GREEN HABITATS PRIVATE LIMITED , MUMBAI V. ACIT-3(1)(2), MUMBAI

ITA 5991/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2809 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 25-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: CHETAN KARIA
• Keywords: Capital asset; Business income; Diversion of income; Bad and doubtful debts; Corroborative evidences
• Section: 143(3); 201; 13

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 5991 /MUM/ 201 7 (ASSESSMENT YEAR 20 14 - 1 5 ) GREEN HABITATS PVT. LTD. 514, DALAMAL TOWERS 211, FPJ MARG NARIMAN POINT MUMBAI - 400 021. V S . DCIT, CIRCLE - 3(1)(2) ROOM NO. 607 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 6452/MUM/2017 (ASSESSMENT YEAR 2014 - 15) ACIT, CIRCLE - 3(1)(2) ROOM NO. 607 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. V S . GREEN HABITAT S PVT. LTD. 514, DALAMAL TOWERS 211, FPJ MARG NARIMAN POINT MUMBAI - 400 021. ( APPELLANT ) ( RESPONDENT ) PAN : AACCG6559P ASSESSEE BY SHRI CHETAN KARIA DEPARTMENT BY SHRI AJAY KUMAR DATE OF HEARING 17.12 . 20 19 DATE OF PRONOUNCEMENT 0 6 . 0 3 . 20 20 O R D E R PER SHAMIM YAHYA (AM) : - THESE ARE APPEALS BY THE ASSESSEE AND REVENUE ARISING OUT OF THE ORDER OF LEARNED CIT(A) DATED 12.7.2017 AND PERTAIN TO A.Y. 2014 - 15. 2. ASSESSEE APPEAL : GROUNDS OF APPEAL READ AS UNDER : - 1. THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ADDITION MADE BY THE ASSESSING OFFICER OF RS. 2 , 96,29,01,000 / - TO THE EXTENT OF 5% THEREOF. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT NO INCOME ACCRUED OR AROSE TO THE APPELLANT ON ACCOUNT OF E - AUCTION OF PROPERTY BY HDFC. GREEN HABITATS PVT. LTD. 2 3 . WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN R EJECTING THE CLAIM OF THE APPELLANT THAT TH E ALLEGED AMOUNT RECEIVABLE BY APPELLANT ON E - AUCTION IS ALLOWABLE AS BAD DEBTS OR BUSINESS LOSS. 4. THE APPELLANT PRAYS THAT: I ) ADDITION SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY BE DELETED AND IT MAY BE HELD THAT N O AMOUNT IS ASSESSABLE IN THE HANDS OF THE APPELLANT ON THE SAID GROUND; II) RECOVERY OF DEMAND IN DISPUTE MAY BE STAYED TILL THE HEARING AND DISPOSAL OF APPEAL; III) ANY OTHER RELIEF YOUR HONOURS MAY DEEM FIT. 3. REVENUES APPEAL : GROUNDS OF A PPEAL READ AS UNDER : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE 5% OF SALE RECEIPT AS ASSESSEE'S INCOME THOUGH IN PRINCIPLE, THE LD. CIT(A) WAS IN AGREEMENT WITH FINDINGS OF THE ASSESSIN G OFFICER ABOUT THE TREATMENT OF E - AUCTION RECEIPT AS BUSINESS INCOME. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION ON ACCOUNT OF AMOUNT RECEIVED THROUGH E - AUCTION OF THE IMPUGNED L AND AND PROPERTY TO ONLY 5% O F THE RECEIPT WITHOUT APPRECIATING THE FACT THAT THE AMENDED FACILITATION AGREEMENT BETWEEN THE ASSESSEE AND HPGPL ON WHICH THE DECISION IS BASED, HAS NOT BEEN REGISTERED AND CANNOT BE RELIED UPON. ' 3. WHETHER ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRI CTING T HE ADDITION OF RS. 2 , 96,29,01,000 O N ACCOUNT OF AMOUNT RECEIVED THROUGH E - AUCTION OF THE IMPUGNED LAND AND PROPERTY TO ONLY 5% OF THE RECEIPT I.E. RS. 14,81,45,050/ - WITHOU T APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY EVIDENCE RELATED TO THE CONSTRUCTION ON THE PROPERTY AND COST OF IT ON THE DATE OF THE E - AUCTION EVEN AFTER GIVING VARIOUS OPPORTUNITIES BY THE ASSESSING OFFICER OR EVEN DURING APPELLATE P ROCEEDINGS.' 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED TO RESTRICT SALE CONSIDERATION OF RS.2 , 96,29,01, 000 / - TO 5% I.E. RS.14,81,45,050/ - WHEN WHOLE LOAN AMOUNT WAS SANCTIONED AGAINST THE ASSESSEE COM PANY'S LAND, WHICH WAS MORTGAGED, WHICH SUGGESTED THE VALUE OF THE LAND WHICH WAS SUBSEQUENTLY E - AUCTIONED 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND. IN LAW, THE LD. CIT(A) WAS JUSTIFIED WHILE RESTRICTING THE SALE CONSIDERATION TO 5% WIT HOUT APPRECIATING THE FACTS THAT LAND COST IS MAJOR COMPONENT OF INVENTORY IN GREEN HABITATS PVT. LTD. 3 REAL ESTATE PROJECTS AND THAT THE ASSET MORTGAGED FOR A JOAN OF RS.2 , 96,29,01,000/ - BY THE HDFC WAS THE LOAN ITSELF AND THIS IS FURTHER ESTABLISHED, BY THE SCHEDULE 1 OF SALE AGR EEMENT BETWEEN HDFC LIMITED AND M/S EVITA CONSTRUCTION PUT. LTD. WHEREIN THE ONLY ASSET NARRATED IS THE PIECE AND PARCEL OF LAND. 5.1 THE LD. CIT(A) ERRED WHILE DELETING THE ADDITION WITHOUT APPRECIATING THAT THE VALUE OF LAND IS SALIENT IN SUCH PROJECT A ND FURTHER APPRECIATION OF THE VALUE CONSTITUTE SIGNIFICANTLY TO THE SALE PRICE OF PROJECT/UNITS THEREON IN A METROPOLITAN CITY LIKE CHENNAI. FURTHER THE ASSESSEE COMPANY HAD PURCHASED THIS LAND IN YEAR 2006 WHICH SUGGESTED LONG HOLDING PERIOD AND APPRECIA TION OF ITS VALUE OVER THE YEARS? 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT CONSIDERING THAT THE ASSESSEE BY WAY OF ADOPTING THIS METHOD OF TRANSFER OF LAND HAS EVENTUALLY SHIFTED THE INCOME COMP ONENT WITHOUT PAYING TAXES DUE TO APPRECIATION O F PRICES OF LAND BEING THE ASSET IN THIS CASE BY CREATING AN OVERRIDING TITLE? THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 4. BRIEF FACTS OF THE CASE ARE AS UNDER : - THE ASSESSEE IS A REGISTERED COMPANY AND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF REAL ESTATE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON GOING THROUGH BALANCE SHEET AND ITS A NNEXURES , THE ASSESSING OFFICER OBSER VED THAT INVENTORIES IN THE FORM OF TURNER SHOWN AT RS. 3,89,47,109/ - AS ON 31/3/2013 WAS SHOWN AS 'NIL' AS ON 31/3/2014. THE PROFIT AND LOSS ACCOUNT FOR THE YEAR SHOWS REVENUE FROM SALE OF UNDIVIDED SALE OF LAND AT RS, 3,53,18,899 / - AND THE CORRESPONDING COST OF LAND SOLD WAS SHOWN AT RS, 3,47 , 45,141/ - . T H E NOTES/ANNEXURES ALSO SHOWS THE COST OF LAND AT RS. 3,47,45,141 / - . DETAILS OF COMPARATIVE FORMAT BALANCE SHEET FILED BY THE APPELLANT SHOWS THAT AN AMOUNT OF RS. 2,53,61,691 / - WAS SHOWN AS 'ADVANCE HOL DING COMPANY' AS ON 31/3/2014. FURTHER, TH E ASSESSING OFFICER ALSO NOTED THAT AN AMOUNT OF RS. 5,02,54,749 / - S H OWN AS 'ADVANCE RECEIVED FROM CUSTOMERS' AS ON 31/3/2013 HAD BECOME NIL FO R THE YEAR ENDING 31/3/2014. THE ASSESSING OFFICER REFERRED TO THE F ACTS THAT EMERGED DURING ASSESSMENT PROCEEDINGS OF ANOTHER CASE M/S. EVITA CONSTRUCTIONS PVT. LTD. WHEREIN IT WAS BEEN GIVEN IN THE SUBMISSIONS MADE BY EVITA CONSTRUCTIONS PVT. LTD. THAT IT HAD ACQUIRED AN IMMOVABLE PROPERTY BEING PIECES AND PARCEL OF UNDI VIDED LAND GREEN HABITATS PVT. LTD. 4 OF 40.76 ACRES WHICH IS SAME PROPERTY THE ASSESSEE - COMPANY HAD MORTGAGE D FOR THE OUTSTANDING LIABILITIES OF THE HOLDING CO . - HPGPL. THE ASSESSING OFFICER, THEREFORE, ISSUED A SHOW CAUSE NOTICE REQUIRING THE APPELLANT TO EXPLAIN AS TO WHY THE SALE OF INVENTORY OF RS. 29 , 62,901,000 / - THROUGH E - AUCTION SHOULD NOT BE CONSIDERED INCOME OF THE ASSESSES COMPANY. FURTHER, A SUPPLEMENTARY SHOW CAUSE NOTICE WAS ALSO ISSUED TO THE ASSESSEE SINCE THE ASSESSING OFFICER OBSERVED THAT THE SALE CERTIFICATE IS SUED BY THE HDFC HAD A DIRECT BEARING ON THE ISSUE AND REAFFIRMED THE FACTUAL POSITION. I N RESPONSE TO THE SHOW CAUSE NOTICES, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE FILED VARIOUS SUBMISSIONS DISCUSSING THEREIN THE SEQUENCE OF EVENTS AND OTHER PRELI MINARY DETAILS RELATING TO THE ASSESSEE COMPANY'S ACCOUNTING OF THE SALE OF MORTGAGE PROPERTY AND THAT OF EVITA CONSTRUCTIONS PVT. LTD. THE ASSESSEE FURTHER MADE SUBMISSIONS WHEREIN A DISCUSSION ON THE ARRANGEMENT OF MORTGAGE AND THE SUBSEQUENT SALE BY THE LENDER I.E. HDFC HAD BEEN MADE AND IT WAS ALSO CONTENDED THAT THE SALE RECEIPTS ON AUCTIONS WERE NOT TAXABLE IN THE HANDS OF THE ASSESSEE COMPANY AND RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS. THE ASSESSEE ALSO SUBMITTED THE DOCUMENTS FROM HDFC AND DETAIL S OF DEVELOPMENT AND CONSTRUCTION OF BUILDINGS AS ON 31/3/2014 ALONGWITH THE LIST OF OTHER CO - MORTGAGORS. 5. THE ASSESSING OFFICER CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND ANALYSED THE FACTS OF THE CASE AND STATED THAT THE ASSESSEE ACQUIRED IN PIECE S AND PARCELS OF LAND AT KANCHIPURAM FOR A CONSIDERATION OF RS. 20.38 LAKHS IN THE YEAR 2006. THE ASSESSEE - COMPANY ALONG WITH THE ASSESSEE 'S HOLDING COMPANY HPGPL WERE TO HAVE DEVELOPED THE SAID PROPERTY UNDER A FACILITATION AGREEMENT. IN THE YEAR 2008, TH E ASSESSEE 'S HOLDING COMPANY HPGPL AVAILED RS. 550 CRORES AS CONSTRUCTION LOAN FROM HDFC FOR WHICH THE ASSESSEE - COMPANY HAD MORTGAGED ITS LAND PROPERTY. THUS, THE ASSESSEE 'S PROPERTY (INVENTORS) OF BOOK VALUE RS. 8,89,47,109/ - WAS MORTGAGED AGAINST THE LO AN OF RS. 550 CRORES. THE HOLDING COMPANY HPGPL DEFAULTED IN THE PAYMENT OF THE LOAN TAKEN AND CONSEQUENTLY THE LENDER - HDFC INVOKED THE SAFAESI ACT AND APPROPRIATED THE MORTGAGED PROPERTY SOLD (E AUCTION) THE SAME TO EVITA GREEN HABITATS PVT. LTD. 5 CONSTRUCTIONS PVT. LTD. FOR A CO NSIDERATION OF RS. 2 , 96,29,01, 000 / - . AS A RESULT THE ASSESSEE COMPANY MADE THE FOLLOWING ADJUSTMENTS - INVENTORIES IN THE FORM OF LAND WAS SHOWN AT RS. 8,89,47,109/ - AS ON 31/3/2013 WAS SHOWN AS NIL AS ON 31/3/2014, THE PROFIT AND LOSS ACCOUNT FOR THE YEAR SHOWED REVENUE FROM SALE OF UNDIVIDED SALE OF FLAT AT RS. 3,53,60,899/ - AND THE CORRESPONDING COST OF LAND WAS SHOWN AT RS. 3,47,45,141/ - . THE A NNEXURES/NOTES IN THIS REGARD SHOWED THE COST OF LAND AT RS. 3,47,45,141 / - . DETAILS OF 'COMPARATIVE FORMAT BALA NCE SHEET' FILED BY THE ASSESSEE SHOWED AN AMOUNT OF RS. 2,53,61,691/ - AS ADVANCE HOLDING COMPANY AS ON 31/3/2014. FURTHER AN AMOUNT OF RS. 5,02,54,749/ - WAS SHOWN AS ADVANCE RECEIVED FROM CUSTOMERS AS ON 31/3/2013 HAD BECOME NIL FOR THE YEAR ENDING 31/3/ 2014. THE ASSESSING OFFICER OPINED THAT I N VIEW OF THE FACTS , THE CONTENTION OF THE ASSESSEE , THAT THE RECEIPTS ARISING FROM OPTION OF THE MORTGA GED PROPERTY IS AGAINST THE DEVELOPMENT (CONSTRUCTION OF BUILDING AND INFRASTRUCTURE), RECEIVABLE FROM CUSTOMER S UPON SALE OF LAND OF THE ASSESSEE COMPANY , APPEARED TO BE INCORRECT AS THE DESCRIPTION OF THE RIGHTS ENCUMBERED AS ENLISTED IN THE SALE CERTIFICATE ISSUED BY HDFC SPEAKS OF ONLY THE IMMOVABLE PROPERTY AS PIECE AND PARCEL OF THE LAND. THEREFORE, WITH REGA RD TO THE DESCRIPTION OF THE PROPERTY, THE ASSESSEE WAS ASKED TO CLARIFY AND EXPLAIN WITH ALL THE SUPPORTING EVIDENCES THE BREAKUP OF THE VALUE SHOWN UNDER 'INVENTORY'. HOWEVER THE ASSESSEE COULD NOT SUBMIT ANY MATERIAL OR DOCUMENTARY EVIDENCES TO SUBSTANT IATE THEIR CLAIM. 6. FURTHER, THE ASSESSING OFFICER OBSERVED THAT THE LANDED PROPERTY ADMEASURING 40 ACRES 76 CENTS SHOWN AS INVENTORY IN THE BALANCE SHEET VALUED AT RS. 8,89,47,109/ - AS ON 31/3/2013 WAS UNDER MORTGAGE WITH HDFC ON BEHALF OF HOLDING COMPAN Y - HPGPL. THE MORTGAGE BEING SECURITY WAS PROVIDED FOR FACILITATING THE HOLDING COMPANY - HPGPL TO AVAIL OF CONSTRUCTION LOAN OF RS. 550 CRORES FROM HDFC FOR ITS OWN BUSINESS PURPOSES. HPGPL DEFAULTED ON THE REPAYMENT OF LOAN AND INTEREST TO HDFC THEREBY CA USED HDFC TO INVOKE THE SARFAESI ACT, 2002 AND APPROPRIATED ALL THAT PIECES AND PARCELS OF LAND BELONGING TO THE ASSESSEE COMPANY AND E - AUCTIONING THE SAME GREEN HABITATS PVT. LTD. 6 TO M/S. EVITA CONSTRUCTIONS PVT. LTD. FOR A CONSIDERATION OF RS. 2 , 96,29,01,000/ - . THE AMOUNT WAS AP PROPRIATED BY HDFC AGAINST LOAN TAKE N BY THE HOLDING COMPANY - HPGPL . THUS THE ASSESSEE COMPANY CARRIED OUT THE FOLLOWING ADJUSTMENTS TO ITS ACCOUNT FOR THE YEAR UNDER CONSIDERATION A. INVENTORY OF RS. 8,89,47,109/ - WAS WRITTEN OFF (SHOWN NIL AS ON 31/3 /2014). B. THE CREDITS OF THE HOLDING COMPANY HPGPL IN THE BOOKS OF THE ASSESSEE WAS ADJUSTED AGAINST THE WRITE OFF OF INVENTORIES C. ADVANCES RECEIVED FROM PROSPECTIVE CUSTOMERS WAS SHOWN ADJUSTED AGAINST THE INVENTORY'S WRITTEN OFF. THUS , ASSESSING OFFI CER HELD THAT IT WAS EVIDENT THAT THE ASSESSEE COMPANY'S INVENTORY WHICH WAS E - AUCTIONED BY HDFC FOR A CONSIDERATION OF RS. 296,29,01,0007 - WAS NOT ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE COMPANY BUT WAS WRITTEN OFF IN THE INVENTORY AT BOOK VALUE AND HA D SET OFF OF EQUIVALENT AMOUNT OF PAYABLES (CREDITORS - LIABILITY) TO THE HOLDING COMPANY. HENCE, ASSESSING OFFICER HELD THAT IT PROVED THAT THE ASSESSEE HAD ADMITTED TO THE BENEFIT ARISING IN THE HANDS OF HOLDING COMPANY - HPGPL ON ACCOUNT OF APPROPRIATION AN D E - AUCTION OF THE LAND BY HDFC AND THE FACT THAT THE QUANTUM OF BENEFIT ARISING TO THE HOLDING COMPANY - HPGPL TO THE EXTENT OF ITS LIABILITY BEING WRITTEN OFF BY HDFC ON ACCOUNT OF APPROPRIATION OF MORTGAGE RS. 296,29,01,000 / - . THUS, THE ASSESSING OFFICER POINTED OUT THAT THE PURPOSE FOR MORTGAGE OF PROPERTY WAS NOT IN THE EXIGENCIES OF ITS BUSINESS AND LACKED AN EXPEDIENCY OR MUTUALITY. ALSO, THE FACT THAT THE BORROWINGS BY THE HOLDING COMPANY - HPGPL CEASED FROM THE MOMENT THE MORTGAGED PROPERTY OF THE ASSE SSEE COMPANY WAS APPROPRIATED AND AUCTIONED BY THE LENDER HDFC UNDER SAFAESI ACT, 2002. THE BENEFIT OF THE CESSATION OF LIABILITY HAD ACCRUED IN THE HANDS OF THE HOLDING COMPANY HPGPL TO THE EXTENT OF ITS OUTSTANDING LIABILITY TOWARDS THE LOAN OF RS. 550 C RCRES TAKEN FROM HDFC AS ON THE DATE OF AUCTION. THE CEASED LIABILITY IN THE HANDS OF THE HOLDING COMPANY HPGPL TO THE EXTENT OF SALE PROCEEDS (E - AUCTION) FROM THE ASSESSEE - COMPANY'S MORTGAGED PROPERTIES GREEN HABITATS PVT. LTD. 7 WAS IN FACT THE INCOME THAT HAD SHIFTED FROM THE ASS ESSEE 'S HANDS TO THAT OF THE HOLDING COMPANY HPGPL. 7. THE ASSESSING OFFICER ALSO STATED THAT WHEN THE ASSESSEE COMPANY PLEDGED (MORTGAGED) THE PROPERTY (LAND), THEN IN THE CASE OF DEFAULT THE CREDITORS HDFC OF THE HOLDING COMPANY HPGPL SHALL HAVE ALL THE RIGHT TO SELL PROPERTY TO RECOVER ITS DUES. MOREOVER, THE SALE (E - AUCTION) OF THE PROPERTY (LAND) HAD RESULTED IN GAIN. THE CONSIDERATION ON TRANSFER/SALE OF THE PROPERTY HAD ULTIMATELY BENEFITED THE DEBTOR (HPGPL), ON WHOSE BEHALF, THE ASSESSEE HAD MORTG AGED THE PROPERTY TO HDFC . THE DEBTOR WHOSE DEBTS HAD BEEN DISCHARGED BY SA L E OF THE SAID PROPERTY (LAND) WAS, IN L AW, DEBTOR TO THE ASSESSEE FOR THE AMOUNT OF CONSIDERATION OF SALE. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT IT DID NOT RECEIVE ANY CONSIDERATION DIRECTLY ON ACCOUNT OF SALE/TRANSFER WAS WITHOUT ANY LOGIC AND HENCE NOT ACCEPTABLE TO THE ASSESSING OFFICER. IN FACT THE ASSESSEE HAD CREATED A FORFEITURE OF ITS INCOME IN FAVOUR OF THE HOLDING COMPANY HPGPL BY REPAYING THE HOLDING COMPANY'S DEBTS. THUS, THE ARRANGEMENT OF MORTGAGE AND SALE THEREON RESULTED IN EXCHANGE OF ITS PROPERTY (LAND) FOR THE AMOUNT OF DEBT OWNED BY THE HOLDING COMPANY HPGPL TO HDFC ON WHOSE BEHALF THE ASSESSEE COMPANY HAD STOOD GUARANTEE. THE ASSESSING OFFICER RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS AND REJECTED THE CONTENTION OF THE ASSESSEE THAT THE TRANSACTION SHOWN BY WAY OF MORTGAGE AND THAT TAXING PROVISIONS ARE NOT ATTRACTED. MOREOVER, THE ALTERNATIVE ARGUMENT OF THE ASSESSEE THAT EVEN IF THE PROCEEDS OF E - AUC TION ARE CONSIDERED AS INCOME IN THE HANDS OF THE ASSESSEE , THE SAME WOULD HAVE TO BE CONSIDERED AS BAD DEBTS OR BUSINESS LOSS ON ACCOUNT OF IT BEING NOT REALIZABLE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SITALDAS TIRATHDAS - 41 ITR 367. THUS, THE AMOUNT OF RS. 296,29,01,000 / - ARISING FROM E - AUCTION OF LAND WAS ACCORDINGLY HELD AS THE SALES RECEIVABLES IN THE HANDS OF THE ASSESSEE IN RESPECT OF THE LAND I. E. TRADING ASSET SOLD. AS THE ASSESSEE HAD WRITTEN OFF INVENTORY OF LAND OF AN AMOUNT OF RS. 8,88,47,107 / - , THE REMAINING AMOUNT OF GREEN HABITATS PVT. LTD. 8 SALE CONSIDERATION OF RS. 287,39,53,891 / - WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE . 8. THE ASSES SING OFFICER COMPLETED THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT AND PASSED ORDER DATED 30/12/2016 COMPUTING THE TO TAL INCOME AT RS. 287,39,53,890/ - . 9. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE LEARNED CIT(A). 10. LEARNED CIT(A) NOTED T HAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF REAL ESTATE. THE PRINCIPAL ACTIVITY OF ASSESSEE IS TO ACQUIRE LAND FOR DEVELOPING RESIDENTIAL TOWNSHIPS IN INDIA. THAT THE ASSESSEE COMPANY HAD ENTERED INTO FACILITATION AGREEM ENT GRANTING DEVELOPMENT RIGHTS TO HIRANANDANI PALACE GARDENS PRIVATE LIMITED (HPGPL), THE PROJECT DEVELOPMENT COMPANY (PDC) AND WHICH IS ALSO ITS HOLDING COMPANY. ASSESSEES FACILITATION AGREEMENT WITH HPGPL WAS DATED 1.4.2009 AS AMENDED ON 1.4.2010. LEA RNED CIT(A) ALSO NOTED THAT SEVEN LANDOWNING COMPANIES INCLUDING THE ASSESSEE ENTERED INTO FACILITATION AGREEMENTS WITH HPGPL FOR DEVELOPMENT OF A TOWNSHIP IN CHENNAI. THEREAFTER LEARNED CIT(A) REFERRED TO FACILITATION AGREEMENT WHICH GAVE HPGPL RIGHTS TO DEVELOP THE IMPUGNED LAND AND CONSTRUCT BUILDINGS AND AS PER THE AMENDED FACILITATION AGREEMENT, ASSESSEE COMPANY WAS ENTITLED TO THE TOTAL CONSIDERATION PAYABLE TOWARDS THE SAID LAND SUBJECT TO MAXIMUM 5% OF THE TOTAL PRICE AT WHICH THE CONSTRUCTED PROPE RTY WITH THE SAID IS SOLD TO THE FINAL CUSTOMER. THEREAFTER, LEARNED CIT(A) NOTED THAT HGPGL OBTAINED PROJECT FINANCE FROM HDFC IN THREE TRANCHES OF RS. 100 CRORES, RS. 300 CRORES AND RS. 150 CRORES DURING 2008 TO 2010 AGAINST COLLATERAL SECURITY OF THE IM PUGNED LAND OWNED BY THE ASSESSEE, STRUCTURE BUILT BY HPGPL RECEIVABLES FROM SALE OF UNITS/LAND AND OTHER RIGHTS SUCH AS STEP - IN RIGHTS. SUBSEQUENTLY, DUE TO SLOWDOWN IN REALTY SECTOR, HPGPL WAS UNABLE TO MEET REPAYMENT SCHEDULES OF THE LOAN FROM HDFC. INV OKING PROVISIONS OF SARFAESI ACT, THE HDFC MA D E E - AUCTION OF THE IMPUGNED PROPERTY WHICH HAD TWENTY ONE BUILDINGS STANDING AS AT THAT TIME. THE SAID GREEN HABITATS PVT. LTD. 9 PROPERTY INCLUDING LAND OWNED BY THE ASSESSEE AND CONSTRUCTION/DEVELOPMENT DONE TILL THAT DATE WAS TRANSFER RED TO ONE M/S. EVITA CONSTRUCTION PVT. LTD. (EVITA) VIDE SALE CERTIFICATE DATED 28.3.2014. THE AUCTION PROCEED WAS RETAINED BY HDFC, WHICH AMOUNTED TO RS. 296,29,01,000/ - . LEARNED CIT(A) OBSERVED THAT HE WAS NOT IN AGREEMENT WITH THE ASSESSING OFFICER THA T THE ENTIRE AMOUNT OF RS. 296 CRORES RECEIVED BY THE HDFC BELONGING TO THE ASSESSEE. HE NOTED THAT THE SALE AGREEMENT WAS OF THE IMPUGNED LAND INCLUDING ALL RIGHTS AND INTEREST S EXISTING ON THE SAID LAND. THIS LEARNED CIT(A) OPINED THAT THE SALE WAS CONS ISTING OF ALL THE CONSTRUCTION DONE BY HPGPL TILL THAT DATE. FURTHER, LEARNED CIT(A) REFERRED TO FACILITATION AGREEMENT WHICH PROVIDED THAT MAXIMUM 5% OF TOTAL PRICE ON WHICH CONSTRUCTED PROPERTY OF THE SAID LAND IS SOLD TO FINAL CUSTOMERS FOR ALL DEVELOPM ENT SHALL BELONG TO THE ASSESSEE. HENCE, LEARNED CIT(A) HELD THAT OUT OF RECEIPT OF RS. 296 CRORES BY HDFC THE ASSESSEE HAD RIGHTFUL CLAIM O F ONLY 5% I.E. RS. 14.8 CRORES. LEARNED CIT(A) FURTHER REJECTED THE ASSESSING OFFICERS OBSERVATION ON THE BUSINESS PRUDENCE ASPECT OF THE ASSESSEE WHICH WAS ADVERSELY COMMENTED BY THE ASSESSING OFFICER. HE NOTED THAT RS. 550 CRORES LOAN WAS SANCTIONED BY THE LENDOR ON THE REALTY DEVELOPMENT OF LAND AND IT WAS NOT ATTRIBUTABLE TO THE LAND ONLY. THEREAFTER LEARNED CIT(A) REFERRED TO THE CONCEPT OF DIVERSION OF INCOME AND REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SITALDAS TIRATHDAS (41 ITR 367) . HE NOTED THAT THE ARRANGEMENT B ETWEEN GH PL (ASSESSEE) AND HPGPL IN THE FORM OF FACILITATION AGREEM ENT IS COMPLETELY INDEPENDENT OF THE TERM LOAN AGREEMENT BETWEEN HDFC AND HPGPL FOR WHICH THE IMPUGNED LAND BELONGING TO ASSESSEE WAS MORTGAGE. T HAT THE FACILITATION AGREEMENT MAKES THE ASSESSEE (GHPL) ENTITLED TO 5% OF THE SALE PRICE OF THE DEVELOPED/CONS TRUCTED PROPERTY. HENCE, HE NOTED THAT IF THE ASSESSEE CHOOSES NOT TO PRESS THAT CLAIM FORGOES THAT CLAIM IT CANNOT BE CONSTRUED AS DIVERSION OF INCOME BY OVERRIDING TITLE. THEREAFTER LEARNED CIT(A) REFERRED TO FOLLOWING CASE LAWS TO REJECT THE ASSESSEES CLAIM THAT NO INCOME HAS ARISEN : - I) CIT VS. ROSHANBABU MOHAMMED HUSSEIN (144 TAXMAN 720) (BOM) II) CIT VS. ATTILI N. RAO (252 ITR 880) (SC) III) CIT VS. SHOORJI VALLABHDAS & CO. (46 ITR 144) GREEN HABITATS PVT. LTD. 10 1 1 . THEREAFTER LEARNED CIT(A) ALSO REJECTED THE ASSESSING OFFICERS REFERENCE THAT PURCHASER M/S. EVITA CONSTRUCTIONS PVT. LTD. AND THE ASSESSEE WERE RELATED PARTY. ACCORDINGLY, HE CONCLUDED BY DIRECTING THE ASSESSING OFFICER TO RESTRICT THE ADDITION ON ACCOUNT OF AMOUNT RECEIVED THROUGH E - AUCTION OF IMPUGNED LA ND AND PROPERTY BY HDFC TO ONLY 5% OF THE RECEIPT AND RECOMPUTED INCOME AFTER GIVING BENEFIT FOR AMOUNT OF INVENTORY OF LAND WRITTEN OFF. 1 2 . AGAINST THIS ORDER THE ASSESSEE AND REVENUE ARE IN CROSS APPEALS BEFORE US. 13 . WE HAVE HEARD BOTH THE COUNSEL A ND PERUSED THE RECORDS. THE REVENUE IN ITS GROUNDS OF APPEAL HAS RAISED GROUND THAT THE AMENDED FACILITATION AGREEMENT BETWEEN THE ASSESSEE AND HPGPL ON WHICH LEARNED CIT(A)S DECISION IS BASED HAS NOT BEEN REGISTERED AND SAME CANNOT BE RELIED UPON. IT HAS ALSO BEEN URGED THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE RELATED TO THE CONSTRUCTION ON THE PROPERTY AND COST OF IT ON THE DATE OF THE E - AUCTION. 14. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LAND HAS NOT BEEN VALUED. HE FURTHER REITERATED THAT THE FACILITATION AGREEMENT IS NOT REGISTERED AND NO DETAIL COST OF CONSTRUCTION THEREON WAS SUBMITTED. HE FURTHER SUBMITTED THAT THE COST OF LAND WAS RS. 8 CRORES AND HOW THE HPGPL COULD GET LOAN OF RS. 550 CRORES ON MORTGAGE OF SAID LAND. 1 5 . LEARNED COUNSEL OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THE FACILITATION AGREEMENT AS WELL AS AMENDMENT THERETO BOTH ARE NOT REGISTERED. THE SAME WERE ALREADY BEFORE THE ASSESSING OFFICER. HE SUBMITTED THAT NO ADVERSE INFERENCE HAS BEEN D RAWN BY THE ASSESSING OFFICER IN THIS REGARD. HE FURTHER SUBMITTED THAT THE HDFC GAVE LOAN OF RS. 550 CRORES NOT ON THE BASIS OF VALUE OF LAND. RATHER HE SUBMITTED THAT LOAN S WERE DISBURSED IN THREE TR A NCHES AS UNDER OVER THE PERIOD OF 2008 TO 2010 : - GREEN HABITATS PVT. LTD. 11 RS. 100 CRORES RS. 300 CRORES RS. 150 CRORES 1 6 . REFERRING TO THE TERMS OF AGREEMENT OF SANCTION OF LOAN LEARNED COUNSEL SUBMITTED THAT THE LOANS WERE LINKED TO STAGE OF CONSTRUCTION OF THE SAID LAND AND THEY WERE DISBURSED TO THEM AFTER THE DUE DI LIGENCE OF THE PROJECT DEVELOPMENT BY THE BANK. HE SUBMITTED THAT BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT RS. 550 CRORES LOAN WAS GIVEN ON MORTGAGE OF LAND OF RS. 8 CRORES. HE SUBMITTED THAT ALL THE COST OF CONSTRUCTION WAS INCURRED BY HPGPL AND NOT BY THE ASSESSEE. HENCE, LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER WAS TOTALLY WRONG IN TAKING ADVERSE INFERENCE THAT COST OF CONSTRUCTION IS NOT APPEARING IN ASSESSEES BOOK. FURTHER LEARNED COUNSEL CLAIMED THAT THE PROJECT WAS BEING CONSTRUCTED BY HPG PL. T HE PROJECT WAS E - AUCTIONED BY HDFC AND SUM WAS RECEIVED AMOUNTING TO RS. 296 CRORES BY HDFC AGAINST LOAN SANCTIONED TO HPGPL ON THE BASIS OF THEIR PROJECT DEVELOPED TILL THAT DATE. HE CLAIMED THAT THE ASSESSEE HAS NOT RECEIVED SINGLE PAISA OUT OF THAT . HENCE HE SUBMITTED THAT NO INCOME ACCRUED TO THE ASSESSEE. HE FURTHER CLAIMED THAT THE AMOUNT ITSELF RETAINED BY THE HDFC AGAINST LOAN SANCTIONED TO HPGPL. HENCE, LEARNED COUNSEL CLAIMED THAT THERE CANNOT BE ANY QUESTION OF INCOME ARISEN TO THE ASSESSEE. LEARNED COUNSEL FURTHER REFERRED TO THE DECISION OF HON'BLE APEX COURT FOR THE PROPOSITION OF DIVERSION OF INCOME BY OVERRIDING TOTALLY. I N THE ALTERNATIVE, LEARNED COUNSEL CLAIMED THAT EVEN PART OF THE AMOUNT IS TREATED AS INCOME OF THE ASSESSEE THE SAME SHOULD BE TREATED AS LOSS AS ASSESSEE HAS NOT RECEIVED ANY AMOUNT WHATSOEVER. HE FURTHER CLAIMED THAT LAND WAS ASSESSEES TRADING ASSET. THE LOAN OF TRADING ASSET SHOULD BE ALLOWED AS TRADING LOSS. HENCE, LEARNED COUNSEL CLAIMED THAT NO INCOME IS TO BE C OMPUTED IN THE HANDS OF THE ASSESSEE. 1 7 . UPON CAREFUL CONSIDERATION, WE NOTE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF REAL ESTATE. IT HAD ENTERED INTO FACILITATION AGREEMENT WITH ITS HOLDING COMPA NY GREEN HABITATS PVT. LTD. 12 HPGPL FOR DEVELOPMENT OF PROJECT IN CHENNAI ON THE LAND HOLDINGS BELONGING TO THE ASSESSEE AS WELL AS OTHER GROUP COMPANIES . IN 2008, THE SAID HPGPL WAS SANCTIONED LOAN OF RS. 550 CRORES AS CONSTRUCTION LOAN FROM HDFC TO BE DISBURSED , S UBSEQUENTLY ON TH E BASIS OF DEVELOPMENT OF THE CONSTRUCTION OF THE PROJECT . THE ASSESSEES LAND WHOSE B OOK VALUE OF RS. 8,88,47,107/ - WAS ALSO GIVEN AS MORTGAGE . THERE WAS ALSO AN AMENDED FACILITATION AGREEMENT. AS PER THIS AGREEMENT THE ASSESSEE COMPANY WAS ENTITLED TO 5% OF SALE PROCEEDS OF THE PROJECT DEVELOPED BY HPGPL. THERE WAS SOME DEVELOPMENT OF THE PROJECT AND SOME SALES WERE ALSO ACCOUNTED FOR. THE ASSESSEE COMPANY GOT 5% AS AGREED. 1 8 . IN THE MEANWHILE HOLDING COMPANY HPGPL GOT DISBURSAL OF THE L OAN OF RS. 55 0 CRORES. THE SAID DISBURSAL WAS DONE ON THE BASIS OF STAGE OF CONSTRUCTION AS PER THE SATISFACTION OF THE BANKER/LENDER. LOAN WAS DISBURSED IN THREE TRANCHES OF RS. 100 CRORES, RS. 300 CRORES AND RS. 150 CRORES DURING 2008 TO 2010 AGAINST COLLATERAL SECUR ITY OF THE INTER ALIA IMPUGNED LAND OWNED BY THE ASSESSEE STRUCTURE BUILT BY HPGPL RECEIVABLES FROM SALE OF UNITS/AND AND OTHER RIGHTS SUCH AS STEP - IN RIGHTS. SUBSEQUENTLY HPGPL WAS UNABLE TO MEET REPAYMENT SCHEDULES OF THE LOAN FROM HDFC. THE L ENDER INVOK ED PROVISIONS OF SARFAESI ACT AND THE PROPERTY WHICH INCLUDED LAND MORTGAGED BY THE ASSESSEE AND THE STANDING CONSTRUCTION THEREON WHICH COMPRISED OF TWENTY ONE BUILDINGS AT THAT POINT OF TIME W ERE AUCTIONED AND HDFC GOT RS. 296 CRORES AGAINST ITS LOAN. I N THIS CONNECTION IT IS FURTHER NOTED THAT THE OTHER GROUP COMPANIES OF HPGPL ALSO HAD AGREEMENTS WITH IT FOR DEVELOPMENT OF PROJECTS ON THEIR LAND AND SAME WERE ALSO MORTGAGED . O N THIS DEFAULT OF HPGPL , PROJECTS AND THE LAND BELONGING TO OTHER GROUP COMPA NIES WERE ALSO AUCTIONED BY THE HDFC AND ALONGWITH PRESENT AMOUNT TOTAL RS. 551 CRORES WERE REALIZED BY H DFC AGAINST LOAN TO HPGPL . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY HAS NOT ACCOUNTED FOR ANY PROCEEDS FOR DISPOSAL OF ITS LAND BY HDFC. T HE ASSESSING OFFICER OBSERVED THAT ANOTHER GROUP COMPANY I.E. M/S. EVITA CONSTRUCTION PVT. LTD. HAD PURCHASED THE SAID PROPERTY THROUGH E - AUCTION. THE ASSESSING OFFICER ASKED THE ASSESSEE COMPANY TO PROVE THAT THE GREEN HABITATS PVT. LTD. 13 ENTIRE RECEIPTS WERE NOT AGAINST THE VALUE OF LAND MORTGAGED BY THE ASSESSEE COMPANY. WHEN THE ASSESSING OFFICER WAS EXPLAINED THAT THE E - AUCTION BY THE LENDER NOT ONLY COMPRISED OF THE LAND BUT ALSO THE CONSTRUCTION THEREON BY HPGPL, RECEIVABLE AND OTHER ITEMS ON THAT DATE , T HE ASSESSING OFFICER WANTED THE ASSESSEE COMPANY TO PROVE AMOUNT SPENT BY IT ON THE CONSTRUCTION. THE ASSESSING OFFICER TOOK ADVERSE INFERENCE AS THE CONSTRUCTION WAS NOT DONE BY THE ASSESSEE AND THE SAME WAS NOT APPEARING IN ASSESSEES BOOKS. THE ASSESSING OFFICER PROCEEDED T O HOLD THAT THE ENTIRE RS. 296 CRORES BELONGED TO THE ASSESSEE. HE ALSO OPINED THAT THERE WAS NO NEED BY THE ASSESSEE TO MORTGAGE THE SAID PROPERTY. 1 9 . ASSESSEE APPEALED BEFORE LEARNED CIT(A). I N ITS APPEAL THE ASSESSEE CLAIMED THAT IT HAD NOT RECEIVED A NY MONEY WHATSOEVER AND THE ENTIRE LAND OF THE ASSESSEE - COMPANY HAS BEEN SOLD BY HDFC IN E - AUCTION AND SALE PROCEEDS OF THE PROPERTY THROUGH E - AUCTION WERE ADJUST ED AGAINST THE LOAN BY HPGPL. AS THE ASSESSEE DID NOT RECEIVE ANY AMOUNT AND IT CLAIMED LOSS T HEREON LEARNED CIT(A) EXAMINED THE ISSUE. HE WAS OF THE OPINION THAT SALE COMPRISED OF LAND BELONGING TO THE ASSESSEE AS WELL AS CONSTRUCTION THEREON BY HPGPL. IN THESE CIRCUMSTANCES, LEARNED CIT(A) REFERRED TO ASSESSEES FACILITATION AGREEMENT WITH HPGPL . AS PER THE TERMS OF THE FACILITATION AGREEMENT HE OPINED THAT ASSESSEE - COMPANY WAS TO RECEIVE 5% OF THE TOTAL PRICE OF THE CONSTRUCTED PROPERTY WHEN SOLD TO THE FINAL CUSTOMER. SO LEARNED CIT(A) APPLIED THIS RATIO AND H E LD THAT 5% OF THE PROCEEDS WERE BE LONGING TO THE ASSESSEE. IN THIS REGARD LEARNED CIT(A) REJECTED THE ASSESSEES CONTENTION THAT THERE WAS DIVERSION OF INCOME BY OVERRIDING TITLE AS PER THE DECISION HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SITALDAS DIRATHDAS (41 ITR 367) . HE NOTED THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND ITS HOLDING COMPANY IN THE FORM OF FACILITATION AGREEMENT IS COMPLETELY INDEPENDENT OF THE TERM OF LOAN AGREEMENT BETWEEN HDFC AND HPGPL. HENCE, HE HELD THAT DOCTRINE OF DIVERSION OF INCOME BY OVERRIDING TITLE WOUL D NOT TAKE AWAY 5% SHARE OF ASSESSEE IN THE PROCEEDS FROM AMBIT OF TAXATION. HE WAS OF THE OPINION THAT NON - RECEIPT OF THE SAID 5% CANNOT BE SAID TO BE DIVERSION OF INCOME BY OVERRIDING TITLE. LEARNED CIT(A) ALSO ACCEPTED THE GREEN HABITATS PVT. LTD. 14 SUBMISSION THAT E - AUCTION WAS NOT ONLY OF THE LAND BUT ALSO STRUCTURE RECEIVABLE AND OTHER THEREON. 20 . NOW BEFORE US THE CONTENTION OF THE REVENUE IS THAT AMENDED FACILITATION AGREEMENT IS NOT REGISTERED. IT HAS ALSO BEEN SUBMITTED THAT THE ASSESSEE FAILED TO PRODUCE EVIDENCE RELATE D TO COST OF CONSTRUCTION OF THE PROPERTY. FURTHER LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE LAND HAS NOT BEEN VALUED. IN THIS CONNECTION WE NOTE THAT THE FACILITATION AGREEMENT AS WELL AS AMENDED FACILITATION AGREEMENT W ERE ALL EXISTING D OCUMENTS. BOTH OF THEM WERE NOT REGISTERED. BOTH OF THEM WERE ACTED UPON BY THE P ARTIES IN THE EARLIER YEARS. THE REVENUE HAS ACCEPTED THE SAME. THE ASSESSING OFFICER HAS NOT RAISED ANY DOUBT WHATSOEVER ABOUT THE FACILITATION AGREEMENT. HENCE, THIS SUBMISS ION OF THE REVENUE IS NOT SUSTAINABLE. 2 1. FURTHERMORE, THE REVENUES SUBMISSION THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE EVIDENCE RELATED TO CONSTRUCTION OF THE PROPERTY AND COST THEREOF IS NOT AT ALL RELEVANT AS THE CONSTRUCTION WAS BEING DONE BY HPGPL. NOTHING STOPPED THE ASSESSING OFFICER FROM OBTAINING INFORMATION FROM HPGPL IF HE SO WANTED. HPGPL IS A CORPORATE BODY. IN ITS ACCOUNT IT HAS DULY RECOGNIZED SALE PROCEEDS OF E - AUCTION AGAINST IT DUES TO THE LENDER . NOTHING OUT OF THE SALE PROCEEDS HAS BEEN GIVEN OR CRE DI TED TO THE ASSESSEE. FURTHERMORE, AS REGARDS THE SUBMISSION THAT LAND HAS NOT BEEN VALUED, IT IS NOTED THAT THERE IS NO WHISPER WHATSOEVER THAT THERE WAS ANY ISSUE OF VALUATIO N OF LAND. MOREOVER, NOTHING STOP PED THE ASSESSING OFFICE R FROM OBTAINING THE VALUE OF LAND. MOREOVER, AS IT IS CLEAR IN THIS CASE SALE WAS NOT DONE BY THE ASSESSEE - COMPANY. ENTIRE PROPERTY WAS E - AUCTIONED BY THE LENDER HPGPL AND THE ENTIRE PROCEEDS WERE RECEIVED BY THE LENDER AGAINST THE LOAN TO HOLDING COMPANY I.E. HPGPL. IT IS ALSO CORRECT THAT DISBURSAL OF ADVANCE WAS UPON THE STAGE OF CONSTRUCTION AND OVER A PERIOD IT CAME TO RS. 550 CRORES. THE SAID DISBURSAL WAS DEPENDENT UPON STAGE OF CONSTRUCTION. BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT ENTIRE S UM WAS RECEIVED ONLY AGAINST LAND BELONGING TO THE ASSESSEE. IT IS FURTHER CLEAR FROM SALE CERTIFICATE WHEREIN IN THE DESCRIPTION OF GREEN HABITATS PVT. LTD. 15 THE PROPERTY IT HAS BEEN MENTIONED THAT THE SAME CONSISTS OF IMMOVABLE PROPERTY BEING SOLD BY WAY OF SALE OF RESIDUARY R IGH T INCLUDING RECEIVABLE OF HPGPL WITH STEP - IN OBLIGATION IN RESPECT TO THE IMMOVABLE PROPERTY. HENCE, IT IS QUITE EVIDENT THAT THE RECEIPT OF E - AUCTION BY THE HDFC AGAINST ITS FINANCE TO HPG PL DID NOT BELONG TO THE ASSESSEE IN ITS ENTIRETY AS THE SAME WAS O F PROJECT AS IT STOOD AS ON THAT DATE. IT COMPR I SED OF THE CONSTRUCTIONS THERE ON AS WELL RECEIVABLE BY HPGPL. LEARNED CIT(A) IS CORRECT IN HIS APPRECIATION THAT THE ASSESSEE CAN BE ENTITLED TO 5% WHICH WAS AGREED UPON IN THE FACILITATION AGREEMENT BETWEEN THE ASSESSEE AND ITS DEVELOPER HOLDING COMPANY I.E. HPGPL. 2 2 . NOW WE C O ME TO THE ASSESSEES CLAIM THAT SINCE IT HAS NOT RECEIVED ANY AMOUNT AND ITS LAND HAS ALSO BEEN E - AUCTIONED, THE ASSESSEES CASE SHOULD BE TREATED AS BUSINESS LOSS. THAT IT SHOULD BE TREATED THAT LAND BEING TRADING ASSET OF THE ASSESSEE HAS BEEN LOST SO ASSESSEE HAS CLAIMED BUSINESS LOSS. FURTHER LIMB OF THE ASSESSEES SUBMISSION IS THAT SINCE LAND WAS MORTGAGED TO THE BANK FOR LOAN TO HPGPL AND THE BANK HAS ADJUSTED THE SALE PROCEEDS AGAINST LOAN TO HPGPL, THERE IS DIVERSION OF INCOME BY OVERRIDING TITLE. THE INC OME HAS BEEN DIVERTED TO HDFC BY HPGPL AND THE ASSESSEE HAS NOT RECEIVED ANY AMOUNT. SO NOTHING CAN BE ATTRIBUTED TO THE ASSESSEES INCOME. WE FIND THAT THIS LIMB OF THE ASSES SEES SUBMISSION I S ALSO NOT SUSTAINABLE. IT IS UNDOUBTED THAT THE ASSESSEE HAD FACILITATION AGREEMENT WITH ITS HOLDING COMPANY FOR DEVELOPMENT OF THE PROJECT ON ITS LAND. AS PER THE SAID AGREEMENT THE ASSESSEE WAS ENTITLED TO 5% OF THE SALE PROCEEDS OF T H E CONSTRUCTED PROPERTY. SINCE IN THE PRESENT CASE HOLDING COMPANYS LOSS WAS ADJUSTED UPON BY E - AUCTIONED OF THE PROPERTY FOR AN AMOUNT OF RS. 296 CRORES , T HE ASSESSEE - COMPANYS SHARE OUT OF THE SAME AS PER THE FACILITATION AGREEMENT CLEARLY ACCRUED TO THE ASSESSEE - COMPANY. IF THE ASSESSEE - COMPANY DID NOT PRESS F O R OR FORWENT ITS CLAIM IT CANNOT BE DIVERSION OF INCOME BY OVERRIDING TITLE. BUT IT WILL BE TREATED AS APPLICATION OF INCOME. HENCE, FIRST LY ASSESSEES SHARE HAS TO BE CONSIDERED AS INCOME OF THE A SSESSEE FOR WHICH NECESSARY CONSEQUENCES OF TAXATION HAS TO FOLLOW. IN THIS VIEW OF THE MATTER IN OUR CONSIDERED OPINION GREEN HABITATS PVT. LTD. 16 ASSESSEES CONTENTION THAT IT HAD LOST EVERYTHING . THAT ITS LAND WHICH WAS ITS STOCK - IN - TRADE HAS BEEN LOST AND HENCE ASSESSEE SHOULD B E ALLOWED LOSS TO THAT EXTENT IS NOT ACCEPTABLE AS ASSESSEES SHARE WILL BE DEEMED TO HAVE BEEN APPLIED BY THE ASSESSEE AFTER ACCRUAL AND HENCE, CONTENTION OF THE ASSESSEE IS NOT ACCEPTED. WE FURTHER NOTE THAT SALE OF LAND BY E - AUCTION AND CONSEQUENT REAL ISATION OF M ONE Y S ARE INCOME OF THE ASSESSEE, AS THE LAND WAS A TRADING ASSET . HENCE THE INCOME , WHICH ACCRUES TO THE ASSESSEE UPON SALE OF TRADING ASSET IS TO BE CONSIDERED DEBT. EVEN ASSESSING OFFICER HAS RE COGNISED THAT THE SALE PROCEEDS OF LAND ARE SAL E RECEIVABLE IN THE LAND OF THE ASSESSEE. THE N ON - REALISATION OF DEBT CAN RESULT IN BAD DEBT WRITTEN OFF IF THE SAME IS WRITTEN OFF IN THE BOOKS. SINCE IT IS NOT THE CASE THAT ANY BAD DEBT HAS BEEN WRITTEN IN THE BOOKS THE ASSESSEES PLEA FAILS. AS PER SE CTION 36(1)(VII) THE ALLOWANCE OF BAD DEBT IS DEPE N D ING UPON ITS BEING WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE IN THE PREVIOUS YEAR. HENCE, IN ABSENCE OF THIS PREREQUISITE THE ASSESSEES CLAIM OF BAD DEBT FAILS. 2 5. ACCORDINGLY, I N THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT IN OUR CONSIDERED OPINION THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 2 6 . IN THE RESULT, THESE APPEALS STAND DISMISSED. ORDER HAS BE EN PRONOUN CED IN THE COURT ON 06 . 03 . 20 20 . SD/ - SD/ - ( RAMLAL NEGI ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 06 / 0 3 / 20 20 COPY OF T HE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. GREEN HABITATS PVT. LTD. 17 BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI