THE FOLLOW I NG DECISIONS IN THIS REGARD 1. S M T.TARULATA SHARA DAS VS CIT (1977) 108 ITR 345(SC) 2. CIT VS CALCUTTA KNIT W EARS (2014) 362 ITR 673 (SC) 3. INDIAN BANK ASSOCIATIONS AND ORS . V S DEVKALA CONSULTANCY SERVICES AND ORS (2CC1) 267 I TR 179 (SC) 4. NA THURAM AGAR WAL VS STATE OF MADHYA PRADESH (1999) 8 SCC 667 (SC) 5. TATA CONSULTANCY SER V ICES VS S T ATE OF ANDHRA PRADESH (2004) 271 I TR 4 01(SC) ACCORDING TO THE LD. AR, THE ABOVE P RINCIP L E IS EVEN MORE APPLICA BLE IN THIS CASE AS THE ADDITION WAS MADE IN THE C ASE OF ASSESSEE BY INVOKING THE DEEMING PROVISION TO TAX A RECEIPT AS AN INCOME, WHERE THE WORDINGS OF THE PROVISIONS BEING INVOKED HAVE TO BE CONSTRUED STRICTL Y . THE LD. AR SU BMITTED THAT A PROVISO WAS INS ER TED IN SECTION 51 O F THE I NC OME TAX ACT WHICH DEALT W ITH MONE Y , RECEI V ED IN RESPECT OF N EGOTIATIONS IN RELATION TO A C APITAL ASSET' BY THE FINANCE(NO . 2) ACT , 20 14 SIMULTANEOUSLY W ITH THE INSERTION OF SECTION 56(2)(IX), THE RE BY FURTHER CONFIRMING THE ANALOGY THAT THE PROVISIONS O F SECTION 5 6 (2)(IX) WOULD APPLY TO THE ADVANCES RECEIVED IN RELATION TO A 'CAPITAL ASSET' AND NOT 'STOCK IN TRADE' . 5.3 FURTHER, THE LD. AR SUBMITTED THAT A READING OF THE AGREEMENT ENTERED INTO D ATED 10/02/2006 BETWEEN ADISHREE P ROPERTIES A PROPRIETARY CONCERN OF RAVI S HANKAR SHETT Y (APPELLANT) AN D M/S. METROCORP, W HICH HAS BEEN TAKEN AS A BASIS FOR MAKING ADDI T IONS, WOULD REVEAL THE FOLLOWING IMPORTANT FACTS: I.T.A. NO. 28/BANG/2020 10 A) THAT THE PROCURER/COORDINATOR I.E ., M/S. ADISHREE PROPERTIES , A PROPRIETARY CONCERN OF RAVI S HANKAR SHE TT Y (APPELLANT),IS IN THE BUSINESS OF BUI L DING AND SELLING OF IAND, HAVING A EXPERTISE IN IDENTIFICATION OF LAND , ASCERTAI NING THEIR SUITABILITY OF LAND O R COMMERCIAL EXP L OITATION ETC. (REFER PAGE 2OF THE AGREEMENT). B) THAT THE PROMOTER/PURCHASER M/S. METROCORP I S IN THE BUSINESS OF PROMOTION OF MODERN TOWN SHIP, RESIDENTIAL, IN D USTRIAL AN D COM MER CIAL COMPLEXES E T C., AND HA D APPROACH ED THE AP PE LLAN T TO F ACIL I TA T E THE PROCURE MENT OF LAND S IN FURTHERANCE OF ITS BUSINESS OBJECTIVES (REFER PAGE 1 OF THE AGREEMENT) . AS IS DISCERNIBLE FROM THE AGREEMENT, THE LD. AR SUBMITTED THAT THE AMOUNTS ADVANCED BY THE PROMOTER/PURCHASER M/S. METROCORP TO M/S. A DISHREE PROPERTIES A PROPRIETARY CONCERN OF RAVI S HANKAR S HETTY (APPELLANT) WAS TO IDENTIFY, PROCURE AND ACQUIRE LANDS WHICH WOULD CONSTITUTE STOCK IN TRADE IN HANDS OF THE PROMOTER/COORDINATOR AND WILL ALSO BE REGARDED AS AN ADVANCE TOWARDS THE PROCUREMENT/ACQUISITION OF LANDS AS STOCK IN TR ADE IN FURTHERANCE OF THE BUSINESS OF THE PROPRIETARY CONCERN OF TH E ASSESSEE M/S. ADISHREE PROPERTIES. IN OTHER WORDS, THE ADVANCE GIVEN AND ADVANCE TAKEN ARE FOR THE PURPOSE OF AND IN RELATION TO PROCUREMENT/ACQUISITION OF LANDS AS STOCK IN TRADE. 5 .4 THE LD. AR FURTHER SUBMITTED THAT A S THE ADVANCES RECEIVED AR E IN THE COURSE OF NEGOTIATIONS FOR TRANSFER OF STOCK IN TRADE AND NOT A CAPITAL ASSET BOTH IN THE HANDS OF THE PAYER I.E., M/S.METROCORP AND THE PAYEE I.E., THE RECIPIENT M/S. ADISHREE PR OPERTIES PROPRIETARY CONCERN OF RAVI S HANKAR SHETTY (APPELLANT ), THE PROVISIONS OF SECTION 56(2) (IX) ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. I.T.A. NO. 28/BANG/2020 11 5.5 THE LD. AR SUBMITTED THAT THE ASSESSEE HAD RECEIVED LETTERS FROM M/S ME TROCORP AND FR OM M/S. METROCORP INFRASTRUCTURE LTD. IN WHICH THE FOLLO WI NG FACTS HA V E BEEN CLEARLY STATED AND CONFIRMED : A) THAT M/S METROCORP AND M/S METROCORP INFRASTRUCTURE LTD HAS NOT ADVANCED FURTHER MONIES TO S RI. RA VI S HETTY, PROPRIE T OR OF ADISHREE PR O PER T IES (APPELLA NT) TO WARDS THE AFORESAID PROCUREMENT AGREEMENT, AS A RESU L T OF WHICH HE IS YET TO FULFIL HIS OBLIGATIONS UNDER THE AGREEMENT. B) THAT THE AMOUNTS ALREADY PAID BV M /S. METRO CORP AND M/S. METROCORP INFRASTRUC T URE LTD TO RAVI S SHETTY (APPEL L ANT) HAS BEEN SHO W N AS ADVANCE IN THE BOOKS OF THE SAID ENTITIES . THE LD. AR SUBMITTED THAT THESE LETTERS ARE CRITICAL EVIDENCE IN SUPPORT OF THE ASSESSEES S C L AIM AN D GOES IN T O THE ROOT OF THE MATTER ON WHICH THE ADDITION WAS MADE . 5.6 THE L D. AR SUBMITTED THAT TH E ASSESSING OFFICER IN PARA 1 OF THE REMAND R EPORT STATED THAT THE ASSESSEE HAD NOT RESPONDED TO THE E - MAIL COMMUNICATION DATED 28/11/2017 BY FURNISHING CONFIRMATION REGARDING AMOUNTS RECEIVED FROM M/S. METROCORP AND M/S. METROCORP INFRASTRUCTURE LTD. AND THEREFORE HAD NOT UTILIZED THE OPPORTUNITY OF FURNISHING THE SAME IN THE GAP OF ONE MONTH BETWEEN THE DATE OF E - MAIL COMMUNICATION AND THE DATE OF THE ORDER. IT WAS SUBMITTED THAT THIS AVERMENT OF THE ASSESSING OFFICER WAS FACTUALLY INCORRECT AS THE ASSES SEE HAD RESPONDED IMMEDIATELY TO THE E - MAIL VIDE HIS SUBMISSION DATED 02/12/2017 AND 20/12/2017 ON THE SUBJECT MATTER OF ADDITIONS. IT WAS SUBMITTED THAT THERE AS NO MURMUR OF IMPENDING ADDITIONS MADE BY THE ASSESSING OFFICER AND NO SHOW CAUSE NOTICE WAS I SSUED ON THE ASSESSEE BASED ON HIS SUBMISSIONS AND CONSEQUENTLY, THE ASSESSEE I.T.A. NO. 28/BANG/2020 12 WAS UNDER THE BONA FIDE BELIEF THAT THE CONFIRMATIONS FILED BY THE ASSESSEE AND THE EXPLANATIONS GIVEN BY THE ASSESSEE WERE IN ORDER AND ACCEPTED BY THE ASSESSING OFFICER. 5.7 THE LD. AR SUBMITTED THAT THE A SSESSING OFFICER HAD HERSELF AFFIRMED THE FACT THAT SRI RATHAN KUMAR THE ADDITIONAL DIRECTOR OF M/S. METROCORP INFRASTRUCTURE LTD. AND MANAGER OF M/S. METROCORP HAD ATTENDED THE SUMMONS U/S. 131 AND FURNISHED STATEMENTS AND CONFIRMATIONS REGARDING ADVANCES OF RS.20,11,00,000/ - GIVEN BY M/S. METROCORP AND RS.1,00,00,000/ - FROM M/S. METROCORP INFRASTRUCTURE LTD. WHICH PROVES BEYOND DOUBT THAT NOT ONLY THE SAID CONCERNS WERE REPRESENTED BY A DESIGNATED OFFICIAL BUT ALSO THAT TH E CONFIRMATION OF BALANCES OF THE ADVANCES GIVEN TO THE ASSESSEE WERE PRODUCED. 5.8 THE LD. AR FURTHER SUBMITTED THAT IN PARA 3 OF THE REMAND R EPORT, THE ASSESSING OFFICER HA S REPRODUCED STATEMENTS MADE BY SRI RATHAN KUMAR FOR AND ON BEHALF OF M/S. ME TROCORP INFRASTRUCTURE LTD. AND M/S. METROCORP. IN PARA 1 OF THE SAME, THE ASSESSING OFFICER HAD CONFIRMED THAT SRI RATHAN KUMAR WAS UNABLE TO FURNISH THE FINANCIAL STATEMENT OF M/S. METROCORP FOR THE YEARS IN WHICH THE ADVANCES WERE GIVEN TO THE ASSESSEE AND IT WAS FURTHER STATED THAT ONLY LEDGER ACCOUNTS WERE PROVIDED SHOWING BANK ACCOUNTS TRANSACTIONS FOR WHICH BANK STATEMENTS WERE NOT PRODUCED. IN THIS REGARD, IT WAS STATED THAT THE ASSESSEE HAD FURNISHED A LETTER DATED 29/01/2019 WHICH CLEARLY SHOWED THAT THE ASSERTION MADE BY THE ASSESSING OFFICER IS FACTUALLY INCORRECT AS COPIES OF FINANCIAL STATEMENTS OF I.T.A. NO. 28/BANG/2020 13 M/S. METROCORP FOR THE YEAR IN WHICH THE ADVANCES WERE GIVEN WERE AVAILABLE ON RECORD. REGARDING SRI RATHAN KUMAR NOT BEING ABLE TO PRODUCE THE BA NK STATEMENTS OF M/S. METROCORP, IT WAS STATED THAT SRI RATHAN KUMAR HAD JOINED THE GROUP ONLY FROM 31/08/2016. THE LD. AR SUBMITTED THAT THE EVIDENCE OF THE ADVANCES RECEIVED BY THE ASSESSEE FROM THE PARTIES THROUGH BANKING CHANNELS WAS CLEARLY ESTABLISH ED BY THE ASSESSEE IN THE LEDGER STATEMENTS PRODUCED BEFORE THE ASSESSING OFFICER. ACCORDING TO THE LD. AR, THE AVERMENT OF THE ASSESSING OFFICER THAT NECESSARY SUPPORTING EVIDENCE FOR RS.110 CRORES INVESTMENT IN M/S. METROCORP WAS NOT PROVIDED IS INCORRE CT AS AUDITED FINANCIAL STATEMENTS OF M/S. METROCORP FOR THE YEAR ENDING 31/03/2008 CLEARLY SHOWED INVESTMENT FROM AN INTERNATIONAL INVESTOR M/S. PRAMERICA. THE LD. AR SUBMITTED THAT THE AVERMENT OF THE AO THAT M/S. METROCORP AND M/S. METROCORP INFRASTRU CTURE LTD. HAD NOT COMPLETED A SINGLE PROJECT IS OF NO CONSEQUENCE AS THE ASSESSEE WAS IN NO WAY RESPONSIBLE FOR THE COMPLETION OF PROJECTS BY THE SAID CONCERNS. IT WAS SUBMITTED THAT THE FINANCIALS OF M/S. METROCORP INFRASTRUCTURE LTD. FOR YEAR ENDED 31/ 03/2009 CLEARLY SHOWED THAT AN AMOUNT OF RS.76,78,24,728/ - WAS INCURRED AS PROJECT COST FOR PROJECT NIRVANA AND THE NON SUBMISSION OF ANY DOCUMENTS PERTAINING TO THE PROJECT WAS IN NO WAY DUE TO THE FAULT OF THE ASSESSEE. 5.9 THE LD. AR SUBMITTED THAT M/S METROCORP HAD FILED ITS RETURN OF INCOME FOR THE A.Y. 2007 - 08 AND A.Y. 2008 - 09 AND M/S. METROCORP INFRASTRUCTURE LTD. HAD FILED ITS RETURN OF INCOME FOR THE A.Y. 2 009 - 10 AND ASSESSMENTS OF BOTH THE CONCERNS WERE COMPLETED U/S. 143(3) OF THE I.T. ACT. THE LD. AR SUBMITTED THAT THE FINANCIALS OF I.T.A. NO. 28/BANG/2020 14 BOTH M/S. METROCORP AND M/S. METROCORP INFRASTRUCTURE LTD. REFLECTED THE ADVANCES. THE LD. AR SUBMITTED THAT THE NATURE OF LANDS BEING PROCURED WAS HELD AS BUSINESS ASSET I.E. STOCK IN TRADE BY THE ASSESSEE AN D QUOTED FROM PROCUREMENT AGREEMENT AS FOLLOWS: I) WHEREAS THE PROCURER/CO - ORDINATOR IS IN THE BUSINESS OF BUYING AND SELLING OF LAND, UNDERTAKING JOINT DEVELOPMENT AGREEMENTS AND HIS HAVING EXPERTISE N IDENTIFICATION OF LAND, VERIFYING THE MARKETABILI TY OF TITLE, SUITABILITY OF THE LAND FOR COMMERCIAL EXPLOITATION AND NEGOTIATION WITH THE LAND OWNERS. II) WHEREAS THE PROMPTER/PURCHASER HEREIN BEING ENGAGED IN THE PROMOTION OF MODERN TOWNSHIPS, RESIDENTIAL, INDUSTRIAL AND COMMERCIAL BUILDING COMPL EXES ETC. HAVE BEEN ON THE LOOKOUT FOR AN IDEALLY LOCATED COMPACT AND CONTAGIOUS BLOCK OF LANDS FOR THE PROMOTION AND DEVELOPMENT OF A MODERN TOWNSHIP CONSISTING OF RESIDENTIAL, INDUSTRIAL AND COMMERCIAL SITES TOGETHER WITH ALL MODERN FACILITIES, AMENIT IES AND INFRASTRUCTURE. THE LD. AR SUBMITTED THAT THE PROCUREMENT AGREEMENT SHOWED THAT THE ASSESSEE WAS IN THE BUSINESS OF BUYING AND SELLING OF LANDS. THUS, IT WAS CLEAR THAT THE NATURE OF ASSET WAS PROCURED FOR THE PURCHASER AND BEING ACQUIRED BY TH E ASSESSEE AS PART OF HIS STOCK IN TRADE AND NOT A CAPITAL ASSET. 5.9.1 REGARDING ANSWERS TO QUESTION 21 AND QUESTION 22 OF THE STATEMENT RECORDED FROM MR. RATHAN KUMAR IN THE REMAND REPORT, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAD NOT REPR ODUCED CERTAIN IMPORTANT ASPECTS OF THE SWORN STATEMENT OF MR. RATHAN KUMAR AS FOLLOWS: ANSWER TO QUESTION 12, SHRI RATHAN KUMAR HAS CLEARLY STATED THAT THE ADVANCES WERE TO THE A PPELLANT TO PROCURE LAND FOR ITS PROJECT NIRVANA. THE SAID PROJECT LOCA TED AT SADAHALLI VILLAGE, DEVANAHALLI TALUK, BANGALORE RURAL DISTRICT. I.T.A. NO. 28/BANG/2020 15 ANSWER TO QUESTION 17, SRI RATHAN KUMAR HAS CLEARLY STATED THAT THE SERVICES OF ADISHREE PROPERTIES WERE EMPLOYED BECAUSE OF THEIR EXPERTISE IN COORDINATING, PROCURING AND ACQUIRIN G LANDS AND ANCILLARY ACTIVITIES OF NEGOTIATING WITH LAND OWNERS, IDENTIFICATION OF LAND AND ITS MARKETABILITY. ANSWER TO QUESTION 22 SRI RATHAN KUMAR HAS CLEARLY STATED THAT M/S. METROCORP HAVE NOT TAKEN ANY LEGAL ACTION AGAINST ADISHREE PROPERTIES. SINCE WE HAVE NO FURTHER ADVANCED THAT REMAINDER AMOUNT AS PER PROCUREMENT AGREEMENT DATED 10/02/2006. 5.9.2 THE LD. AR SUBMITTED THAT THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS DATED 11 SEPTEMBER, 1996 IS DI STINGUISHABLE ON FACTS OF THE PRESENT CASE. THE LD. AR SUBMITTED THAT THE REPRESENTATIVE OF M/S. METROCORP AND M/S. METROCORP INFRASTRUCTURE LTD. HAD CLEARLY STATED THAT NO LEGAL ACTION COULD BE TAKEN AGAINST THE ASSESSEE SINCE FURTHER ADVANCES WERE NOT G IVEN TO THE ASSESSEE TO ENABLE HIM TO FULFIL HIS OBLIGATION UNDER THE PROCUREMENT AGREEMENT. 5.9.2 IT WAS FURTHER SUBMITTED BY THE LD. AR THAT I N THE CASE OF THE ASSESSEE, THE FOLLOWING POINTS NEED TO BE EMPHASIZED AND PLACED ON RECORD. A) THAT THE SUM OF MONEY RECEIVED BY THE APPELLANT WAS NOT FOR THE TRANSFER OF ANY CAPITAL ASSET OWNED OR HELD BY HIM BUT ONLY FOR THE PROCUREMENT OF THE LAND FROM OTHERS. B) THAT THE ADVANCES RECEIVED FOR PROCUREMENT HAVE NOT BEEN FORFEITED BY THE APPELLANT AS ON THAT DATE. C) THAT THE NEGOTIATIONS FOR TRANSFER OF THE LANDS TO BE PROCURED BY THE APPELLANT CANNOT BE SAID TO HAVE BEEN CONCLUDED AS THE APPEL LANT HAD TO RECEIVE FURTHER MONIES TOWARDS PROCUREMENT TO PERFORM HIS OBLIGATIONS UNDER THE PROCUREMENT AGREEMENT, WHICH FACT HAS ALSO BEEN CONFIRMED BY THE REPRESENTATIVE OF THE COMPANY WHICH HAD GIVEN SUCH ADVANCES IN HIS RECORDED IN ANSWER TO QUESTI ON NO. 22 OF THE REMAND REPORT. I.T.A. NO. 28/BANG/2020 16 AS CAN BE SEEN FROM THE ABOVE, IT WAS SUBMITTED THAT NONE OF THE CONDITIONS FOR INVOKING THE PROVISIONS OF SECTION 56(2)(IX) ARE APPLICABLE TO THE APPELLANTS CASE AND HENCE THE ADDITIONS MADE BY THE ASSESSING OFFICER BY INVOKING THE AFORESAID PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT LACKS JURISDICTIONS AND HAS BEEN MADE WITHOUT THE FORCE OF LAW. THE ABOVE CONTENTION IS WITHOUT PREJUDICE TO THE CONTENTION ALREADY TAKEN THAT THE NEGOTIATIONS BETWEEN THE APPELLANT A ND THE CONCERNS M/S. METROCORP AND M/S. METROCORP INFRASTRUCTURE LTD. WHICH PAID THE ADVANCE TO HIM WAS FOR ACQUIRING LANDS WHICH FORMED PART OF STOCK - IN - TRADE AND NOT FOR THE PURPOSE OF ACQUISITION OF CAPITAL ASSETS. THE LD. AR SUBMITTED THAT THE PROVISI ONS OF SECTION 56(2)(IX) WAS INTRODUCED INTO THE INCOME TAX ACT BY FINANCE ACT, 2014 BY AMENDMENT TO SECTION 56 OF THE INCOME TAX ACT. SIMULTANEOUSLY WITH THE INSERTION OF SECTION 56(2)(IX) A PROVISO WAS INSERTED IN SECTION 51 OF THE I.T. ACT IN EFFECT TO PROVIDE THAT IN THE EVENT ANY ADVANCE RECEIVED IN THE COURSE OF TRANSFER OF CAPITAL ASSET H AS BEEN INCLUDED AS INCOME U/S. 56(2)(IX), THE SAME NEED NOT REDUCED FROM THE COST OF ASSET. IN OTHER WORDS, IT WAS SUBMITTED THAT SECTION 56(2)(IX) WAS INTRODUCED TO FIX THE POINT OF TAXABILITY OF THE AMOUNT RECEIVE AND FORFEITED IN THE NEGOTIATION OF TRANSFER OF A CAPITAL ASSET WHICH WAS NOT TAXABLE U/S. 51 BUT ONLY DEFERRED TO A FUTURE DATE BY ALLOWING THE ADVANCE FORFEITED TO BE REDUCED FROM THE COST OF THE ASSET . THUS, BASED ON THE ABOVE SUBMISSIONS, THE LD. AR PRAYED THAT THE ADDITION MAY BE DELETED AND THE APPEAL OF THE ASSESSEE ALLOWED. I.T.A. NO. 28/BANG/2020 17 6. THE LD. DR ON THE OTHER HAND SUBMITTED THAT THE AMOUNTS OF RS.20,11,00,000/ - AND RS.1,00,00,000/ - GIVEN BY METROCORP AND METROCORP INFRASTRUCTURE LTD., RESPECTIVELY TO THE ASSESSEE FOR PROCUREMENT OF LAND WAS NOT RETURNED TO THESE PARTIES IS NOT IN DISPUTE. THE LD. DR SUBMITTED THAT THE ASSESSEE CLAIMED THAT THESE ADVANCES REMAINED A LIABILITY IN HIS BOOKS AND HE MAY HA VE TO RETURN THE SAME AT SOME FURTHER DATE, PARTICULARLY IF THESE CONCERNS FACE LIQUIDATION PROCEEDINGS. THE AO HAS NOTED THAT ONLY AN AMOUNT OF RS.5,53,81,059/ - HAS BEEN GIVEN BY THE ASSESSEE AS ADVANCES AND BALANCE INVESTED IN FIXED ASSETS AND INVESTME NTS IN THE ASSESSEES NAME. THE LD. DR SUBMITTED THAT THE ADVANCES WERE IN THE NATURE OF TRADE ADVANCES AND NOT HAVING RETURNED THE SAME AND HAVING UTILIZED THEM FOR MAKING INVESTMENTS IN HIS OWN NAME, THESE AMOUNTS HAD ACQUIRED THE NATURE OF INCOME IN TH E HANDS OF THE ASSESSEE. ACCORDING TO THE LD. DR THE ASSESSEE CLAIMED THAT HE IS LIABLE TO RETURN THESE ADVANCES BUT THE FACTS OF THE CASE INDICATE THAT THERE HAS BEEN VIRTUAL FORFEITURE OF THE AMOUNT AS THE PROMOTERS HAVE MADE NO ATTEMPT TO RECOVER THE S AME AND IN THE PRESENT CASE, NO SUIT WAS FILED . IN VIEW OF THE ABOVE, THE LD. DR SUBMITTED THAT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE ADDITIONS MADE BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT RECORDS. THE MAIN ISSU E HEREIN IS WITH REGARD TO INVOKING OF PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT IN RESPECT OF LIABILITY SHOWN IN THE NAME OF M/S. METRO CORP AT RS.20.11 CRORES AND M/S. METRO INFRASTRUCTURE LTD. AT RS.1 CRORE AS OUTSTANDING IN THE FINANCIAL STATEMENT FOR THE YEA R UNDER CONSIDERATION . T HIS AMOUNT WAS TREATED BY I.T.A. NO. 28/BANG/2020 18 THE AO AS INCOME OF THE ASSESSEE AND CONFIRMED BY THE CIT(A). THIS AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE FROM M/S. METRO CORPORATION VIDE AGREEMENT DATED 10/02/2006. THE ASSESSEE IS IN THE BUSINESS OF B UYING AND SELLING OF LAND. HE IS IN THE REAL ESTATE BUSINESS. M/S. METRO CORP APPROACHED THE ASSESSEE TO FACILITATE THE PROCUREMENT OF LAND FOR THEIR BUSINESS. SIMILARLY, METRO CORP INFRASTRUCTURE LTD. ADVANCED MONEY TO THE ASSESSEE AMOUNTING TO RS.1 CR ORE IN THE MONTH OF APRIL, 2008. THESE AMOUNTS ARE STATED AS OUTSTANDING IN THE BALANCE SHEET OF THE ASSESSEE FROM YEAR TO YEAR AND ALSO IN THE FINANCIAL YEAR ENDING 31/03/2015 RELEVANT TO THE ASSESSMENT YEAR 2015 - 16. DURING THE COURSE OF ASSESSMENT , ON E NQUIRY BY THE AO, THE ASSESSEE FURNISHED THE C ONFIRMATION LETTERS FROM THE PARTIES WHICH ARE AS FOLLOWS: METROCORP [ NARASIMHA TOWERS, 46/2,3 RD FLOOR , FOURTH CROSS, MALLESHWARAM BANGALORE 560003] 14/11/2018 TO THE ASSISTANT COMMISSI ONER OF I NCOME TAX CIRCLE 6(3)(1), BANGALORE SIR, SUBJECT: CONFIRMATION OF AMOUNT PAID TO SRI RAVI SHANKAR SHETTY, PROPRIETOR OF M/S. ADISHREE PROPERTIES THIS IS TO CONFIRM THAT METROCORP INFRASTRUCTURE LIMITED HAD PAID AN ADVANCE OF RS. 1,00 ,00 ,000/ - (RUPEES ONE CRORE ONLY ) TO MR. R AVI S HANKAR S HETTY , PROPRIETOR, ADISHREE PROPERTIES NO. 89, 1 ST FLOOR, 15 TH MAIN, RMV EXTENSION 560 080 , IN THE MONTH OF APRIL 2008. THE SAID ADVANCES WERE MADE TOWARDS PROCUREMENT OF LAND. W E CO N FIRM THAT WE HAVE NOT ADVANCED FURTHER MONEYS TO SHRI R AVI S HANKAR S HETTY TOWARDS THE AFORESAID PROCUREMENT OF LAND, AS A RESULT OF WHICH, HE IS YET TO FULFILL HIS OBLIGATIONS UNDER THE AGREEMENT. I.T.A. NO. 28/BANG/2020 19 THE AMOUNT PAID TO S RI R AVI S HANKAR S HETTY HAS BEEN SHOWN AS AN ADVANCE TO METROCORPS BOOKS KINDLY NOTE THAT PURSUANT TO AN ASSIGNMENT DEED EXECUTED DURING 2009, METROCORP, THE PARTNERSHIP FIRM, BEARING PAN NO: AAMFM 60578, HAS ASSIGNED ALL ITS RIGHTS, ASSETS AND LIABILITIES TO METROCORP INFRASTRUCTURE LIMITED. THANKI N G YOU FO R METROCORP SD/ - (RATHAN KUMAR ) MANAGER METROCORP INFRASTRUCTURE LIMITED [NARASIMHA TOWERS, 46/2,3 RD FLOOR,FOURTH CROSS, MALLESHWARAM BANGALORE 560003] FROM: METROCORP INFRASTRUCTURE LIMITED, BANGALORE 14/11/2018 PAN: AAMFN 60 57B TO THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 6(3)(1), BANGALORE SIR, SUBJECT: CONFIRMATION OF AMOUNT PAID TO SRI RAVI SHANKAR SHETTY,PROPRIETOR OF M/S. ADISHREE PROPERTIES THIS IS TO CONFIRM THAT METROCORP INFRASTRUCTURE LIMITE D HAD PAID AN ADVANCE OF RS. 1,00 ,00,000/ - (RUPEES ONE CRORE ONLY ) TO MR. RAVI SHANKAR SHETTY, PROPRIETOR, ADISHREE PROPERTIES NO. 89, 1 ST FLOOR, 15 TH MAIN, RMV EXTENSION 560 080 , IN THE MONTH OF APRIL 2008. THE SAID ADVANCES WERE MADE TOWARDS PROCUREMEN T OF LAND. WE CONFIRM THAT WE HAVE NOT ADVANCED FURTHER MONEYS TO SHRI RAVI SHANKAR SHETTY TOWARDS THE AFORESAID PROCUREMENT OF LAND, AS A RESULT OF WHICH, HE IS YET TO FULFILL HIS OBLIGATIONS UNDER THE AGREEMENT. I.T.A. NO. 28/BANG/2020 20 THE AMOUNT PAID TO SRI RAVI SHANKAR SH ETTY HAS BEEN SHOWN AS AN ADVANCE TO METROCORPS BOOKS THANKING YOU FOR METROCORP INFRASTRUCTURE LIMITED SD/ - (RATHAN KUMAR) DIRECTOR 7.1 TH E AO DISALLOWED THE CLAIM OF THE ASSESSEE AND HELD THAT THE SAID RECEIPT IS OUTSTANDING IN THE BOOKS OF ACCOU NT FROM YEAR TO YEAR. IT WAS THE CONTENTION OF THE AUTHORITIES THAT IT IS NOTHING BUT VIRTUAL FORFEITURE AS THE ASSESSEE HAS INVESTED THESE AMOUNTS IN THE FIXED ASSETS AND INVESTMENTS IN HIS BUSINESS. MORE SO, THE LENDER HAS NOT MADE ANY ATTEMPT TO RECO V ER THE SAME FROM THE ASSESSEE. THUS, HE INVOKED THE PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT. THE CIT(A) CONFIRMED THE SAME. 7. 2 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 56(2)(IX) WOULD NOT BE APPLICABLE ON THE FACT S OF THE PRESENT CASE BECAUSE THE SAID SECTION C A ME IN FORCE WITH EFFECT FROM 01/04/2015 AND THE ASSESSEE HAS NOT RECEIVED ANY SUM OR ADVANCE IN THIS ASSESSMENT YEAR. THEREFORE, PROVISION WOULD NOT BE APPLICABLE. WE ARE UNABLE TO SUBSCRIBE TO SUCH AN ARGU MENT THAT THE PROVISION IS APPLICABLE ONLY TO THE AMOUNT RECEIVED AFTER 01/04/2015 BECAUSE THE DEEMING PROVISION IS ATTRACTED IN THE EVENT IF ANY SUM IS TREATED BY THE ASSESSEE OUT OF ANY SUM AND MONEY RECEIVED AS ADVANCE OR OTHERWISE IN THE COURSE OF NEGO TIATION FOR THE TRANSFER OF A CAPITAL ASSET. HENCE, WE HAVE TO SEE HEREIN WHETHER THE AMOUNT I.T.A. NO. 28/BANG/2020 21 RECEIVED BY THE ASSESSEE IS IN THE COURSE OF TRANSFER OF A CAPITAL ASSET QUA WHETHER THERE IS FORFEITURE OF THE AMOUNT IN THE ASSESSMENT UNDER CONSIDERATION. FRO M THE PLAIN READING OF SECTION 56(2) (IX) , I T IS CLEAR THAT MONEY WAS RECEIVED AS ADVANCE OR OTHERWISE IN THE COURSE OF NEGOTIATION FOR TRANSFER OF CAPITAL ASSET. THEREFORE, SUM RECEIVED IN THE COURSE OF NEGOTIATION FOR TRANSFER OF A CAPITAL ASSET IS SINE Q UA NON FOR INVOKING THE DEEMING PROVISIONS. THIS NEGOTIATION IS TO BE IN RELATION TO THE TRANSFER OF A CAPITAL ASSET IN WHOSE CASE THE DEEMING PROVISION IS ATTRACTED. IN OTHER WORDS, THE CAPITAL ASSET WHICH IS THE SUBJECT MATTER OF NEGOTIATION FOR TRANSFE R MUST BELONG TO THE ASSE SSEE. THE LOWER AUTHORITIES W ERE OF THE OPINION THAT SINCE THE AMOUNT RECEIVED FROM M/S. METRO CORP AND M/S. METRO INFRASTRUCTURE LTD. WAS INVESTED BY THE ASSESSEE IN ACQUISITION OF FIXED ASSETS AND INVESTMENTS IN ASSESSEES BUSINE SS , IT ATTRACTED PROVISIONS OF SECTION 56(2)( I X) OF THE I.T. ACT. FROM THE BARE READING OF SECTION 56(2)( I X) SHOWS THAT ANY AMOUNT RECEIVED DURING THE COURSE OF NEGOTIATIONS FOR TRANSFER OF CAPITAL ASSET . THE DEEMING PROVISION IS APPLICABLE IN A SITUATION WHERE THE PERSON WHO OWNS A CAPITAL ASSET ENTERS INTO A NEGOTIATION FOR TRANSFER OF HIS CAPITAL ASSET WITH THE OTHER PERSON AND RECEIVES ANY ADVANCE WHICH IS FORFEITED ON ACCOUNT OF FAILURE OF NEGOTIATION FOR TRANSFER OF SUCH CAPITAL ASSET, THEN THE MONEY RECEIVED AS ADVANCE IS HIT BY THE DEEMING PROVISIONS WHICH IS TAXABLE AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE RECEIVER. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT TH E ASSESSEE IS IN THE BUSINESS OF REAL ESTATE BUSINESS . TH E PARTIES VIZ. M/S. METRO CORP AND M/S. METRO CORP INFRASTRUCTURE LTD. HAVE ADVANCED MONEY TO THE ASSESSEE TO FACILITATE THE PROCUREMENT OF LAND FOR THE FURTHERANCE OF THEIR BUSINESS AS THE ASSESSEE IS IN THE BUSINESS OF BUYING AND SELLING OF LAND, I.T.A. NO. 28/BANG/2020 22 HAVING EXPERTISE IN THE IDENTIFICATION OF LAND, VERIFICATION OF MARKETABILITY OF TITLE, SUITABILITY OF LAND FOR COMMERCIAL EXPLOITATION ETC. THIS WAS MENTION ED IN PAGE 2 OF THE AGREEMENT ENTERED BY THE ASSE SSEE WITH M /S. METRO CORP. THERE IS NO DISPUTE REGARDING THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF PROCUREMENT AND CO - ORDINATOR OF LAND OR HE IS IN THE REAL ESTATE BUSINESS . THE MONEY WAS NOT RECEIVED FROM THESE TWO PARTIES DURING THE COURSE OF NE GOTIATIONS FOR TRANSFER OF ANY CAPITAL ASSET. THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE FROM THESE TWO PARTIES FOR THE PURPOSE OF PROCUREMENT OF LAND FOR THEIR BUSINESS OPERATIONS WHICH IS STOCK IN TRADE TO THE PRESENT ASSESSEE. . AS DISCUSSED EARLIER , THE MONEY RECEIVED DURING NEGOTIATION FOR TRANSFER OF CAPITAL ASSET IS HIT BY THE DEEMING PROVISION OF SECTION 56(2)(IX) OF THE ACT AND NOT TO STOCK IN TRADE. . THE AFORESAID PROPOSITION IS ALSO BORNE OUT WITH THE LEGISLATIVE INTENT WHILE INTRODUCING SEC TION 56(2)(IX) BY FINANCE ACT 2014 WHICH IS REPRODUCED AS FOLLOWS: SECTION 56 FINANCE ACT, 2014 6.10 TAXABITITY OF ADVANCE FOR TRANSFER OF A CAPITAL ASSET WHERE ADVANCE IS FORFEITED. (SECTIONS 5I AND. - 56) IN TRAV A NCORE RUBBER & TEA CO. LTD.. VS. CIT [2 000J 243 ITR 158/109 TAXMAN 250 ) IT WAS HELD THAT FORFEITURE OF ADVANCE MONEY RECEIVED FOR TRANSFER OF CAPITAL ASSET CANNOT BE TREATED AS REVENUE RECEIPT CHARGEABLE TO TAX. IN ORDER TO OVERCOME THIS RULING BY THE SUPREME COURT, SECTION 56 RELATING TO INCO ME FROM OTHER SOURCES HAS BEEN AMENDED BY THE FINANCE (NO. 2) ACT, 2014 BY INSERTING A NEW CLAUSE (IX) IN SUB - SECTION (2) OF THE AFORESAID. SECTION. THE SAID. NEW CLAUSE (IX) PROVIDES THAT WHERE ANY SUM OF MONEY, RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF THE NEGOTIATION FOR TRANSFER OF A CAPITAL ASSET, IS FORFEITED AND THE NEGOTIATIONS DO NOT RESULT IN TRANSFER OF SUCH CAPITAL ASSET, THEN, SUCH SUM SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2015 AND WILL ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2015 - 16 AND SUBSEQUENT YEARS. I.T.A. NO. 28/BANG/2020 23 CONSEQUENTIAL AMENDMENTS HAVE BEEN MADE TO DEFINITION OF INCOME IN SECTION 2(24) AND IN SECTION 51. THE EXISTING PROVISIONS CONTA INED IN CLAUSE (24) OF SECTION 2 DEFINE THE TERM INCOME. THE CLAUSE (24) HAS B EEN AMENDED SO AS TO IN CLUDE ANY SUM OF MONE Y REFERRED TO IN CLAUSE (IX) OF SUB - SECTION(2) OF SECTION 56 IN THE DEFINITION OF INCOME. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE AY 2015 - 16 AND SUBSEQUENT YEARS. THE EXISTING PROVISIONS CONTAINED IN SECTION 51 PROVIDE THAT WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION, THE SUBJECT OF NEGOTIATIONS FOR ITS TRANSFER, A NY ADVANCE OR OTHER MONEY RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOWN VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST O F ACQUISITION. FINANCE (NO. 2) ACT, 2014 HA INSERTED A PROVISO IN THE SAID SECTION, SO AS TO PROVIDE THAT WHERE ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF THE NEGOTIATIONS FOR TRANSFER OF A CAPITAL ASSET HAS BEEN INCLUDED IN TH E TOTAL INCOME OF THE ASSESSEE FOR ANY PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF CLAUSE (IX) OF SUB - SECTION (2) OF SECTION 5 6 , THEN, SUCH SUM SHALL NOT BE DEDUCTED FROM THE COST OF ACQUISITION. THIS AMENDMENT AIMS TO AVOID DOUBLE TAXATION OF THE F ORFEITED ADVANCE. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE AY 2015 - 16 AND SUBSEQUENT YEARS. 7.3 THUS, THE PROVISIONS OF SECTION 56(2)(IX) HAS TO BE UNDERSTOOD IN THE LIGHT OF SECTION 51 OF THE ACT WHICH PROVIDED THAT WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION, SUBJECT MATTER OF NEGOTIATION FOR ITS TRANSFER AND ANY ADVANCE OR ANY OTHER MONEY HAS BEEN RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATION, THEN SAME WAS TO BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED AT WRITTEN DOWN VALUE OR FAIR MARKET VALUE WHILE COMPUTING THE COST OF ACQUISITION. NOW FROM THE ASSESSMENT YEAR 2015 - 16, IF SUCH SUM RECEIVED AS AN ADVA N CE IS INCLUDED IN THE TOTAL INCOME THEN SAME IS DEDUCTED FROM THE COST OF ACQUISITION . SECTION 51 REFERS TO CAPITAL ASSET BELONGING TO THE ASSESSEE WHICH WAS SUBJECT MATTER OF NEGOTIATION FOR TRANSFER AND ASSESSEE RECEIVING ANY SUM AS ADVANCE FROM SUCH NEGOTIATION. IT WAS NOT APPLICABLE TO TH E TRANSFEREE. IN THE I.T.A. NO. 28/BANG/2020 24 PRESENT CASE, THE FACTS SHOW THAT THE ASSESSEE RECEIVED MONEY FOR PROCUREMENT OF LAND ON BEHALF OF THESE TWO PARTIES WHICH CANNOT BE SAID THAT THE ASSESSEE RECEIVED MONEY ON TRANSFER OF HIS CAPITAL ASSET TO THE TWO PARTIES. FURTHER, THE ASSESSEE HAS NOT FORFEITED THE AMOUNT RECEIVED BY HIM AND IT HAS BEEN SHOWN AS OUTSTANDING IN THE RESPECTIVE NAME OF THESE TWO PARTIES IN THE B ALANCE S HEET OF THE PRESENT ASSESSEE . THE ENTRY IN THE B ALANCE S HEET ITSELF SHOWS THAT IT IS OUTSTANDING ON THE DATE OF THE BALANCE SHEET AND THE ASSESSEE IS LIABLE TO PAY THE SAME TO THE TWO PARTIES. MORE SO, THE PARTIES HA VE GIVEN CONFIRMATION LETTERS STATING THAT THE AMOUNT IS OUTSTANDING FROM THE ASSESSE E TO THEM. IN SUCH A SITUATION , IT CANNOT BE CONSIDER ED AS AN AMOUNT FORFEITED BY THE ASSESSEE SO AS TO INVOKE THE PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT. 7.4 FURTHER, THE OTHER CONTENTION OF THE LD. DR IS THAT THE ASSESSEE HAS INVESTED BULK OF THIS AMOUNT WHICH WAS RECEIVED BY ASSESSEE IN FIX ED ASSETS AND INVESTMENTS. IN OUR HUMBLE OPINION, USAGE OF THE FUNDS BY THE ASSESSEE CANNOT BE REASON TO INVOKE THE PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT. THE USAGE OF SAID FUNDS BY THE ASSESSEE CANNOT CHANGE THE CHARACTER OF THE SOURCE OF FUNDS RECEIVED BY THE ASSESSEE AND IT WILL REMAIN AS RECEIVED TOWARDS PROCUREMENT OF LAND ON BEHALF OF THE LENDER FOR PROCURING L AND WHICH IS STOCK IN TRADE TO THE ASSESSEE. AS DISCUSSED EARLIER, WE HAVE TO SEE ONLY THE ISSUE THAT WHETHER THE ASSESSEE HAS RE CEIVED THE MONEY IN THE C OURSE OF TRANSFER OF CAPITAL ASSET OR WHETHER THERE IS FORFEITURE. IN OUR HUMBLE OPINION, THESE TWO CONDITIONS WERE NOT FULFILLED SO AS TO INVOKE THE PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT. I.T.A. NO. 28/BANG/2020 25 7.5 THE LOWER AUTHORITIES PLACE D RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. (222 ITR 344) WHEREIN THE ASSESSEE RECEIVED DEPOSITS NOT BEING IN THE NATURE OF SECURITY DEPOSITS HELD BY THE ASSESSEE FOR PERFORMANCE OF CONTRACT BY ITS CONSTITUENTS OR ITS CUSTOMERS IN THE COURSE OF BUSINESS AND DEPLETED BY ADJUSTMENTS FROM TIME TO TIME, UNCLAIMED BALANCES TRANSFERRED BY THE ASSESSEE TO ITS P&L ACCOUNT OR ITS TRADING RECEIPT, EVEN THOUGH THE RECEIPT WAS INITIALLY TREATED AS CAPITAL RE CEIPT, THE CLAIM OF DEPOSITORS HAVING BECOME BARRED BY TIME. IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS (SUPRA), THE AMOUNTS WERE RECEIVED FROM TRADE PARTIES WHO HAVE NOT MADE ANY CLAIM OF REPAYMENT OF BALANCES. THE ASSESSEE WROTE BACK THE AMOUN T TO THE P&L ACCOUNT BECAUSE THE VARIOUS TRADE PARTIES DID NOT CLAIM THESE AMOUNTS FOR A LONG TIME. THE UNCLAIMED SURPLUS BALANCES RETAINED BY THE ASSESSEE ITSELF WAS TREATED AS TRADE RECEIPT BY BRINGING IT TO THE P&L ACCOUNT AND THE CLAIM OF THE CUSTOMER S HAVE BECOME BARRED BY LIMITATION . HENCE, IT WAS TREATED AS TRADE RECEIPT OF THE ASSESSEE. IN THE PRESENT CASE, THE AMOUNT WAS RECEIVED BY THE ASSESSEE IN THE COURSE OF HIS BUSINESS OPERATIONS AND IT WAS SHOWN AS LIABILITY IN HIS BALANCE SHEET TILL THE F.Y. ENDING 31/03/2015 RELEVANT TO THE A.Y. 2015 - 16. THERE WAS NO WRITE OFF BY THE ASSESSEE BY CREDITING IT TO THE P&L ACCOUNT. BY SHOWING THE BALANCE AS OUTSTANDING IN THE BALANCE SHEET, THE DEBIT IS ACKNOWLEDGED BY THE ASSESSEE AND THE LENDER ALSO CONF IRMED THE SAME. IT CANNOT BE SAID THAT THE CLAIM OF THE PARTIES HAS BEEN BARRED BY TIME. THE PROVISIONS OF SECTION CONSIDERED BY THE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS (SUPRA) IS WITH REFERENCE TO SECTION 28. IN THE PRESEN T CASE, THE SPECIFIC PROVISION IS SEC. 56(2)(IX) I.T.A. NO. 28/BANG/2020 26 WHICH IS IN RELATION TO CAPITAL ASSET . BEING SO, THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS (SUPRA) IS NOT APPLICABLE TO THE PRESENT CASE. THUS, IN OUR OPI NION, THERE IS NO FORFEITURE OF THE AMOUNT SO RECEIVED BY THE ASSESSEE AND IT IS OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ALSO CONFIRMED BY THE LENDERS. THERE IS ALSO NO NEGOTIATION FOR TRANSFER OF CAPITAL ASSET BY THE ASSESSEE WITH THESE T WO PARTIES. THUS, THE ASSESSEES CASE IS NOT HIT BY THE PROVISIONS OF SECTION 56(2)(IX) OF THE I.T. ACT. ACCORDINGLY, THE ADDITION SUSTAINED BY THE CIT(A) IS DELETED. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7.6 THE CHARGING OF INTEREST U/S. 234A AND 234B IS CONSEQUENTIAL. SINCE WE HAVE DELETED THE ADDITION MADE BY THE AO U/S. 56(2)(IX) OF THE I.T. ACT, THERE IS NO QUESTION OF LEVY OF INTEREST UNDER THESE SECTIONS. THUS, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESU LT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - (BEENA PILLAI) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BENGALURU DATED: 8 TH OCTOBER, 2020 GJ / REDDY GP I.T.A. NO. 28/BANG/2020 27 COPY TO: 1 . SHRI RAVI SHANKAR SHETTY, #289, 1 ST FLOOR, 15 TH MAIN, RMV EXTENSION, BENGALURU - 560 08 . 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 6(3)(1), BENGALURU 3 . THE COMMISSIONER OF INCOME - TAX(APPEALS), BENG ALURU - 6 . 4. THE PR. COMMISSIONER OF INCOME - TAX, BENGALURU. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., BENGALURU