ACIT, New Delhi V. M/s. Raj Buildwell Pvt. Ltd., New Delhi

ITA 4638/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8438 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 31-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Competent authority
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT & SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.4638/DEL/2016 ASSESSMENT YEAR 2013-14 ACIT, CENTRAL CIRCLE-2, NEW DELHI. V. M/S. RAJ BUILDWELL PVT. LTD., 1497, BHARDWAJ BHAWAN, WAZIRNAGAR, KOTLA, MUBARAKPUR, NEW DELHI. TAN/PAN: AADCR 3293G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SURENDER PAL, SR.D.R. RESPONDENT BY: SHRI PARIKSHIT AGARWAL, CA DATE OF HEARING: 16 10 2019 DATE OF PRONOUNCEMENT: 13 01 2020 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 07.06.2016, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIII, NEW DEL HI FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2013-14. THE SOLE GROUND RAISED BY THE REVENUE RELATES TO DELETION OF ADDITION OF RS.5 CRO RES RELATES TO NON-REFUNDABLE SECURITY DEPOSIT WHICH WAS ADDED BY THE ASSESSING OFFICER AS UNDISCLOSED RECEIPTS. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE-COMPANY IS ENGAGED IN THE REAL ESTATE BUSINESS AND HAS FILED ITS RETUR N OF INCOME ON 16.07.2014 AT AN INCOME OF RS.36,47,140/-. A SUR VEY WAS I.T.A. NO.4638/DEL/2016 2 ALSO CARRIED OUT ON 25.04.2013, DURING THE COURSE O F WHICH, AN AGREEMENT DATED 07.11.2012 BETWEEN THE ASSESSEE- COMPANY AND M/S. KRRISH GREENHOMES PVT. LTD. WAS FO UND. AS PER THE TERMS OF AGREEMENT DATED 07.11.2012, SPE CIFICALLY CLAUSE NO.3.7, ASSESSING OFFICER DEDUCED THAT THE D EVELOPER HAD PAID SUM OF RS.5 CRORES AS A NON-REFUNDABLE DEP OSIT WHICH HAS NOT BEEN TAKEN AS RECEIPT BY THE ASSESSEE AND INSTEAD IT HAS TREATED AS ADVANCE. THE ASSESSING OF FICER THUS ADDED THE SAID AMOUNT AS UNDISCLOSED RECEIPT. 3. BEFORE THE LD. CIT (A), DETAILED SUBMISSIONS WER E MADE AND VARIOUS DOCUMENTS WERE PLACED AND FOLLOWING FEA TURES WERE HIGHLIGHTED FROM ENTIRE GAMUT OF MATERIAL QUA THE ISSUE, HAS BEEN INCORPORATED BY THE LD. CIT (A) IN THE FOL LOWING MANNER: THE APPELLANT IS THE LEGAL AND REGISTERED OWNERS O F A CONTIGUOUS PARCEL OF LAND ADMEASURING 10.89 ACRES A T VILLAGE- FAZILPUR JHARSA, SECTOR-71, TEHSIL & DISTRICT- GURG AON ON WHICH IT HAD OBTAINED DEVELOPMENT LICENSE FOR SETTING-UP OF A IT PARK COLONY ON 28.06.2008, BUT DESIROUS OF DEVELOPMENT A ND CONSTRUCTION OF A RESIDENTIAL GROUP HOUSING COLONY ON THE LAND, IT ENTERED INTO AN AGREEMENT WITH KGHPL REQUIRING T HE LATTER TO OBTAIN APPROPRIATE DEVELOPMENT LICENSES FROM THE DI RECTORS, TOWN AND COUNTRY PLANNING/GOVERNMENT AUTHORITY IN H ARYANA (DTCP), AND THE APPELLANT EXECUTED A POA IN FAVOU R OF KGHPL; (II) THE APPELLANT AGREED TO TRANSFER AND ASSIGN E XCLUSIVE DEVELOPMENT RIGHTS AND ENTITLEMENT OVER THE LAND TO KGHPL I.T.A. NO.4638/DEL/2016 3 WHO WERE ASSIGNED EXCLUSIVE AND ABSOLUTE DEVELOPMENT/CONSTRUCTION RIGHTS AND ENTITLEMENT OVE R THE LAND; (III) KGHPL WAS TO OBTAIN THE CHANGES IN THE LAND USAGE AND REVISED LICENSES, AND TO OBTAIN ALL APPROVALS F OR IMPLEMENTATION AND EXECUTION OF THE PROJECT FOR RES IDENTIAL GROUP HOUSING COLONY ON THE LAND AT THEIR (KGHPL) C OST AND EXPENSE, WITHIN FIVE MONTHS; (IV) KGHPL WAS TO ENSURE THAT EARLIER LOI FOR IT P ARK COLONY SHALL REMAIN VALID IF THE LOI FOR GROUP HOUSING IS NOT GRANTED BY THE COMPETENT AUTHORITY; (V) THE RIGHTS AND ENTITLEMENTS OF KGHPL WAS TO CO ME INTO FORCE AND BE EFFECTIVE UPON THE GRANT OF LETTER OF INTENT/LOL FROM DTCP FOR SETTING UP OF RESIDENTIAL GROUP HOUSING CO LONY ON THE LAND AND KGHPL WAS TO CARRY OUT ALL ACTS FOR THE DE VELOPMENT AND CONSTRUCTION OF THE PROJECT AT ITS COSTS AND EX PENSES INCLUDING ALL FEES SUCH AS EDC/IDS ETC AND/OR CHARG ES INCLUDING SERVICE TAX, BANK GUARANTEE FOR EDC/IDC, INTEREST AND PENALTY; (VI) IN CONSIDERATION OF THE GRANT/TRANSFER/ASSIGNM ENT OF THE RIGHTS, TITLES, INTEREST AND ENTITLEMENTS, INCLUDIN G THE DEVELOPMENT RIGHTS, BY THE APPELLANT TO THE KGHPL T HE DEVELOPED AND CONSTRUCTED/BUILT-UP AREA IN THE PROJ ECT ALONGWITH THE LAND WAS TO BE SHARED IN THE RATIO OF 38% (APPELLANT) AND 62% (KGHPL); (VII) KGHPL WAS TO COMPLETE CONSTRUCTION OF THE AP PELLANTS SHARE AND OFFER POSSESSION WITHIN A PERIOD OF 3 (TH REE) YEARS (WHICH WAS MUTUALLY EXTENDED BY ONE YEAR VIDE AGREE MENT DT. I.T.A. NO.4638/DEL/2016 4 08.01.2013, THE GRACE PERIOD PROVIDED IN THE ORIGIN AL AGREEMENT; (VIII) AND IN CONSIDERATION OF ALL OF THE RIGHTS, TITLES AND INTEREST ASSIGNED, CONVEYED AND TRANSFERRED TO KGHP L, IN ADDITION TO THE DEVELOPMENT, CONSTRUCTION AND HANDI NG OVER OF THE APPELLANTS SHARE, KGHPL WAS TO PAY A SUM OF RS . 5,00,00,000 (RUPEES FIVE CRORES ONLY) TO THE APPELL ANT AS NON- REFUNDABLE DEPOSIT, WITHIN 10 (TEN) DAYS OF DATE O F THE LOI FOR GROUP HOUSING COLONY. IN THE ABOVE AGREEMENT IT WAS ALSO PROVIDED THAT KG HPL SHALL NOT EXIT THE PROJECT TILL THE SAME IS COMPLETED SO HOWEVER THAT IN CASE KGHPL EXITED EARLIER THAN COMPLETION, THE APPELLANT SHALL REPOSSESS THE LAND AND THE KGHPL SHALL HANDOVER THE BUILDING PROJECT INCLUDING ITS SHARE ALLOCATION ON AS IS WHE RE IS BASIS FREE FROM ALL LIEN, ENCUMBRANCES, DISPUTE, CLAIMS O F ANY PARTY INCLUDING CONTRACTOR CUSTOMERS AND UNDERTAKE NOT TO CLAIM ANY AMOUNT/DAMAGES FROM THE APPELLANT IN ANY MANNER WHATSOEVER, AND THAT HOWSOEVER KGHPL SHALL BE RESPO NSIBLE FOR ALL THE LIABILITIES IN RESPECT ALL THE OBLIGATI ONS FOR WHICH IT WAS RESPONSIBLE FOR AS PER THE AGREEMENT, AND THAT KGHPL SHALL BE RESPONSIBLE AND LIABLE TO MEET ITS OBLIGAT IONS TOWARDS THE AUTHORITIES AND TO PAY SUCH AMOUNTS AS MAY BE R EQUIRED TO BE PAID FOR KEEPING THE SANCTIONS ALIVE AND SUBSIST ING. IN THE AGREEMENT IT WAS ALSO PROVIDED THAT CONSIDER ING THAT KGHPL WILL BE INVESTING SUBSTANTIAL SUMS OF MONEY, NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NEITHER PARTY SHALL BE ENTITLED TO TERMINATE THIS AGREEMENT FOR ANY REA SON WHATSOEVER IF THE LOI FOR GROUP HOUSING IS GRANTED/ ACCORDED FOR I.T.A. NO.4638/DEL/2016 5 DEVELOPMENT/CONSTRUCTION OF A RESIDENTIAL GROUP HOU SING COLONY ON THE LAND. 4. BEFORE THE LD. CIT (A), IT WAS FURTHER SUBMITTED THAT NECESSARY APPROVALS TOOK LOT OF TIME AND NO ACTIVIT Y WAS CARRIED OUT ON THE PROJECT AND NO REVENUE HAS BEEN GENERATED FROM THE SAID PROJECT. ACCORDINGLY, IF NO SERVICES HAVE BEEN RENDERED THEN EVEN ON ACCRUED SYSTEM OF ACCOUNTING, SAID ADVANCE CANNOT BE BROUGHT TO TAX IN THIS YEAR. IT W AS FURTHER BROUGHT TO THE NOTICE THAT DISPUTE WAS GOING BETWEE N THE ASSESSEE AND THE SAID PARTY IN RESPECT OF THE SAME LAND AND DEVELOPMENT, ETC., WHICH IS PENDING BEFORE THE HON BLE DELHI HIGH COURT. THE LD. CIT (A) AFTER CONSIDERING THE V ARIOUS SUBMISSIONS AND THE MATTER WHICH WAS SUBJUDICE BEFOR E THE HONBLE HIGH COURT, FINALLY OBSERVED AND HELD AS UN DER: 3.1.6 ON PERUSAL OF THE DOCUMENTS RELATED TO THE L EGAL NOTICES AND THE WRIT PETITION FILE BEFORE THE HONBLE DELHI HIGH COURT IT APPEARS THAT BOTH THE APPELLANT AND KGHPL FIRST ISS UED LEGAL NOTICES TO EACH OTHER ALLEGING DEFAULT IN NON-PERFO RMANCE ON EACH OTHERS PART LEADING TO FILING OF WRIT PETITIO N BY KGHPL U/S 9 OF THE ARBITRATION & CONCILIATION ACT 1996 BEING O.M.P. 269/2014 AND I.A. NO.3969/2014 WHEREIN THE HONBLE DELHI HIGH COURT INITIALLY PASSED ORDER ON 01.03.2014 DIR ECTING BOTH THE PARTIES TO MAINTAIN STATUS QUO AND RETRAINED TH E APPELLANT FROM DISTURBING THE POSSESSION OF THE SUIT PROPERTY , AND VIDE ORDER DT. 21.05.2014 FOLLOWING COMPROMISE AFFIDAVIT S FROM BOTH PARTIES THE HONBLE HIGH COURT ALLOWED THE PETITION TO BE WITHDRAWN AND DISMISSED THE WRIT. SUBSEQUENTLY FOLL OWING LEGAL NOTICE FROM THE APPELLANT DT. 15.03.2016 AND COUNTER LEGAL I.T.A. NO.4638/DEL/2016 6 NOTICES OF KGHPL AND THE APPELLANT THE MATTER TRAVE LED TO THE HONBLE DELHI HIGH COURT ONCE AGAIN BEING O.M.P.(L) (COMM.) NO.162/2016 FILED BY H.C. INFRACON PVT. LTD. (HCIPL HEREINAFTER, WHICH HAD PURCHASED THE SHARES OF KGHP L IN THE INTERREGNUM) WHEREIN THE HONBLE HIGH COURT PASSED INTERIM ORDER ON 03.05.2016 RESTRAINING THE APPELLANT FROM CREATING ANY THIRD PARTY RIGHTS IN RESPECT OF THE 10.89 ACRE S OF THE ABOVE LAND OR ENTER INTO ARRANGEMENT OR AGREEMENT OF WHAT SOEVER NATURE FOR THE SALE/TRANSFER OR DISPOSAL OF THE SAI D LAND AND RETRAINED THE APPELLANT FROM DISTURBING THE POSSESS ION OF THE SUIT PROPERTY, AND THE MATTER WAS LISTED FOR HEARIN G ON 17.05.2016 BUT HAS BEEN ADJOURNED TO JULY 2016 AND IS STILL PENDING. WHILE THE PRIMARY CLAIM OF THE APPELLANT I S THAT SINCE KGHPL DID NOT PAY RS. 19.00 CRORE AS EDC/IDC CHARGE S (LATER REVISED TO RS.43.00 CRORE) IT LED TO DELAY IN SANCT ION OF THE BUILDING PLAINS AND OBTAINING APPROVAL/SANCTION FOR RESIDENTIAL HOUSING COLONY AND THE DEVELOPMENT OF THE PROPERTY WAS NOT UNDERTAKEN AND COMPLETED WITHIN THE TIME OF FOUR YE ARS AND THEREFORE SOUGHT TERMINATION OF THE AGREEMENT, KGHP L/HCIPL CLAIM IS THAT THEY HAD OBTAINED APPROPRIATE CHANGES IN THE LAND USAGE AND REVISION IN THE LICENSE BUT THE APPELLANT DID NOT FULFILL ITS COMMITMENT OF DISCHARGING ITS OUTSTANDING TAXES , RATES, DUTIES, CESS ETC. OF ABOUT RS. 14.22 CRORES WHICH W AS PAID BY KGHPL (AT THE REQUEST OF THE APPELLANT) AND THAT TH E IDC CHARGES ARE FULLY PAID AS OF APRIL 2016 AND IT HAS ALSO GIVEN BANK GUARANTEE OF RS.2.50 CRORE TO DTCP HARYANA AGA INST EDC AND THEREFORE SOUGHT REFUND OF THAT AMOUNT AND THE SAME TIME CHARGING THE APPELLANT THAT THE DELAY IN OBTAINING SANCTION WAS DUE TO THIS REASON AND CHALLENGED THE NOTICE FOR TE RMINATION OF THE AGREEMENT WHICH ACCORDING TO KGHPL/HCIPL ARE I.T.A. NO.4638/DEL/2016 7 IRREVOCABLE. THE APPELLANT ALSO OFFERED TWO PAY ORD ERS DT. 21.04.2016 OF RS.2.50 CRORE EACH TO THE OTHER PARTY . HOWEVER, THE MATTER IS STILL SUBJUDICE BEFORE THE HONBLE DE LHI HIGH COURT. 3.1.7 IT THEREFORE TRANSPIRES THAT AGAINST THE IMPU GNED AMOUNT OF RS.5.00 CRORE KGHPL/HCIPL HAS MADE CLAIM OF MORE THAN RS. 14.00 CRORE FROM THE APPELLANT. THUS, WHILE ON THE ONE HAND, IT IS NOT CERTAIN EVEN AS OF TODAY AS TO WHET HER THE APPELLANT HAS TO PAY RS.14.00 CRORE OR ANY SUCH SUM WHICH THE HONBLE HIGH COURT MAY DECIDED WHICH WOULD, IF PAID , BE AN EXPENDITURE IN THE HANDS OF THE APPELLANT OR WHETHE R THE APPELLANT WOULD BE ALLOWED TO RETAIN RS.5.00 CRORE OR WHETHER THE TWO AMOUNTS WOULD BE ADJUSTED AGAINST EACH OTHE R, THE SERVICE TO BE RENDERED BY KGHPL/HCIPL OR THE APPELL ANT IS STILL IN A LIMBO THE PROJECT HAVING NOT TAKEN OFF AS YET, AND THEREFORE TREATING THE SAID AMOUNT OF RS.5.00 CRORE AS REVENU E RECEIPT BEING CONTINGENT UPON THE DECISION OF THE HONBLE H IGH COURT THE SAID CANNOT BE CONSIDERED AS INCOME OF THE APPE LLANT DURING THE YEAR UNDER CONSIDERATION. THE TAXABILITY OR OTHERWISE OF THE IMPUGNED AMOUNT WOULD ARISE IN THE YEAR WHEN IT IS CONSIDERED AS RECEIPT DEPENDING UPON THE DEVELOPMEN T OF THE PROJECT BY THE OTHER PARTY AND IN TERMS OF THE DECI SION OF THE HONBLE HIGH COURT. I HOLD ACCORDINGLY. THE ADDITIO N MADE IS THEREFORE DELETED. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE POIN TED OUT THAT THERE HAS BEEN SETTLEMENT AGREEMENT ENTERED BE TWEEN THE ASSESSEE AND THE SAID PARTY ON 11.01.2017 AND H ONBLE DELHI HIGH COURT VIDE JUDGMENT AND ORDER DATED 18.0 1.2017 HAS HELD THAT IN VIEW OF THE SETTLEMENT AGREEMENT, PETITION I.T.A. NO.4638/DEL/2016 8 FILED BY THE ASSESSEE IS DISPOSED OFF AND MATTER IS TO RESOLVED IN TERMS OF SETTLEMENT AGREEMENT. THUS, THE ISSUE O F TAXABILITY CAN BE DECIDED IN VIEW OF THE SETTLEMENT AGREEMENT AND THE JUDGMENT OF THE HONBLE HIGH COURT. 6. LD. DR ALSO ACCEPTED THAT THE MATTER CAN GO BAC K TO THE ASSESSING OFFICER TO DECIDE THE ISSUE ON THE BASIS OF DECISION OF HONBLE HIGH COURT. 7. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDER AND MATERIAL PLACED O N RECORD, WE FIND THAT THE ASSESSEE HAD ENTERED INTO AN AGREE MENT WITH THE KGHPL FOR DEVELOPMENT AND CONSTRUCTION OF RESID ENTIAL GROUP HOUSING SOCIETY ON THE LAND BELONGING TO THE ASSESSEE, WHEREBY THE OTHER PARTY WAS REQUIRED TO OBTAIN APPR OPRIATE DEVELOPMENT LICENSES FROM DIRECTOR TOWN AND COUNTR Y PLANNING HARYANA AND ASSESSEE HAD AGREED TO TRANSF ER AND ASSIGN EXCLUSIVE DEVELOPMENT RIGHTS OVER THE LAND T O KGHPL IN CONSIDERATION OF ALL THE VARIOUS CONDITIONS AS H IGHLIGHTED ABOVE IN THE FOREGOING PARAGRAPH. THE KGHPL WAS TO PAY SUM OF RS.5 CRORES TO THE ASSESSEE AS A NON-REFUNDABLE DEPOSIT IN LIEU OF TRANSFER OF RIGHT AND INTEREST ETC. IN ADDI TION TO THE DEVELOPMENT, CONSTRUCTION AND HANDING OVER THE ASSE SSEE SHARE. FURTHER DUE TO NON-FULFILLMENT OF VARIOUS CO NDITIONS, DISPUTE HAS ARISEN BETWEEN THE TWO PARTIES AND THE MATTER WAS CHALLENGED BEFORE THE HONBLE DELHI HIGH COURT. LD. CIT (A) HAS NOTED THE CONTROVERSY BETWEEN THE PARTIES A S INCORPORATED ABOVE AND HAS HELD THAT, TILL HONBLE HIGH COURT I.T.A. NO.4638/DEL/2016 9 DECIDES, THE AMOUNT OF RS.5 CRORE IS PURELY CONTING ENT AND DEPENDING UPON THE DECISION OF THE HONBLE HIGH COU RT THE SAME CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. FURTHER, THE TAXABILI TY OF THE SAID AMOUNT WOULD ARISE IN THE YEAR WHEN IT IS CONS IDERED AS RECEIPT DEPENDING UPON DEVELOPMENT OF THE PROJECT A ND IN TERMS OF THE DECISION OF THE HONBLE HIGH COURT. 8. NOW BEFORE US, IT HAS BEEN BROUGHT ON RECORD THAT A SETTLEMENT AGREEMENT HAS BEEN ENTERED BETWEEN THE P ARTIES ON 11.07.2017 AND THE HONBLE DELHI HIGH COURT VIDE JUDGMENT AND ORDER DATED 18.01.2017 HAS TAKEN THE SETTLEMENT AGREEMENT ON RECORD AND HAS DISPOSED OF THE SAID PETITION TO BE DECIDED IN TERMS OF SETTLEMENT AGREE MENT. SINCE THE ISSUE HAS ATTAINED FINALITY IN TERMS OF SETTLEM ENT AGREEMENT DULY APPROVED BY THE HONBLE HIGH COURT, THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSIN G OFFICER TO IMPLEMENT THE SAID SETTLEMENT AGREEMENT AND DECIDE THE ISSUE. ACCORDINGLY, THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2020. SD/- SD/- [G.S. PANNU] [AMIT SHUKLA] VICE PRESIDENT JUDICIAL MEMBER DATED: 13 TH JANUARY, 2020 PKK: