Income Tax Officer, Ward9(1), Pune, Pune V. M/s. Aalok Developers, Pune, Pune

ITA 470/PUN/2022

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the CIT(A), which had allowed the deduction of Rs.3.60 crore by M/s. Aalok Developers, a construction and development company. The deduction was claimed on account of a forfeited advance payment made for the purchase of a property, which was intended to be used as stock-in-trade, not as a capital asset. The Assessing Officer initially disallowed the deduction, questioning the assessee's efforts to recover the forfeited amount. However, the CIT(A) reversed this decision after a remand report from the AO acknowledged the genuineness of the assessee's agreement and the normalcy of the incurred loss. The Tribunal, after reviewing the facts and the remand report, concurred with the CIT(A) and dismissed the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137743 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-02-2023
• Assessment Year: misc
• Appeal Filed On: 20-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, ‘A’ PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपीऱ सं. / ITA. No.470/PUN/2022 निर्धारण वषा / Assessment Year : 2014-15 ITO, Ward 9(1), Pune Vs. M/s. Aalok Developers 5022, 1 st Floor, S.N.16/1, Laxmannagar, Chinchwad, Pune – 411033 PAN: AARFA6741K Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP : This appeal by the Revenue is directed against the order dated 20.04.2022 passed by the CIT(A), Pune-13, in relation to assessment year 2014-15. 2. The Revenue is aggrieved by the deletion of addition of Rs.3.60 crore, which was claimed by the assessee as ‘business loss’ on forfeiture of advance for purchase of certain property in the business of construction activity. Assessee by Shri Suhas Bora Revenue by Shri Ramnath P Murkunde Date of hearing 10-02-2023 Date of pronouncement 10-02-2023 ITA No.470/PUN/2022 M/s. Aalok Developers 2 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of development and construction of properties, which requires purchase of certain lands or the properties as such. The assessee made an advance payment of Rs.3.60 crore to a certain person for purchase of a property, which was agreed to be purchased for sum of Rs.18 crore. The agreement was subject to the assessee paying the balance amount and taking possession of the property. As the assessee could not pay the remaining amount, the sum of Rs.3.60 crore paid earlier was forfeited by the seller and claimed by the assessee as deduction. The Assessing Officer (AO) did not allow the deduction on the ground that no efforts were made by the assessee for recovery of the amount, hence deduction was not permissible. During the course of the first appellate proceedings, a remand report was called for from the AO. On the basis of such remand report, the ld. CIT(A) deleted the addition. Aggrieved thereby, the Revenue has come up in appeal before the Tribunal. 4. Having heard both the sides and gone through the relevant material on record, it is seen that the assessee paid Rs.3.60 crore to the seller of property for its purchase. As the transaction could ITA No.470/PUN/2022 M/s. Aalok Developers 3 not fructify, the advance amount was forfeited, for which the assessee claimed deduction. The property in question was not purchased as a capital asset but as stock-in-trade. If the transaction had gone through, the purchase price of Rs.18 crore would have been debited to the assessee’s Profit and loss account and not to the Balance sheet. It is elementary that if some loss is incurred in respect of stock-in-trade, such loss has to be allowed as deduction. In the extant case, the ld. CIT(A) called for a remand report from the AO, whose relevant parts have been reproduced on pages 11 onwards. The AO in the remand report admitted that the observations of the AO in the original assessment order to the effect that the assessee did not make any efforts to retrieve the money advanced, were not correct; the assessee genuinely entered into an agreement for purchase of property and loss was rightly incurred; the vendor admitted the receipt of advance as well as its forfeiture. In view of foregoing facts, it becomes abundantly clear that the assessee entered into a genuine agreement for purchase of the property and the loss was incurred in the normal course of business which, therefore, could ITA No.470/PUN/2022 M/s. Aalok Developers 4 not have been disallowed. We, therefore, countenance the impugned order. 5. In the result, the appeal is dismissed. Order pronounced in the Open Court on 10 th February, 2023. Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 10 th February, 2023 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. 5. The CIT(A)-13, Pune The Pr. CIT-3, Pune DR, ITAT, ‘A’ Bench, Pune आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune ITA No.470/PUN/2022 M/s. Aalok Developers 5 Date 1. Draft dictated on 10-02-2023 Sr.PS 2. Draft placed before author 10-02-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *