ITO 8(1)(4), MUMBAI V. AVIS MOTORS P. LTD, MUMBAI

ITA 5422/MUM/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3274 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURLI
• Keywords: Business income

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ITA/5422/MUM/2010 , / ASSESSMENT YEARS: 2007-08 THE INCOME TAX OFFICER-8(1)(4) ROOM NO.206, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. AVIS MOTORS PVT. LTD. NEXT TO GUPTAS PETROL PUMP SAFED POOL, ANDHERI KURLA ROAD, SAKI NAKA (E),MUMBAI-400 072. PAN:AAFCA 8187 Q ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.MURLI ASSESSEE BY: SHRI MEHUL SHAH / DATE OF HEARING: 29.03.2016 / DATE OF PRONOUNCEMENT: 29.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER,DTD.05/04/2010 OF THE CIT (A) -16,MUMBAI THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 30/10/ 2007, DECLARING TOTAL INCOME AT RUPEES NIL.THE AO COMPLET ED THE ASSESSMENT,U/S.143(3) OF THE ACT, ON 4/12/ 2009,DETERMINING THE INCOME OF THE ASSESSE E AT RS. 4.80 CRORES. 2 .EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE A DDITION OF RS.4.79 CRORES ON ACCOUNT OF SALE PROCEEDS RECEIVED ON ACCOUNT OF SALE OF A PREM ISES.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD PURCHASED AN IMM OVABLE PROPERTY LOCATED AT ANDHERI- KURLA ROAD FROM JET AIRWAYS PRIVATE LIMITED(JET)AS PER PURCHASE AGREEMENT DATED 17/07/ 2006 FOR A TOTAL CONSIDERATION OF RS. 12.16 CRORES, THAT THE ASSESSEE HAD ENTERED INTO ANOTHER AGREEMENT FOR SALE ON 22/06/2006WITH HARSHIL HAREN CHOKSEY(HHC) AND BHUPINDER SINGH (BS)AND MANISHA CHOKSEY(MC),THAT THE ASSESSEE HAD N OT DISCLOSED ANY PROFIT ON THE SALE OF FIRST FLOOR OF THE BUILDING NOR HAD IT SHOWN THE RE CEIPT OF RS.5 CRORES IN ITS BALANCE SHEET.THE AO ISSUED A SHOW CAUSE NOTICE TO EXPLAIN AS TO WHY THE ADVANCE AMOUNT RECEIVED FROM HHC(RS.2.71CRORES),BS(RS.1.77 CRORES) AND MC(RS.30L AKHS) RESPECTIVELY WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND WERE DIRECTLY CREDITED IN THE BOOKS OF ACCOUNTS OF THE DIRECTORS OF THE COMPANY.HE FURTHER ASKED AS TO WHY THE SALE CONSIDERATION RECEIVED FROM THE ABOVE MENTIONED PARTIES(RS.4.79CRORES)SHOULD NOT BE TREAT ED AS INCOME ON SALE OF THE FIRST FLOOR OF THE PREMISES.AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE,THE AO CONCLUDED THAT SALE PROCEEDS OF RS. 4.79 CRORES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE COMPANY, THAT SAME WERE RECORDED IN THE PERSONAL ACCOUNT OF THE DIRECTORS. HE OBSERVED THAT THE ASSESSEE HAD CLAIMED THE TERMINATION OF SALE AGREEM ENT,THAT IT HAD NOT SUBMITTED ANY COPY OF THE SAID AGREEMENT DURING THE ASSESSMENT PROCEEDING S,THAT IT WAS BUSINESS INCOME OF THE ASSESSEE.FINALLY,HE MADE AN ADDITION OF RS.4,80,60, 000/-TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED THAT THE AS SESSEE HAD ENTERED INTO MOU WITH JET, THAT IT ALSO ENTERED INTO AN AGREEMENT FOR SALE OF FIRST FLOOR OF THE BUILDING TO BE CONSTRUCTED AFTER TAKING THE POSSESSION OF THE PROPERTY WITH TH REE PERSONS,THAT THE SALE AGREEMENT FOR FIRST FLOOR WAS MADE EVEN BEFORE THE POSSESSION WAS TAKEN ,THAT IN SEPTEMBER,2007 THE AGREEMENT FOR SALE DEED DATED TO 22/06/2006 WAS TERMINATED BY BOTH THE PARTIES,THAT ADVANCES RECEIVED 5422/10-AVIS 2 FROM HHC,BS AND MC WAS REPAID,THAT THE EVIDENCE DEM ONSTRATING THE REPAYMENT WAS MADE AVAILABLE TO THE AO, HAT THE AGREEMENT CANCELLING T HE PURCHASE DEED WAS SUBMITTED TO THE AO, THAT THE AGREEMENT DATED 22/6/2006 WAS NOT A SA LE DEED BUT WAS AN AGREEMENT TO SALE THE PREMISES MENTIONED THEREIN ON FULFILLING OF CERTAIN CONDITIONS,THAT IT HAD NOT GIVEN POSSESSION OF THE FIRST FLOOR TO THE BUYERS, THAT BY MISTAKE T HE AMOUNT FROM THE PURCHASER OF THE FIRST FLOOR WAS SHOWN IN THE NAMES OF THE DIRECTORS OF THE ASSE SSEE. 3.1 AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT AGREEMENT OF SALE DATED 22/6/2006 WAS ENTERED BETWEEN THE ASSESSEE AND THE THREE BUYERS FOR THE SALE OF FIRST FLOOR OF THE BUILDING TO BE C ONSTRUCTED FOR SALE CONSIDERATION OF RS. 5 CRORES, THAT THE ASSESSEE HAD RECEIVED RS. 4.80 CRO RES IN ADVANCE,THAT THE SUM IN QUESTION WAS SHOWN IN THE PERSONAL ACCOUNT OF THE DIRECTORS, THA T THE PROPERTY WAS PURCHASED BY THE ASSESSEE ON 17/07/2006 FOUR TOTAL SALE CONSIDERATIO N OF RS.12.16 CRORES,THAT THE ASSESSEE HAD ADMITTED THAT BY MISTAKE THE ADVANCE RECEIVED WAS T AKEN TO THE ACCOUNTS OF THE DIRECTORS IN PLACE OF SHOWING THE SAME IN THE BOOKS OF ACCOUNTS OF THE COMPANY, THAT THE SALE AGREEMENT DATED 22/6/2006 WAS TERMINATED BY THE AGREEMENT MAD E ON 17/09/2007,THAT THE AMOUNT RECEIVED IN ADVANCE WAS REFUNDED BACK TO THE BUYERS , THAT THE ASSESSEE HAD PROVED THE GENUINENESS OF THE TRANSACTION BY SUBMITTING THE CO NFIRMATION OF THE PURCHASES,THAT THE AGREEMENT OF JUNE 2006 WAS MADE WITHOUT HAVING THE POSSESSION OF THE LAND AND BUILDING BY THE ASSESSEE,THAT THE AO HAD NOT DISPUTED THE GENUI NENESS OF THE TRANSACTION OF RS. 4.80 CRORES,THAT THE ADVANCE RECEIVED BY THE ASSESSEE CO ULD NOT BE TREATED AS INCOME BECAUSE THE ASSESSEE WAS NOT IN POSSESSION OF THE LAND. FINALLY , HE DELETED THE ADDITION MADE BY THE AO. 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR) STATED THAT ASSESSEE HAD NOT SHOWN THE INCOME IN ITS BOOKS OF A CCOUNTS RECEIVED FROM THE PURCHASERS OF FIRST FLOOR,THAT THERE WAS NO JUSTIFICATION FOR SHO WING THE ADVANCE IN THE HANDS OF THE DIRECTORS,THAT THE ASSESSEE HAD RECEIVED A SUM OF R S.4.80 CRORES IN JUNE,2006 BUT SAME WAS NOT SHOWN IN THE RETURN,THAT THE AO WAS JUSTIFIED I N MAKING THE ADDITION.THE AUTHORISED REPRESENTATIVE(AR)CONTENDED THAT THE ASSESSEE HAD R ETURNED BACK THE MONEY TO THE PURCHASER OF THE FIRST FLOOR OF THE BUILDING TO BE CONSTRUCTE D,THAT THE TECHNICAL MISTAKE OF SHOWING THE INCOME IN THE HANDS OF THE DIRECTORS WAS EXPLAINED TO THE AO,THAT TO OBTAIN THE LOAN FROM THE BANK THE ASSESSEE HAD SHOWN THE ADVANCE IN THE BOOK S OF ACCOUNTS OF THE DIRECTORS, THAT THE SALE HAD NOT TAKEN PLACE IN JUNE 2006. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD ENTERED INTO MEMORANDA OF UNDERSTANDING WITH JET FOR PURCHASE OF A PROPERTY F OR RS. 12.61 CRORES,THAT THE AGREEMENT BETWEEN THE ASSESSEE AND JET WAS ENTERED INTO IN JU LY 2007,THAT BEFORE GETTING THE POSSESSION OF THE PROPERTY THE ASSESSEE HAD ENTERED INTO AN AG REEMENT WITH THREE PURCHASERS ON 22/ 06/ 2006,THAT AS PER SAID AGREEMENT THE ASSESSEE AGREED TO HAND OVER THE FIRST FLOOR OF THE PROPERTY TO THE BUYERS,THAT THE PURCHASE AGREEMENT BETWEEN T HE ASSESSEE AND JET AIRWAYS WAS CANCELLED IN SEPTEMBER 2007, THAT THE ASSESSEE HAD PAID JET RS. 12.61 CRORES IN THE MONTH OF JULY,2006, THAT THE ASSESSEE HAD RETURNED THE MONEY TO HHC,BS AND MC AFTER THE AGREEMENT WITH JET WAS CANCELLED.WE ARE OF THE OPINION THAT M ONEY RECEIVED BY THE ASSESSEE FROM THREE PERSONS WAS ADVANCE ONLY.THE ASSESSEE HAD NOT SHOWN THE ADVANCE IN ITS BOOKS OF ACCOUNTS IS ALSO A FACT. BUT,FOR THAT REASON,IT CAN NOT BE HELD THAT TAXABLE INCOME HAD ACCRUED TO OR IT WAS RECEIVED BY IT.THE ASSESSEE HAD MADE P AYMENTS TO THE JET.THUS,THE ADVANCE RECEIVED FROM THE BUYERS OF THE FIRST FLOOR OF THE PROPERTY WAS PAID FOR PURCHASING THE PROPERTY,IN OUR OPINION,THE FAA WAS JUSTIFIED IN HO LDING THAT THE ADVANCE RECEIVED BY THE ASSESSEE COULD NOT BE TREATED ITS INCOME.THEREFORE, CONFIRMING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. 5422/10-AVIS 3 AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH ,MARCH, 2016. 29 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.