M/S. VIJAY BUILDERS, MUMBAI V. INCOME TAX OFFICER WARD 12(1)(2), MUMBAI

ITA 2833/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8240 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 11-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 04-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A.NO. 2833/MUM/2009 ASSESSMENT YEAR : 2003-04 M/S. VIJAY BUILDERS, 32, APOLLO STREET, FORT, MUMBAI 400 023. PAN: AAAFV 1521 G VS. THE INCOME TAX OFFICER WARD 12(1)(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.P. BAIRAGRA RESPONDENT BY : SHRI SUMEET KUMAR O R D E R PER P.M. JAGTAP, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XII, MUMBAI, D ATED 26.03.2009 FOR THE ASSESSMENT YEAR 2003-04, AND THE SOLITARY ISSUE ARI SING OUT OF THE SAME RELATES TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF ASSESSEES CLAIM FOR LOSS OF R S.12 LAKHS ON RE-PURCHASE AND SALE OF ROW HOUSE. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING RESI DENTIAL AND COMMERCIAL COMPLEXES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD COMPLETED AND SOLE ONE PROJECT AT VASHI, WHEREAS THE OTHER PROJE CT AT VASAI WAS UNDER CONSTRUCTION. THE RETURN OF INCOME FOR THE SAID YEA R WAS FILED BY THE ASSESSEE ON 27.11.2003 DECLARING TOTAL INCOME OF RS. 3,07,780/- . IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 31. 03.2006, THE INCOME RETURNED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFIC ER. THE RECORD OF THE SAID ASSESSMENT SUBSEQUENTLY CAME TO BE EXAMINED BY THE LEARNED COMMISSIONER OF INCOME-TAX AND ON SUCH EXAMINATION, HE FOUND THAT T HE ASSESSMENT COMPLETED BY ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 2 THE ASSESSING OFFICER UNDER SECTION 143(3) WAS ERRO NEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, INTER ALIA, IN RESPECT OF ACCEPTING THE ASSESSEES CLAIM FOR LOSS OF RS. 12,00,000/- ON PURCHASE AND SALE OF ROW HOUSE IN VASHI PROJECT WITHOUT EXAMINING THE GENUINENESS THEREOF. HE, THEREFORE, SET ASIDE THE SAID ASSESSMENT ON THIS ISSUE BY AN ORDER PASSED UNDER S ECTION 263 ON 09.10.2006 AND DIRECTED THE ASSESSING OFFICER TO RE FRAME THE SAME TO THAT EXTENT AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. AS PER THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME -TAX, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY ITS CLAIM FOR LOSS OF RS. 12.00.000/- INCURRED ON RE-PURCHASE AND SALE OF ROW HOUSE IN V ASHI PROJECT. IN REPLY, THE FOLLOWING SUB MISSIONS WERE MADE BY THE ASSESSE E VIDE ITS LETTER DATED 11.12.2007 : WITH REGARD TO YOUR HONOURS QUERY FOR LOSS ON SAL E OF ROW HOUSE, WE WOULD LIKE TO INFORM TOUR HONOUR THAT THE SAID ROW HOUSE NO.4 WAS SOLD IN THE YEAR 1997 TO THE BUYER AT A SALE PRICE OF RS. 3 9,00,000/- AGAINST THE COST OF RS. 17,93,350/- OF THE SAID ROW HOUSE. HENC E, A PROFIT OF RS. 21,06,650/- HAS ALREADY BEEN BOOKED IN A.Y. 1996-97 AND ALREADY OFFERED FOR TAXATION. THE SAID ROW HOUSE WAS AGREED TO BE S OLD AGAINST FINANCIAL ARRANGEMENT WITH THE SAID BUYER WITH AN ASSURANCE THAT PARTY WILL MAKE GOOD PROFIT ON THE MONEY INVESTED BY THEM. THIS WAS DONE WHEN THE PROPERTY MARKET WAS AT BOOM. BUT IN SPITE OF FURTHE R BOOM, THE MARKET COLLAPSED TO THE TUNE OF 40% APPROX. AND AS IT HAS NOT IMPROVED FOR CONSISTENT PERIOD OF NEARLY 5 YEARS. THE PARTY INST EAD OF MAKING FURTHER PAYMENT AND TAKING POSSESSION OF THE ROW HOUSE STAR TED INSISTING TO REFUND THE MONEY PAID ALONG WITH THE ASSURED RETURN OF APPROX 20% PER ANNUM. HOWEVER, THE ASSESSEE NEGOTIATED WITH THEM AND ARRIVED AT A COMPRISING FIGURE TO RETURN THEIR PRINCIPAL AMOUNT ONLY. THOUGH THE ASSESSEE HAS USED THE MONEY INVESTED BY THE BUYER F OR NEARLY 5 YEARS, NO COMPENSATION OR INTEREST HAS BEEN PAID. AS THE FUN S OF THE ASSESSEE WERE BLOCKED DUE TO NO FURTHER PAYMENTS MADE BY THE BUYE R, THE ASSESSEE SOLD THE ROW HOUSE TO NEW PARTY AT SALE PRICE OF RS. 27, 00,000/- WHICH WAS THE CURRENT MARKET AT THE TIME. AT THIS JUNCTION, WE WOULD LIKE TO BRING TO YOUR HO NOURS KIND NOTICE THAT EVEN BY SELLING THE ROW HOUSE AT RS.27,00,000/- THE ASSESSEE HAS NOT INCURRED ANY LOSS. BECAUSE THE PROFIT OF RS.21,06,6 50/- ON THE SAID ROW HOUSE HA ALREADY BEEN BOOKED IN A.Y.1996-97. BY CAN CELING THE AGREEMENT AND RE-SELLING THE ROW HOUSE THE ASSESSEE COULD REA LIZE RS.5,50,000/- WHICH WAS BLOCKED BECAUSE OF NO FURTHER PAYMENT MAD E BY THE ORIGINAL BUYER, WHO HAD ONLY THE FINANCE ARRANGEMENT IN BOOK ING OF THE SAID ROW HOUSE WITH INTENTION TO EARN GOOD PROFIT AFTER RE-S ELLING IT AFTER A SHORT TIME AND THAT IS THE REASON HE HAS NOT TAKEN THE POSSESS ION OF THE ROW HOUSE. ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 3 IN VIEW OF THESE FACTS, WE WOULD LIKE TO BRING TO Y OUR HONOURS KIND NOTICE THAT ALTHOUGH THE ASSESSEE HAS SUFFERED A BOOK LOSS OF RS. 12,00,000/- ON CANCELLATION OF AGREEMENT OF ROW HOUSE WHICH WAS GI VEN AS ON SECURITY AGAINST THE FINANCE ARRANGEMENT, NO ACTUAL LOSS HAS BEEN SUFFERED ON THE CONTRARY EARNED A PROFIT BY USING FUNDS OF THE BUYE R FREE OF COST/INTEREST/NON-PAYMENT OF ASSURED RETURN FOR 5 Y EAS, REALIZING THE MONEY WHICH WAS BLOCKED DUE TO NO FURTHER PAYMENTS. IN VIEW OF THESE FACTS, YOUR HONOUR IS REQUESTED NO T TO DISALLOW THE LOSS ON SALE OF ROW HOUSE. 3. THE ABOVE SUBMISSION OF THE ASSESSEE WAS NOT FOU ND ACCEPTABLE BY THE ASSESSING OFFICER AND TREATING THE TRANSACTION OF R E-PURCHASE AND SALE OF ROW HOUSE TO BE NOT GENUINE, HE DISALLOWED THE CLAIM O F THE ASSESSEE FOR LOSS OF RS. 12,00,000/- INCURRED IN RESPECT OF THE SAID TRANSAC TION IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 26 3 VIDE AN ORDER DATED 20.12.2007. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 263, AN APPEAL WAS PREFERRED BY T HE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND THE SUBM ISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED ON ITS BEHALF BEF ORE THE LEARNED CIT(A) IN SUPPORT OF THE CLAIM OF LOSS OF RS.12,00,000/- INCURRED ON REPURCHASE AND SALE OF ROW HOUSE IN VASHI PROJECT. THE LEARNED CIT(A) DID NOT FIND MERIT IN THE SAID SUBMISSIONS AND PROCEEDED TO UPHOLD THE DISALLOWANC E MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE SAID LOSS FOR THE FOLLOWI NG REASONS GIVEN IN PARA 3.4 OF HIS IMPUGNED ORDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSTT. ORDER. THE SUBMISSIONS MADE BY THE APPELLANT ARE A BUNDLE OF CONTRADICTIONS. AT ONE STAGE IT IS ADMITTING THAT IT HAD SOLD THE ROW HOUSE FOR RS. 39 LACS AND ACCORDINGLY, DISCLOSED THEM IN ITS ACCOUNTS AND THE PROFITS THEREON HAD BEEN OFFERED TO TAX. ON THE OTHER HAND, IT IS CLAIM ING THAT THERE WAS NO SALES AND THE AMOUNT OF RS.2150000/- WAS RECEIVED A S FINANCIAL LOAN FOR WHICH THE ROW HOUSE WAS KEPT AS SECURITY AND THE S ALES WAS MISTAKENLY REPORTED IN THE FY 96-97. IN THE FACTS AND CIRCUMST ANCES OF THE CASE, IT WOULD BE NECESSARY TO EXAMINE THE STATUS OF THE ROW HOUSE AS APPEARING IN THE ACCOUNTS OF THE APPELLANT FOR THE FY RELEVANT T O AY 96-97. FROM THE STATEMENT OF CLOSING STOCK FILED, THE ROW HOUSE WAS SHOWN AS CLOSING STOCK BY TAKING THE VALUATION BASED ON THE MARKET PRICE @ RS.2516/- PER SQ.FT. IN ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 4 THE FY RELEVANT TO AY 96-97. EACH ROW HOUSE COMPRI SED OF 1550 SQ. FT. THE VALUATION OF THE 3 ROW HOUSES WAS SHOWN AT RS. 1170 0000/- IN THE AY 96- 97. THE APPELLANT HAD SUBMITTED THAT THE ROW HOUSE WAS VALUED ON MARKET PRICE AND NOT ON THE COST OF CONSTRUCTION. THE CO ST OF CONSTRUCTION ON EACH ROW HOUSE WAS CLAIMED AT RS.1793350/- @ RS.115 7/- PER SQ. FT. THE CLOSING STOCK OF THE ROW HOUSE AS ON 31.3.97 HAD BE EN SHOWN AT RS.39 LACS THEREBY INDICATING THE TWO ROW HOUSES HAD BEEN SOLD DURING THE FY 96-97. THE CLOSING STOCK OF ROW HOUSES SHOWN IN THE AY 98- 99 IS NIL. THIS CLEARLY SHOWS THAT BY THE YEAR ENDING 31.3.98, THE APPELLAN T HAD SHOWN THAT IT HAD SOLD OUT ALL THE 3 ROW HOUSES. THE PERUSAL OF T HE STATEMENT FILED SHOWS NO ROW HOUSES FROM THE AY 98-99 TO AY 2002-03. IT I S ONLY IN THE AY 2003- 04, THE APPELLANT HAD SHOWN ONE ROW HOUSE BY WAY OF REPURCHASE. THE CLAIM OF THE APPELLANT THAT THERE HAD BEEN A MISTAK E IN SHOWING ONE OF THE ROW HOUSE AS HAVING BEEN SOLD IS NOT BORNE BY THE R ECORDS. AS STATED ABOVE, THERE ARE NO ROW HOUSES IN THE CLOSING STOCK FROM THE AY 98-99 TO 2002-03. EVEN IF THE APPELLANTS CONTENTION THAT TH ERE HAD BEEN A MISTAKE IN TREATING THE LOAN RECEIVED AS SALES IS TO BE ACC EPTED, IT COULD HAVE BEEN ACCEPTED ONLY IN THE INITIAL YEAR OF HAVING DONE SO I.E. UPTO AY 97-98. THE FACT THAT THE APPELLANT HAD BEEN CONSISTENTLY SHOWI NG THAT THERE ARE NO CLOSING STOCK FROM THE AY 98-99 TO 2002-03 CLEARLY SHOWS THAT IT CANNOT BE A CASE OF MISTAKE. THE MISTAKE OCCURRING IN ONE YEA R COULD NOT HAVE BEEN REPEATED FOR YEARS TOGETHER AND RECTIFY IT ONLY IN THE AY 2003-04. THE CLAIM OF THE APPELLANT OF HAVING RECEIVED THE AMOUN T OF RS. 2150000/- IS ALSO NOT BORNE IN THE ACCOUNTS AS NO SUCH AMOUNTS A PPEARS IN THE LIABILITY SIDE OF THE BALANCE SHEET. IN VIEW OF THE ABOVE, TH E CONTENTION OF THE APPELLANT THAT IT HAD WRONGLY BOOKED THE SALES OF T HE ROW HOUSE IN EARLIER YEARS CANNOT BE ACCEPTED. WHATEVER BE THE UNDERSTAN DING BETWEEN THE APPELLANT AND THE BUYER, THE FACT THAT THE PROPERTY IS NOT APPEARING AS A CLOSING STOCK AND THE AMOUNT RECEIVED FROM THE BUYE R IS NOT APPEARING AS LIABILITY, CLEARLY SHOWS THAT THE TRANSACTIONS PER TAINING TO THE PROPERTY HAD BEEN RIGHTLY BOOKED IN THE AY 96-97 AND SOLD PRIOR TO AY 98-99. THE FACT THAT THE APPELLANT COULD NOT REALIZE THE FULL VALUE OF RS. 39 LACS FROM THE BUYER DOES NOT AFFECT THE TAXABILITY OF RS. 39 LACS IN THE AY 96-97 AS IT IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. THE PERUSAL OF THE STATEMENT OF CLOSING STOCK FILED FOR THE AY 2003-04 CLEARLY SHOWS THAT THE ROW HOUSE HAD BEEN SHOWN AS REPURCHASED AT RS.39 LA CS. IN VIEW OF THE ABOVE, THE CLAIM OF THE APPELLANT FOR SETTING OFF I TS NOTIONAL LOSS INCURRED ON ACCOUNT OF A TRANSFER MADE IN THE EARLIER YEARS CAN NOT BE ALLOWED TO BE SET OFF THE RELEVANT YEAR. ACCORDINGLY, THE ABOVE GROUN DS OF APPEAL ARE DISMISSED. 5. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), TH E ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ITS VASHI PROJECT WAS COMPLETED BY THE ASSESSEE IN THE PREVIOUS YEAR RELE VANT TO THE ASSESSMENT YEAR 1996-97 AND THE ROW HOUSE IN THE SAID PROJECT INCLU DED IN THE CLOSING STOCK OF THAT YEAR WAS VALUED AT RS.39,00,000/- AS AGAINST ITS CO ST OF RS.18,00,000/-. HE SUBMITTED THAT THE STOCK OF FINISHED GOODS WAS BEIN G VALUED BY THE ASSESSEE AT SELLING PRICE AND THE PROFIT IN RESPECT OF THE SAID ROW HOUSE AMOUNTING TO ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 5 RS.21,00,000/- WAS ALREADY BOOKED BY THE ASSESSEE IN THE ASSESSMENT YEAR 1996- 97 AS PER THE SAID METHOD. HE INVITED OUR ATTENTION TO THE DETAILS OF UNSECURED LOANS OF THE ASSESSEE AS ON 31.03.1997 PLACED AT PA GES 99 AND 100 OF HIS PAPER BOOK TO POINT OUT THAT A LOAN OF RS. 19,00,000/- WA S TAKEN BY THE ASSESSEE FROM SMT. KANTA DEVI SARAF AND SMT. ANJU P. SARAF. HE S UBMITTED THAT AS A SECURITY TO THE SAID LOANS, AN AGREEMENT FOR SALE OF UNSOLD ROW HOUSE WAS ENTERED INTO BY THE ASSESSEE WITH THE LOAN CREDITORS IN JANUARY 1997 SH OWING THEREIN THE SALE CONSIDERATION OF ROW HOUSE AT RS. 39,00,000/-. HE S UBMITTED THAT EVEN THOUGH THE AMOUNT OF LOAN OF RS. 19,00,000/- WAS ADJUSTED IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE AGAINST SALE OF ROW HOUSE AND THE BALANCE AMOUNT OF RS.20,00,000/- RECEIVABLE AGAINST SALE OF ROW HOUSE WAS REFLECTED IN THE SUNDRY DEBTORS, IT WAS PURELY A CASE OF FINANCIAL TRANSACTION WHEREBY THE LOAN WAS RECEIVED BY THE ASSESSEE AND THE ROW HOUSE WAS OFFERED AS SECURITY BY ENTERING INTO AGREEMENT TO SALE. HE SUBMITTED THAT POSSESSION OF THE ROW HOU SE WAS NOT TAKEN BY THE CONCERNED PARTIES AND SINCE THERE WAS A FALL IN THE MARKET PRICE OF THE ROW HOUSE OFFERED AS SECURITY , THE ASSESSEE CANCELLED THE AG REEMENT TO SALE OF ROW HOUSE ON 21.08.2002 AND SOLD THE ROW HOUSE AT RS.27,00,000/- ON 17.09.2002 AS AGAINST THE VALUE OF RS. 39,00,000/- ALREADY DISCLOSED. H E SUBMITTED THAT THE ASSESSEE THUS SUFFERED A LOSS OF RS. 12,00,000/- FROM THIS T RANSACTION AND THERE WAS NO REASON FOR THE ASSESSING OFFICER AS WELL AS FOR THE LEARNED CIT(A) TO DOUBT THE GENUINENESS OF THE SAID TRANSACTION, TAKING INTO CO NSIDERATION ALL THE FACTS OF THE CASE INCLUDING ESPECIALLY THE FACT THAT THE STAMP D UTY VALUE OF THE ROW HOUSE SOLD AS ON THE DATE OF SALE WAS ONLY RS. 21,91,500/- AS AGAINST RS. 27,00,000/- SHOWN BY THE ASSESSEE. HE CONTENDED THAT EVEN THE CONDUCT OF THE PURCHASERS IN NOT TAKING THE POSSESSION OF THE ROW HOUSE WHICH WAS RE ADY AGAIN GOES TO SHOW THAT THEY WERE ONLY INVESTORS AND NOT PURCHASERS OF THE ROW HOUSE. ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 6 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON TH E OTHER HAND, STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE AND SUBMITTED THAT THE REASONS G IVEN BY THE LEARNED CIT(A) IN PARA 3.4 OF THE SAID ORDER ARE SUFFICIENT TO ESTABL ISH THAT THE TRANSACTIONS OF REPURCHASE AND SALE OF ROW HOUSE RESULTING IN A CLA IM OF LOSS OF RS. 12,00,000/- BY THE ASSESSEE ARE NOT GENUINE. HE ALSO INVITED OUR ATTENTION TO PARAGRAPH NO.2 OF THE ORDER PASSED BY THE LEARNED CIT(A) UNDER SECTIO N 263 OF THE ACT AND POINTED OUT THAT ALTOGETHER A DIFFERENT STAND WAS TAKEN BY THE ASSESSEE DURING THE COURSE OF PROCEEDINGS UNDER SECTION 263 WHILE JUSTIFYING I TS CLAIM FOR LOSS OF RS.12,00,000/- BY STATING THAT THERE WAS A MISTAKE IN PASSING THE ACCOUNTING ENTRIES IN THE BOOKS OF EARLIER YEARS. HE SUBMITTED THAT THERE IS NO DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE TO SUPPORT AND SU BSTANTIATE ITS STAND THAT THE ROW HOUSE WAS GIVEN AS COLLATERAL SECURITY FOR THE LOAN TAKEN. HE SUBMITTED THAT EVEN THE ENTRIES MADE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT CLEARLY SHOW THAT ROW HOUSE WAS SOLD BY THE ASSESSEE. HE CONTENDED T HAT IF AT ALL THE SAID ENTRIES WERE MADE BY MISTAKE BY THE ASSESSEE IN THE ASSESSM ENT YEAR 1997-98, THE SAME SHOULD HAVE BEEN CORRECTED BY IT ATLEAST IN THE SUB SEQUENT YEAR. HE CONTENDED THAT IF THERE WAS A FALL IN THE MARKET PRICE OF THE ROW HOUSE IN THE EARLIER YEARS AS CLAIMED BY THE ASSESSEE, THE RESULTANT LOSS RELATE S TO THE SAID YEARS AND CANNOT BE CLAIMED IN THE YEAR UNDER CONSIDERATION. 8. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT NO INTEREST WAS PAID ON LOANS TAKEN BY THE ASSESSEE FR OM SMT. KANTA DEVI SARAF AND SMT. ANJU P. SARAF, WHICH BY ITSELF IS SUFFICIENT TO SHOW THAT IT WAS A CASE OF INVESTMENT MADE BY THE SAID PERSONS IN THE ROW HOUS E AND THEY WERE NOT THE PURCHASES OF THE ROW HOUSE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE VASHI PROJECT WAS COMPLETED BY THE ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 7 ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR 1996-97 AND ONE OF THE ROW HOUSES REMAINING UNSOLD WAS INCLUDED IN THE CLOSING STOCK AT MARKET RATE OF RS. 39,00,000/-. IN THE IMMEDIATELY SUCCEEDING YEAR, AN AGREEMENT TO SALE THE SAID ROW HOUSE WAS ENTERED INTO BY THE ASSESSE E WITH SMT. KAMNTA DEVI SARAF AND SMT. ANJU P. SARAF FOR A CONSIDERATION OF RS.39 ,00,000/- SHOWN THEREIN. THE SAID AGREEMENT, HOWEVER, WAS SUBSEQUENTLY CANCELLED AFTER A PERIOD OF MORE THAN FIVE YEARS ON 21.08.2002 AND THE ROW HOUSE WAS CLAI MED TO BE SOLD BY THE ASSESSEE THEREAFTER ON 17.09.2002 FOR A CONSIDERATI ON OF RS.27,00,000/-. THE ASSESSEE THUS CLAIMED TO HAVE SUFFERED A LOSS OF RS . 12,00,000/- FROM THIS TRANSACTION OF REPURCHASE AND SALE OF ROW HOUSE AND WHILE JUSTIFYING THE GENUINENESS OF THE SAID TRANSACTION, THE STAND TAKE N BY THE ASSESSEE IS THAT THE ROW-HOUSE WAS ACTUALLY NOT SOLD TO SMT. KANTA DEVI SARAF AND SMT. ANJU P. SARAF, BUT THE SAME WAS OFFERED TO THEM AS SECURITY AGAINS T THE LOAN OF RS. 19,00,.000/- RECEIVED FROM THEM. IT IS NO DOUBT TRUE THAT THE A MOUNT OF RS. 19,00,000/- RECEIVED BY THE ASSESSEE FROM THE SAID PARTIES WAS REFLECTED IN ITS BOOKS OF ACCOUNT AS LOANS AS ON 31.03.1997. HOWEVER, IN TH E IMMEDIATELY SUCCEEDING YEAR, THE ASSESSEE ADJUSTED THIS AMOUNT OF RS.19,0 0,.000/- AGAINST THE SALE CONSIDERATION OF THE ROW HOUSE AMOUNTING TO RS. 39, 00,000/- AND THE BALANCE AMOUNT OF RS. 20,00,000/- WAS SHOWN UNDER THE HEAD SUNDRY DEBTORS. AS RIGHTLY CONTENDED BY THE LEARNED DEPARTMENTAL REPRE SENTATIVE IN THIS CONTEXT, IF AT ALL THERE WAS A MISTAKE IN PASSING THESE ACCOUNTING ENTRIES IN THE BOOKS FOR THE ASSESSMENT YEAR 1998-99 AS CLAIMED BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX DURING THE COURSE OF PRO CEEDINGS UNDER SECTION 263, THE SAID MISTAKES SHOULD HAVE BEEN CORRECTED BY IT IN THE NEXT YEAR. THE ASSESSEE, HOWEVER, HAS NOT DONE SO EITHER IN THE NEXT YEAR I. E. ASSESSMENT YEAR 1998-99 OR EVEN IN THE SUBSEQUENT YEARS UPTO ASSESSMENT YEAR 2 002-03. ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 8 10 IT IS ALSO OBSERVED THAT THE ASSESSEE HAS ALSO N OT PRODUCED ANY EVIDENCE TO SHOW THAT THE AGREEMENT TO SALE THE ROW HOUSE W AS ENTERED INTO JUST AS A SECURITY WHICH WAS OFFERED FOR A LOAN OF RS. 19,00, 000/- TAKEN FROM SMT. KANTA DEVI SARAF AND SMT. ANJU P. SARAF. A PERUSAL OF A COPY OF THE SAID AGREEMENT FOR SALE PLACED AT PAGE NOS. 11 TO 47 ALSO DOES NOT SHO W OR INDICATE THAT THE SAME WAS ENTERED INTO IN ORDER TO OFFER THE ROW HOUSE A S A SECURITY TO THE CONCERNED PARTIES. IT IS ALSO DIFFICULT TO ACCEPT THAT THE A MOUNT PAID BY THE CONCERNED PARTIES WAS RECEIVED BACK BY THEM ON CANCELLATION F THE AGR EEMENT FOR SALE AFTER A PERIOD OF MORE THAN FIVE YEARS WITHOUT ANY INTEREST OR OTH ER COMPENSATION. IT ALSO DOES NOT STAND TO THE TEST OF NORMAL HUMAN CONDUCT OR HU MAN PROBABILITY THAT THE ASSESSEE WOULD GIVE UP HIS CLAIM OF A SUM OF RS. 20 ,00,000/- RECEIVABLE UNDER THE AGREEMENT FOR SALE BY CANCELLING THE SAID AGREEMENT AND INSTEAD ACCEPT A SUM OF RS. 7,00,000/- ONLY WHICH IT GOT ON THE RESALE OF R OW HOUSE. IN THE CASE OF CIT VS. DURGA PRASAD MORE (82 ITR 540), THE HONBLE SUPREME COURT HAS HELD THAT WHERE A LITTLE PROBING IS SUFFICIENT TO SHOW THAT THE APP ARENT IS NOT THE REAL, THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES AS WELL AS HUMAN PROBABILITIES TO FIND OUT THE REALITY OF RECI TALS MADE IN THE RELEVANT DOCUMENTS. TO THE SIMILAR EFFECT IS THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT(214 ITR 801)(SC) W HEREIN THE CLAIM OF THE ASSESSEE WAS HELD TO BE NOT GENUINE, APPLYING THE T EST OF HUMAN PROBABILITIES. IN THE PRESENT CASE, IF THE CLAIM OF THE ASSESSEE IS C ONSIDERED IN THE LIGHT OF ALL THE SURROUNDING FACTS AND CIRCUMSTANCES AS WELL AS FROM THE ANGLE OF PREPONDERANCE OF PROBABILITIES, IT CAN REASONABLY BE CONCLUDED THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE FOR RE-PURCHASE AND SALE OF ROW HOUSE ARE NOT GENUINE AND ITS CLAIM FOR LOSS ARISING FROM THE SAID TRANSACTIONS CANNOT BE ALLOWED. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED C IT(A), CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCO UNT OF ASSESSEES CLAIM FOR THE ITA NO. 2833/M/2009 M/S.VIJAY BUILDERS 9 SAID LOSS AND UPHOLDING THE SAME ON THIS ISSUE, WE DISMISS THIS APPEAL FILED BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MARCH, 2011. SD. SD. (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED THE 11 TH MARCH, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE ITO, WARD- 12(1)(2), MUMBAI 3. THE CIT-XII, MUMBAI 4. THE CIT(A)-XII, MUMBAI 5. THE DR F BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI