ITO (IT) 2(1)(1), MUMBAI V. ADMINSTRATOR OF THE ESTATE OF LATE MR. E.F DINSHAW, MUMBAI

ITA 334/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5048 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 16-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAG VYAS SR; SREEKAR
• Assessee Lawyers: DILIP S DAMLE
• Keywords: Capital asset converted into stock in trade; Capital asset; Recovery proceedings; Business income; Opportunity of being heard; Principle of natural justice; Rule of consistency; Question of law; Assessment record; Set aside; Capital Gains
• Section: 45(2); 143(3); 142(1); 133(6); 201; 143(2); 113; 43; 48; 13; 22; 147; 56

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL I, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1389/MUM/2015 (ASSESSMENT YEAR: 2011-12) ITO(INTERNATIONAL TAXATION)-2(1)(1), ROOM NO.1724, 17 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400 021 VS. ADMINISTRATOR OF THE ESTATE OF LATE MR. E. F. DINSHAW, 412,CHURCHGTE CHAMBERS, 5 SIR VITHALDAS THAKERSEY MARG, MUMBAI-400 020 PAN NO.AAEPD8394A APPELLANT .. RESPONDENT ITA NO.334/MUM/2017 ( ASSESSMENT YEAR: 2012-13 ) ITO(INTERNATIONAL TAXATION)-2(1)(1), ROOM NO.1724, 17 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400 021 VS. ADMINISTRATOR OF THE ESTATE OF LATE MR. E.F. DINSHAW, 412,CHURCHGTE CHAMBERS, 5 SIR VITHALDAS THAKERSEY MARG, MUMBAI-400 020 PAN NO.AAEPD8394A APPELLANT .. RESPONDENT REVENUE BY SHRI PARAG VYAS, SR. COUNSEL & SHRI SREEKAR, CIT-D.R. ASSESSEE BY SHRI DILIP S. DAMLE, A.R. DATE OF HEARING 22/11/2019 DATE OF PRONOUNCEMENT 19/02/2020 2 O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)10, MUMBAI, DATED 28/10/2014 & 27.09.2016 AND THEY PERTAIN TO ASSESSMENT YEARS 2011-12 & 2012-13 RESPECTIVELY. SINCE, THE FACTS ARE COMMON AND ISSUES ARE IDENTICAL, FOR THE SAKE O F CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.1389/MUM/2015 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADVANCE OF RS 269.48CR, RECEIVED BY THE ASSESSEE ON TRANSFER OF ASSET, AS INCOME BY THE AO IN THE LIGHT OF SERIOUS DISPUTE BETWEEN DEVELOPER AND THE ASSESSEE REGARDIN G THE VALIDITY OF LEASE RENT AGREEMENT AS WELL AS DEVELOPMENT RIGHT AGREEME NT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADVANCE IN COME OF RS 269.48CR RECEIVED BY THE TRANSFER OF ASSET WITHOUT APPRECIAT ING THE FACT THAT IN THE RELATIVELY NEW CIRCUMSTANCES THE AO ANALYZED AND CO NCLUDED THAT REVENUE HAS ARISEN ON ACCOUNT OF TRANSFER OF ASSET AND THE TAX ON THE REVENUE GENERATED CANNOT BE POSTPONED INDEFINITELY. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN HOLDING THAT THE ADVANC ES RECEIVED IN DIFFERENT YEARS, THOUGH CREDITED IN THE ACCOUNT OF THE ASSESS EE IN THE PREVIOUS YEAR RELEVANT TO THE AY-2011-12,IS NOT TAXABLE IN THAT A SSESSMENT YEAR WITHOUT APPRECIATING THE FACT THAT THESE AMOUNTS HAD BEEN S HOWN AS THE CONTINGENT RECEIPTS BY THE ASSESSEE AND WERE NOT OFFERED TO TA X IN YEAR OF RECEIPT. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN HOLDING THAT THE LEASE RENT AND 12% OF SALE PROCEEDS PERTAINING TO THE AY 2009-10, 2010-11 AND THE INSTANT ASSESSMENT YEAR 2011-12 DEPOSITED IN THE BANK A/C OF THE ASSES SEE ON THE BOMBAY HIGH COURT'S DIRECTIONS, CANNOT BE TAXED IN THIS YEAR, W ITHOUT APPRECIATING THE FACT THAT THESE AMOUNT HAD BEEN SHOWN AS THE CONTINGENT RECEIPT BY THE ASSESSEE AND WERE NOT OFFERED TO TAX IN YEAR OF RECEIPT. 5 THE APPELLANT PRAYS THAT THE ORDER OF THE ID. CIT(A)'S ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER RESTORED. 3 6 THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, ADMINISTRATOR OF ESTATE OF LATE MR. EDULJI FRAMRIZE DINSHAW, IS ASSE SSED AS AN INDIVIDUAL AND IN THE CAPACITY OF REPRESENTATIVE OF THE ASSESS EE FILED ITS RETURN OF INCOME FOR THE AY. 2011-12 ON 29.07.2011 DECLARING TOTAL INCOME OF RS.1,33,34,503/-, COMPRISING OF INCOME FROM SHORT T ERM CAPITAL GAINS AND INCOME FROM OTHER SOURCES. IN ADDITION, THE ASSESS EE HAD ALSO DISCLOSED LONG TERM CAPITAL LOSS OF RS.18,99,26,806 /- AND CARRIED FORWARD SAID LOSS U/S 74 OF THE INCOME TAX AC,1961. THE CA SE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, AND NOTICES UNDER SECTIO N 143(2) AND 142(1) OF THE INCOME TAX AC,1961 WERE ISSUED. IN RESPONSE TO NOTICE, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE SHRI DILI P S. DAMLE ATTENDED FROM TIME TO TIME AND FILED VARIOUS DETAILS AS CALL ED FOR. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE AIR INFORMATION AVAILABLE IN THE DEPARTMENTAL D ATA BASE SYSTEM SHOWS THE RECORDS OF 19 NUMBER OF REGISTRATION DETA ILS WITH RESPECT TO TRANSFER OF IMMOVABLE PROPERTIES WORTH RS.85,52,30, 000/- AND CIB INFORMATION OF 43 TRANSACTIONS OF RS.36,31,00,000/- ENTERED INTO BY THE ASSESSEE OR ON ASSESSEE BEHALF DURING THE F.Y. 2010 -11 RELEVANT TO A.Y. 2011-12, BUT NO INCOME FROM SAID TRANSACTION HAS BE EN OFFERED TO TAX UNDER THE HEAD CAPITAL GAINS, THEREFORE, HE CALLED UPON THE ASSESSEE REPRESENTATIVE TO EXPLAIN AND RECONCILE AIR DATA BA SE WITH RETURN OF INCOME FILED FOR THE RELEVANT YEAR. IN RESPONSE, T HE AUTHORISED REPRESENTATIVE OF THE ASSESSEE FILED A LETTER DATED 18.12.2013 AND EXPLAINED INFORMATION AVAILABLE IN AIR DATA BASE AN D ALSO CONTENDED THAT AMOUNT RECEIVED TOWARDS AGREEMENT FOR SALE OF PROPERTIES, I.E. FLATS 4 IN THE BUILDING OWNED BY THE ASSESSEE CANNOT BE TRE ATED AS TRANSFER U/S 2(47)(V) READ WITH SECTION 53A OF THE TRANSFER OF P ROPERTIES ACT, 1882. THE RELEVANT WRITTEN SUBMISSIONS OF THE ASSESSEE HA VE BEEN REPRODUCED BY THE AO IN ASSESSMENT ORDER AT PARA. 5.2 ON PAGE S 3 OF ASSESSMENT ORDER. 5. THE FACTS CULLED OUT FROM THE RECORDS IN RESPECT OF IMPUGNED DISPUTE ARE THAT ONE MR. EDULJI FRAMRIZE DINSHAW A PARSI AMERICAN, RESIDENT OF NEW YORK, USA HAD DURING HIS LIFE TIME INHERITED VAST TRACKS OF LAND IN NORTHERN SUBURBS OF MUMBAI WHICH WERE AC QUIRED BY HIS FATHER LATE F.E. DINSHAW (EFD). IN FEBRUARY 1970, EFD EXEC UTED HIS WILL APPOINTING HIS SISTER MS. BACHOOBAI WORONZOW ('BW') AS THE EXECUTRIX OF THE WILL FOR ADMINISTERING THE ESTATE. THE BOMBAY HIGH COURT VIDE ITS ORDER DATED 21ST DECEMBER 1972 APPOINTED MR. NUSLI N WADIA ('NNW') AS THE ADMINISTRATOR OF THE ESTATE OF EFD ('THE ASS ESSEE'). MR. NNW, ACTING AS THE SOLE ADMINISTRATOR OF THE ESTATE OF T HE SAID E.F.DINSHAW, ENTERED INTO AGREEMENTS WITH DEVELOPERS OF REAL EST ATE (M/S IVORY PROPERTIES AND HOTELS PRIVATE LIMITED IN RELATION T O DEVELOPMENT OF DESIGNATED LAND ADMEASURING 205.69 ACRES AND M/S FE RANI HOTELS PRIVATE LIMITED IN RELATION TO DEVELOPMENT OF THE D ESIGNATED LAND ADMEASURING 478.50 ACRES (HEREINAFTER REFERRED TO A S 'DEVELOPERS'}. BY THE SAID AGREEMENTS, THE DEVELOPERS WERE APPOINTED AS PROJECT CO- ORDINATORS FOR THE PURPOSE OF DEVELOPMENT AND CONST RUCTION THEREON ON THE IMMOVABLE PROPERTIES FORMING PART OF THE ESTATE OF THE SAID E.F.D. MR. NNW AS ADMINISTRATOR OF THE ESTATE WOULD GRANT A LEASE OF THE IMMOVABLE PROPERTIES OF THE ESTATE OF THE SAID E.F. D FOR CERTAIN AGREED PERIOD OF 5 YEARS AND DEVELOPERS WOULD CLEAR THE LA ND OF ENCROACHERS AT THEIR OWN COST AND DEVELOP THE PROPERTIES BY CONSTR UCTION THEREUPON. IT 5 WAS AGREED BETWEEN THE PARTIES THAT WHENEVER THE SP ACES IN THE CONSTRUCTIONS ARE SOLD, NNW, ACTING AS THE SOLE ADM INISTRATOR OF THE ESTATE OF THE SAID DINSHAW WOULD BE ENTITLED TO REC EIVE FROM THE CUSTOMERS 12% OF THE CONSIDERATION. CLAUSE 12 OF T HE SAID AGREEMENTS WITH THE DEVELOPERS READS AS UNDER: 'ALL GROSS REALIZATIONS FROM THE DISPOSAL/TRANSFER, (BY ANY AND ALL DIFFERENT FORMATS) AS AFORESAID, OF THE DIFFERENT DEVELOPED S EGMENTS, ARE TO BE DIVIDED BETWEEN THE OWNER AND THE COMPANY RESPECTIVELY TOWA RDS THE RESPECTIVE PRICE OF THE LAND AND SALE-PRICE OF THE BUILDING/S (SEGMENT-WISE) AS PER THE TABLE SET OUT HEREUNDER: A) 12% (TWELVE PERCENT) OF ALL SUCH GROSS RECEIPT S/REALIZATIONS SHALL BE RECEIVABLE BY THE OWNER (DIRECTLY FROM THE PURCHASE RS/PROSPECTIVE PURCHASERS/ UNITHOLDERS /FLAT HOLDERS BY PAYEE'S A/ C CHEQUES) AND THE SAME SHALL BELONG TO AND SHALL BE THE PROPERTY OF THE OW NER. B) 88% (EIGHTY EIGHT PERCENT) OF ALL SUCH GROSS R ECEIPTS/REALIZATIONS SHALL BE RECEIVABLE BY THE COMPANY (DIRECTLY FROM THE PURCHA SERS/PROSPECTIVE PURCHASERS/UNIT HOLDERS/FLAT HOLDERS BY PAYEE'S A/C CHEQUES) AND THE SAME SHALL BELONG TO AND SHALL BE THE PROPERTY OF THE CO MPANY.' MR. NNW, ACTING AS THE SOLE ADMINISTRATOR OF THE SA ID ESTATE, AND THE DEVELOPERS HAS ENTERED INTO MOU'S WITH THE PURCHASE RS FROM 1997 ONWARDS FOR SALE OF UNITS IN THE BUILDING(S) TO BE CONSTRUCTED ALONG WITH SHARE OF LAND. MR. NNW IN HIS CAPACITY AS THE ADMIN ISTRATOR HAS RECEIVED MONIES (REPRESENTING INSTALMENTS) WHICH HAVE BEEN R ECORDED IN ITS BOOKS OF ACCOUNTS OF THE ESTATE AS 'ADVANCES' AND R EFLECTED ON THE 'LIABILITIES' SIDE OF THE BALANCE SHEET. HOWEVER, WHERE CONVEYANCES HAVE BEEN EXECUTED, THE ADVANCES HAVE B EEN RECORDED AS CONSIDERATION ACCRUING ON SALE OF LAND AND THE PROF IT ARISING THERE FROM HAS BEEN OFFERED TO CAPITAL GAINS TAX IN THE AY 200 2-03 AND AY 2003-04 IN THE HANDS OF THE ESTATE. THE DEPARTMENT HAD CONS IDERED THESE GAINS AS BUSINESS INCOME IN VARIOUS YEARS ARISING OUT OF THE BUSINESS OF REAL ESTATE ACTIVITY CARRIED OUT BY NNW THE ADMINISTRATO R. THE TRIBUNAL HAS CONSISTENTLY HELD THAT THE SAME IS CAPITAL GAINS AN D NOT BUSINESS INCOME IN THE HANDS OF THE ESTATE. THE TRANSACTION WHICH WAS INVOLVED IN 6 AY 2003-04 RELATED TO SALE OF ASSESSEE'S INTEREST I N LAND SITUATED AT MALAD, MUMBAI IN RESPECT OF WHICH THE DEVELOPMENT R IGHTS WERE AWARDED TO M/S IVORY PROPERTIES PVT. LTD. IN AY 200 3-04, THE ASSESSEE HAD EXECUTED TWO CONVEYANCES IN FAVOUR OF M/S BLUEB ERRY & M/S PROPERTY VENTURE AND 12% SHARE IN THE SALE CONSIDER ATION RECEIVED FROM THE TRANSFEREE WAS OFFERED TO TAX UNDER THE HEAD 'C APITAL GAINS' IN THE YEAR IN WHICH THE CONVEYANCES WERE EXECUTED. AS SUC H, IN RESPECT OF SALE OF LAND COVERED BY THE DEVELOPMENT AGREEMENT W ITH IVORY PROPERTIES PVT. LTD, ALSO; THE APPELLATE AUTHORITIE S UP TO THE HONBLE SUPREME COURT HAD UPHELD THE ASSESSEE'S CONTENTION THAT THE PROFIT MADE BY THE ASSESSEE WOULD BE ASSESSABLE UNDER THE HEAD 'LONG TERM CAPITAL GAINS'. FURTHER, IN THE YEAR 2008, MR. NNW TOOK LEGAL STEPS FOR TERMINATION OF HIS AGREEMENTS WITH IVORY & FERANI R ESPECTIVELY. THE ASSESSEE NOT ONLY TERMINATED THE DEVELOPMENT AGREEM ENTS BUT ALSO REVOKED THE POWERS OF ATTORNEY GIVEN TO EACH OF THE DEVELOPERS. THE ASSESSEE ALSO FILED SUITS AGAINST THE DEVELOPERS I. E. IVORY & FERANI IN THE HIGH COURT OF BOMBAY WHICH ARE CURRENTLY PENDING AS SUIT NO. 414 OF 2008 AND SUIT NO.1628 OF 2008 RESPECTIVELY. ASSESSE E NOTIFIED THE MEMBERS OF THE PUBLIC AT LARGE BY PUBLISHING PUBLIC NOTICES IN THE NEWSPAPER ABOUT TERMINATION OF THE DEVELOPMENT AGRE EMENTS AS ALSO ABOUT THE REVOCATION OF THE POWERS OF ATTORNEYS ISS UED IN THEIR FAVOUR. ASSESSEE FILED CRIMINAL COMPLAINTS AGAINST IVORY AN D FERANI AND THEIR DIRECTORS WITH THE ECONOMIC OFFENCES WING (EOW) MUM BAI; UNDER SECTIONS 406, 409, 420 READ WITH 120(B) OF THE INDI AN PENAL CODE FOR PERPETRATING FRAUD BY EMPLOYING DISINGENUOUS MODUS OPERANDI AND THEREBY MISAPPROPRIATING THE ASSESSEES LAND BY SEL LING IT TO ITSELF AND NOT TO GENUINE THIRD PARTY PURCHASERS. BASED ON TH E COMPLAINTS FILED BEFORE THE EOW AN FIR WAS REGISTERED AGAINST THE FE RANI AND ITS DIRECTORS IN JANUARY 2011. AS REGARDS IVORY; IN 20 08 EOW REGISTERED 7 THE FIR UNDER SECTION 406, 409, 420 READ WITH 120(B ) AGAINST MR. C.L. RAHEJA AND HIS SONS FOR CHEATING AND CRIMINAL BREAC H OF TRUST. THE EOW HAS COMPLETED INVESTIGATION AND HAVE ALSO COLLECTED THE NECESSARY DETAILS AND DOCUMENTS CORROBORATING THE FRAUD PERPE TRATED BY THEM ON THE APPELLANT. BASED ON THE STATEMENTS RECORDED EOW WAS SATISFIED THAT FRAUD / CHEATING AND MISAPPROPRIATION WAS COMM ITTED AND ACCORDINGLY ON 22ND OCTOBER 2013 EOW HAS FILED CHAR GE SHEET AGAINST MR. CHANDRU L. RAHEJA AND HIS TWO SONS RAVI AND NEE L U/S. 406, 409, 420 R/W 120 (B) OF IPC. THE CASE IS NOW PENDING FOR TRIAL BEFORE THE METROPOLITAN MAGISTRATE, 47TH COURT AT ESPLANADE CO URT MUMBAI. AS REGARDS TO FERANI, AN APPLICATION SEEKING AD-INTERI M AND INTERIM INJUNCTIONS WAS MOVED BEFORE HON'BLE BOMBAY HIGH CO URT. THE ORDER THEREON WAS PRONOUNCED BY THE SINGLE BENCH OF THE B OMBAY HIGH COURT ON 19TH JULY 2010. IN ITS ORDER DATED 19.07.2010, T HE HON'BLE BOMBAY HIGH COURT FOUND PRIMA-FACIE CASE IN FAVOUR OF THE ADMINISTRATOR OF EFD. HOWEVER THE COURT ALSO ACCEPTED THAT THE PRELIMINAR Y ISSUE RELATING TO LIMITATION NEEDS TO BE DECIDED BEFORE PROCEEDING IN THE MATTER. AGAINST THE ORDER & JUDGMENT OF THE SINGLE JUDGE, FERANI FI LED AN APPEAL AND THE DIVISION BENCH OF THE HIGH COURT BY ITS INTERIM ORD ER DATED 26.07.2010 STAYED THE JUDGMENT OF THE SINGLE JUDGE. ADMINISTRA TOR ALSO FILED AN CROSS APPEAL AGAINST ORDER OF SINGLE JUDGE ON 3RD A UGUST 2010 WHICH WAS ADMITTED AND DIRECTED TO BE HEARD ALONG WITH TH E APPEAL OF FERANI. LATER ON, THE DIVISION BENCH OF THE BOMBAY HIGH COU RT BY ITS COMMON ORDER AND JUDGMENT DATED 19.07.2012 ALLOWED THE APP EAL OF FERANI SINCE THE SINGLE JUDGE HAD DISPOSED OF THE ENTIRE NOTICE OF MOTION CONTRARY TO SECTION 9-A OF CPC. THE JUDGMENT OF THE SINGLE JUDG E WAS SET ASIDE TO THAT EXTENT. IN ITS JUDGMENT DATED 19.07.2012, THE DIVISION BENCH OF THE HIGH COURT FRAMED THE PRELIMINARY ISSUES UNDER SECT ION 9A OF CPC AS 8 'WHETHER THE CLAIM OF THE PLAINTIFF IN THE SUIT IS BARRED BY LIMITATION' AND FURTHER DIRECTED AS FOLLOWS: (I) PENDING THE HEARING AND FINAL DISPOSAL OF THE PRELIMINARY ISSUE, (FERANI) IS DIRECTED TO MAINTAIN ACCOUNTS AND TO CONTINUE DE POSITING AN AMOUNT EQUIVALENT TO 12% OF THE GROSS SALE CONSIDERATION I N A DESIGNATED BANK ACCOUNT. THE AMOUNT UPON DEPOSIT SHALL BE INVESTED IN A FIXED DEPOSIT TO ABIDE BY FURTHER ORDERS OF THE LEARNED TRIAL JUDGE ; AND (II) LIBERTY IS RESERVED TO THE ADMINISTRATOR TO AP PLY BEFORE THE LEARNED SINGLE JUDGE FOR APPROPRIATE INTERIM RELIEFS AFTER THE FINAL DECISION ON THE PRELIMINARY ISSUE. 6. DURING ASSESSMENT PROCEEDINGS, HE AO, AFTER CONS IDERING RELEVANT SUBMISSIONS OF THE ASSESSEE, AGREEMENT BETWEEN THE PARTIES, SUBSEQUENT DISPUTE AND CANCELLATION OF AGREEMENT AN D POWER OF ATTORNEY AND ALSO ORDERS OF THE HONBLE BOMBAY HIGH COURT IN CIVIL SUITS CAME TO THE CONCLUSION THAT ALTHOUGH THE ASSESSEE H AD RECEIVED 12% SHARE IN SALE PROCEEDS OF DEVELOPED AREA IN BUILDIN G CONSTRUCTED ON THE LEASED LAND, BUT INCOME FROM SAID TRANSACTION HAS N OT BEEN RECOGNISED FOR WANT OF CONVEYANCE OF LAND TITLE. THE AO FURTHE R OBSERVED THAT IF YOU GO THROUGH THE CONTENTS OF AGREEMENT BETWEEN THE PA RTIES COUPLED WITH POWER OF ATTORNEY GIVEN TO DEVELOPERS, IT IS VERY C LEAR THAT THE ASSESSEE HAD VOLUNTARILY ENTERED INTO LEASE AGREEMENT IN THE YEAR 1995 AND ALSO ENTERED INTO A DEVELOPMENT AGREEMENT FOR DEVELOPMEN T OF A PROPERTY FOR AGREED REVENUE SHARING. FURTHER, THE ASSESSEE HAD RECEIVED HIS SHARE OF 12% REVENUE FROM SALE PROCEEDS OF DEVELOPED BUIL DING UPTO FINANCIAL YEAR 2008 AND SHOWN UNDER THE HEAD ADVANCES FROM CU STOMERS. HE FURTHER, OBSERVED THAT ALTHOUGH, THERE WAS DISPUTE CROPPED UP BETWEEN THE PARTIES IN RESPECT OF SHARE OF REVENUE AND MATT ER WENT TO THE HONBLE BOMBAY HIGH COURT, BUT ON PERUSAL OF ORDERS OF THE HONBLE BOMBAY HIGH COURT IN VARIOUS CIVIL SUITS, THE HON'BLE BOMB AY HIGH COURT DID NOT GRANTED INJECTION TO THE ASSESSEE NOR STOPPED DEVEL OPMENT ACTIVITIES IN 9 THE IMPUGNED LAND, THEREFORE IT CAN BE SAFELY HELD THAT THE AGREEMENT BETWEEN THE PARTIES IS IN FORCE SUBJECT TO COURT VE RDICT AND THE ASSESSEE IS CONTINUED TO RECEIVE HIS 12% SHARE OF REVENUE FR OM SALE OF PROPERTIES, WHICH IS EVIDENT FROM THE FACT THAT THE DEVELOPER M /S FERANI HOTELS PRIVATE LIMITED HAD DEPOSITED ASSESSEE SHARE IN DES IGNATED BANK ACCOUNT. HE, THEREFORE, OPINED THAT THE ASSESSEE HA D ABSOLUTE RIGHT OVER THE MONEY RECEIVED TOWARDS SALE OF PROPERTY AND HEN CE AMOUNT RECEIVED IN THE IMPUGNED ASSESSMENT YEAR, INCLUDING AMOUNT RECEIVED IN EARLIER YEAR IS TAXABLE FOR THE IMPUGNED ASSESSM ENT YEAR UNDER THE HEAD INCOME FROM BUSINESS. FURTHER, ALTHOUGH THE A O HAD TAKEN A VIEW THAT AMOUNT IS ASSESSABLE UNDER THE HEAD BUSINESS I NCOME, BUT SUBSEQUENTLY CHANGED HIS STAND AND HELD THAT THE AS SESSEES SHARE OF 12% INCOME FROM SALE OF FLATS IS ASSESSABLE UNDER T HE HEAD INCOME FROM OTHER SOURCES ON THE GROUND THAT AMOUNT SHOWN UNDER THE HEAD ADVANCES IS A LIABILITY WHICH CEASED TO EXIST AS LI ABILITY AND THEREFORE WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . THE AO HAD ALSO TAKEN SUPPORT FROM THE PROVISIONS OF MAHARASHT RA FLAT/APARTMENT OWNERS ACT, (MOA) ACT, TO COME TO THE CONCLUSION T HAT THERE BEING DEEMED CONVEYANCE IN FAVOUR OF THE FLAT PURCHASERS, AND HENCE INCOME ACCRUED IN A FINANCIAL YEAR RELEVANT TO A.Y. 2011-1 2 BECOMES DEEMED CONVEYANCE OF LAND. THE AO FURTHER OBSERVED THAT T HE ASSESSEE IS CONTINUED TO RECEIVE MONEY TOWARDS 12% SHARE OF INC OME FROM SALE OF PROPERTY AND CREDITED INTO ADVANCE ACCOUNT WITHOUT OFFERING ANY INCOME, EVEN THOUGH THERE IS NO OBLIGATION ON THE ASSESSEE TO REPAY THE SAME TO THE FLAT PURCHASERS. THE ASSESSEE WAS NOT ABLE TO PROVE THAT THERE EXISTED ANY LIABILITY TO THE CREDITORS SHOWN IN THE BOOKS OF ACCOUNTS. AS SUCH THE LIABILITY IS A NONEXISTENT AND LIABLE TO B E TREATED AS INCOME AS THERE IS CESSATION OF LIABILITY. EVEN OTHERWISE, T HE AMENDMENT IN THE MAHARASHTRA FLAT/APARTMENT OWNERS ACT MANDATES DEE MED 10 CONVEYANCE OF TITLE OF LAND TO THE FLAT OWNERS MAKE S THE CONDITION IMPOSED BY THE ASSESSEE OF TRANSFER OF TITLE OF LAN D TO RECOGNISE REVENUE IS ILLEGAL CONDITION WITHIN MAHARASHTRA AND THE ACC OUNTING OF RECEIPTS OF SALE PROCEEDS AS LIABILITY UNDER THE CATEGORY OF AD VANCE IS ALSO RENDERED ILLEGITIMATE AND ILLEGAL. THUS, THE ENTIRE ADVANCE RECEIVED UP TO 31.03.2011 IS NOT AN ADVANCE, BUT A LIABILITY WHICH HAS CEASED TO EXIST OR A LIABILITY WHICH HAS BEEN LEGALLY WATERED DOWN BY THE DUE PROCESS OF LAW. THEREFORE, HE OPINED THAT ENTIRE ADVANCES RECE IVED UPTO 31.03.2010 OF RS.269,48,90,886/- IS TREATED AS NON EXISTING LI ABILITY AND ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. SIMILARLY , THE AMOUNT OF ADVANCE RECEIVED FOR THE ASSESSMENT YEAR 2011-12 HA S BEEN TREATED AS NON EXISTING LIABILITY AND ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. FURTHER, THE AO HAD ALSO ASSESSED LEASE R ENTAL RECEIVABLE FROM M/S. IVORY PROPERTIES AND HOTELS PVT. LTD., MU MBAI AND RENT RECEIVED FROM M/S. FERANI HOTELS PVT. LTD. UNDER TH E HEAD INCOME FROM OTHER SOURCES. 7. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) , THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THIS ISSUE W HICH HAS BEEN REPRODUCED AT PARA 5 ON PAGES 47 TO 127 OF LD. CIT( A) ORDER. THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE T HE LD. CIT(A) ARE THAT THE AO HAS COMPLETELY IGNORED THE JUDICIAL DEC ISIONS/JUDGEMENTS GIVEN BY THE JURISDICTIONAL ITAT AS WELL AS HONBLE BOMBAY HIGH COURT, IN ASSESSEES OWN CASE WHILE ASSESSING THE INCOME U NDER THE HEAD INCOME FROM OTHER SOURCES FOR WHICH THERE WAS NO RE ASON FOR DOING SO. THE ASSESSEE HAD ALSO VEHEMENTLY ARGUED THE ISSUE I N LIGHT OF JUDGMENT OF HONBLE BOMBAY HIGH COURT IN CIVIL SUITS FILED B Y THE ASSESSEE IN CONNECTION WITH CANCELLATION OF AGREEMENT ENTERED W ITH M/S. FERANI 11 HOTELS PVT. LTD. AND SUBSEQUENT FINDINGS OF HONBLE BOMBAY HIGH COURT THAT THE ASSESSEE IS HAVING A PRIMA-FACIE GROUNDS F OR CANCELLATION OF AGREEMENT AND POWER OF ATTORNEY AS SUCH IT IS VERY CLEAR THAT THE HONBLE BOMBAY HIGH COURT HAS IN PRINCIPLE ACCEPTED THE CON TENTIONS OF THE ASSESSEE. THE ASSESSEE FURTHER CONTENDED THAT EVEN THOUGH AGREEMENT AND POWER OF ATTORNEY WAS CANCELLED, THE DEVELOPER UNILATERALLY OPENED AN ACCOUNT IN BANK IN THEIR NAME AND DEPOSITED 12% SHARE OF THE ASSESSEE TO SAID BANK ACCOUNT, HOWEVER, FACT REMAIN S THAT THE ACCOUNT OPENED BY THE DEVELOPERS IS NOWHERE CONNECTED TO TH E ASSESSEE AND ALSO THE ASSESSEE IS NEITHER OPERATING SAID BANK AC COUNT NOR USED THE MONEY LYING IN THE SAID BANK ACCOUNT BECAUSE THE AM OUNT DEPOSITED IN THE SAID ACCOUNT IS KEPT IN FIXED DEPOSITS UNDER TH E SUPERVISION OF TRIAL COURT AND THEREFORE IT CANNOT BE SAID THAT MONEY DE POSITED IN DESIGNATED ACCOUNT IS BELONGED TO THE ASSESSEE, CONSEQUENTLY I NCOME ACCRUED FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD ALSO RELIED UPON PLETHORA OF JUDICIAL DECISIONS IN SUPPORT OF HIS AR GUMENT AND ARGUED THAT INTERIM AMOUNT RECEIVED PURSUANT TO ORDER OF COURT IS NOT LIABLE TO TAX IN THE YEAR OF RECEIPT BUT IT IS TAXABLE IN THE YEAR W HEN FINAL AWARD IS PASSED BY THE COURT. SINCE, THE MATTER IS SUBJUDICED BEFO RE THE COURT, UNLESS THE COURT DECIDES THE ISSUE FINALLY THE DISPUTED AM OUNT CANNOT BE CONSIDERED AS INCOME ACCRUED TO THE ASSESSEE. 8. THE LD. CIT(A), AFTER CONSIDERING THE RELEVANT S UBMISSIONS OF THE ASSESSEE AND ALSO BY RELYING UPON VARIOUS EVIDENCES INCLUDING CERTAIN JUDICIAL PRECEDENTS AND ALSO JUDGMENTS OF HONBLE BOMBAY HIGH COURT IN CIVIL SUITS FILED BY THE PARTIES, HELD THAT AMOU NT RECEIVED BY THE ASSESSEE TOWARDS 12% SHARE FROM SALE OF FLATS IS AS SESSABLE UNDER THE HEAD CAPITAL GAINS WHEN THE APPELLANT HAS CONVEYED OWNERSHIP RIGHTS IN THE LAND IN FAVOUR OF THE PURCHASERS, BUT NOT ASSES SABLE UNDER THE HEAD 12 INCOME FROM BUSINESS OR PROFESSION. THE LD. CIT(A) FURTHER HELD THAT THE ASSESSEE HAS RIGHT FROM THE BEGINNING CONSIDERED AM OUNT RECEIVED FROM SALE OF FLATS INCLUDING FOR A.Y. 2001-02 AND 2002-0 3 UNDER THE HEAD LONG TERM CAPITAL GAINS, HOWEVER, THE AO WHILE PASSING THE ASSESSMENT ORDER FOR AY. 2003-04 ASSESSED THE INCOME UNDER THE HEAD INCOME FROM BUSINESS. SUBSEQUENTLY, ON APPEAL THE APPELLATE AU THORITIES, INCLUDING THE ITAT AND THE JURISDICTIONAL HONBLE BOMBAY HIGH COURT HAS HELD THAT PROFIT/GAIN ARISING ON TRANSFER OF OWNERSHIP RIGHTS IN THE LAND WAS ASSESSABLE UNDER THE HEAD CAPITAL GAINS. THEREFORE, HE OPINED THAT THERE IS NO MERIT IN THE FINDING OF THE AO IN FIRST PART OF THE ASSESSMENT ORDER THAT INCOME RECEIVED TOWARDS SALE OF FLAT IS ASSESS ABLE UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION. 9. IN SO FAR AS, THE FINDINGS OF THE AO IN REGARD T O ADDITION TOWARDS ADVANCES RECEIVED FROM CUSTOMERS FROM SALE OF FLATS UNDER THE HEAD INCOME FROM OTHER SOURCES, THE LD. CIT(A) OBSERVED THAT WHEN INCOME WAS CHARGEABLE TO TAX ONLY UNDER THE HEAD CAPITAL G AINS AS THE CHARGE OF TAX IS INEXTRICABLY LINKED WITH THE TRANSFER OF A C APITAL ASSET AND HENCE THE QUESTION OF TAXING THE ADVANCES SHOWN UNDER THE HEAD LIABILITIES UNDER ANY HEAD OF INCOME INCLUDING INCOME FROM OTHE R SOURCES AS THERE IS NO TRANSFER OF CAPITAL ASSETS IN THE GIVEN PREVI OUS YEAR. THE LD. CIT(A) FURTHER OBSERVED THAT THE AOS ACTION IS ALSO COMPL ETELY UNJUSTIFIED AND INCORRECT IN VIEW OF THE ACCOUNTING PRINCIPLES FOR RECOGNITION OF INCOME, BECAUSE UNLESS THE INCOME ACCRUED DURING THE RELEVA NT FINANCIAL YEAR THE QUESTION OF TAXATION OF SAID RECEIPTS DOES NOT ARISE. HE, FURTHER, OPINED THAT THE AO HAS TAXED ENTIRE RECEIPTS UNDER THE HEAD INCOME FROM OTHER SOURCES INCLUDING AMOUNT RECEIVED IN EAR LIER PERIOD WITHOUT APPRECIATING THE FACT THAT ON ONE SIDE HE ADMITS TH AT ADVANCES RECEIVED IS TOWARDS SALE OF PROPERTY AND ON THE OTHER HAND H E OPINED THAT 13 LIABILITIES SHOWN UNDER THE HEAD ADVANCES IS CEASED TO EXIST AND CONSEQUENTLY ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT APPRECIATING THE FACT THAT PROVISIONS OF C HARGING SECTION 4 & 5 WHICH EMPOWERS AND INCOME TAX AUTHORITY TO ASSESS I NCOME TO TAX IN A PARTICULAR ASSESSMENT YEAR, BUT NOT INCOME OF A JUS T PRECEDING ACCOUNT YEAR. THEREFORE, HE OPINED THAT THE AO HAS ASSESSE D ADVANCES RECEIVED UNDER THE HEAD INCOME FROM OTHER SOURCES W ITHOUT ADDUCING ANY COGENT EVIDENCE AND MATERIAL TO ESTABLISH THAT THE SUMS RECEIVED BY THE ASSESSEE DURING THE FINANCIAL YEAR 1995-96 TO 2 008-09 BECAME INCOME CHARGEABLE TO TAX IN THE ASSESSMENT YEAR 201 1-12, WHICH HAS BEEN ACCEPTED AS LIABILITIES BY THE AO IN ALL THE P RECEDING ASSESSMENT YEARS UPTO ASSESSMENT YEAR 2010-11. ACCORDINGLY, D ELETED ADDITIONS MADE BY THE AO OF RS.2,69,48,90,886/- UNDER THE HEA D INCOME FROM OTHER SOURCES. SIMILARLY, THE LD. CIT(A) HAD ALSO DELETED ADDITIONS MADE BY THE AO TOWARDS ADVANCES RECEIVED FOR THE ASSESSM ENT YEAR 2009-10 TO 2011-12 ON THE GROUND THAT AMOUNT RECEIVED TOWAR DS 12% SHARE OF INCOME FROM SALE OF FLATS IS NOT LIABLE TO TAX, BEC AUSE THE ASSESSEE HAS NOT TRANSFERRED RIGHT IN IMMOVABLE PROPERTY DURING THE RELEVANT PERIOD DUE TO CANCELLATION OF DEVELOPMENT AGREEMENT DATED 02.01.1995 AND ALSO REVOCATION OF THE POWER OF ATTORNEY GIVEN TO P HFL. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 7.1 HAVING TAKEN NOTE TO THE AO'S ORDER AS WE LL AS APPELLANT AR'S SUBMISSIONS, I FIND THAT THE APPELLANT RECEIVED THE GROSS SUMS OF RS.278,51,85,876/- DURING THE PERIOD 1995-96 TO 200 8-09 FROM VARIOUS INTENDING PURCHASERS OF THE CONSTRUCTED SPACES IN TERMS OF THE DEVELOPMENT AGREEMENTS DATED 02.01.1995. OUT OF THE AFORESAID S UM RECEIVED BY APPELLANT IN THE FORM OF 'DEPOSITS', THE APPELLANT HAS ALREADY OFFERED A SUM OF RS.9,02,94,990/- AS INCOME OF THE APPELLANT UNDER T HE HEAD 'CAPITAL GAINS' IN F.YS 2001-02 85 2002-03 IN THE YEAR WHEN THE RELEVA NT CONVEYANCES WERE EXECUTED IN RESPECT OF SALE/TRANSFER OF LAND. HOWEV ER, THE APPELLANT DID NOT RECOGNIZE THE INCOME FOR THE REMAINING 'DEPOSITS'/ 'ADVANCES' AGGREGATING RS.269,48,90,886/- IN HIS BOOKS OF ACCOUNTS OR IN T HE INCOME-TAX RETURNS ON THE GROUND THAT RELEVANT CONVEYANCES WERE NOT EXECU TED. I FIND THAT WHILE COMPLETING THE ASSESSMENT OF THE APPELLANT U/S. 143 (3) OF THE ACT FOR 14 A.Y.2003-04, THE AO MERELY CHANGED THE HEAD OF INCO ME AS 'BUSINESS INCOME' INSTEAD OF 'CAPITAL GAINS' AS DISCLOSED BY THE APPELLANT BUT DID NOT DISPUTE THE YEAR OF TAXABILITY OF THE INCOME WHICH ACCRUED IN THE HANDS OF THE APPELLANT ON EXECUTION OF CONVEYANCE IN FAVOUR OF T HE PURCHASER OF THE SPACES CONSTRUCTED IN TERMS OF DEVELOPMENT AGREEMENT DATED 02.01.1995. IT IS ALSO A FACT ON RECORD THAT THE AO ACCEPTED THE APPELLANT'S METHOD OF REVENUE RECOGNITION IN ALL THE PRECEDING ASSESSMENT YEARS A S DISCLOSED BY THE APPELLANT. EXCEPT CHANGING THE HEADS OF INCOME AS R ECORDED ABOVE IN RESPECT OF ASSESSABILITY OF INCOME AS A RESULT OF TRANSFER/ SALE OF LAND WHEN THE CONVEYANCE DEED WAS EXECUTED BY THE APPELLANT IN NO NE OF THE PRECEDING ASSESSMENT YEAR, THE AO DID NOT MAKE ANY WHISPER IN RELATION TO ASSESSABILITY OF 'DEPOSITS'/ 'ADVANCES' RECEIVED BY THE APPELLANT PURSUANT TO THE AGREEMENTS EXECUTED WITH THE INTENDING PURCHASERS O F THE FLATS/CONSTRUCTED SPACES. THUS, IT IS AMPLY CLEAR THAT THE AO ACCEPTE D THE APPELLANT'S PROPOSITION THAT INCOME ARISING FROM TRANSFER OF AP PELLANT'S RIGHT IN LANDS WERE CHARGEABLE TO TAX ONLY IN THE YEAR'S IN WHICH THE R ELEVANT CONVEYANCES WERE EXECUTED AND NOT IN ANY OTHER YEAR. THE PERUSAL OF ASSESSMENTS COMPLETED UNDER SECTION 143(3) OF THE ACT IN THE CASE OF THE APPELLANT IN ALL THE PRECEDING ASSESSMENT YEARS ESTABLISHES THAT THE ASS ESSING OFFICERS CONSISTENTLY ACCEPTED THAT THE 'DEPOSITS' / 'ADVANC ES' RECEIVED FROM THE INTENDING PURCHASERS REPRESENTED 'LIABILITY' AND HE NCE, IT DID NOT REPRESENT INCOME OF THE APPELLANT FOR THE YEARS IN WHICH EITH ER THE RELEVANT AGREEMENTS WERE EXECUTED OR THE AMOUNTS RECEIVED AS PER THE AG REEMENTS DATED 02.01.1995. IN VIEW OF THE ABOVE FACTS OF THE APPEL LANT'S CASE, I DO NOT FIND ANY MERIT IN THE AO'S ACTION OF ASSESSING THE SAID SUM OF RS.269,48,90,886/- AS APPELLANT'S INCOME CHARGEABLE IN THE A.Y.2011-12 . EVEN IN MY CONSIDERED VIEW, THE ACTION OF THE AO IS COMPLETELY CONTRARY T O THE PROVISION OF CHARGING SECTION I.E. SECTION 4 AND 5, WHICH EMPOWERS AN INC OME-TAX AUTHORITY TO ASSESS INCOME TO TAX IN A PARTICULAR ASSESSMENT YEA R FOR INCOME OF A JUST PRECEDING ACCOUNTING YEAR. EVEN, I FIND THAT THE AO COULD NOT ADDUCE ANY COGENT EVIDENCE AND MATERIAL TO ESTABLISH THAT THE SUMS RECEIVED BY THE APPELLANT DURING THE FYS 1995-96 TO 2008-09 BECAME INCOME' CHARGEABLE TO TAX IN THE AY 2011-12, WHICH-HAS BEEN ACCEPTED AS ' LIABILITIES' BY THE ASSESSING OFFICERS IN THE ALL THE PRECEDING ASSESSM ENT YEARS UPTO A.Y. 2010- 11. 7.2 IN MY CONSIDERED VIEW, THE AO HAS WRONGLY ASSUM ED THAT THE SUM OF RS.269,48,90,886/- HAS BECOME INCOME DUE TO CESSATI ON OF THE LIABILITY AS THE AO IS OF THE VIEW THAT THE APPELLANT CAN APPROPRIAT E 12% SHARE IN THE SALE PROCEEDS AS HIS INCOME AND HE HAD NO LIABILITY WHAT SOEVER TO REFUND IT. THIS ASSUMPTION OF THE AO IS BASED ON THE JUDGMENT OF TH E DIVISION BENCH OF THE BOMBAY HIGH COURT IN THE CASE OF N.N. WADIA VS FERA NI HOTELS LIMITED IN APPEAL NO. 817 OF 2010 IN SUIT NO. 1628 OF 2008 DAT ED 19.07.2012. HOWEVER, THE AO'S THIS ASSERTION IS COMPLETELY INCORRECT AND WITHOUT HAVING ANY BASIS FOR THE SAME. THE AO COMPLETELY IGNORED THIS HARD T RUTH THAT THE APPELLANT'S RIGHT OF 12% SHARE OF SALE PROCEEDS OF ANY SALE AGR EEMENT WITH THE PROSPECTIVE PURCHASER OF THE FLAT/PREMISES EXISTS O NLY IN LIEU OF THE .APPELLANT'S LIABILITY TO EXECUTE THE CONVEYANCE DEED IN FAVOUR OF THE INTENDING PURCHASERS OF THE CONSTRUCTED SPACES WITH THE SPECIFIC INTENTI ON OF ACQUIRING THE OWNERSHIP RIGHTS AND INTERESTS IN THE LAND OVER WHI CH THE DEVELOPERS HAD 15 CONSTRUCTED THE BUILDINGS. THE PAYMENTS WERE NOT IN TENDED FOR ANY OTHER PURPOSE BUT FOR THE SPECIFIC PURPOSE OF ACQUIRING T HE RIGHTS IN THE LAND OWNED BY THE APPELLANT. BESIDES THIS, THE DECISION OF DIV ISION BENCH OF BOMBAY HIGH COURT DATED 19.07.2012 WAS MERELY INTERIM DIRECTION S WHICH DID NOT IN ANY MANNER RESOLVE THE DISPUTES BETWEEN THE PARTIES AS WRONGLY ASSUMED BY THE AO. HENCE, THE AO WAS IN ERROR IN CONCLUDING THAT T HE DISPUTES BETWEEN THE PARTIES STOOD RESOLVED AND 12% SHARE RECEIVED BY TH E APPELLANT OR ALLEGEDLY RECEIVED BY THE DEVELOPER ON BEHALF OF THE APPELLAN T BECAME INCOME OF THE APPELLANT BECAUSE IT WAS THE LEAST MINIMUM CONSIDER ATION RECEIVABLE AND FOR WHICH ADMINISTRATOR HAD NO LIABILITY TO REFUND. 7.3. EVEN, I FIND THAT THE DIVISION BENCH OF HON'BL E BOMBAY HIGH COURT NOWHERE DECIDED THE THE CLAIMS & COUNTER CLAIMS OF THE PARTIES TO ITS FINALITY BUT ONLY REQUIRED THE TRIAL COURT TO FIRST MEET THE PRELIMINARY OBJECTION OF THE DEVELOPER REGARDING MAINTAINABILITY OF THE SUIT ON THE GROUND OF LIMITATION AND ONLY THEREAFTER PROCEED WITH THE TRIAL. IN VIEW OF THE SAME, THE SAID JUDGMENT NOWHERE CRYSTALLIZED THE RIGHTS & OBLIGATI ONS OF THE PARTIES TO THE DISPUTE. I, THEREFORE, DO NOT FIND ANY MERIT IN THE AO'S CONCLUSION THAT RS.269,48,90,886/- OR ANY PART THEREOF BEING THE 'D EPOSITS' / 'ADVANCES' RECEIVED FROM INTENDING PURCHASERS DURING THE FYS 1 995-96 TO 2008-09 BECAME LEGALLY CHARGEABLE TO TAX IN A.Y.2011-12. EV EN AS PER THE METHODS OF ACCOUNTING PRESCRIBED IN SECTION 145, THE AMOUNTS/D EPOSITS RECEIVED IN THE YEARS PRIOR TO 2010-11 COULD NOT BE BROUGHT TO TAX IN AY 2011-12 UNDER THE PROVISIONS OF THE I.T. ACT, 1961. EVEN I ALSO FIND FORCE IN THE APPELLANT AR'S THIS ARGUMENT THAT THE AO HIMSELF WAS NOT CONVINCED BY HIS OWN ACTION THAT THE AMOUNT RECEIVED BY THE APPELLANT IN A PERIOD OF 14 YEARS I.E. FROM F.Y. 1995-96 TO 2008-09 BECAME CHARGEABLE TO TAX AS INCO ME IN A.Y.2011-12, WHICH IS EVIDENT FROM HIS SUBSEQUENT ACTION OF RE-O PENING OF THE ASSESSMENT OF THE APPELLANT U/S.148 OF THE ACT FOR A.Y.2007-08 AND 2009-10. TO THIS EFFECT, THE APPELLANT'S AR FILED COPIES OF NOTICES U/S.148 OF THE ACT IN THE APPELLATE PROCEEDINGS. BESIDES THIS, SPECIFICALLY T HE APPELLANT'S AR ALSO BROUGHT MY ATTENTION TO SPECIFIC FINDING OF THE AO RECORDED IN PARA 28 OF THE ASSESSMENT ORDER, WHICH READS THAT ''WITHOUT PREJUD ICE TO THE ABOVE, PROCEEDINGS ARE BEING SEPARATELY INITIATED TO EXAMI NE THE CHARGEABILITY OF INCOME OUT OF THE 12% SHARE IN THE SALE PROCEEDS AN D OTHER RECEIVABLES, ARISING IN EACH EARLIER PREVIOUS YEARS IN THE ASSES SMENT YEAR RELEVANT TO THE RESPECTIVE PREVIOUS YEAR OF RECEIPT OR ACCRUAL. IN VIEW OF THESE FACTS AND ALSO AFTER TAKING NOTING TO THE FACT THAT JURISDICTIONAL BOMBAY HIGH COURT IN THE APPELLANT'S CASE IN A.Y.2003-04 HAS SPECIFICALLY HE LD THAT THE APPELLANT HOLDS THE LAND BY WAY OF INVESTMENT AND HENCE, THE GAINS/ PROFIT ARISED FROM THE TRANSFER OF LAND WAS CHARGEABLE TO TAX IN THE YEAR IN WHICH THE TRANSFER OF SUCH CAPITAL ASSET TAKES PLACE. HENCE, I HAVE NO HESITAT ION TO HOLD THAT THE ACTION OF THE AO IN TAXING THE SUM OF RS.269,48,90,886/- WHIC H WAS 'DEPOSITS/ADVANCES' SHOWN BY THE APPELLANT IN ITS B OOKS OF ACCOUNTS PERTAINING TO F.Y. 1995-96 TO 2008-09 CANNOT BE BRO UGHT TO TAX IN THE YEAR A.Y.2011-12 AS 'INCOME FROM OTHER SOURCES' KEEPING RELIANCE ON THE DECISION OF JURISDICTIONAL BOMBAY HIGH COURT'S JUDGMENT IN T HE APPELLANT'S OWN CASE IN A.Y. 1987-88 TO 1989-90 AND ALSO A.Y.2003-04. ACCOR DINGLY, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE AO'S ACTION OF TAXING THE ENTIRE SUM OF RS.269,48,90,886/- WHICH WAS RECEIVED BY THE APPELL ANT IN A PERIOD OF 14 16 YEARS AS 'INCOME FROM OTHER SOURCES' IN A.Y.2011-12 IS COMPLETELY INCORRECT AND UNJUSTINED UNDER THE PROVISIONS OF INCOME-TAX A CT AS WELL AS AGAINST THE ACCOUNTING PRINCIPLES. THEREFORE, THE ADDITION SO M ADE BY THE AO OF RS.269,48,90,886/- STANDS DELETED. THEREFORE, THE A PPELLANT'S THESE GROUNDS OF APPEAL ARE ALLOWED. 7.4 EVEN IT IS ALSO VERY IMPORTANT FACT TO NOTE THAT THE JUDGMENT OF THE DIVISION BENCH, BOMBAY HIGH COURT, WHICH THE AO TOO K NOTE TO HOLD THAT THERE WAS CESSATION OF LIABILITY ON THE PART OF THE APPEL LANT WAS ADJUDICATED IN JULY 2012 SUBSEQUENT TO ACCOUNTING YEAR CLOSING OF THE A SSESSMENT YEAR 2011-12 I.E. 31.03.2011. HENCE, THE COGNIZANCE TAKEN BY THE AO OF THIS ORDER IN RESPECT OF RETURN OF INCOME FILED PRIOR TO THIS JUD GMENT OF THE BOMBAY HIGH COURT WAS COMPLETELY WRONG AND. UNJUSTIFIED. 8. THROUGH GROUND NOS. 17 & 18, THE APPELLANT HAS A GITATED AGAINST THE AO'S ACTION OF MAKING ADDITION OF RS.6,35,29,260/- & RS. 2,62,55,640/- COLLECTED BY M/S.FHL DURING F.Y.2008-09 AND 2009-10 RESPECTIVELY ON ACCOUNT OF ALLEGED 12% SHARE IN THE HANDS OF THE APPELLANT. THE APPELL ANT CONTENDED THAT NO OPPORTUNITY WAS GRANTED BY THE AO BEFORE MAKING THI S ADDITION, HENCE THE AO HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. THE REFORE, THE APPELLANT REQUESTED THAT THE ADDITIONS SO MADE DESERVES TO BE DELETED IN FULL. 8.1 HAVING TAKEN NOTE TO THE AO'S ORDER AS WELL AS APPELLANT AR'S SUBMISSIONS AND DOCUMENTS AVAILABLE ON RECORD, IT I S EVIDENT THAT THE APPELLANT INSTITUTED LEGAL PROCEEDINGS -CIVIL/CRIMI NAL IN 2008 AGAINST THE DEVELOPERS WHO WERE PARTY TO THE DEVELOPMENT AGREEM ENT DATED 02.01.1995. SUBSEQUENT TO THAT, M/S.IPHPL NEITHER ENTERED INTO AGREEMENTS WITH THE INTENDING PURCHASERS NOR COLLECTED & PAID ANY SUMS TO THE APPELLANT'S 12% SHARE IN THE SALE PROCEEDS. BUT M/S.FHPL CONTINUED WITH THE DEVELOPMENT OF THE LAND AND CONTINUED TO ENTER INTO AGREEMENTS WIT H THE INTENDING PURCHASERS FOR SALE OF THE CONSTRUCTED SPACES. THOUGH THE APPE LLANT HAD NOT ONLY ISSUED NOTICE OF TERMINATION OF THE AGREEMENT BUT ALSO REV OKED THE POWER OF ATTORNEY GRANTED TO FHPL UNDER THE DEVELOPMENT AGREEMENT DAT ED 02.01.1995. EVEN THE ADMINISTRATOR HAD ALSO FILED LIS PENDENCE NOTIC E WITH THE OFFICE OF THE SUB- REGISTRAR, BORIVALI. THE ADMINISTRATOR ALSO PUBLISH ED PUBLIC NOTICES WARNING THE MEMBERS OF GENERAL PUBLIC CAUTIONING THEM AGAINST E NTERING INTO ANY AGREEMENTS WITH THE DEVELOPERS IN VIEW OF THE PENDI NG LITIGATION. DESPITE ALL SUCH STEPS TAKEN BY THE APPELLANT, FHPL CONTINUED T O DEVELOP THE PROPERTY AND ENTERED INTO REGISTERED AGREEMENTS FOR SALE. CO NSEQUENT TO THAT M/S.FHPL. COLLECTED 12% SHARE IN THE SALE PROCEEDS ON ACCOUNT OF SALE OF CONSTRUCTED SPACES BY THE INTENDING PURCHASER ON BE HALF OF THE APPELLANT, BUT AS THE APPELLANT/ADMINISTRATOR OF THE ESTATE INITIA TED LEGAL PROCEEDINGS AGAINST M/S.FHPL AS DETAILED ABOVE, HENCE, THE APPELLANT IN STRUCTED HIS BANKER, ICICI BANK NOT TO ACCEPT PAYMENTS FROM THE INTENDING PURC HASERS OR FROM THE DEVELOPERS. IN THIS SITUATION, I FIND THAT THE DEVE LOPER M/S.FHPL WITHOUT THE CONSENT OF THE APPELLANT OPENED AN ACCOUNT WITH IND IAN BANK, BANDRA UNDER THE NAME & STYLE OF 'FERANI HOTELS PVT LTD A/C N.N. WADIA SHARE' HAVING A/C NO.843184512 IN WHICH IT HAS DEPOSITED VARIOUS SUMS BEING 12% SHARE OF THE SALE PROCEEDS RECEIVED FROM THE INTENDING PURCHASER S. I FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO GATHERED THE INFO RMATION OF DEPOSITS 17 MADE IN THIS BANK ACCOUNT OF RS.6,35,29,260/- & RS. 2,62,55,640/- IN FYS 2008-09 & 2009-10 RESPECTIVELY FROM THE DEVELOPERS AND THE BANK BY ISSUING NOTICE U/S. 133(6) OF THE ACT. I FIND THAT THE AO H AVING TAKEN NOTE TO THE DECISION OF THE BOMBAY HIGH COURT REFERRED AS ABOVE , HELD THAT THE AMOUNTS SO COLLECTED/DEPOSITED BY M/S.FHPL WAS AN ACT OF TH E AGENT OF THE APPELLANT AND HENCE, THE SAME REPRESENTED MINIMUM SHARE IN TH E SALE PROCEEDS FOR WHICH THE APPELLANT HAD NO LIABILITY TO REFUND. IN VIEW OF THE SAME, THE AO BROUGHT THE TOTAL SUM SO RECEIVED IN F.Y.2008-09 AN D 2009-10 CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES' IN A .Y.2011-12. 8.2 HOWEVER, I AM COMPLETELY NOT IN AGREEMENT WITH THE AO'S ACTION OF TAXING THE AFORESAID SUM IN THE HANDS OF THE APPELLANT IN A.Y.2011-12 AFTER TAKING NOTE TO THE FACT THAT THE APPELLANT HAD TAKEN ALL L EGAL STEPS PREVENTING FHPL TO PROCEED WITH THE DEVELOPMENT AND ENTER INTO AGREEME NTS FOR SALE OF THE CONSTRUCTED SPACES WITH THE INTENDING PURCHASERS. N OT ONLY THIS, THE APPELLANT HAD ALSO INSTITUTED CIVIL & CRIMINAL PROCEEDINGS SE EKING CANCELLATION OF AGREEMENTS AND RESTORATION OF LAND. BESIDES THIS, I ALSO NOTE THAT THE SAID DEPOSITS WERE MADE BY M/ S. FHPL IN THE INDIAN BANK ACCOUNT WITHOUT HAVING ANY PERMISSION/CONSENT FROM THE APPELLANT. THEREFOR E, THE AMOUNT SO DEPOSITED IN THE SAID ACCOUNT BY NO MEANS CAN BE SA ID BELONGED TO THE ADMINISTRATOR NOR SUCH AMOUNT EVER REACHED TO THE A DMINISTRATOR. HENCE, BY NO STRETCH OF IMAGINATION THE SAME CAN BE BROUGHT T O THE AMBIT OF INCOME IN THE HANDS OF THE APPELLANT CHARGEABLE TO TAX IN A.Y .2011-12. IT IS ALSO EVIDENT FROM THE APPELLANT'S SUBMISSION THAT M/S. FHPL DID NOT EVER INTIMATE OR PROVIDE ANY DETAILS OF SUCH COLLECTION TO THE APPEL LANT. THE APPELLANT COULD GATHER THIS INFORMATION OF SUCH DEPOSIT ONLY AFTER INSPECTION OF THE ASSESSMENT RECORDS OF THE AO SUBSEQUENT TO THE ASSESSMENT ORDE R PASSED BY THE AO FOR A.Y.2011-12. . THEREFORE, I FIND THAT NO INCOME ACC RUED TO THE APPELLANT ON ACCOUNT OF UNAUTHORIZED SALE OF CONSTRUCTED SPACES CARRIED OUT BY FHPL IN THE NAME & ON BEHALF OF THE APPELLANT. IT IS ALSO A FACT ON RECORD THAT THE HON'BLE BOMBAY HIGH COURT DIRECTED M/S.FHPL FOR MAI NTAIN A SEPARATE ACCOUNT OF 12% SHARE OF THE SALE PROCEEDS AS AN INT ERIM MEASURE WHICH WILL BE LIABLE TO BE GOVERNED BY THE ORDER OF THE TRIAL COURT. THUS, THE RIGHTS & OBLIGATIONS OF THE PARTIES IN THE AMOUNTS COLLECTED WERE SUBJECT TO THE OUTCOME OF THE ORDER TO BE PASSED BY THE HIGH COURT . HENCE, THE . RIGHTS OF THE APPELLANT IN THE AMOUNTS SO COLL ECTED REMAINED ' INDETERMINATE AND INCHOATE. FURTHER TO THAT, EVEN I ALSO FIND T HAT THE DEVELOPER M/S.FHPL OPENED THE BANK ACCOUNT IN JULY 2009 IN INDIAN BANK FOR DEPOSITING 12% SHARE SUO MOTO ONCE THE APPELLANT STOPPED THROUGH ITS BANKER TO TAKE ANY DEPOSIT FROM FHPL OR BY ANY PROSPEC TIVE/INTENDING PURCHASERS OF THE PREMISES. THUS, THE APPELLANT'S THIS INITIATIVE OF DEPOSITING 12% SHARE SUO MOTO IN SEPARATE ACCOUNT WAS MUCH PRIOR TO THE ORD ER DELIVERED IN JULY, 2012 BY THE HON'BLE BOMBAY HIGH COURT. HENCE, IN MY CONS IDERED VIEW, THERE IS NO SANCTITY IN TAXING THE AFORESAID SUM IN THE HANDS O F THE APPELLANT ON THE BASIS OF HIGH COURT JUDGMENT WHICH WAS DELIVERED IN JULY 2012 AFTER THE CLOSURE OF THE ACCOUNTING YEAR. IN VIEW OF THE SAME, I CONSIDE R IT PROPER AND APPROPRIATE TO HOLD THAT THE ACTION OF THE AO OF TAXING THE AFO RESAID SUM OF RS.6,35,29,260/- AND RS.2,62,55,640/- RECEIVED IN F .Y.2008-09 AND 2009-10 IN A.Y.2011-12 IS COMPLETELY INCORRECT AND UNJUSTIF IED UNDER THE PROVISIONS OF INCOME-TAX ACT. ACCORDINGLY, THE ADDITION MADE BY T HE AO STANDS DELETED. 18 9. THROUGH GROUND NO. 14 TO 16, THE APPELLANT HAS A GITATED AGAINST THE AO'S ACTION OF MAKING ADDITION OF RS. RS.17,32,37,955/- ON ACCOUNT OF ALLEGED 12% SHARE OF THE SALE REALIZATION WITH REFERENCE TO M/S .FHPL. THE APPELLANT ALSO CONTENDED THAT THE SAID ADDITION WAS MADE WITHOUT G IVING OPPORTUNITY OF BEING HEARD AND HENCE, THE AO VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. FURTHER TO THAT, THE APPELLANT ALSO CONTENDED THAT THE AO IGNO RED THE FACT THAT THE APPELLANT HAD ALREADY TERMINATED HIS AGREEMENT WITH M/S.FHPL IN 2008 AND ALSO REVOKED THE POWER OF ATTORNEY. THEREFORE, NO P ART OF THE SAID SUM WAS CHARGEABLE TO TAX AS INCOME SINCE THE MATTER WAS SU BJUDICE BEFORE THE HON'BLE COURT. 9.1 FURTHER, THE APPELLANT. ALSO SUBMITTED THAT THE AO'S ACTION OF TAKING NOTE OF JUDGMENT OF BOMBAY HIGH COURT FOR TAXING THE AFORES AID SUM IN THE HANDS OF THE APPELLANT WAS ALSO CONTRARY TO THE FACT THAT TH E SAID JUDGMENT WAS GIVEN BY THE COURT IN JULY 2012. THEREFORE, BY NO STRETCH OF IMAGINATION, FHPL COULD HAVE DEPOSITED ANY SUM IN F.Y.2010-11 IN COMPLIANCE TO SAID ORDER. HENCE, THE AO'S ACTION OF INFERRING BASE FOR TAXING THE AF ORESAID SUM IN THE HANDS OF THE APPELLANT IN A.Y.2011-12 BASED ON BOMBAY HIGH C OURT'S JUDGMENT WAS COMPLETELY ERRONEOUS. 9.2 I FIND THAT THE AFORESAID SUM OF RS. 17,32,37,9 55/- WAS DEPOSITED BY THE DEVELOPER M/S.FHPL, UNILATERAL!/ AND WITHOUT THE CO NSENT OF THE APPELLANT, WHO HAD EXECUTED AGREEMENTS FOR SALE IN FAVOUR OF T HE INTENDING PURCHASERS AFTER 2008 EVEN THOUGH THE APPELLANT HAD INSTITUTED LEGAL PROCEEDINGS SEEKING CANCELLATION OF AGREEMENT DATED 02.01.1995. I FIND THAT THIS ACT OF THE DEVELOPER IN EXECUTING THE AGREEMENT FOR SALE WAS W ITHOUT THE CONSENT OF THE APPELLANT AND ALSO AFTER REVOCATION OF POWER OF ATT ORNEY GIVEN BY THE APPELLANT IN FAVOUR OF M/S.FHPL CONSEQUENT TO DEVEL OPMENT AGREEMENT DATED 02.01.1995. EVEN I FIND THAT THE APPELLANT HA D FILED SUIT IN THE COURT FOR CANCELLATION OF THE AGREEMENT DATED 02.01.1995 AND RESTORATION OF LAND ON ACCOUNT OF FRAUD COMMITTED BY THE DEVELOPER WHILE E XECUTING THE AGREEMENT. HAVING TAKEN NOTE TO THE SUBMISSION OF THE APPELLAN T AND THE DOCUMENTS ON RECORD, I AM OF THE CONSIDERED VIEW THAT THE AO WAS COMPLETELY UNJUSTIFIED IN HIS ACTION IN HOLDING THAT THE APPELLANT BY .EXECUT ING AGREEMENTS IN 1995 AND GRANTING IRREVOCABLE DEVELOPMENT RIGHTS AND EXECUTI NG POWER OF ATTORNEY AUTHORIZING FHPL TO UNDERTAKE SALE OF THE CONSTRUCT ED SPACES, THE ADMINISTRATOR HAD ALSO GRANTED RIGHTS TO THE DEVELO PER TO CONDUCT SALE OF HIS OWNERSHIP RIGHTS IN LAND. 9.3 HAVING TAKEN NOTE TO THE DECISION OF SINGLE JUD GE OF BOMBAY HIGH COURT INTERIM ORDER DELIVERED ON 19.07.2010 WHEREIN, THE HON'BLE JUDGE HAS MADE ADVERSE COMMENTS ON THE ACT OF THE DEVELOPER. BESID ES THIS, TAKING NOTE OF INVESTIGATION CONDUCTED BY EOW AGAINST THE IPHPL AN D FHPL AND ALSO AFTER ADMISSION OF SUITS FILED BY THE APPELLANT BEFORE TH E BOMBAY HIGH COURT FOR CANCELLATION OF THE DEVELOPMENT AGREEMENT DATED 02. 01.1995, IT IS EXPLICITLY EVIDENT THAT THE TERMS AND CONDITIONS FOR THE DEVEL OPMENT WHICH WAS STATED IN THE DEVELOPMENT AGREEMENT DATED 02.01.1995 WAS SUBJ UDICE AND THEREFORE, IN VIEW OF THE FACT THAT THE AFORESAID SUM WHICH WA S DEPOSITED BY THE DEVELOPER M/S.FHPL WITHOUT HAVING CONSENT FROM THE APPELLANT IN THE INDIAN 19 BANK ACCOUNT TO WHICH THE APPELLANT HAS NO ACCESS N OR THE APPELLANT HAS ANY RIGHT OVER SUCH MONEY TO USE IN ANY MANNER. IN MY C ONSIDERED VIEW, THE ACT OF THE AO IN BRINGING THE SAID SUM OF RS. 17,32,37,95S /- TO TAX WAS COMPLETELY UNJUSTIFIED AND INCORRECT WHEN IN THE GIVEN FACTS O F THE APPELLANT CASE, WHERE THE RIGHTS AND OBLIGATIONS OF THE PARTIES ARISING . FROM THE INTERPRETATIONS AND EXECUTION OF THE AGREEMENT DATED 02.01.1995 ARE IND ETERMINATE AND INCHOATE. EVEN, IT IS ALSO OBSERVED FROM THE SUBMISSION OF TH E APPELLANT ON RECORD THAT THE LIS PENDENCE NOTICE WERE SERVED BY THE APPELLAN T TO THE SUB-REGISTRAR, BORIVALI, FOR RESTRAINING FOR REGISTRATION OF DEVEL OPMENT AND SALE AGREEMENT BY THE DEVELOPER IN RELATION TO CONSTRUCTED SPACES. 9.4 EVEN, I FIND THAT THE ACTION OF THE AO IN TREAT ING THE FHPL AS AGENT OF THE APPELLANT FOR TAXING THE AFORESAID SUM UNDER THE HE AD 'INCOME FROM OTHER SOURCES' IN A.Y.2011-12 WAS CONTRARY TO THE TERM ST ATED IN CLAUSE 15 OF THE AGREEMENT DATED 02.01.1995, WHICH CLEARLY MANIFEST THAT THE RELATIONSHIP BETWEEN THE APPELLANT AND DEVELOPER WAS NOT ONE OF PRINCIPAL AND AGENT. THEREFORE, I HAVE NO HESITATION TO HOLD THAT THE UN ILATERAL CONDUCT AND ACTS OF FHPL IN EXECUTING THE AGREEMENT FOR SALE OF LAND ON BEHALF OF THE ADMINISTRATOR, IN A SITUATION WHERE THE OPERATION O F THE AGREEMENT DATED 02.01.1995 ITSELF IS SUBJUDICE, AND ALSO THE SUM AL LEGEDLY SO COLLECTED AND DEPOSITED BY FHPL IN ITS ACCOUNT WITH INDIAN BANK, CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE APPELLANT AS THE SAME WAS NOT A CCESSIBLE TO THE APPELLANT. 9.5 EVEN I FIND THAT THE AO'S RELIANCE ON JUDGMENT OF THE APEX COURT IN THE CASES OF CIT VS UNITED PROVINCES ELECTRIC SUPPLY CO [244 ITR 764] AND CIT VS K.C.P. LTD [245 ITR 421] IS NOT APPLICABLE IN TH E APPELLANT'S CASE AS THE SAME, IS CLEARLY DISTINGUISHABLE ON THE FACTS OF TH E APPELLANT'S CASE. IN THE CASE OF THE APPELLANT, THE AMOUNT COLLECTED BY FHPL IS ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS' WHERE AS THE DECISION RELIED U PON BY THE AO IS IN RESPECT OF INCOME ASSESSABLE UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS'. THUS, IN THE CIRCUMSTANCES WHERE THE APPELLANT HAS FILED SUI T FOR CANCELLATION OF DEVELOPMENT AGREEMENT DATED 02.01.1995 AND ALSO REV OKED THE POWER OF ATTORNEY GIVEN TO FHPL. ANY UNILATERAL EXECUTION OF AGREEMENT FOR SALE BY FHPL CANNOT BE TERMED AS INCOME OF THE APPELLANT. I N VIEW OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE ADDITION SO MADE BY THE AO OF RS. 17,32,37,95S/- WAS COMPLETELY UNJUSTIFIED AN D INCORRECT. ACCORDINGLY, THE SAME IS DELETED. 10. IN SO FAR AS, ADDITIONS MADE BY THE AO TOWARDS LEASE RENTAL INCOME OF RS.39,60,000/-, THE LD. CIT(A) OBSERVED T HAT THE AO WAS INCORRECT IN BRINGING TO TAX LEASE RENTAL EVEN THOU GH IT WAS DEMONSTRATED THAT THE ASSESSEE HAS CANCELLED DEVELOPMENT AGREEME NT DATED 02.01.1995 AND A CIVIL AND CRIMINAL PROCEEDINGS HAV E BEEN FILED AGAINST THE DEVELOPER IN THE COURTS. HE FURTHER OBSERVED TH AT THE AO DID NOT BRING ON RECORD ANY DOCUMENTS OR MATERIAL EXCEPT TH E AGREEMENT DATED 20 02.01.1995 UNDER WHICH THE LEASEHOLD RIGHTS WERE IN TENDED TO BE GRANTED. MOREOVER, THE AGREEMENT ITSELF PROVIDED F OR GRANT OF LEASE ONLY FOR A PERIOD OF FIVE YEARS AND NOT BEYOND, THEREFOR E, HE OPINED THAT THE AO WAS NOT HAVING SUFFICIENT AND COGENT MATERIAL ON THE BASIS OF WHICH HE COULD INFER THAT ASSESSEE HAD SUBSISTING AND ENF ORCEABLE RIGHT TO CLAIM LEASE RENT AS THE ASSESSEE NEVER EXECUTED ANY REGISTERED DOCUMENT BY WHICH LEASE OF PROPERTY WAS GRANTED IN FAVOUR OF THE DEVELOPERS. ACCORDINGLY, HE DELETED ADDITIONS TOWA RDS LEASE RENTAL AMOUNTING TO RS.39,60,000/- UNDER THE HEAD INCOME F ROM OTHER SOURCES. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDE R: 10. THROUGH GROUND NO. 19 TO 21, THE APPELLANT HAS AGITATED AGAINST THE AO'S ACTION OF TAXING THE LEASE RENT INCOME OF RS.39,60, 000/- AS INCOME OF THE APPELLANT ASSESSABLE IN A.Y. 2011-12. THE APPELLANT CONTENDED THAT THE AO ERRED IN ASSESSING ALLEGED LEASE RENTAL OF RS.19,80 ,000/- EACH FROM THE FHPL AND IPHPL WITHOUT BRINGING ANY DOCUMENT ON RECORD T O SUGGEST THAT THE APPELLANT HAD IN FACT GRANTED LEASE OF DEMISED LAND AND SUCH LEASE WAS LEGALLY IN FORCE IN TERMS OF WHICH THE APPELLANT CO ULD HAVE RECEIVED THE LEASE RENT IN F.Y.2010-11. THE APPELLANT FURTHER SUBMITTE D THAT THE ADMINISTRATOR HAS TERMINATED THE TENANCIES THROUGH PROPER LEGAL C HANNEL IN 2008, HENCE, THE AO COULD NOT ASSESS ANY LEASE RENT IN THE HANDS OF THE APPELLANT IN ABSENCE OF ANY LEGAL DOCUMENT TO THIS EFFECT. 10.1 I FIND THAT THE AO HAS ASSESSED THE SUM OF RS. 39,60,000/- AS LEASE RENTAL INCOME IN THE HANDS OF THE APPELLANT IN TERM S OF THE AGREEMENT DATED 02.01.1995 BY WHICH THE ADMINISTRATOR HAD AGREED TO GRANT LEASE OF THE DEMISED LANDS IN FAVOUR OF THE DEVELOPERS FOR PERIO D OF FIVE YEARS. HE ALSO NOTED THAT CLAUSE (2) OF THE AGREEMENTS PROVIDED TH AT THE LEASE WOULD BE EXECUTED IN THE FORM AGREED AND ANNEXED TO THE AGRE EMENT. IT WAS ALSO PROVIDED THEREIN THAT THE ADMINISTRATOR WOULD EXECU TE THE LEASE IN THE AGREED FORMAT AS AND WHEN THE DEVELOPERS CALLED UPON THE A DMINISTRATOR TO EXECUTE. IN CONSIDERATION OF GRANT OF LEASE RIGHTS THE DEVEL OPERS WERE REQUIRED TO PAY MONTHLY LEASE RENTS OF RS.55,OOO/- EACH. IT IS AN A DMITTED FACT THAT ALTHOUGH THE FORM OF LEASE AGREEMENT WAS AGREED AND WAS ANNE XED TO THE AGREEMENT DATED 02.01.1995, YET NO LEASE DEEDS WERE FORMALLY EXECUTED IN FAVOUR OF THE DEVELOPERS SINCE THEY DID NOT CALLED UPON THE ADMINISTRATOR TO FORMALLY EXECUTE THE LEASE DOCUMENT. IT IS ALSO AN ADMITTED FACT THAT EVEN THOUGH LEASE DEED WAS NOT FORMALLY EXECUTED THE DEV ELOPERS PAID MONTHLY SUMS OF RS.55,000/- TO THE ADMINISTRATOR WHICH HE C ONTINUED TO ACCEPT. THUS, BASED ON THE APPELLANT'S ACT AND ALSO OF THE DEVELO PER, THE AO HELD THAT THERE EXISTED AN ARRANGEMENT BETWEEN THE PARTIES IN TERMS OF WHICH APPELLANT WAS RECEIVING RS.55,000/- PER MONTH FROM EACH OF THE DE VELOPER. HOWEVER, FROM THE DOCUMENT AND THE APPELLANT'S SUBMISSION, IT IS INFERRED THAT THE APPELLANT 21 HAD SPECIFICALLY TERMINATED THE AGREEMENT IN YEAR 2 008. BESIDES THIS, IT IS ALSO A FACT ON RECORD THAT THE COUNSEL OF THE ADMINISTRA TOR ISSUED LEGAL NOTICES IN THE YEAR 2008 TERMINATING THE ARRANGEMENTS UNDER WH ICH THE DEVELOPERS WERE PAYING MONTHLY SUMS OF RS.55,000/-. IN VIEW OF THE SAME, THE APPELLANT CLAIMS THAT NO LEASE RENTAL INCOME CAN BE TERMED AS INCOME OF THE APPELLANT AS THE DEVELOPMENT AGREEMENT DATED 02.01.1995 ITSELF WAS T ERMINATED BY THE APPELLANT. 10.2 THIS WAS ALSO BROUGHT TO MY NOTICE BY THE APPE LLANT'S AR THAT THE ADMINISTRATOR STOPPED ACCEPTING THE MONTHLY PAYMENT S. SUBSEQUENT TO THAT THE DEVELOPERS HAD DEPOSITED MONTHLY AMOUNTS IN THE ACCOUNTS UNILATERALLY OPENED BY BOTH THE DEVELOPERS IN THEIR OWN NAMES. H OWEVER, THE APPELLANT'S AR CLAIMED THAT SUCH UNILATERAL ACT DID NOT RESULT IN ACCRUAL OF ANY INCOME IN THE HANDS OF THE APPELLANT. HENCE, IT WAS REQUESTED THAT ADDITION SO MADE BY THE AO SHOULD BE DELETED. 10.3 HAVING PERUSED THE AO'S ORDER AND APPELLANT AR 'S SUBMISSION, I FIND THAT THE LEASE RENTAL AMOUNT I.E. RS.39,60,000/- WHICH W AS ASSESSED AS INCOME OF THE APPELLANT FOR AY 2011-12 RELATES TO THE PERIOD F.Y.2008-09 TO 2010-11 MEANING THEREBY PAYMENT PERTAINING TO A.Y.2009-10 A ND 2010-11 WERE ALSO ASSESSED AS INCOME OF THE APPELLANT IN A.Y.2011-12. AFTER TAKING NOTE OF THE SUBMISSION AND DOCUMENTS ON RECORD, I FIND THAT A S UM OF RS.26,40,000/- WHICH IS FORMING PART OF RS.39,60,000/- ALLEGEDLY P ERTAINED TO FYS 2008-09 & 2009-10 RELEVANT TO AYS 2009-10 & 2010-11 RESPECTIV ELY. THEREFORE, I FIND THAT THE ACTION OF THE AO IN CHARGING SUCH SUM I.E. RS.26,40,000/- IN THE HANDS OF THE APPELLANT IN A.Y.2011-12 IS COMPLETELY UNJUSTIFIED AND INCORRECT. FURTHER TO THAT, THE REMAINING SUM OF RS.13,20,000/ - PERTAINED TO F.Y.2010-11 THOUGH IT IS RELEVANT TO A.Y.2011-12 BUT AS I FIND THAT THE SAID SUM WAS UNILATERALLY DEPOSITED BY THE DEVELOPER IN THEIR AC COUNT WITHOUT ANY INTIMATION TO THE APPELLANT. FURTHER TO THAT, EVEN I FIND THAT THE APPELLANT HAS NO ACCESSIBILITY TO THE SAID SUM WHICH WAS DEPOSITED I N THE ACCOUNTS MAINTAINED AND OPERATED BY THE DEVELOPER WITHOUT HAVING ANY CO NSENT FROM THE APPELLANT TO THIS EFFECT. SURPRISINGLY, EVEN IT IS ALSO INFER RED FROM THE APPELLANT'S SUBMISSION THAT THERE WAS NO INTIMATION TO THE APPE LLANT ABOUT ANY SUCH DEPOSIT IN A SEPARATE ACCOUNT. IN VIEW OF THE SAME AND ALSO TAKING NOTE OF ENTIRE FACTS AND SUBMISSION AVAILABLE ON RECORD, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT EVEN THIS SUM OF RS.13,20, 000/- CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE APPELLANT IN VIEW OF DISPUT E IN RELATION TO CANCELLATION OF DEVELOPMENT AGREEMENT DATED 02.01.1995 AND CIVIL AN D CRIMINAL PROCEEDINGS FILED BY THE APPELLANT AGAINST THE DEVE LOPER IN THE COURTS. IN VIEW OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE T O HOLD THAT THE ADDITION MADE BY THE AO OF RS.39,60,000/- IN THE HANDS OF TH E APPELLANT IS AGAINST THE PROVISIONS OF LAW AND HENCE, THE SAME IS DELETED. 10.4 UNDER NONE OF THE CHARGING PROVISIONS OF THE I NCOME-TAX ACT, 1961, SUM OF RS.26,40,000/- COULD BE BROUGHT TO TAX IN AY 201 1-12. EVEN IF ONE ACCEPTS THE AO'S PRESUMPTION THAT APPELLANT WAS LEGALLY ENT ITLED TO RECEIVE LEASE RENT ON MONTHLY BASIS, YET BOTH UNDER THE MERCANTILE SYS TEM AND THE CASH SYSTEM OF ACCOUNTING, THE INCOME ALLEGEDLY PERTAINING TO F YS 2008-09 & 2009-10 COULD NOT BE ASSESSED TO TAX IN AY 2011-12. PARTICU LARLY AO HAS ADMITTEDLY 22 THAT LEASE RENT IS ASSESSABLE UNDER THE HEAD 'OTHER SOURCES'. IN THE CIRCUMSTANCES IT WAS NECESSARY FOR THE AO TO PROVE THAT THE SAID SUM OF RS.26,40,000/- WAS EITHER RECEIVED BY THE APPELLANT DURING FY 2010-11 OR LEGAL RIGHT TO RECEIVE SUCH INCOME ACCRUED OR CRYST ALLIZED DURING FY 2010-11. IN ABSENCE OF FULFILLMENT OF EITHER OF THE TWO SITU ATIONS THE AO COULD NOT ASSESS RS.26,40,OOO/- AS APPELLANT'S INCOME IN AY 2 011-12. 10.5 EVEN WITH REGARD TO ASSESSMENT OF R S.13,20,000/- ALLEGEDLY PERTAINING TO AY 2011-12 I FIND THAT THE SUM WAS NO T CHARGEABLE IN THE APPELLANT'S HANDS BECAUSE THE ASSESSEE DID NOT HAV E ANY SUBSISTING LEGAL RIGHT TO CLAIM OR RECEIVE LEASE RENTALS FROM THE DE VELOPERS. IT IS TRUE THAT THE AGREEMENTS DATED 02.01.1995 ENVISAGED GRANTING OF L EASE OF THE DEMISED LANDS IN FAVOUR OF THE DEVELOPERS. SAVE & EXCEPT TH E CLAUSE (2) OF THE AGREEMENTS DATED 02.01.1995 THERE WAS NOTHING MORE ON RECORD WHICH ESTABLISHED THAT THE LEASE OF LAND WAS IN FACT GRAN TED IN FAVOUR OF THE DEVELOPERS. THE AGREEMENTS OF 02.01.1995 SPECIFICAL LY PROVIDED THAT THE LEASE WOULD BE GRANTED IN THE FORM AGREED BETWEEN THE PARTIES. FORMAT OF THE LEASE WAS ANNEXED TO THE AGREEMENTS. HOWEVER IT IS AN ADMITTED FACT THAT SUCH LEASE AGREEMENT WAS NEVER FORMALLY EXECUTED BY THE ADMINISTRATOR IN FAVOUR OF EITHER OF THE DEVELOPERS. A LEASE CREATES AN INTEREST IN AN IMMOVABLE PROPERTY, SUCH LEASE IS REQUIRED T O BE EVIDENCED BY A REGISTERED DEED, DULY STAMPED AS PER THE PROVISIONS OF THE INDIAN STAMP ACT. IN THE PRESENT CASE ADMITTEDLY THE DEVELOPERS HAVE CLAIMED THAT LEASE RENT PAYABLE WAS RS.55,000/- PER MONTH. IN OTHER WORDS T HE CONSIDERATION PAYABLE FOR GRANT OF LEASE WAS IN EXCESS OF RS. 100/- AND THEREFORE IN - ORDER TO ACQUIRE ANY ENFORCEABLE LEGAL LEASEHOLD RIGHT S, IT WAS NECESSARY THAT THE LEASE WAS GRANTED BY A FORMAL WRITTEN AGREEMENT WHI CH WAS PROPERLY STAMPED AND REGISTERED. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO WHICH IN ANY MANNER SUGGESTS THAT ANY FORMAL LEASE AGREEMENT CRE ATING PERPETUAL LEASE IN FAVOUR OF THE DEVELOPERS WAS CREATED BY THE APPELLA NT. THIS NEEDS TO BE NOTED BECAUSE CLAUSE (2) OF THE AGREEMENT OF JANUAR Y 1995 HAD ENVISAGED THE LEASE ONLY FOR A LIMITED PERIOD OF 5 YEARS WHIC H STOOD EXPIRED IN JANUARY 2000. IN THE CIRCUMSTANCES FOR THE AO TO INFER SUBS ISTENCE OF LEASE IN FY 2010-13'EXISTENCE OF A FORMAL LEASE DEED WAS NECESS ARY. I THEREFORE FIND FORCE IN THE SUBMISSIONS OF THE A/R THAT IN ABSENCE OF A PROPERLY EXECUTED LEASE DEED THERE DID NOT EXIST ANY LEGALLY ENFORCEA BLE AGREEMENT UNDER WHICH THE ASSESSEE COULD DEMAND PAYMENT OF LEASE RENT. AT THE SAME TIME IT IS ALSO NOTED THAT THE DEVELOPERS MADE MONTHLY PAYMENTS AND THE APPELLANT ACCEPTED SUCH PAYMENTS TILL 2006 AND 2008 FROM IPHP L AND FHPL RESPECTIVELY. HOWEVER IN ABSENCE OF THE REGIS TERED LEASE AGREEMENT, SUCH PAYMENT COULD ONLY BE INFERRED AS A PRIVATE AG REEMENT OR ARRANGEMENT BETWEEN THE PARTIES WHICH DID NOT CREATE ENFORCEABL E LEASE RIGHTS IN FAVOUR OF THE PAYERS ON PERPETUAL BASIS. IN MY CONSIDERED OPI NION THE PAYMENTS COULD AT BEST BE CONSIDERED TO BE CONTRACTUAL PAYMENTS NOT AMOUNTING TO TENANCY OR LEASE BECAUSE SUCH AN ARRANGEM ENT WAS NOT SUPPORTED BY ANY REGISTERED & STAMPED INSTRUMENT OF LEASE. WHATEVER PRIVATE ARRANGEMENT OR UNDERSTANDING IN TERMS OF WHICH MONT HLY PAYMENTS WERE MADE, WAS TERMINATED BY THE ASSESSEE BY ISSUING LEG AL NOTICES. ONCE THE ASSESSEE TOOK REQUISITE STEPS FOR TERMINATION OF A GREEMENT OF HIS PRIVATE UNDERSTANDING WITH THE DEVELOPER THE ASSESSEE ITSEL F NEVER ACKNOWLEDGED OR 23 ACCEPTED THAT ANY LEASE HOLD RIGHTS SUBSISTED WITH THE DEVELOPERS. THE AO DID NOT BRING ON RECORD ANY DOCUMENTS OR MA TERIAL EXCEPT THE AGREEMENT DATED 02.01.1995 UNDER WHICH THE LEASEHOLD RIGHTS WERE INTENDED TO BE GRANTED. MOREOVER THE SAID AGREE MENT ITSELF PROVIDED FOR GRANT OF LEASE .ONLY FOR A PERIOD OF 5 YEARS AND NO T BEYOND. VIEWED FROM ANY ANGLE THEREFORE I FIND THAT THERE WAS NO SUFFICIENT & COGENT MATERIAL AVAILABLE WITH THE AO ON THE BASIS OF WHICH HE COULD INFER TH AT ASSESSEE HAD SUBSISTING & ENFORCEABLE RIGHT TO CLAIM LEASE RENT AS THE ASSE SSEE NEVER EXECUTED ANY REGISTERED AND DULY STAMPED DOCUMENT BY WHICH LEASE OF PROPERTY WAS GRANTED IN FAVOUR OF THE DEVELOPERS, IN VIEW OF THE FOREGOING THEREFORE I HOLD THAT THE AO WAS NOT JUSTIFIED IN ASSESSING LEASE RE NT OF RS.13,20,000/- ALLEGEDLY PERTAINING TO FY 2010-11. FOR THE REASONS SET OUT IN THE AFORESAID THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.39, 60,000/-. 11. THE LD. SR. COUNSEL, SHRI PARAG. A. VYAS, APPEA RING FOR THE REVENUE SUBMITTED THAT THE LD. CIT(A) WAS ERRED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, DELETING ADDI TIONS MADE BY THE AO TOWARDS ADVANCE OF RS.269.48 CRORES ON TRANSFER OF ASSETS IN LIGHT OF SERIOUS DISPUTE BETWEEN THE DEVELOPER AND THE ASSES SEE REGARDING THE VALIDITY OF LEASE AGREEMENT AS WELL AS DEVELOPMENT RIGHT AGREEMENT. THE LD. SR. COUNSEL FURTHER SUBMITTED THAT THE LD. CIT( A) HAS FAILED TO APPRECIATE THE FACTS IN LIGHT OF VARIOUS REASONS GI VEN BY THE AO TO ASSESS ADVANCES UNDER THE HEAD INCOME FROM OTHER SO URCES WHICH IS EVIDENT FROM THE FACT THAT THE HONBLE BOMBAY HIGH COURT HAS NOT GRANTED ANY INTERIM RELIEF TO THE ASSESSEE FOR CANC ELLATION OF AGREEMENT DATED 02.01.1995 AND POWER OF ATTORNEY. THE LD. SR. COUNSEL FURTHER SUBMITTED THAT THE FIRST AND FOREMOST QUESTION NEED S TO BE ANSWERED IS WHETHER INCOME ARISING FROM DEVELOPMENT AGREEMENT I S IN THE NATURE OF CAPITAL GAINS OR IN THE NATURE OF BUSINESS INCOME. HE FURTHER SUBMITTED THAT INCOME ARISING TO THE ASSESSEE FROM THE AGREEM ENT DATED 02.01.1995 IS TAXABLE AS BUSINESS INCOME, SINCE ON ENTERING INTO THE DEVELOPMENT AGREEMENT THE ASSESSEE HAS CHANGED ITS HOLDING FROM THAT OF INVESTMENT TO THAT OF STOCK IN TRADE. HE FURTHE R SUBMITTED THAT THE TERM STOCK IN TRADE IS NOT DEFINED UNDER THE INCOME TAX AC,1961 AND 24 THEREFORE A DICTIONARY MEANING MAY BE ADOPTED AS PE R WHICH THE TERM STOCK IN TRADE MEANS, THE INVENTORY CARRIED BY A R ETAIL BUSINESS FOR SALE IN THE ORDINARY COURSE OF BUSINESS. HE FURTHER REF ERS TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DIRECTOR GENER AL OF INCOME TAX, ADMIN AND OTHERS VS. GTC INDUSTRIES LTD. & ORS REPO RTED IN (2016) 240 TAXMAN 209 HAS NOTED THE FACT THAT ENTERING INTO A DEVELOPMENT AGREEMENT WOULD CONVERT LAND INTO STOCK IN TRADE. THE LD. SR. COUNSEL HAD ALSO REFERRED THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF RAJA J. RAMESHWARA RAO VS. CIT (42 ITR 179) AND SUB MITTED THAT WHEN LAND IS SOLD IN FLATS AFTER DEVELOPMENT OF THE AREA TO MAKE IT MORE ATTRACTIVE THE SAME AMOUNTS TO A BUSINESS ACTIVITY. THE LD. SR. COUNSEL FURTHER SUBMITTED THAT THE MOMENT THE ASSESSEE ENTE RED INTO A DEVELOPMENT AGREEMENT IT BECOMES STOCK IN TRADE OF THE ASSESSEE, CONSEQUENTLY ANY INCOME ARISING FROM SAID TRANSACTI ON IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. SINCE LAND WA S PART OF DEVELOPMENT AGREEMENT ON ENTERING INTO DEVELOPMENT AGREEMENT IT BECOMES STOCK IN TRADE BASED UPON DECISIONS OF THE HON'BLE SUPREME COURT OF INDIA CITED ABOVE AND THE MEANING OF THE T ERM STOCK IN TRADE. SINCE INTERIM RELIEF WAS REFUSED BY THE BOMBAY HIGH COURT VIDE ORDER DATED 19TH JULY 2010, THE INCOME RELATING TO THE TR ANSACTIONS PERTAINING TO THE PERIOD FROM 1995-96 TO 2010-11 RELATING TO T HE DEVELOPMENT AGREEMENT TREATED AS AN ADVANCE BY THE ASSESSEE ACQ UIRED THE CHARACTER OF ACCRUED INCOME. THE PROVISIONS OF SEC TION 52 AND 53A OF THE TRANSFER OF PROPERTY ACT ENCLOSED MARKED EXHIBI T A MAY BE CONSIDERED IN THIS REGARD. AS PER SECTION 52, A TH IRD PARTY ACQUIRES RIGHT IN A PROPERTY WHICH IS SUBJECT MATTER OF A SUIT DEP ENDING UPON THE RESULT OF THE SUIT OR AS DIRECTED BY THE COURT. IN THE INS TANT CASE, THE HON'BLE BOMBAY HIGH COURT IN JULY 2010 REJECTED THE MOTION FOR INTERIM RELIEF ON THE BASIS OF EQUITY. THIS IS ALSO CONFIRMED BY THE DIVISION BENCH OF THE 25 BOMBAY HIGH COURT IN 2012 HENCE THE WHOLE OF THE IN COME OF THE ASSESSEE SHOWN AS ADVANCE PERTAINING TO THE PERIOD FROM 1995 TO 2008- 09 IS INCOME RELATING TO THE YEAR 2011-12. THE LD. SR. COUNSEL FURTHER SUBMITTED THAT ON TAXABILITY OF INCOME DEPOSITED IN DESIGNATED BANK ACCOUNTS FOR SALE OF FLATS DURING 2009-10 TO 2011-1 2, IT SEEMS THESE DEPOSITS ARE UNDER COURT ORDER AND AS PER COURT ORD ER DATED 19TH JULY 2010, AD INTERIM STAY HAS BEEN REJECTED ONLY A DIRE CTION HAS BEEN GIVEN THAT FUTURE SALE OF FLATS WOULD BE SUBJECT TO CONCU RRENCE OF BOTH PARTIES. THE INCOME PERTAINING TO SALE OF FLATS PRIOR TO THE FILING OF THE SUIT WOULD BE TAXABLE FOR THE A.Y.2011-12 AS STATED ABOVE WHIL E THE ONE RELATING TO THE PERIOD AFTER FILING OF THE SUIT MAY BE SUBJECT TO THE APPLICATION OF SECTION 52 OF THE TRANSFER OF PROPERTY ACT AND THE ORDER OF THE BOMBAY HIGH COURT DATED 19TH JULY 2010. 12. THE. LD. SR. COUNSEL, FURTHER, SUBMITTED THAT A S PER THE DOCTRINE OF LIS PENDENS INCORPORATED IN SECTION 52 OF THE TRANS FER OF PROPERTY ACT, 1882, THE TRANSFERS OF THIRD PARTIES ALTHOUGH NOT I LLEGAL (AS HELD BY THE SUPREME COURT OF INDIA IN THOMSON PRESS INDIA LTD V S NANAK BUILDERS AND INVESTORS PRIVATE LIMITED) WOULD DEPEND UPON TH E RESULT IN THE PENDING PROCEEDINGS. IN THE PENDING PROCEEDINGS INT ERIM STAY WAS REFUSED IN RESPECT OF THE FLATS ALREADY SOLD BY FER ANI, BUT FUTURE SALES WERE MADE EFFECTIVE SUBJECT TO CONCURRENCE OF ALL P ARTIES. THIS ASPECT WAS ALSO OVERRULED BY THE BOMBAY HIGH COURT DIVISIO N BENCH IN ITS JUDGMENT DATED 19TH JULY 2012. SINCE INTERIM STAY W AS REFUSED BY BOMBAY HIGH COURT ONE MAY ARGUE THAT INCOME IN RESP ECT OF THESE TRANSACTIONS ALSO ACCRUED ON DATE OF THE DECISION I N 2010. HE, FURTHER, SUBMITTED THAT ON THE ASPECT OF AMOUNT BEING NOT AV AILABLE TO THE ASSESSEE ONE MAY SEE THAT THE ASSESSEE AS PER THE D ECISIONS OF THE BOMBAY HIGH COURT IN 2010/2012 CANNOT PUT THE CONST RUCTION OR SALE OF 26 FLATS ON HOLD. HENCE THE ONLY ISSUE WHICH WOULD REM AIN IN THE EQUITY OF THINGS WOULD BE WHETHER IT WOULD BE ENTITLED TO FUR THER COMPENSATION IN ADDITION TO THE 12% DEPOSITED IN A DESIGNATED BANK ACCOUNT. IN ANY VIEW OF THE MATTER THE ASSESSEE WOULD NOT BE RECEIVING A NY AMOUNT LESSER THAN THAT OF 12% ALREADY BEING CREDITED TO THE DESI GNATED BANK ACCOUNT WHICH IT CAN ALWAYS WITHOUT PREJUDICE TO ITS CONTEN TIONS SEEK TO WITHDRAW. IT MAY BE NOTED THE ASSESSEE ITSELF ON ITS OWN ACCO UNT HAD STOPPED ACCEPTING THE 12% AMOUNT ON THE GROUND THAT THE AGR EEMENT IS IN DISPUTE. UNDER SECTION 11 OF THE MAHARASHTRA OWNERS HIP FLATS ACT 1970 EVEN THE LAND HAS TO BE TRANSFERRED TO THE PURCHASE R OF THE FLATS (SOCIETY). HENCE, IN ANY VIEW OF THE MATTER THE AM OUNTS RECEIVED/DEPOSITED IN BANK ACCOUNTS (INCLUDING LEAS E RENTALS) AS STATED ABOVE ARE RIGHTLY TREATED AS INCOME OF THE YEAR 201 1-12. IN THE DECISION OF THE BOMBAY HIGH COURT IN THE ASSESSEE'S OWN CASE FOR A. Y. 2003-04, THE HON'BLE HIGH COURT WAS NOT APPRISED IT IS RESPE CTFULLY SUBMITTED ABOUT THE DECISION OF THE SUPREME COURT OF INDIA HO LDING SALE OF LAND (BASED UPON DEVELOPMENT CONTRACT) TO BE BUSINESS IN COME AND FOLLOWS THE EARLIER ORDER FOR YEARS NOT CONCERNED WITH THE DEVELOPMENT AGREEMENT WITHOUT EITHER SIDE ATTEMPTING TO POINT O UT THE DIFFERENCE. 13. THE LD. SR. COUNSEL FURTHER REFERRING TO MAHARA SHTRA FLAT/APARTMENT OWNERS ACT, 1970 SUBMITTED THAT SEC TION 11 OF SAID ACT, IS VERY CLEAR THAT THE PROMOTER SHALL TAKE ALL NECE SSARY STEPS TO COMPLETE HIS TITLE AND CONVEY TO THE ORGANISATION OF PERSONS , WHO TAKE FLATS, WHICH IS REGISTERED EITHER AS A CO-OPERATIVE SOCIETY OR A S COMPANY OR AN ASSOCIATION OF FLAT OWNERS, HIS RIGHT TITLE AND INT EREST IN THE LAND AND EXECUTE ALL RELEVANT DOCUMENTS, THEREFORE IN ACCORD ANCE WITH THE AGREEMENT EXECUTED UNDER SECTION 4 AND IF NO PERIOD FOR THE EXECUTION OF THE CONVEYANCE IS AGREED UPON, HE SHALL EXECUTE THE CONVEYANCE WITHIN 27 THE PRESCRIBED PERIOD AND ALSO DELIVER ALL DOCUMENT S OF TITLE, RELATING TO THE PROPERTY WHICH MAY BE IN HIS POSSESSION OR POWE R. THE LD. SR. COUNSEL FURTHER SUBMITTED THAT THE PLAIN READING OF SECTION 11 IN CONJUNCTION WITH SECTION 52A OF TRANSFER OF PROPERT Y ACT 1882, MAKES IT VERY CLEAR THAT ONCE AN AGREEMENT FOR SALE IS ENTER ED INTO BETWEEN THE PARTIES, THEN THE TITLE AND INTEREST IN THE SAID PR OPERTY PASSED ON TO THE BUYER AND CONSEQUENTLY TRANSFER TAKE PLACE WITHIN T HE MEANING OF SECTION 2(47)(V) OF THE INCOME TAX AC,1961. THE LD . SR. COUNSEL FURTHER SUBMITTED THAT IN THIS CASE ALTHOUGH ASSESSEE CONTI NUED TO RECEIVE 12% SHARE OF INCOME FROM TRANSFER OF PROPERTY, BUT DEFE RRED RECOGNITION OF REVENUE FOR INDEFINITE PERIOD EVEN THOUGH THE DEVEL OPER HAS CONVEYED OWNERSHIP TO THE FLAT BUYERS BY CITING A REASON THA T HE HAD CANCELLED DEVELOPMENT AGREEMENT AND POWER OF ATTORNEY. BUT, F ACT OF THE MATTER IS THAT THE HONBLE BOMBAY HIGH COURT HAS NOT GRANTED ANY INTERIM RELIEF OR STAY TO THE DEVELOPER FOR CONSTRUCTION WORK. FURTH ER, THE HONBLE BOMBAY HIGH COURT HELD THAT M/S. FERANI HOTELS PVT. LTD. CAN CONTINUE CONSTRUCTION ACTIVITIES, HOWEVER FURTHER STATED THA T NO SALES UNLESS THE CONSENT OF THE OWNER. THIS CLEARLY INDICATES THAT T HE DEVELOPER IS CONTINUED TO DEVELOP THE PROPERTY AND THE ASSESSEE IS RECEIVING HIS SHARE OF INCOME, THEREFORE IT CANNOT BE SAID THAT A MOUNT RECEIVED, TOWARDS SALE OF PROPERTY IS AN ADVANCE IN THE NATUR E OF CONTINGENT LIABILITY. THE LD. SR. COUNSEL HAD ALSO EXTENSIVEL Y ARGUED THE ISSUE IN LIGHT OF VARIOUS CLAUSES OF AGREEMENT AND FINDINGS OF HONBLE BOMBAY HIGH COURT IN CIVIL SUIT AND SUBMITTED THAT THE ASS ESSEE IS POSTPONING TAX LIABILITY ON THE INCOME WHICH IS ACCRUED FOR THE YE AR EVEN THOUGH THERE IS NO INJECTION OR STAY FROM THE COURT. THEREFORE, TH E AO WAS RIGHT IN ASSESSED ADVANCES SHOWN IN THE BALANCE SHEET UNDER THE HEAD INCOME FROM OTHER SOURCES AND THIS ORDER SHOULD BE UPHELD. 28 14. THE LD. SR. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY APPRECIATED THE FACTS IN LIGHT OF VARIO US EVIDENCES FILED BY THE ASSESSEE TO COME TO THE CONCLUSION THAT THE AO WAS INCORRECT IN HOLDING THAT AMOUNT RECEIVED TOWARDS 12% SHARE OF INCOME FR OM SALE OF FLATS IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. THE LD. SR. COUNSEL FURTHER SUBMITTED THAT THE ISSUE OF HEAD OF INCOME UNDER WHICH RECEIPT FROM SALES IS ASSESSABLE IS NO LONGER AN ISSUE, BEC AUSE THE MATTER HAS BEEN FINALLY SETTLED BY THE HONBLE BOMBAY HIGH COU RT IN ASSESSEES OWN CASE FOR EARLIER PERIOD WHERE THE ASSESSEE HAD OFFERED INCOME UNDER THE HEAD INCOME FROM CAPITAL GAINS, WHEREAS T HE AO HAD ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PRO FESSION. ON APPEAL, THE APPELLATE AUTHORITIES INCLUDING LD. CIT (A) AND ITAT HELD THAT INCOME EMBEDDED IN THE ADVANCE RECEIVED WAS CHARGEA BLE ONLY UNDER THE HEAD INCOME FROM CAPITAL GAINS AND THAT TOO IN THE YEAR OF THE TRANSFER OF THE CAPITAL ASSET. THE LD. A.R. FURTHER SUBMITTED THAT THE LD. CIT(A) HAD RECORDED CATEGORICAL FINDING IN PARAS 6. 9 TO 6.21 THAT INCOME RECEIVED FROM TRANSFER OF CAPITAL ASSET IS CHARGEAB LE TO TAX UNDER THE HEAD CAPITAL GAINS BUT NOT UNDER THE HEAD INCOME FR OM OTHER SOURCES. THESE SPECIFIC FINDINGS OF THE LD. CIT(A) ARE NOT C HALLENGED BY THE DEPARTMENT IN ANY OF THE GROUNDS OF APPEAL AND ONCE THE FINDINGS OF THE LD. CIT(A) GOES UNCHALLENGED, THEN GROUND NO.1 BECO MES ONLY ACADEMIC, BECAUSE NOWHERE IN ANY GROUNDS IT IS CLAI MED BY THE REVENUE THAT TRANSFERS OF THE CAPITAL ASSETS TOOK E FFECT IN ASSESSMENT YEAR 2011-12 AND SOME RECEIVED REPRESENTS CONSIDERA TION IN RESPECT OF ASSET TRANSFER. 15. THE LD. A.R. FOR THE ASSESSEE FURTHER REPLYING TO ARGUMENT OF THE LD. SR. COUNSEL FOR THE REVENUE SUBMITTED THAT WHEN INCOME FROM SALE OF FLATS HAS BEEN CONSISTENTLY ASSESSED UNDER THE H EAD CAPITAL GAINS AND 29 SUCH TREATMENT HAS BEEN FINALLY APPROVED BY THE HON BLE BOMBAY HIGH COURT, THEN THERE IS NO REASON FOR THE AO TO HOLD T HAT THE LAND HAS BEEN CONVERTED INTO STOCK IN TRADE WHEN DEVELOPMENT AGRE EMENT IS ENTERED. IN FACT, IT IS NOT THE CASE OF THE AO THAT THE ASSE SSEE HAS CONVERTED INVESTMENTS INTO STOCK IN TRADE THEREBY PROVISIONS OF SECTION 45(2) OF THE INCOME TAX ACT, 1961 AND SUBSEQUENT SALE OF FLATS I S A SALE OF STOCK IN TRADE AND RESULTANT INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS/ PROFESSION. THE LD. A.R. FURTHER SUBMITT ED THAT NO DOUBT THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT I N THE YEAR 1995 AND RECEIVED SALE CONSIDERATION WHEREVER CONVEYANCE HAS BEEN ENTERED INTO TO TRANSFER RIGHT AND INTEREST IN LAND UPTO AS SESSMENT YEAR 2003-04. IN FACT, THE ASSESSEE HAD EXECUTED 2 SALE DEEDS AND INCOME THERE FROM HAS BEEN OFFERED UNDER THE HEAD INCOME FROM CAPITAL GAINS. THE AO DISPUTED AND ASSESSED INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION, BUT ULTIMATELY THE HONBLE BOMBAY HIGH COURT HAS HELD THAT IT IS ASSESSABLE UNDER THE HEAD INCOME FROM CAPITAL GA INS. THEREFORE, THERE IS NO MERIT IN ARGUMENTS OF THE LD. SR. COUNS EL FOR THE REVENUE. 16. THE LD. SR. COUNSEL FOR THE ASSESSEE IN REPLY T O ARGUMENTS OF THE LD. SR. COUNSEL FOR THE REVENUE THAT EVEN IF INCOM E IS NOT ASSESSABLE UNDER THE HEAD CAPITAL GAINS, BUT THE AO WAS VERY M UCH RIGHT IN ASSESSING ADVANCES SHOWN IN THE BALANCE SHEET UNDER THE HEAD INCOME FROM OTHER SOURCES AS NON EXISTING LIABILITY BECAUS E THE ASSESSEE WAS DEFERRING INCIDENCE OF TAX FOR UNLIMITED PERIOD ON THE GROUND OF DISPUTE BETWEEN THE PARTIES AND CANCELLATION OF DEVELOPMENT AGREEMENT DATED 02.01.1995 AND POWER OF ATTORNEY, BUT FACT REMAINS THAT THE ASSESSEE HAS CANCELLED DEVELOPMENT AGREEMENT DATED 02.01.199 5 IN THE YEAR 2008 AND A SUIT HAS BEEN FILED BEFORE THE COURT. T HE ASSESSEE HAD ALSO FILED CRIMINAL CASES AGAINST IVORY HOTELS AND PROPE RTIES PVT. LTD., FOR 30 WHICH THE ECONOMIC OFFENCE WING OF MUMBAI POLICE HA D FILED CHARGE SHEET. IN SO FAR AS AGREEMENT WITH M/S. FERANI HOTE LS PVT. LTD., AGREEMENT AND POWER OF ATTORNEY HAS BEEN CANCELLED AND ALSO A CIVIL SUIT HAS BEEN FILED IN THE COURT OF LAW TO RESTORE THE POSSESSION AND THE LEGAL TITLE OF THE DISPUTED LAND WITH THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT SINGLE MEMBER JUDGE HAD TAKEN UP THE CAS E FOR HEARING, BUT AT A TIME OF HEARING M/S. FERANI HOTELS PVT. LTD. HAD CHALLENGED THE APPLICATION FILED BY THE ASSESSEE ON THE GROUND OF LIMITATION. HOWEVER, THE HONBLE BOMBAY HIGH COURT HAS PASSED AN INTERIM ORDER AND OBSERVED THAT THE ASSESSEE HAD PRIMA-FACIE GROUNDS FOR CANCELLATION OF AGREEMENT AND POWER OF ATTORNEY. ALTHOUGH, THE DIV ISION BENCH OF HONBLE BOMBAY HIGH COURT HAS SUSPENDED THE JUDGMEN T OF HONBLE SINGLE JUDGE, BUT HAS NOT GIVEN ANY FINDING IN RESP ECT OF DISPUTE BETWEEN THE PARTIES, HOWEVER, ONLY STATED THAT THE DEPENDANTS M/S. FERANI HOTELS PVT. LTD. CAN CONTINUE CONSTRUCTION A ND SALE OF FLATS IN CONCURRENCE WITH LAND OWNERS, TILL THE COURT DECIDE S THE DISPUTE BETWEEN THE PARTIES. THEREFORE, IT DOES NOT MEAN THAT THE INCOME IN RESPECT OF AMOUNT DEPOSITED IN DESIGNATED BANK ACCOUNT IS ACCR UED TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION; CONSEQUE NTLY, IT CAN BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD. A.R. FOR THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS ASSE SSED TOTAL ADVANCES RECEIVED BY THE ASSESSEE UPTO ASSESSMENT Y EAR 2011-12 UNDER THE HEAD INCOME FROM OTHER SOURCES AS NONEXI STENT LIABILITY, BUT PROVISIONS OF SECTION 56 DOES NOT PERMIT THE AO TO ASSESS INCOME OF EARLIER YEARS IN THE YEAR UNDER CONSIDERATION. THE LD. A.R. FURTHER SUBMITTED THAT ASSUMING FOR A MOMENT BUT NOT ACCEPT ING, THE LIABILITY IS CEASED TO EXIST, BUT PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT, 1961 CANNOT BE INVOKED, IF INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THIS REGARD, HE RELIED UPON VARIOUS JUDICIAL 31 PRECEDENTS INCLUDING THE DECISION OF ITAT KOLKATA B ENCH IN THE CASE OF DCIT VS. M/S. EVERYDAY INDUSTRIES INDIA LTD. IN ITA NO.94/KOL/2004 DATED 03.02.2016. THE ASSESSEE HAD ALSO RELIED UPON THE DECISION OF ITAT MUMBAI, IN ASSESSEES OWN CASE, IN ITA NO.1033 /M/2018 DATED 27.03.2019 AND ARGUED THAT UNDER IDENTICAL SET OF F ACTS, THE TRIBUNAL HELD THAT AMOUNT LYING IN DESIGNATED BANK ACCOUNT OPENED BY THE DEVELOPER IN THE NAME OF THE ASSESSEE AND CONSEQUENT INTEREST IS INTEGRAL PART OF THE FUNDS UNDER THE CUSTODY OF THE COURT AND SAID A MOUNT IS NOT ACCESSIBLE TO THE ADMINISTRATOR. THE ASSESSEE HAD ALSO RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. L. SAMBASIVA REDDY (2015) 62 TAXMANN.COM 174 AND THE D ECISION OF ITAT, MUMBAI IN THE CASE OF BOMBAY GOWRAKSHAK MANDA LI VS. ITO IN ITA NO.5508/M/2014. 17. WE HAVE HEARD COUNSELS OF BOTH PARTIES, PERUSED MATERIALS AVAILABLE ON RECORD ALONG WITH ORDERS OF THE REVENU E AUTHORITIES. WE HAVE ALSO CAREFULLY CONSIDERED CASE LAWS CITED B Y BOTH SIDES. THE FACT WHICH LEADS TO IMPUGNED DISPUTE ARE THAT T HE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT AND POWER OF A TTORNEY INFAVOUR OF M/S IVORY HOTELS & PROPERTIES LIMITED A ND M/S FERANI HOTELS PRIVATE LIMITED IN THE YEAR 1995 FOR DEVELOP MENT OF CERTAIN PARCEL OF LANDS IN MUMBAI. THE ADMINISTRATOR OF THE ESTATE OF LATE EFD TERMINATED THE DEVELOPMENT AGREEMENT AND FILED SUIT IN BOMBAY HIGH COURT IN 2008. UPON TERMINATION OF THE DEVELOPMENT AGREEMENT IN MAY 2008, THE ADMINISTRATOR HAD INSTRU CTED ICICI BANK NOT TO ACCEPT DEPOSITS BEING 12% SHARE OF THE SALE PROCEEDS RECEIVABLE UNDER THE AGREEMENT DATED 02.01.1995. SI NCE ESTATE OF EFD AS WELL AS ITS BANKER I.E., ICICI BANK WAS NOT ACCEPTING THE PAYMENT OF 12% SHARE OF THE SALE PROCEEDS, FERANI S U-MOTTO, 32 UNILATERALLY OPENED A CURRENT A/C BEARING NO.843184 512 WITH INDIAN BANK, BANDRA BRANCH, MUMBAI UNDER THE NOMENCLATURE/CAUSE TITLE OF 'FERANI HOTELS PVT. LTD -NN WADIA SHARE' AND UTILIZED FOR DEPOSITING THE 12% SHARE OF THE PROCEEDS ARISING FROM SALE OF FLATS/UNITS BY FERANI AFTER TH E DETERMINATION OF THE DEVELOPMENT AGREEMENT IN 2008. ALTHOUGH SUCH A/ C WAS OPENED BY FERANI: THE ADMINISTRATOR WAS NEVER INFOR MED ABOUT BANK NAME, DETAILS OF SUCH AN A/C NOR HAD THE ADMIN ISTRATOR AUTHORIZED FERANI TO OPEN THE SAID ACCOUNT AND COLL ECT AND DEPOSIT SUCH SUMS IN THE SAID ACCOUNT. THE ADMINISTRATOR MO VED AN APPLICATION BEARING NOTICE OF MOTION NO. 1863/2008 IN SUIT NO. 1628 OF 2008; SEEKING AD-INTERIM AND INTERIM INJUNC TIONS AGAINST FERANI WHO ALONE WAS UNILATERALLY CARRYING ON DEVEL OPMENT WORK IN TERMS AGREEMENT DATED 02.011995 EVEN AFTER THE A GREEMENT WAS DETERMINATED AND POWER OF ATTORNEY GIVEN TO BOT H DEVELOPERS WAS WITHDRAWN. THE HEARING OF THE MOTION WAS CONDUC TED ON 24 '' JUNE 2010. THE ORDER THEREON AS PRONOUNCED BY THE S INGLE BENCH OF THE BOMBAY HIGH COURT ON 19T1 JULY 2010. IN ITS ORDER DATED 19.07.2010 THE HON'BLE BOMBAY HIGH COURT FOUN D PRIMA- FACIE CASE IN FAVOUR OF THE ADMINISTRATOR OF EFD AN D OBSERVED IN PARA-68 (PAGE-771-772) AS FOLLOWS: 'IT MAY BE MENTIONED THAT A DEFENDANT, WHO IS ON TH E WRONG SIDE OF THE LAW, UPON HAVING COMMITTED ACTS OF FRAUD AND DECEIT AND PUT UP CONSTRUCTION AFTER HAVING COMMITTED SUCH FRAUD CANNOT MAKE BOLD TO STA TE TO COURT THAT NO MATTER WHAT HIS ACT IS; HE MUST BE ENTITLED TO CONSTRUCT A ND DEVELOP THE PROPERTY. ONCE A PRIMA-FADE CASE IS MADE OUT BY THE PLAINTIFF FOR GRANT OF INTERIM RELIEF IN EQUITY, THE DEFENDANT CANNOT DEFEAT THE RELIEF BEING GRANTE D UPON HIS OWN CONVENIENCE AND TO SEEK TO BALANCE IT WITH THE PRIMA-FADE CASE. IT IS ONLY IF THE CONVENIENCE OF THE DEFENDANT IS SUCH AS CAN BE BALANCED WITH PL AINTIFFS CASE THAT THE CONCEPT 33 AND DOCTRINE OF THE TERM 'BALANCE OF CONVENIENCE', CAN WEIGH IN FAVOUR OF THE DEFENDANT.' 18. WE FURTHER NOTED THAT DURING THE HEARING ON TH E NOTICE OF MOTION BEFORE SINGLE BENCH OF THE HIGH COURT, FERANI RAISE D THE PLEA OF LIMITATION IN TERMS OF SEC. 9A(1) OF THE CIVIL PROC EDURE CODE. THE COURT NOTED THAT SINCE THE PLEA REGARDING BAR OF LI MITATION WAS A PRELIMINARY ISSUE WHICH WENT TO THE ROOT OF THE JUR ISDICTION OF THE COURT IT HAD TO BE DECIDED IN THE FIRST INSTANCE. SINCE T HE PRELIMINARY ISSUE OF LIMITATION WAS REQUIRED TO BE DECIDED FIRST, THE COURT ORDERED FERANI NOT TO PUT ANY PARTY EITHER GENUINE THIRD PARTY OR RELATED PARTIES IN POSSESSION OF THE CONSTRUCTED PREMISES EXCEPT WITH THE APPROVAL OF THE ASSESSEE PENDING THE SUIT. THE COURT ALSO DIREC TED THAT THE ISSUE RELATING TO LIMITATION WOULD BE DECIDED FIRST BEING THE JURISDICTIONAL ISSUE. SINCE IN THE ORDER DATED 19.07.2010 THE BOMB AY HIGH COURT HAD ISSUED INJUNCTION AGAINST FERANI FROM HANDING O VER POSSESSION TO THE FLAT PURCHASERS; AN APPEAL BEING APPEAL NO. 817 OF 2010 WAS MOVED BEFORE THE DIVISION BENCH OF THE BOMBAY HIGH COURT BY FERANI. SIMILARLY, SINCE THE INJUNCTION AS SOUGHT B Y ESTATE EFD WAS NOT GRANTED; COUNTER APPEAL BEING APPEAL NO. 806 OF 2010 WAS FILED BY ESTATE EFD BEFORE DIVISION BENCH OF THE BOMBAY H IGH COURT. THE DIVISION BENCH OF THE BOMBAY HIGH COURT BY ITS JUDG MENT DATED 19.07.2012 (PAGE 787- 822) DECIDED THESE CROSS APPE ALS WHICH AROSE FROM THE JUDGMENT OF THE BOMBAY HIGH COURT OR DER DATED 19.07.2010 PASSED IN RELATION TO NOTICE OF MOTION N O. 1863 OF 2010 SEEKING AD INTERIM RELIEF. THIS IS APPARENT FROM TH E OPENING PARA OF THE JUDGMENT WHICH READS: 'THESE APPEALS ARISE FROM A JUDGMENT DATED 19.07.20 10 OF A LD. SINGLE JUDGE ON A MOTION FOR INTERIM RELIEF IN HIS SUIT. WHEN AN APPLICATION FOR AD INTERIM 34 RELIEF CAME UP FOR HEARING BEFORE THE LD. SINGLE JU DGE; AN OBJECTION TO THE MAINTAINABILITY OF THE SUIT WAS RAISED ON BEHALF OF THE FIRST DEFENDANT ON THE GROUND THAT THE CLAIM WAS BARRED BY LIMITATION.' AFTER CONSIDERING THE ARGUMENTS ON BEHALF OF THE RI VAL PARTIES; IN PARA- 35 THE HIGH COURT RECORDED THE FOLLOWING FINDINGS: (I) APPEAL 817 OF 2010 FILED BY FERANI HOTELS PRIVATE L IMITED SHALL STAND ALLOWED AND THE IMPUGNED ORDER OF THE LEARNED SINGL E JUDGE DATED 19 JULY 2010 SHALL STAND SET ASIDE: (II) THE FOLLOWING ISSUE IS RAISED UNDER SECTION 9A OF T HE CODE OF CIVIL PROCEDURE,1908 AND SHALL BE TRIED AS A PRELIMINARY ISSUE: 'WHETHER THE CLAIM OF THE PLAINTIFF IN THE SUIT IS BARRED BY LIMITATIO N.' (III) ..................... (IV) ..PENDING THE HEARING AND FINAL DISPOSAL OF THE PRE LIMINARY ISSUE, FERANI HOTELS PRIVATE LIMITED IS DIRECTED TO MAINTA IN ACCOUNTS AND TO CONTINUE DEPOSITING AN AMOUNT EQUIVALENT TO 12% OF THE GROSS SALE CONSIDERATION IN A DESIGNATED BANK ACCOUNT. THE AMO UNT UPON DEPOSIT SHALL BE INVESTED IN A FIXED DEPOSIT TO ABI DE BY FURTHER ORDERS OF THE LEARNED TRIAL JUDGE: (V) LIBERTY IS RESERVED TO THE PLAINTIFF TO APPLY BEFOR E THE LEARNED SINGLE JUDGE FOR APPROPRIATE INTERIM RELIEFS AFTER THE FIN AL DECISION ON THE PRELIMINARY ISSUE; (VI) WE CLARIFY THAT ALL THE OBSERVATIONS CONTAINED IN T HIS JUDGMENT ARE CONFINED TO THE ISSUES WHICH HAVE ARISEN BEFORE THI S COURT AT THE PRESENT STAGE AND THE VIEW EXPRESSED BY THE COURT ON THE ME RITS OF THE RIVAL CONTENTIONS SHALL NOT COME IN THE WAY OF THE DISPOS AL OF THE NOTICE OF MOTION OR THE SUIT IN TERMS OF THE DIRECTIONS ISSUE D. 19. WE FURTHER NOTED THAT FROM BARE PERUSAL OF THE JUDGMENT DATED 19.07.2012, IT IS VERY CLEAR THAT THE DIVISION BENC H OF THE HIGH COURT DID NOT ADJUDICATE THE SUIT FILED BY THE APPE LLANT WHEREIN THE ASSESSEE HAD REQUESTED FOR GRANTING RELIEF IN THE F ORM OF CANCELLATION AGREEMENT DATED 02.01.1995 AND POSSESS ION OF THE PROPERTY. THE BOMBAY HIGH COURT HAD GRANTED LIBERTY TO THE 35 ASSESSEE EVEN TO APPLY FOR INTERIM RELIEF ONCE THE PRELIMINARY ISSUE WAS DECIDED BY THE TRIAL COURT. IT IS THEREFORE FAC TUALLY AND LEGALLY INCORRECT TO CANVASS A PROPOSITION THAT IN VIEW OF THE JUDGMENTS OF THE BOMBAY HIGH COURT DATED 19.07.2010 AND 19.07.20 12 THE ASSESSEES PLEA FOR GRANT OF INJUNCTION AGAINST FER ANI WAS REJECTED FOREVER AND THEREBY THE SALE AGREEMENTS EXECUTED BY FERANI HAD BECOME FINAL AND CONSEQUENTLY THEREFORE THE INCOME EMBEDDED IN THE ENTIRE ADVANCE RECEIVED DURING THE PERIOD 1996- 97 TO 2010-11 BECOME CHARGEABLE TO TAX IN AY 2011-12. FURTHER, TH E CONTENTION RAISED TO THIS EFFECT BY THE ID. COUNSEL FOR THE RE VENUE IS NOT SUPPORTED BY THE SPECIFIC LIBERTY GRANTED BY DIVISI ON BENCH IN ITS ORDER DATED 19.07.2012. IT IS ALSO TO BE NOTED THAT THE SUM OF RS 269.48 CRORES ASSESSED AS INCOME IN AY 2011-12 INCL UDES ONLY RS. 156.48 CRORES RECEIVED UNDER THE AGREEMENT WITH FERANI AND REMAINING SUM OF RS 113 CRORES WAS RECEIVED UNDER T HE AGREEMENT WITH IVORY. IN RESPECT OF IVORY, THERE WA S NO ORDER OF THE COURT EITHER ON THE NOTICE OF MOTION OR IN THE SUIT FILED. IN THAT VIEW OF THE MATTER, INFERENCE AGAINST THE ASSESSEE COULD NOT BE DRAWN IN AY 2011-12 IN RELATION TO AMOUNTS RECEIVED IN TO TAL IN RS 269.48 CRORES. AS REGARDS AGREEMENT WITH IVORY THERE WAS N O DEVELOPMENT DURING THE FINANCIAL YEAR 2010-11 SO AS TO WARRANT DRAWING ANY INFERENCE THAT INCOME TO THE ASSESSEE A CCRUED DURING THE RELEVANT YEAR IN RESPECT OF SUMS RECEIVED UP TO 2008-09 UNDER THE AGREEMENT WITH IVORY. IT IS ALSO ENTIRELY INCOR RECT ON THE PART OF THE AO AS ALSO THE LD. COUNSEL FOR THE REVENUE TO I NTERPRET & HOLD THAT THE JUDGEMENT OF BOMBAY HIGH COURT DATED 19.07 .2012 FINALLY ADJUDICATED UPON THE RIGHTS AND OBLIGATIONS OF THE PARTIES ARISING FROM THE DEVELOPMENT AGREEMENT DATED 02.01 .1995. T HE AO WHILE COMPLETING THE INCOME TAX ASSESSMENT ORDER FO R A.Y. 2011- 36 12 INTERPRETED THE JUDGMENT OF THE BOMBAY HIGH COUR T DATED 19.07.2012 IN THE MANNER THAT THE COURT HAD FINALLY DECIDED ON THE ASSESSES ENTITLEMENT TO RECEIVE THE CONSIDERATION O N SALE OF THE CONSTRUCTED SPACES IN HIS OWN RIGHT EVEN THOUGH THE SUIT HAS REMAINED PENDING EVEN TILL TODAY. IN FACT THE HONB LE HIGH COURT DIRECTED THAT PENDING HEARING AND FINAL DISPOSAL OF THE PRELIMINARY ISSUE; FERANI WOULD MAINTAIN THE ACCOUNTS AND TO CO NTINUE DEPOSITING AN AMOUNT EQUIVALENT TO 12% OF THE GROSS SALE CONSIDERATION IN THE DESIGNATED BANK ACCOUNT. THE C OURT FURTHER DIRECTED THAT THE AMOUNT UPON DEPOSIT WOULD BE INVE STED IN FIXED DEPOSITS TO ABIDE BY THE FURTHER ORDERS OF THE LD. TRIAL JUDGE. FROM BARE PERUSAL OF THE ORDER OF THE HIGH COURT'S JUDGMENT: IT WAS EVIDENT THAT NOWHERE THE HIGH COURT HAD IN ANY MANNER EXPRESSED ANY OPINION OR MADE ANY OBSERVATION THAT THE MONEYS DEPOSITED IN THE DESIGNATED A/C BY FERANI CO ULD BE APPROPRIATED BY ESTATE EFD OR THAT THE ESTATE EFD C OULD EXERCISE CONTROL OR DOMAIN EITHER OVER THE AMOUNTS DEPOSITED IN THE DESIGNATED A/C OR OVER THE FIXED DEPOSITS MADE BY FERANI OUT OF THE SUMS DEPOSITED IN THE DESIGNATED A/C. NO WHERE THE COURT HAD EVEN INDICATED THAT IN ITS OPINION ESTATE EFD COULD HAVE ANY ACCESS TO THE SUMS COLLECTED BY FERANI. KE EPING IN MIND THE FACT THAT ESTATE OF EFD IN THE SUIT FILED HAD REQUESTED FOR CANCELLATION OF THE AGREEMENT DATED 02.01.1995 AND HAD SOUGHT RESTITUTION OF THE PROPERTY IN ITS ORIGINAL FORM, THE COURT HAD CATEGORICALLY DIRECTED THAT THE AMOUNTS INVESTE D BY FERANI IN FIXED DEPOSIT WOULD ABIDE BY THE FURTHER ORDERS OF THE TRIAL JUDGE TRYING THE SUIT FILED BY ESTATE OF EFD. IN TH E CIRCUMSTANCES, IT IS VERY CLEAR THAT THE COURT WAS VERY CATEGORICAL IN ITS DIRECTION THAT THE AMOUNT COLLEC TED BY FERANI 37 WOULD REMAIN UNDER ITS EXCLUSIVE CONTROL AND OVER W HICH ESTATE OF EFD WOULD NEITHER HAVE ANY CONTROL OR ACCESS. FU RTHER THIS FACT HAS BEEN ACCEPTED BY THE ITAT 'E' BENCH MUMBAI FOR AY 2013-14 IN ITS ORDER IN ITA NO. 1033/MUM/2018 DT. 2 7.03.2019. THE COORDINATE BENCH OF THE ITAT AGREED WITH THE AS SESSEES CONTENTION THAT THE AMOUNTS COLLECTED AND KEPT IN D EPOSIT BY FERANI WAS UNDER COURT CUSTODY AND ITS DISPOSAL DEP ENDENT UPON THE FINAL ORDER OF THE COURT TRYING THE SUIT. THE R ELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: 13. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE GONE THROUGH THE DETAILED ARGUMENTS MADE BY LD COUNSEL FOR THE ASSESSEE. WE HAVE ALSO H EARD LD CIT-DR AND GONE THROUGH CASE RECORDS. WE NOTED THAT THE AMOUNT OF RS.4,06,41,567/- CREDITED BY INDIAN BANK ON THE FDS DID NOT CONSTITU TE INCOME CHARGEABLE TO TAX FOR THE A.Y. 2013-14 FOR THE PRESENT ASSESSE ME RELY ON THE GROUND THAT THE BANK HAD DEDUCTED TAX AT SOURCE AND THE TAX PAYMENT WAS REPORTED AGAINST THE PAN ALLOTTED IN THE NAME OF ESTATE OF EFD. WE H AVE NOTICE FROM THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT DATED 19.07.2 012 THAT THE RELEVANT DIRECTIONS OF THE HIGH COURT WERE PRONOUNCED WHILE DISPOSING THE APPEAL FILED BY FERANI AGAINST THE JUDGMENT OF THE SINGLE JUDGE DISPOSING NOTICE OF MOTION FOR INTERIM RELIEF. WE ARE OF THE VIEW THAT CIT WAS UNJUSTIFIED IN DRAWING INFERENCE AGAINST THE ASSESSEE ON THE GROUND THAT I T WAS THE ASSESSEE WHO HAD APPROACHED THE COURT AND THEREFORE ASSESSEE COU LD NOT DENY THE FACT THAT THE FIXED DEPOSITS WERE MADE IN ITS FAVOUR ON THE BASIS OF COURT DIRECTIONS & THE FDS LEGALLY BELONGED TO THE ASSESSEE. WE HAVE NOTED THE FACT THAT THE ASSESSEE HAD FILED SUIT BEFORE HON'BLE BOMBAY HIGH COURT IN 2008 AFTER TERMINATING THE AGREEMENT DATED 02-01-1995 AND PRAY ED FOR RESTITUTION OF THE PROPERTY IN ITS ORIGINAL FORM. THE SAID SUIT WAS PE NDING AND THEREFORE THE RIGHTS OF THE PARTIES FLOWING FROM THE AGREEMENT DA TED 02-01-1995 WERE INCHOATE AND/OR INDETERMINATE. EVEN THE CIT (A) IN HIS APPELLATE ORDER FOR THE A.Y. 2011-12 DATED 28.10.2014 HAD HELD THAT NO INCO ME ARISING FROM AGREEMENTS FOR SALE UNILATERALLY EXECUTED BY FERANI DURING F.Y.2010- 11 WAS LEGALLY CHARGEABLE TO TAX IN ASSESSEE'S HANDS BECAU SE THE ENTIRE MATTER WAS SUB-JUDICE AND ASSESSEE WAS NEVER A PARTY TO THE AG REEMENTS FOR SALE EXECUTED BY FERANI AND FOR WHICH THE AMOUNTS WERE D EPOSITED IN THE BANK A/C OPENED BY FERANI IN ITS OWN NAME. BUT IT IS TO BE M ENTIONED THAT THESE FACTS ITSELF IS ENOUGH TO CREATE THE DEBATE AND THIS ORDE R OF CIT(A) IS PENDING ADJUDICATION BEFORE TRIBUNAL. MOREOVER, WE MAKE IT CLEAR THAT THIS ORDER OF OURS WILL IN NO WAY AFFECT THE HEARING OF THAT APPE AL. COPY OF THE APPELLATE ORDER FOR THE A.Y. 2012-12 IS ENCLOSED AT PAGES 172 TO 347 OF THE ASSESSEE'S PAPER BOOK. THE SAME VIEW WAS TAKEN BY THE CIT (A) FOR A.Y. 2012-13 AS WELL. THE APPEAL AGAINST THE ORDER U/S 143(3) FOR A .Y. 2013-14 IS PENDING 38 BEFORE CIT (A). HOWEVER, IT IS EVIDENT THAT ON THE SAME SET OF FACTS AS PREVAILED IN THE PRIOR YEARS AND THE APPELLATE AUTH ORITIES HAVE HELD THAT SINCE THE ASSESSEE WAS NOT A PARTY TO ANY OF THE SALE AGR EEMENTS AFTER THE AGREEMENT DATED 02-01-1995, WHICH WAS TERMINATED IN MAY 2008, NO INCOME COULD BE LEGALLY INFERRED WITH REFERENCE TO AMOUNTS UNILATERALLY COLLECTED BY FERANI. HOWEVER, UNTIL THE SUIT WAS DECIDED ONE WAY OR OTHER NO INCOME IN LAW COULD BE INFERRED IN THE ASSESSEE'S HANDS ON SU BSTANTIVE BASIS AND IN CASE REVENUE WANT TO ASSESSEE THE SAME HERE IT CAN ONLY BE ASSESSED ON PROTECTIVE BASIS AT THE MOST. BUT THAT IS NOT THE C ASE HERE BECAUSE REVENUE HAS TO GIVE FIND WHERE THIS HAS TO BE ASSESSED ON S UBSTANTIVE BASIS. 14. BE THE SAME AS IT MAY, IN THE PRESENT CASE THE ISSUE IS NOT WHETHER THE PART OF THE SALE PRICE DEPOSITED IN THE A/C NO. 843 184512 WAS ASSESSABLE AS INCOME OF THE ASSESSEE. AFTER THE A/C NO. 843184512 WAS UNILATERALLY OPENED BY FERANI IN JULY 2009, THE AMOUNTS COLLECTED & KEP T IN SAID CURRENT A/C DID NOT YIELD ANY FURTHER INCOME. IN JULY 2012 THE DIVI SION BENCH OF HON'BLE BOMBAY HIGH COURT WHILE DISPOSING OF THE APPEAL OF FERANI, HOWEVER ISSUED DIRECTIONS TO FERANI TO MAINTAIN THE ACCOUNT OF THE AMOUNTS COLLECTED AND DEPOSITED IN THE DESIGNATED A/C. THE HON'BLE HIGH C OURT FURTHER DIRECTED FERANI (AND NOT ESTATE OF EFD) TO MAKE FDS OUT OF T HE SUMS COLLECTED. THE HON'BLE HIGH COURT'S ORDER FURTHER CLARIFIED THAT T HE AMOUNT INVESTED IN THE FIXED DEPOSIT WOULD ABIDE BY FURTHER ORDERS OF THE TRIAL JUDGE. AS SUCH THE DIRECTIONS OF HON'BLE BOMBAY HIGH COURT WERE EXPRES S IN THEIR INTENT AND LANGUAGE. NOWHERE THE ORDER COURT REQUIRED ESTATE O F EFD TO TAKE ANY STEPS WITH REGARD OR WITH REFERENCE TO AMOUNTS COLLECTED BY FERANI. IT WAS NOT FOR ADMINISTRATOR TO KEEP ACCOUNT OF THE MONEYS COLLECT ED. THE DIRECTIONS OF THE COURT EXPRESSLY BOUND FERANI TO DEAL WITH THE AMOUN TS COLLECTED BY IT IN A PARTICULAR MANNER. EVEN THOUGH THE COURT PERMITTED FERANI TO PROCEED WITH COLLECTING THE SALE PROCEEDS FROM THE FLAT PURCHASE RS AND THE COURT HAD REQUIRED FERANI TO MAINTAIN THE ACCOUNTS IN RESPECT OF 12% SHARE OF THE SALE PROCEEDS COLLECTED BY IT AND FURTHER REQUIRED FERAN I TO PERIODICALLY KEEP SUCH SALE PROCEEDS IN FIXED DEPOSITS SO THAT FERANI DID NOT HAVE FREE AND UNFETTERED ACCESS TO SUMS SO COLLECTED. THE COURT ALSO MADE IT EXPRESSLY CLEAR THAT THE AMOUNTS UPON BEING INVESTED IN FIXED DEPOSITS WOULD ULTIMATELY BE GOVERNED BY THE ORDERS OF THE TRIAL COURT. THE DIRECTIONS OF HON'BLE BOMBAY HIGH COURT MADE IT CLEAR THAT THE DEPOSITS KEPT WITH THE BANK UNDER THE ORDERS OF HON'BLE BOMBAY HIGH COURT ESSENTIALLY CONSTITUTED FUNDS IN CUSTODIA LEGIS. IN OTHER WORDS, UPON THE AMOUNTS BEING KEPT IN FDS THE FUNDS REMAINED IN THE CUSTODY OF THE COURT. IN THE CIRCUMSTANCES THEREFORE INTERE ST ACCRUING ON THESE FIXED DEPOSITS ALSO CONSTITUTED INTEGRAL PART OF THE FUND S UNDER THE CUSTODY OF THE COURT AND NOT ACCESSIBLE TO THE ADMINISTRATOR. 20. WE FURTHER NOTED THAT AFTER THE AGREEMENT FOR DEVELOPMENT WAS TERMINATED IN MAY 2008 AND THE SUIT WAS FILED IN BO MBAY HIGH COURT, ONLY ONE OF THE DEVELOPER VIZ. FERANI UNILAT ERALLY CONTINUED TO EXECUTE AGREEMENTS FOR SALE IN FAVOUR OF THE FLAT 39 PURCHASERS BY USING THE POWER OF ATTORNEY EXECUTED IN ITS FAVOUR IN JANUARY 1995, EVEN THOUGH SAID POWER OF A TTORNEY WAS LEGALLY REVOKED IN 2008. SINCE ADMINISTRATOR WA S NEVER PARTY TO ANY OF THE AGREEMENTS UNILATERALLY EXECUTE D BY FERANI AND NO PART OF THE CONSIDERATION EVER REACHED THE B ANK A/C OF ESTATE EFD, THE ASSESSEE RIGHTLY NEITHER ACCOUNTED THE RECEIPT OF THE PART CONSIDERATION IN ITS BOOKS NOR REPORTED ANY GAIN OR PROFIT ACCRUED ON EXECUTION OF SALE AGREEMENTS IN T HE I T RETURNS FILED 21. IN THIS FACTUAL BACK GROUND, THE QUESTION THAT NEEDS TO BE FIRST ANSWERED IS WHETHER THE AO WAS RIGHT IN STATING THA T INCOME FROM SALE OF FLATS UNDER AGREEMENT DATED 2-1-1995 IS ASS ESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE IS SUE OF HEAD OF INCOME UNDER WHICH AMOUNT RECEIVED TOWARDS 12% SHAR E OF INCOME FROM SALE OF FLATS UNDER AGREEMENT DATED 2-1 -1995 IS ASSESSABLE IN ATTAINED FINALITY, BECAUSE THE HONBL E SUPREME COURT FOR THE A.Y. 2003-04 HAD ACCEPTED THE CONTENT ION OF THE ASSESSEE THAT INCOME IS ASSESSABLE UNDER THE HEAD I NCOME FROM CAPITAL GAIN IN SLP FILED BY THE REVENUE. THEREFORE , IN THE FIRST INSTANCE THE ID. COUNSEL FOR THE REVENUE SHOULD HAV E RESTRICTED HIS ARGUMENTS WITH REFERENCE TO THE GROUNDS OF APPEAL W HICH AROSE FROM THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT PERMISSIBLE FOR THE COUNSEL OF THE REVENUE TO MAKE OUT A CASE WHICH THE REVENUE ITSELF HAD NEVER MADE OUT. IN THE PRESENT CASE, APP ELLANT BEFORE THIS TRIBUNAL IS THE ASSESSING OFFICER WHO HAD PASS ED THE ASSESSMENT ORDER. IN THE ORDER PASSED UNDER SECTION 143(3), THE A.O. HAD CONSCIOUSLY AND AFTER DUE APPLICATION OF M IND TO VARIOUS FACTS OPTED TO ASSESS THE INCOME UNDER THE HEAD 'OT HER SOURCE' 40 AND NOT PROFITS AND GAINS FROM BUSINESS. IN THE CIR CUMSTANCES, WHILE REPRESENTING THE A.O., HIS COUNSEL CANNOT BE PERMITTED TO MAKE OUT A CASE WHICH WAS NOT THE CASE OF THE A.O. AT THE ASSESSMENT STAGE. IT IS FURTHER MATERIAL TO DRAW AT TENTION TO THE FACT THAT CIT(A) IN HIS ORDER RECORDED A CATEGORICA L FINDING THAT THE AMOUNTS ASSESSED AS INCOME WERE RECEIVED AS 'ADVANC E' FROM VARIOUS PERSONS TO WHOM THE ASSESSEE HAD AGREED TO TRANSFER HIS RIGHT, TITLE AND INTEREST IN LAND. THE INCOME EMBED DED IN SUCH ADVANCE COULD THEREFORE BE ASSESSED ONLY UNDER THE HEAD 'CAPITAL GAINS' AND NOT UNDER ANY OTHER HEAD OF INCOME. FURT HER SUCH INCOME COULD ONLY BE ASSESSED IN THE RELEVANT PREVI OUS YEAR IN WHICH TRANSFER OF THE CAPITAL ASSET TOOK LEGAL EFFE CT ON SCRUTINY OF MEMORANDUM OF APPEAL, IT WAS NOTED THAT, IN FOUR GR OUNDS OF APPEAL THE REVENUE HAS NOT CHALLENGED THE SAID SPEC IFIC FINDING AND DIRECTIONS OF CIT(A). IN ABSENCE OF ANY SPECIFI C CHALLENGE TO THE CIT(A) FINDING IN THE GROUNDS OF APPEAL, THE RE VENUE CANNOT BE PERMITTED TO RAISE ARGUMENTS IN RELATIONS TO HEA D OF INCOME, MORE PARTICULARLY WHEN THE MATTER WAS SETTLED IN EA RLIER YEARS. 22. WE FURTHER NOTED THAT THE CIT(A) HAD RECORDED C ATEGORICAL FINDING IN HIS ORDER, WHEREIN HE HAS FIRST SET OUT THE HISTORICAL BACKGROUND OF ASSESSES CASE INTER ALIA GIVING DETAI LS OF PAST ASSESSMENTS IN WHICH PROFIT ON SALE OF INHERITED LA NDS WAS ASSESSED AS BUSINESS INCOME, BUT HELD TO BE ASSESSA BLE UNDER THE HEAD CAPITAL GAINS BY THE APPELLATE AUTHORITIES INCLUDING HONBLE BOMBAY HIGH COURT. IN RESPECT OF LANDS WHIC H WERE SUBJECT MATTER OF DEVELOPMENT AGREEMENTS DATED 02.0 1.1995, THE ASSESSEE HAD RECOGNIZED INCOME ON EXECUTION OF FOUR CONVEYANCE IN AY 2002-03 AND AY 2003-04 RESPECTIVEL Y. THE 41 INCOME WAS OFFERED UNDER THE HEAD CAPITAL GAINS. IN THE ASSESSMENT UNDER SECTION 143(3) FOR THE AY 2003-04, THE A.O. A SSESSED THE SAME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. IT MAY BE NOTED THAT IN AY 2003-04 CIT(A) RELYING ON THE ITAT ORDER FOR AY 1987-88 TO 1989-90 AND 1991-92 TO 96-97 DECIDED THAT THE INCOM E FROM SALE OF LAND SHOULD BE TAXED AS CAPITAL GAINS. THE SAME WAS CONFIRMED BY ITAT. THE HIGH COURT ALSO DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE BY RELYING ON THE COURTS ORDER OF AY 1997- 98. THE HONBLE SUPREME COURT HAS DISMISSED SLIP FILED BY D EPARTMENT FOR AY 2003-04 ON 07.01 .2013. THEREFORE IT IS VERY CLEAR THAT FOR AY 2003-04 THE SUBJECT LAND WHICH IS COVERED BY THE DEVELOPMENT AGREEMENTS DATED 02.01.1995 WAS CONSIDERED AND HELD BY THE HONBLE BOMBAY HIGH COURT TO BE CAPITAL ASSET' AND NOT 'STOCK IN TRADE'. THE CIT(A) HAS FURTHER HELD THAT AS PER THE PRINCIPLE OF CONSISTENCY, IT WAS NECESSARY FOR THE A.O. TO BRING ON RECORD NEW MATERIAL OR EVIDENCE TO ESTABLISH THAT POSITION ACC EPTED OR ALLOWED TO BE PERSISTED IN THE PAST BY THE PARTIES WAS NOT LEGALLY AND FACTUALLY CORRECT. BEFORE, THE AO DEPARTS FROM THE VIEW ADOPTED EARLIER IT IS NECESSARY FOR HIM TO ESTABLISH WITH S UFFICIENT EVIDENCE THAT POSITION ACCEPTED BY THE PARTIES IN THE EARLIE R YEARS WAS LEGALLY OR FACTUALLY NO LONGER TENABLE. 23. IT IS PERTINENT TO NOTE THAT, NO TAXABLE EVENT CONTEMPLATED BY SECTION 2(47)(V) AND SECTION 45 OF THE I T ACT., HA D TAKEN PLACE DURING THE FINANCIAL YEAR FY 2010-11 SO AS TO ENABL E THE AO TO ASSESS THE AMOUNTS RECEIVED DURING THE FY 1996-97 T O 2010-11 TO BE ASSESSED AS INCOME OF THE AY 2011-12. IT IS F URTHER MATERIAL TO STATE THAT THE AO HIMSELF HAS CONTRADIC TED HIS CONCLUSION BECAUSE AFTER COMPLETION OF ASSESSMENT F OR THE AY 42 2011-12, HE REOPENED THE ASSESSMENTS OF THE AYS 200 7-08 TO 2010-11 U/S 147 OF THE ACT FOR ASSESSING THE ADVANC ES RECEIVED FROM THE FLAT PURCHASERS IN THE RELEVANT FINANCIAL YEARS ON THE PLEA THAT INCOME WAS ASSESSABLE IN THE RESPECTIVE YEARS WHEN AGREEMENTS WERE EXECUTED AND AMOUNTS WERE RECEIVED THE ASSESSEE NEVER IN THE PAST CHANGED HOLDING OF HIS L AND FROM 'CAPITAL ASSET' TO 'STOCK IN TRADE'. THE INCOME TAX ASSESSME NT OF THE ASSESSEE FOR THE AY 1995-96 I.E. THE YEAR IN WHICH DEVELOPME NT AGREEMENTS WERE EXECUTED, WAS COMPLETED U/S 143(3), IN THAT ORDER, THE AO DID NOT RECORD ANY FINDING TO THE EFFECT THAT BY ENTERING I NTO DEVELOPMENT AGREEMENT COUPLED WITH THE RECEIPT OF SECURITY DEPO SIT OF RS 200 LACS THE LAND WAS CONVERTED INTO 'STOCK IN TRADE'. EVEN IN THE ASSESSMENT ORDER FOR THE AY 2003-04, WHEN THE ASSES SEE HAD OFFERED THE INCOME ON EXECUTION OF TWO CONVEYANCES THE AO ASSESSED THE SAID PROFIT AS BUSINESS INCOME BY FOLL OWING THE REASONS DISCUSSED IN THE PRIOR YEAR WHICH WERE DISA PPROVED BY THE BOMBAY HIGH COURT. IN THE ASSESSMENT ORDER FOR THE AY 2003-04 NO CASE WAS MADE OUT BY THE A.O. THAT THE LAND WHICH W AS SUBJECT MATTER OF THE DEVELOPMENT AGREEMENT DATED 02.01.199 5 WAS CONVERTED INTO 'STOCK IN TRADE' BECAUSE OF THE FACT THAT TRANSFER OF LAND WAS UNDER A DEVELOPMENT AGREEMENT. IN ABSENCE ANY SUCH FINDING IN THE PRIOR YEAR'S ASSESSMENTS COMPLETED U NDER SECTION 143(3), THE AO COULD NOT MAKE OUT AN ALTOGETHER NEW CASE WHEN FACTUAL MATRIX OF THE CASE DID NOT CHANGE IN THE FY 2010-11. FURTHER, VIRTUE OF SIGNING OF DEVELOPMENT AGREEMENT DT. 02.01.1995, LAND DID NOT CHANGE THE COLOUR/CHARACTE R FROM INVESTMENT/CAPITAL ASSET TO STOCK IN TRADE. WE FURT HER NOTED THAT LAND WAS ACQUIRED WAY BACK IN 1923 AND SINCE THEN I T WAS HELD AS CAPITAL ASSET/INVESTMENT. THE ADMINISTRATOR ALONG W ITH BACHOOBAL 43 WORONZOW (BW) BEING THE SOLE BENEFICIARY OF THE EST ATE OF LATE E.F.DINSHAW ENTERED INTO THE DEVELOPMENT AGREEMENT IN 1995 EVEN THOUGH THE LAND WAS INHERITED AS FAR BACK IN 1 936. IN OTHER WORDS, THE ADMINISTRATOR OF THE ESTATE AND THE SOLE BENEFICIARY DEALT WITH THE LAND FOR THE FIRST TIME, ALMOST AFTE R 60 YEARS FROM THE TIME LAND WAS INHERITED. ALL THE ABOVE FACT CLEARLY DEMONSTRATES THAT HOLDING OF LAND CANNOT BE CONSTRUED AS STOCK I N TRADE THEREBY THE RESULTANT GAIN ALSO CANNOT BE TAXED UNDER THE H EAD BUSINESS INCOME. IN ANY CASE, THE AO IN HIS ORDER ULTIMATELY TAXED THE INCOME UNDER HEAD 'INCOME FROM OTHER SOURCES' WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THIS CLEARLY PROV ES THAT AO HIMSELF WAS NOT CONVINCED THAT TAXABILITY OF THIS I NCOME UNDER THE HEAD 'BUSINESS INCOME'. THE DEPARTMENT HAS ALSO RI GHTLY NOT TAKEN ANY GROUND OF APPEAL TO TAX THE SAME UNDER TH E HEAD BUSINESS. WE, THEREFORE, ARE OF THE VIEW THAT THE L D. COUNSEL IS TRYING TO OPEN A CONCLUDED FACT ON TAXABILITY OF IN COME UNDER THE HEAD 'CAPITAL GAIN', THOUGH SUCH GROUNDS ARE NOT PL EADED IN PRESENT APPEAL FILED BY THE DEPARTMENT. 24. THE ID. COUNSEL FOR THE REVENUE HAS RELIED ON T HE CASE OF DG OF INCOME TAX (ADMIN) AND ORS VS GTC INDUSTRIES LIMITE D AND OTHERS REPORTED IN (2016) 240 TAXMANN 209 (SC) IN SUPPORT OF HIS CONTENTION THAT WHEREVER AN ASSESSEE ENTERS INTO A DEVELOPMENT AGREEMENT WITH A BUILDER, THEN IT NECESSARILY LEADS TO INFERE NCE THAT THE ASSESSEE HAS CONVERTED THE CAPITAL ASSET INTO STOCK IN TRADE. HOWEVER IT IS TO BE NOTED THAT THE FACTS OF THIS CA SE ARE TOTALLY DIFFERENT AND CANNOT BE RELIED ON IN THE PRESENT MA TTER. IN THIS CASE, THE ASSESSEE A SICK INDUSTRY WAS DE-REGISTERED FROM SICK INDUSTRIAL COMPANIES ACT AS AND WHEN ITS NET WORTH BECAME POSI TIVE AFTER YEARS 44 LATER, ASSESSEE PUT ON SALE ONE OF ITS PROPERTY. FU RTHER, THE QUESTION FOR DECISION BEFORE THE SUPREME COURT WAS NOT WHETH ER INCOME ARISING FROM SALE OF LAND WAS ASSESSABLE AS BUSINES S INCOME OR CAPITAL GAIN. THE QUESTION WAS ALSO NOT WHETHER THE IMMOVABLE PROPERTIES OF GTC WERE ITS CAPITAL ASSET OR STOCK I N TRADE. IN THAT CASE, GTC WAS A SICK COMPANY UNDER SICA AND SCHEME FOR ITS REVIVAL WAS SANCTIONED BY BIFR. DURING THE PERIOD O F REVIVAL SCHEME THE SAID GTC ENTERED INTO AGREEMENTS WITH TRANSFER OF ITS IMMOVABLE PROPERTIES TO TWO PROPERTY DEVELOPERS BY EXECUTING THE DEVELOPMENT AGREEMENTS. THE IT DEPARTMENT HOWEVER SOUGHT TO ATT ACH THESE PROPERTIES FOR RECOVERY OF TAXES. THE RECOVERY PROC EEDINGS WERE OPPOSED BY GTC CLAIMING THAT IT WAS A SICK COMPANY AND DURING THE PERIOD WHEN REVIVAL SCHEME IS IN OPERATION ATTACHME NT OF ITS PROPERTIES BY IT DEPARTMENT WAS NOT PERMISSIBLE. QU ESTION FOR DECISION BEFORE THE SC WAS THEREFORE, WHETHER THE A TTACHMENT OF THE PROPERTIES WAS PERMISSIBLE AND THE ATTACHMENT WAS L EGALLY VALID. THE RELEVANT FINDINGS OF THE SUPREME COURT ON THE ISSUE ARE AS UNDER. 'WHAT FOLLOWS FROM THE ABOVE IS THAT THE HIGH COUR T WAS CONVINCED BY THE REASON THAT THE QUESTION AS TO WHETHER THE COMPANY HAD INDULGED IN SALE OF ASSETS UNAUTHORISEDLY AND IN VIOLATION OF P ARA 9 (5) (B) WHICH IS YET TO BE TAKEN BY THE BOARD. THE HIGH COURT ALSO P ROCEEDED ON A PALPABLY WRONG PRESUMPTION THAT THE SANCTIONED SCHE ME WAS STILL UNDER OPERATION AND, THEREFORE, BAR UNDER SECTION 2 2 OF THE S/CA APPLIED. FOR THIS REASON, IT DIRECTED THAT THE ONLY REMEDY LEFT FOR THE REVENUE WAS TO APPROACH THE BOARD FOR LIFTING OF BA R UNDER SECTION 22 OF THE 3/CA. FROM THE FACTS AND EVENTS NOTED ABOVE, THIS P REMISE AND ASSUMPTIONS ARE CLEARLY ERRONEOUS AND CONTRARY TO RECORD. (19)' .. 'THE INCOME TAX DEPARTMENT SHALL BE ENTITLED TO TAK E STEPS FOR ATTACHMENT OF THE PROPERTIES OF THE COMPANY, INCLUD ING VILLE PANE LAND AS PER THE PROVISIONS OF THE INCOME TAX ACT AND SHA LL BE ENTITLED TO SELL THE SAME. IF THERE ARE ANY SECURED CREDITORS IN RES PECT OF THESE PROPERTIES, SUCH ATTACHMENT AND SALE SHALL BE SUBJE CT TO RIGHTS OF THOSE CREDITORS. OUT OF THE PROCEEDS, THE PRINCIPAL AMOUN T OF TAX DUE TO THE INCOME TAX DEPARTMENT AND EVEN THE ADMITTED EXCISE DUES SHALL BE PAID TO THE REVENUE. IN SO FAR AS PAYMENT OF INTEREST AN D PENALTY IS CONCERNED, THAT WOULD BE DEPENDENT UPON THE DECISIO N WHICH THE BOARD 45 WOULD GIVE. (33)' 25. FROM THE PLAIN READING OF THE FINDINGS OF THE S UPREME COURT IN THE CASE OF GTC, IT WAS EVIDENT THAT THE COURT WAS NEVER CALLED UPON TO DECIDE THE NATURE AND CHARACTER OF GTC'S LAND HO LDINGS NOR THE COURT WAS DECIDING THE QUESTION AS TO WHETHER THE I NCOME ON SALE OF IMMOVABLE PROPERTIES WAS ASSESSABLE AS CAPITAL GAIN S OR BUSINESS INCOME. THEREFORE IT IS INCORRECT TO SAY THAT HONB LE SC HAD DECIDED ISSUE OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE. IN THIS REGARDS, IT IS RELEVANT TO MAKE A REFERENCE TO VERY IMPORTAN T OBSERVATION OF SUPREME COURT IN THE CASE OF CIT VS SUN ENGINEERING WORKS (198 ITR 297). THE OBSERVATIONS ARE AS FOLLOWS 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE COMPLETE 'LA W' DECLARED BY THE COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND OBS ERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT. A DECISION OF THIS COURT TAKES I TS COLOUR FROM THE QUESTION INVOLVED IN THE CASE IN WHICH IT IS RENDER ED AND WHILE APPLYING THE DECISION TO LATER CASE, THE COURT MUST CAREFULL Y TRY THE ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS CO URT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION BY THIS COURT, TO SUPP ORT THEIR REASONING. IT IS NOT PROPER TO REGARD A WORD, CLAUSE OR A SENTENC E OCCURRING IN THE JUDGMENT OF THE SUPREME COURT, DIVORCED FROM ITS CO NTEXT, AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTI ON WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT' APPLYING THESE OBSERVATIONS TO THE ASSESSEE CASE, O NE NEEDS TO ASCERTAIN WHETHER THE JUDGMENT RELIED UPON WAS AT ALL APPLICABLE OR RELEVANT IN DECIDING THE ASSESSES CAS E. THE LANDS WERE INHERITED BY EFD ON DEMISE OF HIS FATHER IN 19 36 AND AFTER HIS DEMISE IN 1970 THE LANDS WERE HELD BY THE ADMINISTR ATOR FOR THE BENEFIT OF HIS SISTER. IN THE CONTEXT OF THE ENTIRE LAND HOLDING OF F.E.D ADMEASURING 2500 ACRES APPROXIMATELY WHICH WA S INHERITED BY HIS TWO NON-RESIDENT CHILDREN I.E. EFD AND BW, T HE BOMBAY HIGH 46 COURT HAD TAKEN NOTE OF THESE MATERIAL FACTS AND AL SO OBSERVED THAT NO SALE OF LAND HAD TAKEN PLACE IN THE LIFE TIME OF EFD, BUT THE SALE OF LAND FIRST TOOK PLACE ALMOST AFTER 65 YEARS AFTE R THE LAND WAS PURCHASED. THE HIGH COURT IN THE ASSESSES OWN CASE THEREFORE HELD THAT ENTIRE LAND HOLDING IN THE HANDS OF THE ADMINI STRATOR WAS CAPITAL ASSET AND THEREFORE INCOME ON IT'S TRANSFER WAS ASSESSABLE AS CAPITAL GAINS BUT NOT AS BUSINESS INCOME. EVEN T HOUGH THE CIT(A) IN HIS ORDER HAS ELABORATELY DISCUSSED THIS JUDGMENT OF THE JURISDICTIONAL HIGH COURT WHICH HAS BECOME FINAL AN D THEREFORE BINDING ON THE REVENUE, THE LD. COUNSEL FOR THE REV ENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO DISTINGUISH THE S AME. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE IN JUDGMENT RELIED UPON BY THE LD COUNSEL, NO PRINCIPLE OF LAW PER SE WAS LAID DOWN NOR THE COURT WAS CALLED UPON TO DECIDE THE QUESTION ABOUT CHARACTERIZATION OF INCOME WHEN THE LAND ADMITTEDLY WAS ACQUIRED AS A BUSINESS ASSET AND IT WAS GIVEN FOR DEVELOPMENT BY A SICK CO MPANY TO RAISE FINANCIAL RESOURCES. IN FACT, IT APPEARS THAT IT WA S SICK COMPANY'S ASSERTION THAT LAND BEING BUSINESS ASSET WAS CONVER TED BY IT AS STOCK IN TRADE. NO SUCH AVERMENT HAS EVER BEEN MADE IN THE PRESENT CASE BY THE ASSESSEE AT ANY TIME BEFORE ANY AUTHORITY. FURTHER, NO IMMOVABLE PROPERTY OF THE ASSESSEE WAS CONVERTED INTO STOCK IN TRADE IN ANY OF THE YEARS AND ALSO NOT PUT THE ENTIRE PROPERTY ON SALE AND HENCE THE FACTS OF THE CASE QU OTED BY ID. COUNSEL ARE TOTALLY DIFFERENT FROM THE PRESENT CASE AND HENCE NOT APPLICABLE. 26. THE ID. COUNSEL HAS FURTHER RELIED ON THE CASE OF RAJA J. RAMESHWAR RAO VS. CIT, REPORTED IN 42 ITR 179 (SC) IN SUPPORT OF HIS CONTENTIONS. THE FACTS OF THIS CASE ARE TOTALLY DIFFERENT AND 47 CANNOT BE RELIED ON IN THE PRESENT MATTER. IN THIS CASE, THE PERSON ACQUIRED THE LAND WITH A VIEW TO SELLING IT LATER A FTER DEVELOPING IT. THE PERSON ALSO WENT ON DIVIDING THE LAND INTO PLOTS, D EVELOPED THE AREA TO MAKE IT MORE ATTRACTIVE AND SOLD THE LAND NOT AS A SINGLE UNIT BUT IN PARCELS. BASED ON THESE FACTS, THE COURT HAS UPHELD THAT HE IS CARRYING ON BUSINESS AND MAKING A PROFIT. FACTS OF THIS CASE WERE SOMEWHAT SIMILAR TO THE FACTS INVOLVED IN THE CASE OF G. VENKATSWOMI NAIDU AND CO VS CIT (35 ITR 594)(SC). T HE JUDGMENT OF THE BOMBAY HIGH COURT IN THE ASSESSES C ASE WAS RENDERED AFTER DUE CONSIDERATION OF THIS SC JUDGMEN T WHICH HAS LAID DOWN SEVERAL TESTS FOR DECIDING WHETHER THE IN COME DERIVED FROM DEALINGS IN LAND IS TO BE ASSESSED AS BUSINESS INCOME OR CAPITAL GAINS. AFTER EXAMINING THE FACTS AND CIRCUM STANCES IN WHICH LAND WAS ACQUIRED BY FED AND THE MANNER IN WH ICH IT WAS HELD BY THE SUCCESSORS AND CONSIDERING THE CHANGED CIRCUMSTANCES IN WHICH THE HOLDING OF THE LAND ITSE LF BECAME DIFFICULT, THE BOMBAY HIGH COURT HAD CATEGORICALLY HELD THAT THE DEALINGS OF THE ADMINISTRATOR WITH THE INHERITED LA ND WERE WITH A VIEW TO PROTECT THE CORPUS OF THE ESTATE AS WELL AS INTEREST OF THE BENEFICIARY AND THEREFORE, COULD NOT BE REGARDED AS BUSINESS OR ADVENTURE IN THE NATURE OF TRADE AND THEREFORE THE INCOME WAS ASSESSABLE ONLY UNDER THE HEAD CAPITAL GAIN' AND NO T UNDER THE HEAD BUSINESS'. 27. FURTHER, IN EVERY CASE WHERE LAND IS GIVEN TO A DEVELOPER UNDER DEVELOPMENT AGREEMENT THERE CANNOT BE A PRESU MPTION THAT THE OWNER OF THE LAND HAS CONVERTED THE LAND IN TO STOCK IN TRADE. IN THIS REGARD, THE ASSESSEE RELIED UPON THE DECISI ON OF THE ITAT KOLKATA IN ITA NO94IKOLI2012 DATED 03.02.2016, IN T HE CASE OF 48 EVEREADY INDUSTRIES INDIA LTD. IN THIS CASE, ASSESS EE HAD ACQUIRED AN INDUSTRIAL PLOT OF LAND AT MADRAS IN 1971 FOR SE TTING UP A FACTORY. AFTER THE FACTORY WAS OPERATED FOR 23 YEARS THE COM PANY DECIDED TO CONSOLIDATE ITS OPERATIONS AT ONE LOCATION. PURS UANT TO SUCH DECISION, THE FACTORY LAND WAS FOUND SURPLUS. IN DE CEMBER 2004 THE ASSESSEE ENTERED IN A DEVELOPMENT AGREEMENT IN RESPECT OF 7.1. ACRES OF LAND WITH A DEVELOPER WHO AGREED TO P AY PART CONSIDERATION IN CASH AND PART CONSIDERATION IN THE FORM OF 20% OF THE CONSTRUCTED AREA IN THE PROPOSED NEW BUILDING W HICH THE DEVELOPER WAS TO CONSTRUCT. THE AO HELD THAT THE GA IN REALIZED BY THE ASSESSEE ON TRANSFER OF THE DEVELOPMENT RIGHTS WAS ASSESSABLE AS BUSINESS INCOME. ON APPEAL, THE CIT(A) & ITAT CONCU RRENTLY HELD THAT THE GAIN WAS ASSESSABLE AS CAPITAL GAINS AND NOT AS BUSINESS PROFIT. THE ITAT HELD THAT UNDER THE AGREEMENT THE ASSESSEE LAND OWNER WAS TO RECEIVE A DEFINITE CONSIDERATION AND T HE ASSESSEE DID NOT PARTICIPATE IN ANY MANNER IN THE ACTIVITY OF DE VELOPMENT, CONSTRUCTION AND SALE OF THE NEW BUILDING. ALL THE COST AND EXPENSES ASSOCIATED WITH DEVELOPMENT AND CONSTRUCTI ON OF THE NEW BUILDINGS WAS TO BE BORNE BY THE DEVELOPER AND ASSESSEE HAD NO OBLIGATION TO PERFORM. ALL RISKS ASSOCIATED WITH THE VENTURE OF DEVELOPMENT OF REAL ESTATE WERE SOLELY BORNE BY THE DEVELOPER AND NO RISK WAS SHARED BY THE LAND OWNER. THE ITAT, THE REFORE AGREED WITH THE ASSESSEE CONTENTION THAT THE ASSESSEE ITSE LF NEVER TOOK PART IN TRADE AND NO RISKS ASSOCIATED WITH THE ADVE NTURE IN THE NATURE OF TRADE WAS BORNE BY THE LAND OWNER. THEREF ORE, IN DECIDING TRUE AND CORRECT NATURE AND CHARACTER OF I NCOME IT IS NECESSARY TO EXAMINE FACTS AND SURROUNDING CIRCUMST ANCES OF EACH CASE. IT IS NOT CORRECT OR APPROPRIATE TO PICK UP S OME FACTS OR STRAY OBSERVATIONS IN THE JUDGMENT OF THE COURT, DIVORCED FROM THE FACTUAL 49 CONTEXT IN WHICH IT IS MADE BY THE COURT. IN THE AS SESSES CASE, THE LAND WAS ACQUIRED WAY BACK IN 1923 AND SINCE THEN I T WAS HELD AS INVESTMENT OR CAPITAL ASSET AND NEVER AS STOCK IN T RADE. NO ACTIVITY WAS CARRIED ON IN THE SAID LAND. THE ADMIN ISTRATOR JOINTLY WITH THE SOLE BENEFICIARY OF THE ESTATE OF EFD ENTE RED INTO THE DEVELOPMENT AGREEMENT, AND HENCE THE FACTS OF THE C ASE QUOTED BY ID. COUNSEL, BEING TOTALLY DISTINGUISHABLE, AND THESE JUDGMENTS HAVE NO APPLICATION. 28. THE ID. COUNSEL HAS MADE STATEMENT THAT 'INCOM E PERTAINING TO SALE OF FLATS PRIOR TO FILING OF SUIT WOULD BE T AXABLE FOR AY 2011-12 AS STATED ABOVE WHILE THE ONE RELATING TO PERIOD AF TER FILING OF THE SUIT MAY BE SUBJECT TO APPLICATION OF SECTION 52 OF THE TRANSFER OF PROPERTY ACT, 1882 AND THE ORDER OF THE BOMBAY HIGH COURT DATED 19 TH JULY 2010. IN THIS REGARD, IT IS IMPORTANT TO NOTE THAT SINCE THE AGREEMENT ITSELF STANDS DETERMINATED, THE QUESTION OF DECLARING AN INCOME FROM THE PROCEEDS CALCULATED ON THE ALLEGED AGREEMENT CANNOT BE PART OF TAXABLE INCOME. UNDER SUCH CIRCUM STANCES, THE AMOUNTS RECEIVED FROM THE FLAT PURCHASERS WILL BE L IABLE FOR TAX SUBJECT TO OUTCOME OF THE DECISION IN CIVIL SUIT. T HEREFORE, ENTIRE AMOUNT ASSESSED BY A.O. FOR A.Y. 2011-12 IS INCORRE CT. FURTHER, IT IS NOTED THAT THE BANK ACCOUNT WAS OPENED BY FERANI IN THE NAME OF FERANI HOTELS PVT. LIMITED A/C - N N WADIA SHARE ', BUT THE BANK STATEMENT SHOWS IN THE NAME OF FERANI HOTELS PVT. L IMITED' ONLY AND NOT THE ADMINISTRATOR OF EFD. THE SAID ACCOUNT WAS NEVER OPENED BY THE ADMINISTRATOR NOR HAD THE ADMINISTRAT OR CONSENTED FOR OPENING OF SUCH AN ACCOUNT. THE ADMINISTRATOR H AD NEVER PROVIDED HIS PAN NOR THE BANK COMPLETED KYC FORMALI TIES IN RESPECT OF THIS ACCOUNT. THE ACCOUNT TITLE INCLUDES THE NAME OF 50 SHRI. N.N. WADIA; NOWHERE IT CLARIFIES AS TO IN WHA T CAPACITY NAME OF SHRI NN WADIA HAS BEEN MENTIONED. IT IS MATERIAL AND PERTINENT TO NOTE THAT SHRI N.N. WADIA IS ASSESSED TO TAX IN HIS OWN NAME AND IN HIS OWN RIGHT IN RESPECT OF INCOME WHICH HE EARNS IN HIS INDIVIDUAL CAPACITY AS ADMINISTRATOR OF THE ESTATE OF EFD IN TERMS OF SECTION 168 OF THE ACT. AS SUCH, THE MERE REFERE NCE TO THE NAME OF N.N. WADIA IN THE ACCOUNT OPENED AND OPERATED BY FERANI HOTELS PVT. LTD., COULD NOT LEAD TO CONCLUSION THAT THE AMOUNTS DEPOSITED BY FERANI BELONGED TO ESTATE OF EFD. THE ADMINISTRATOR ESTATE OF E.F. DINSHAW DOES NOT HAVE ANY CONTROL OR DOMAIN OVER NEITHER THE SAID ACCOUNT NOR SUCH ACCOUNT CAN BE OP ERATED BY THE ASSESSEE. 29. WE FURTHER NOTED THAT THE COORDINATE BENCH OF T HIS TRIBUNAL IN ITS ORDER 27 03.2019 IN ITA NO. 1033/MUM/2018 FOR A Y 2013-14 HAD TAKEN NOTE OF THIS FACTUAL AND LEGAL BACKGROUND . TAKING INTO ACCOUNT SPECIFIC DIRECTIONS CONTAINED IN THE HIGH C OURT'S ORDER DATED 19.07.2012, THE TRIBUNAL AGREED THAT THE RIGH TS AND OBLIGATION OF THE PARTIES FLOWING OR ARISING FROM O R UNDER THE AGREEMENTS DATED 02.01.1995 WHERE INDETERMINATE. TH E ITAT ALSO AGREED THAT THE FIXED DEPOSITS MADE BY FERANI UNDER THE ORDER OF THE HIGH COURT DID NOT BELONG TO THE ADMINISTRATOR AS HE NEITHER HAD CONTROL OR DOMAIN OVER THE SAID AMOUNTS AND THE SE FIXED DEPOSITS WERE TO BE GOVERNED BY THE ORDER OF THE TR IAL COURT BEFORE WHOM THE SUIT WAS PENDING. ONCE THE TRIBUNAL HAS HELD THAT THE AMOUNTS COLLECTED BY FERANI DURING THE PENDENCY OF THE SUIT AND KEPT IN FD'S ARE AMOUNTS KEPT IN CUSTODY OF THE COU RT AND NOT ACCESSIBLE TO THE ADMINISTRATOR TILL DISPOSAL OF TH E SUIT AND TO BE GOVERNED BY THE FINAL ORDER OF THE HIGH COURT, THEN THE AMOUNTS SO 51 COLLECTED CANNOT BE CONSIDERED TO BE INCOME OF THE ASSESSEE. FURTHER, THE AO HAS BROUGHT TO TAX ADVANCES WHICH T HE ASSESSEE HAD RECEIVED DURING THE PERIOD 1996-97 TO 2008-09 T OTALLY RS 269,48,90,856/- UNDER THE HEAD OTHER SOURCE. WE ARE SURPRISED TO NOTE THAT THE AO HAD MADE ADDITIONS CONTRARY TO THE PROVISION OF SECTION 56 OF THE INCOME TAX ACT WHICH GOVERN THE A SSESSMENT OF INCOME UNDER THE RESIDUARY HEAD. FURTHER, SAID PROV ISIONS NOWHERE PERMIT THE A.O. TO ASSESS RECEIPTS OF PRIOR YEARS IN ONE LUMP SUM IN LATER YEAR ON THE GROUND THAT IN PRIOR YEARS THE RECEIPT WAS NOT TAXED. THE A.O., ON ONE SIDE HAS ADMITTED T HAT RS 269.48 CRORES WAS RECEIVED FOR TRANSFER OF ASSET AND THERE WERE SERIOUS DISPUTES BETWEEN THE DEVELOPER AND THE ASSESSEE AND ON THE OTHER HAND AN ADVANCE SHOWN UNDER LIABILITIES IN BA LANCE SHEET IS INCOME OF THE ASSESSEE WITHOUT ASSIGNING ANY REASON S AS TO HOW A LIABILITY TAKES CHARACTER OF INCOME FOR THE AY YE AR 2011-12. THE 'ASSET IN QUESTION IS INHERITED LAND WHICH WAS ACQU IRED IN 1923 BY FED AND INHERITED IN 1936 BY E.F.D. THE BOMBAY HIGH COURT IN ITS JUDGMENT CONSIDERED THE CIRCUMSTANCES IN WHICH THE ENTIRE LAND WAS INHERITED BY THE CHILDREN OF F.E.D. AND HELD TH AT THE ADMINISTRATOR WAS HOLDING THIS LAND AS CAPITAL ASSE T AND THEREFORE INCOME ON ITS TRANSFER CAN ONLY BE TAXED UNDER THE HEAD 'CAPITAL GAINS'. IN THE CIRCUMSTANCES, ONCE THE A.O. HAS ADM ITTED THAT RS. 269.48 CRORES WAS RECEIVED AS ADVANCE AGAINST TRANS FER OF ASSET, THEN HE COULD NOT UNDER THE PROVISIONS OF SECTION 5 6 OF THE ACT ASSESS THE SAME AS INCOME BECAUSE NONE OF THE TAXAB LE EVENTS CONTEMPLATED UNDER SECTION 56 TOOK EFFECT IN FY 201 0-11. MOREOVER AS HELD BY THE HIGH COURT, THE LAND IN QUE STION IS CAPITAL ASSET OF THE ASSESSEE, AND HENCE, INCOME EMBEDDED I N ADVANCES AGAINST THE TRANSFER CAN ONLY BE ASSESSED UNDER THE HEAD CAPITAL 52 GAINS AND THAT TOO IN THE YEAR IN WHICH 'TRANSFER' OF THE CAPITAL ASSET LEGALLY TAKES EFFECT AND NOT IN ANY YEAR. SIN CE, IN THE SUIT THE ASSESSEE HAS CLAIMED FOR CANCELLATION OF DEVELO PMENT AGREEMENT IN ITS ENTIRETY AND HAS PRAYED FOR REPOSS ESSION OF THE ENTIRE LAND IN ITS ORIGINAL FORM, THE TRANSFER OF T HE CAPITAL ASSET IF ANY CAN HAPPEN ONLY WHEN THE SUIT OF THE ASSESSEE I S FINALLY DECIDED BY THE COURT AND THE DECISION OF THE COURT BECOMES FINAL. IN VIEW OF THESE FACTS, THE AMOUNTS WHICH THE ASSES SEE RECEIVED DURING THE PERIOD 1995-96 TO 2010-11 COULD NOT BE CHARGE T O TAX AS INCOME IN AY 2011-12, UNDER THE HEAD INCOME FROM OTHER SOURCE OR ANY OTHER HEAD OF INCOME. 30. IN SO FAR AS THE OBSERVATIONS OF THE AO IN PARA . 26 OF THE ASSESSMENT ORDER, WE FIND THAT ALTHOUGH THE A.O. CO NSIDERED THE ADVANCES RECEIVED IN THE PRIOR YEARS AS INCOME FOR AY 2011-12 ON THE GROUND THAT THERE WAS CESSATION OF LIABILITY, B UT NOTHING MORE HAS BEEN ELABORATED ON THIS POINT. IN THIS REGARD, IT IS PERTINENT NOTE THAT IN THE ASSESSMENT ORDER, THE A.O. ASSESSED THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. WE FURTHER NOTE THAT SECTION 56 OF THE INCOME TAX ACT, 1961 DEFINES THE SCOPE OF THE INCOME WHICH IS CHARGEABLE TO TAX UNDER THE HEAD OTHER SOU RCE. THE RESIDUARY HEAD OF INCOME CAN BE INVOKED ONLY WHEN T HE INCOME IS NOT FOUND ASSESSABLE UNDER ANY OTHER HEAD OF INCOME . IN THE INSTANT CASE, AS ADMITTED BY THE A.O., THE ADVANCES WERE RECEIVED AGAINST THE TRANSFER OF LAND AND THEREFORE ANY CONS IDERATION RECEIVED FOR TRANSFER OF IMMOVABLE PROPERTIES COULD NOT BE ASSESSED UNDER THE HEAD OTHER SOURCES. FURTHER, THE A.O HAS ALSO ACCEPTED THE FACT THAT THERE WERE SERIOUS DISPUTES BETWEEN THE DEVELOPER AND THE ASSESSEE REGARDING THE VALIDITY O F THE LEASE 53 AGREEMENT AS WELL AS DEVELOPMENT RIGHT AGREEMENT. T HE DOCUMENTS ON RECORDS PROVE BEYOND DOUBT THAT SUCH D ISPUTES WERE SUB JUDICE EVEN TILL MARCH 2011 BEING THE END OF PREVIOUS YEAR. ONCE IT IS EVIDENT THAT THE DISPUTES WERE SUB JUDICE THEN, IT COULD NOT BE ARGUED THAT DURING THE PENDENCY OF THE LEGAL PROCEEDINGS THERE WAS CESSATION OF LIABILITY. AS SU CH ON THE FACTS OF THE CASE, IT COULD NOT BE ESTABLISHED THAT THERE WAS CESSATION OF LIABILITY. IT IS FURTHER OBSERVED THAT SECTION 41(1 ) HAS NO APPLICATION, BECAUSE THE LIABILITY CONTEMPLATED BY THAT SECTION RELATES TO TRADING LIABILITY FOR WHICH DEDUCTION WA S ALLOWED TO THE ASSESSEE THE COMPUTATION OF INCOME OF ANY EARLIER Y EAR. IN THIS CASE, THE AMOUNT ASSESSED WAS NEVER ALLOWED AS A DE DUCTION IN ANY EARLIER YEAR. 31. IN THIS REGARD, THE ASSESSEE PLACED HIS RELIANC E ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N I.T.A. NO. 5508/MUM/2015 DATED 06.02.2015 FOR AY 2010-11 IN TH E CASE OF BOMBAY GOWRAKSHAK MANDALI VS I T.O. IN THIS CASE, T HE ASSESSEE TRUST OWNED A PROPERTY IN MUMBAI. THE TRUST HAD ENT ERED INTO A DEVELOPMENT AGREEMENT WITH M/S LOKHANDWALA CONSTRUC TION INDUSTRIES LIMITED FOR WHICH CONSIDERATION OF RS 11 CRORES OR RS 50 PER SQUARE FEET OF AVAILABLE FSI WHICHEVER IS HIGHE R WAS TO BE PAID. THE SAID TRUST RECEIVED RS 32.50 CRORES FROM THE DE VELOPER. HOWEVER, SINCE THERE WERE DISPUTES WITH THE DEVELOP ER WITH REGARDS TO QUANTUM OF AVAILABLE FSI, ADVANCE OF RS 32.50 CRORE RECEIVED FROM THE DEVELOPER WAS SHOWN AS LIABILITY IN ITS BOOKS. THE MANNER IN WHICH THE ADVANCE RECEIVED WAS SHOWN IN THE BALANCE SHEET AND THE DISCLOSURE IN RELATION THERET O BY WAY OF NOTES IN THE AUDITED ACCOUNTS WAS CONSISTENTLY SAME IN ALL THE 54 PAST YEARS AND WAS ACCEPTED BY THE REVENUE IN PAST ASSESSMENTS. IN AY 2010-11, THE A.O ASSESSED THE SA ID SUM ON THE GROUND THAT IT WAS INCOME OF THAT YEAR BECAUSE THERE WAS CESSATION OF LIABILITY. ON APPEAL BY THE ASSESSEE, THE ITAT OBSERVED THAT DEVELOPMENT AGREEMENT WAS ENTERED IN 1984 AND ADVANCE WAS RECEIVED WAS NEVER DISPUTED. TILL PRECE DING YEAR, ADVANCE RECEIVED IN 1984 WAS TREATED AS ADVANCE AND WAS NEVER DISPUTED. THE FACT THAT FROM 1984 TILL DATE THERE H AD BEING NO CHANGE IN THE STATUS OF THE TRANSACTION AND THERE W AS NECK DEEP LITIGATION WAS ALSO NOT DISPUTED BY THE REVENUE. KE EPING IN MIND THESE FACTS, THE ITAT HELD THAT FOR AN AMOUNT TO BE ADDED BACK UNDER SECTION 41(1) WHICH SHOULD BEAR THE CHARTER O F INCOME. NOWHERE FROM THE ORDERS OF REVENUE AUTHORITIES IT A PPEARED THAT DURING THE YEAR, SOMETHING NEW HAPPENED HAD WHICH C ONVERTED THE ADVANCES INTO REMISSION OF LIABILITY TO BE TREA TED AS INCOME. THE TRIBUNAL HELD THAT INVOCATION OF SECTION 41 (1) WAS UNCALLED FOR. WE FIND THAT FACTS OF THE PRESENT CASE ARE PAR I MATERIA TO THE CASE CONSIDERED BY THE TRIBUNAL. EVEN IN THIS CASE, THE ENTIRE TRANSACTION WITH THE DEVELOPERS IS IN NECK DEEP IN LITIGATION AND THE ASSESSEE HAS FILED SUIT REQUESTING FOR CANCELLATION AND RESTITUTION OF THE LANDS. EVEN AT THE BEGINNING AND THE CLOSE OF T HE FY 2010-11, THE DISPUTES BETWEEN PARTIES WAS SUB JUDICE AND BEA RING THE ORDER PASSED ON NOTICE OF MOTION SEEKING INTERIM RELIEF A ND THERE WAS NO PROCESS ON THE MAIN SUIT WHICH REMAINED PENDING. AS SUCH, DURING THE RELEVANT YEAR, THERE WAS NO MATERIAL CHANGE IN THE FACTUAL MATRIX IN THE ASSESSEE CASE. WE THEREFORE ARE OF TH E OPINION THAT THE DECISION OF THE ITAT SQUARELY APPLIES TO THE FA CTS OF PRESENT CASE. 55 32. FURTHER, IN OUR CONSIDERED VIEW IN ORDER TO TAX ANY RECEIPT AS INCOME, IT IS NECESSARY FOR THE REVENUE TO SHOW THA T THE RECEIPT OF THE MONEY IS WITHOUT ANY CONDITIONS ATTACHED AND TH E RECIPIENT HAS COMPLETE DOMAIN, CONTROL AND OWNERSHIP OVER THE MON EY RECEIVED. WHEREVER MONEY IS RECEIVED IN TERMS OF AGREEMENT WH ICH BY ITSELF IS DISPUTED AND PENDING FOR DECISION IN COURT, THEN NO INCOME EMBEDDED IN SUCH RECEIPTS CAN BE MADE EXIGIBLE TO T AX AS INCOME FOR THE SIMPLE REASON THAT THE RECIPIENT HAS INHERE NT OBLIGATION TO REFUND THE SAME TO THE PAYER IN THE CASE IN THE EVE NT THE COURT DECIDES THE OTHER WAY. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. L. SAMBASHIVA REDDY (62 TAXMANN.COM 174). IN THIS CASE, IT IS THE CASE OF THE REVENUE THAT ONCE THE SINGLE JUDGE IN H ER ORDER REFUSED TO GRANT INJUNCTION AGAINST FERANI TO PROCE ED WITH CONSTRUCTION, THEN IT AUTOMATICALLY LEAD TO CONCLUS ION THAT ALL AGREEMENTS WITH FLAT PURCHASERS BECOME FINAL AND TH EREBY INCOME ACCRUED. WE ARE UNABLE TO AGREE WITH ARGUMEN TS OF THE LD. SR. COUNSEL FOR THE REVENUE FOR THE SIMPLE REAS ON THAT IN THE FIRST PLACE IT IS TO BE NOTED THAT IN THE ORDER DAT ED 19.07.2010 THE COURT RESTRAINED FERANI FROM HANDING OVER POSSESSIO N OF FLATS TO RELATED AS WELL AS NON-RELATED THIRD PARTIES TILL T HE NOTICE OF MOTION WAS DISPOSED. ONCE THE COURT RESTRAINED FERA NI FROM HANDING OVER POSSESSION, IT IMPLIED THAT THE AGREEM ENTS WITH FLAT PURCHASERS COULD NOT HAVE BEEN GIVEN EFFECT TO AND THEREBY THERE WOULD NOT HAVE BEEN TRANSFER OF PROPERTY IN LAW. EV EN IN THE DECISION OF THE DIVISION BENCH OF THE HIGH COURT IN JULY 2012, THE COURT DIRECTED THE TRIAL COURT TO FIRST DECIDE THE PRELIMINARY ISSUE OF LIMITATION IN TERMS OF SECTION 9A OF CPC AND THE REAFTER TO PROCEED WITH THE SUIT. IT ALSO GRANTED LIBERTY TO T HE ASSESSEE AT 56 THAT STAGE TO SEEK INTERIM RELIEF BY MOVING NOTICE OF MOTION. THEREFORE, IT IS FACTUALLY AND LEGALLY INCORRECT FO R THE ID. COUNSEL TO CONTEND THAT UPON DISPOSAL OF ASSESSEE NOTICE OF MOTION SEEKING AD INTERIM RELIEF THE AGREEMENTS WITH THE P ARTIES BECOME FINAL AND INCOME CHARGEABLE TO TAX ACCRUED IN AY 20 11-12. 33. WE FURTHER NOTED THAT WHEN, THE APPEALS WERE FIXED FOR CLARIFICATION ON 22/11/2019, THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT THE HONBLE SUPREME COURT, VIDE ITS ORDER DATED 04/10/2019 PASS ED BY THE THREE JUDGE BENCH IN IVORY SLP AND FERANI REVIEW PETITIO N, DECIDED THE REFERENCE OF QUESTION OF LAW IN FAVOUR OF THE ADMIN ISTRATOR HOLDING THAT THE ISSUE OF LIMITATION CANNOT BE DECIDED U/S 9A OF CIVIL PROCEDURE CODE AND ALL THE ISSUES, INCLUDING LIMITATION OF PETITIO N FILED BY THE PARTIES AND THE MERIT OF THE MATTER TO BE DECIDED BY THE TRIAL COURT ON THE BASIS OF CONTENTIONS OF BOTH THE PARTIES AND ALSO, DECIDE AN Y APPLICATIONS SEEKING INTERIM INJUNCTION/ RELIEF IF ANY. FROM THE ABOVE, IT IS VERY CLEAR THAT AS OF DATE, THERE IS NO MATERIAL CHANGE IN FACTUAL MATRIX , BECAUSE AFTER THE ADMINISTRATOR DETERMINATED THE AGREEMENTS DATED 02/ 01/1995, REVOKED THE POWER OF ATTORNEY GRANTED TO RAHEJA AND FILED T HE SUITS IN THE HONBLE BOMBAY HIGH COURT IN 2008, THERE IS PRACTICALLY NO PROGRESS AND THE ENTIRE MATTER IS SUB-JUDICE. THEREFORE, WE ARE OF T HE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE CONTENTION OF THE LD. AR F OR THE REVENUE THAT THE DECISION OF DIVISION BENCH OF HONBLE BOMBAY HIGH C OURT IN REVIEW PETITION FILED BY FERANI HOTELS PVT.LTD, HAS REST T HE MATTER OF DISPUTE BETWEEN THE PARTIES REGARDING DEVELOPMENT AGREEMENT AND SHARING OF SALE CONSIDERATION, AND CONSEQUENTLY, INCOME ACCRUE S TO THE ASSESSEE FOR THE IMPUGNED ASST YEAR. 34. IN THIS VIEW OF THE MATTER AND CONSIDERING FACT S AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE CONSIDERED VIEW THAT TH E LD. CIT(A) AFTER 57 CONSIDERING RELEVANT FACTS HAS RIGHTLY HELD THAT TH E AO WAS INCORRECT IN TAXING ADVANCES RECEIVED BY THE ASSESSEE UP TO THE A.Y. 2011-12 AS INCOME CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF THE LD . CIT(A) AND REJECT GROUNDS TAKEN BY THE REVENUE. 35. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM REVENUE APPEAL IS TAXABILITY OF LEASE RENTAL RECEIVED BY TH E ADMINISTRATOR. THE AO HAS MADE ADDITIONS TOWARDS LEASE RENTAL DEPOSITED B Y IVORY AND FERANI IN SEPARATE ACCOUNT UNDER THE HEAD INCOME FROM OTHE R SOURCES ON THE SAME REASONING ON WHICH HE HAD ASSESSED ADVANCES UN DER THE HEAD INCOME FROM OTHER SOURCES. IT IS THE CONTENTION OF THE ASSESSEE THAT LEASE RENT ALLEGEDLY DEPOSITED IN THE SEPARATE BANK ACCOUNTS BY IVORY & FERANI OF RS. 39.60000/- WAS NOT LEGALLY CH ARGEABLE TO TAX AS INCOME OF THE ASSESSEE AS THERE WAS NO PRIVI TY OF CONTRACT DURING THE FYS 2008-09 TO 2010-11 IN TERMS OF WHICH THE ASSESSEE COULD HAVE CLAIMED SUCH RENT FROM IVORY & FERANI. 36. WE HAVE HEARD COUNSELS OF BOTH PARTIES AND PERU SED MATERIALS ON RECORD ALONG WITH ORDERS OF LOWER AUTH ORITIES. WE FIND THAT IN THE AGREEMENTS DATED 02.01.1995 WITH F ERANI & IVORY CLAUSE 2 ENVISAGED THAT THE ASSESSEE WOULD GRANT A LEASE OF THE DEMISED LANDS FOR A PERIOD OF 5 YEARS. IN THE CIRCU MSTANCES, MERELY BECAUSE GRANT OF LEASE WAS PROVIDED IN THE A GREEMENT DATED 02.01.1995 BUT WHEN IN FACT THE LEASE DEED WA S NEVER EXECUTED IN FAVOUR OF THE PARTIES, THEN SAID FERANI & IVORY COULD NOT PRESUME THAT LEASE RIGHTS WERE IN FACT AWARDED IN THEIR FAVOUR BY THE ADMINISTRATOR. IN ABSENCE OF ANY FORMAL REGI STERED LEASE AGREEMENT, IVORY & FERANI COULD NOT LEGALLY INFER T HAT THE LEASE OF 58 LAND WAS GRANTED BY THE ADMINISTRATOR IN RESPECT OF THE LANDS. THE FACT THAT THE ENFORCEABLE LEASE WAS NOT IN OPER ATION WAS NOT DISPUTED BY THE REVENUE. THE IVORY HAD ACCEPTED CON TRACTUAL TENANCY WHEN IT HAD EXECUTED CONVEYANCE IN FY 2001- 02 AND 2002-03. THE ASSESSEE HAD FILED COPY OF LEASE DEED DATED 25- 10-2001. WE FIND THAT CLAUSE (IV)(B) OF THE DEED OF CONVEYANCE DATED 25.10.2001 EXECUTED BETWEEN THE ASSESSEE AND IVORY PROPERTIES AND HOTELS PVT. LTD AND TOYOTA LAKOZY AU TO PVT. LTD., WHICH CLEARLY TALKS ABOUT CONTRACTUAL MONTHLY TENAN CY ON THE EXPIRY OF THE LEASE. FROM THE ABOVE, IT IS EVIDENT THAT EVEN IF ONE ACCEPTS THE CLAIM OF THE DEVELOPERS THAT LEASE FOR THE PERIOD OF FIVE YEARS WAS GRANTED THE SAME CAME TO CONCLUSION IN JANUARY 2000 ON EXPIRY OF FIVE YEAR PERIOD. THEREAFTER THE RELATIONSHIP BETWEEN THE PARTIES WAS THAT OF LANDLORD AND CONTRA CTUAL MONTHLY TENANT. BEFORE THE LOWER AUTHORITIES, THE ASSESSEE HAD FILED REQUISITE DOCUMENTARY EVIDENCE TO PROVE THAT IN 200 8 THE ASSESSEE HAD TAKEN NECESSARY LEGAL STEPS TO TERMINA TE THE CONTRACTUAL TENANCY OF EACH DEVELOPER. IN THE CIRCU MSTANCES, ONCE THE ASSESSEE HAD TAKEN LEGAL STEPS TO TERMINAT E THE CONTRACTUAL MONTHLY TENANCY, THE DEVELOPERS COULD N OT UNILATERALLY CLAIMED THEMSELVES TO BE HAVING LEASEH OLD RIGHTS IN THE LAND IN TERMS OF COVENANTS CONTAINED IN THE AGR EEMENT DATED 02.01.1995. 37. WE FURTHER NOTED THAT THE ASSESSING OFFICER BEF ORE CONCLUDING THAT INCOME BY WAY OF LEASE RENT HAD AC CRUED, FAILED TO BRING ON RECORD SUFFICIENT, ADEQUATE AND COGENT DOCUMENTARY EVIDENCE WHICH PROVED THAT A LEGALLY VALID & BINDIN G AGREEMENT SUBSISTED BETWEEN THE ADMINISTRATOR AND FERANI & IV ORY IN TERMS 59 OF WHICH THE ASSESSEE HAD VESTED RIGHT OF CLAIMING MONTHLY RENT FROM THEM. THE ASSESSEE HAD TAKEN SUFFICIENT LEGAL STEPS FOR TERMINATION OF TENANCIES WHICH COULD BE INFERRED ON LY FROM THE CONDUCT OF THE PARTIES AND CONSEQUENT TO THE TERMIN ATION OF TENANCIES, THE ASSESSEE HAD STOPPED ACCEPTING THE M ONTHLY PAYMENTS TENDERED BY IVORY & FERANI. FURTHER, WHEN THE ASSESSEE STOPPED ACCEPTING THE MONTHLY PAYMENTS, FE RANI & IVORY UNILATERALLY OPENED ACCOUNTS WITH THE BANKS I N THEIR OWN NAMES AND CONTINUED DEPOSITING THE MONTHLY SUMS OF RS.55,000/- . BUT, FACT REMAINS THAT THESE ACCOUNTS WERE OPENED BY FERANI & IVORY ENTIRELY ON THEIR OWN VOLITION AND IN THEIR O WN NAMES AND THE ADMINISTRATOR HAD NEVER GRANTED HIS CONSENT EITHER FOR OPENING OF THE ACCOUNTS OR DEPOSITING THE MONTHLY SUMS OF RS.5 5,000/-. IT IS ALSO MATERIAL THAT THERE EXISTED NO PRIVITY OF CONT RACT EITHER WRITTEN OR IMPLIED IN TERMS OF WHICH FERANI OR IVORY HAD LE GAL OBLIGATION TO PAY AND THE ADMINISTRATOR HAD VESTED RIGHT TO DEMAN D PAYMENT OF MONTHLY LEASE RENT. THESE ACCOUNTS WERE OPENED BY T HESE COMPANIES BY PROVIDING DETAILS & INFORMATION ABOUT THEMSELVES. THE ADMINISTRATOR OF ESTATE OF EFD HAD NEVER AUTHOR IZED OR PERMITTED EITHER OF THE COMPANIES TO OPEN THE ACCOU NT NOR HAD IT PROVIDED ANY INFORMATION ENABLING EITHER OF THE COM PANIES TO OPEN THESE ACCOUNTS. IN THE CIRCUMSTANCES, ON ACCOU NT OF UNILATERAL ACTS OF THE PROJECT COORDINATORS, NO INC OME IN LAW COULD BE INFERRED PARTICULARLY WHEN NO PART OF THE INCOME ASSESSED WAS EITHER LEGALLY DUE TO THE ASSESSEE OR WHEN THE AMOU NTS WERE NOT ACTUALLY RECEIVED BY THE ADMINISTRATOR. THE LD. CIT (A) AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY HELD THAT TH E AO WAS INCORRECT IN TAXING LEASE RENT AS INCOME CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE, WE ARE INCLINED TO UPHOL D FINDINGS OF THE LD. 60 CIT(A) AND REJECT GROUNDS TAKEN BY THE REVENUE. 38. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASST. YEAR 2011-12 IS DISMISSED. ITA.NO. 334/MUM/2017-ASST YEAR 2012-13. 39. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL FI LED BY THE REVENUE ARE IDENTICAL TO FACTS AND ISSUES, WHICH WE HAD CON SIDERED IN ITA.NO. 1389/MUM/2015, FOR ASST YEAR 2011-12, BUT FOR FIGUR ES. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN ITA NO. 1389 /MUM/2015 FOR ASST YEAR 2011-12 SHALL MUTATIS MUTANDIS APPLY TO THIS A PPEAL ALSO. WE, THEREFORE FOR DETAILED REASONS GIVEN IN PRECEDING P ARAGRAPH IN ITA NO. 1389/MUM/2015 UPHELD THE FINDINGS OF THE LD. CIT(A) AND DISMISS APPEAL FILED BY THE REVENUE. 40. AS A RESULT, APPEALS FILED BY THE REVENUE FOR A SST. YEARS 2011-12 AND 2012-13 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 /02 /2020 SD/ - (SAKTIJIT DEY) SD/ - (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 19/02/2020 61 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//