ACIT, Agra V. M/s Northland Development & Corpn., Agra

ITA 9/AGR/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6793 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 19-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SEEMA RAJ
• Assessee Lawyers: MAHESH AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Fair market value
• Section: 45(2); 50C; 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.09/AGR/2008 ASST. YEAR: 2005-06 ASSTT. C.I.T., CIRCLE-1, VS. M/S NORTHLAND DEV ELOPMENT & AGRA. HOTEL CORPORATION, LAURIES HOTEL, AGRA. (PAN : AADFN 1944 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SEEMA RAJ, CIT D.R. RESPONDENT BY : SHRI MAHESH AGARWAL, C.A. ORDER PER P.K. BANSAL, A.M.: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 24.10.2008. 2. GROUND NO.1 RELATES TO THE DELETION OF THE ADDIT ION OF RS.19,09,105/- WHILE THE GROUND NO.2 RELATES TO THE DELETION OF THE ADDITION OF RS. 89,25,061/-. 3. THE BRIEF FACTS IN RESPECT OF GROUND NO.1 ARE TH AT THE ASSESSEE OWNS A BIG AREA OF OPEN LAND IN ITS PROPERTY KNOWN AS LAURIES HOTEL AT SA I KA TAKIA CROSSING, AGRA. ON ONE SIDE, THIS LAND FACES MAIN M.G. ROAD AND ON THE OTHER SIDE IT FACES NAMNAIR KUTLUPUR ROAD WHICH IS HABITUATED BY LOW INCOME PEOPLE. ON THE NAMNAIR KUTLUPUR ROAD, THE ASSESSEE HAS GOT DONE 2 SOME CONSTRUCTION UNDER A BUILDERS AGREEMENT WHERE THE ASSESSEE WAS TO GET UPPER GROUND FLOOR AND FIRST FLOOR AND THE BUILDER WAS TO GET LOWER GR OUND FLOOR AND SECOND FLOOR. DURING THE YEAR THE ASSESSEE HAD MADE THREE SALES - ONE FOR THE OP EN LAND FACING MAIN M.G. ROAD AND TWO, ONE OF WHICH WAS ON BUILDERS ACCOUNT, FOR THE CONSTRUC TED AREA FACING NAMNAIR KUTLUPUR ROAD AS DETAILED HEREUNDER :- 1. 1 ST FLOOR OF A COMMERCIAL PROPERTY SOLD TO SHRI BRAJES H KUMAR JAIN AND SMT. SARALA JAIN, LAND RATE RS.2,400/- PER SQ . MTR. RS.14,00,000/- 2. 2AND FLOOR OF COMMERCIAL PROPERTY SOLD TO SHRI R AJ KUMAR JAIN AND SMT. SUNITA JAIN, LAND RATE RS.2,400 PER SQ. M TR. RS.14,16,000/- 3. 288.47 SQ. MTR. OF LAND SOLD TO SHRI SUMIT MITTA L AND SHRI MADHUR MITTAL @ RS.16,500/- PER SQ. MTR. RS .41,00,000/- 4. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE SH OULD GET THE SAME CONSIDERATION IN RESPECT OF ALL THE SALES AND ACCORDINGLY ISSUED THE QUESTIONNAIRE TO THE ASSESSEE. THE ASSESSEE POINTED OUT THAT THE LAND FACING M.G. ROAD HAS A CI RCLE RATE @ RS.13,000/- PER SQ. MTR. WHILE, THE LAND FACING OTHER SIDE HAS A CIRCLE RATE @ RS.2 ,400/- PER SQ. MTR. FOR THAT THE ASSESSEE SUBMITTED COPY OF THE CIRCLE RATE. THUS, THE ASSES SEE SUBMITTED THAT EVEN THE CONSIDERATION SHOWN AS PER SECTION 50C IS ALSO IN CONFORMITY WITH THE ACTUAL SALES VALUE. THE A.O. DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND APPLI ED A RATE OF RS.16,500/- TO THE LAND COMPONENT OF THE TWO SALES MADE TO SHRI RAJ KUMAR JAIN AND SM T. SUNITA JAIN AND THUS WORKED OUT THE UNDERSTATEMENT OF THE CAPITAL GAIN AT RS.8,56,875/- AND RS.10,52,230/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE WENT IN APPEA L BEFORE THE CIT(A). THE CIT(A) NOTED THAT THE SALE OF THE SECOND FLOOR WAS ON ACCOUNT OF THE BUILDER. SHE DELETED THE ADDITION OF RS.8,56,875/- BY OBSERVING UNDER PARA 2.2 AS UNDER :- 3 2.2. I HAVE PERUSED THE RECORDS AND CONSIDERED TH E RIVAL CONTENTIONS AND MY FINDING ARE AS UNDER:- * THE AO HAS TAXED THE IMPUGNED AMOUNTS AS INCOME UNDER THE HEAD 'LONG TERM CAPITAL GAINS' AS ALSO EXPRESSLY STATED BY HIM ON PAGE 4 OF THE ASSESSMENT ORDER. THE AO HAS APPARENTLY INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT BY ADOPTING THE CIRCLE RATE AND REFERRING THE PROPERTY TO THE VALUATION CELL, WHICH ALSO CORROBOR ATES THE TAXATION OF THE IMPUGNED AMOUNTS AS INCOME UNDER THE HEAD 'LONG TER M CAPITAL GAINS'. HENCE, TAX, IF ANY, IS LIABLE TO BE CHARGED AS PER SECTION 112 OF THE I.T. ACT. THE AO IS DIRECTED ACCORDINGLY. * THE APPELLANT EXECUTED A MEMORANDUM OF AGREEMENT ON 01.08.2002 WITH AKRATI CONSTRUCTIONS PVT. LTD., AGRA TO CARRY OUT C ONSTRUCTION OF A BUILDING ON ITS PROPERTY ADJOINING NAMNER ROAD [33/ 100 KUTLUPUR, AGRA]. AS PER CLAUSE 5 AND 6 OF THIS AGREEMENT, THE BUILDE R IS LIABLE TO RAISE A 4- STORIED BUILDING COMPRISING LOWER GROUND FLOOR, UPP ER GROUND FLOOR, FIRST AND SECOND FLOORS. IN LIEU OF CONSTRUCTION COSTS, T HE LOWER GROUND FLOOR (BASEMENT) AND SECOND FLOOR AREA OF THE CONSTRUCTED BUILDING WOULD BE HANDED OVER TO THE BUILDER. THE APPELLANT WOULD BE OWNER OF THE UPPER GROUND FLOOR AND THE FIRST FLOOR . M./S AKRITI CONSTRUCTIONS PVT. LTD. I.E. THE BUILDER WOULD BE ENTITLED TO EXECUTE SALE DEED OF T HE LOWER GROUND FLOOR AND THE SECOND FLOOR FROM THE APPELLANT, IN HIS OWN NAME OR IN THE NAME OF ANY PERSON OF THE CHOICE OF M/S. AKRITI CONSTRUCTIO N PVT. LTD. THE RELEVANT CLAUSE 5 IS EXTRACTED BELOW:- '.............................. 5. THAT THE BUILDER, WILL RAISE FOUR STORIED BUILD ING, I.E. LOWER GROUND FLOOR, UPPER GROUND FLOOR, FIRST AND SECOND FLOORS AND ONL Y AFTER COMPLETION OF FULL FOUR STORYE CONSTRUCTION, THE LOWER GROUND FLO OR (BASEMENT) AND SECOND FLOOR AREA OF THE CONSTRUCTED BUILDING SHALL BE HANDED OVER TO THE BUILDER IN LIEU OF CONSTRUCTION COSTS. NO OTHER AM OUNT, WOULD BE DUE TO THE BUILDER WILL NOT HAVE ANY OTHER RIGHT, TITLE, I NTEREST OR CLAIM ON THE PROPERTY OR AGAINST THE OWNER. THE FIRST PARTY I.E. OWNER, SHALL BE OWNER OF UPPER GROUND FLOOR AND THE FIRST FLOOR. HOWEVER, IT IS AGREED THAT WATER TANKS WILL BE PERMITTED FOR THE BUILDING ON THE ROO F OF THE SECOND FLOOR.' THUS, OWNERSHIP OF THE 4 FLOORS HAS BEEN CLEARLY D EFINED IN THE AGREEMENT. DURING THE YEAR UNDER CONSIDERATION, 2 FLOORS HA VE BEEN SOLD- 1ST FLOOR TO SHRI BRAJESH KUMAR JAIN AND SMT. SA RLA JAIN 2ND FLOOR TO SHRI RAJ KUMAR JAIN AND SMT. SUNITA JAIN IN TERMS OF THE ABOVE MENTIONED MEMORANDUM OF AGR EEMENT, CLEARLY PROFIT [LONG TERM CAPITAL GAINS] ARISING ON SALE OF THE 1ST FLOOR IS TAXABLE IN THE APPELLANT'S HANDS WHEREAS PROFIT ARISING ON THE SAL E OF THE 2ND FLOOR IS TAXABLE IN 4 THE HANDS OF M/S. AKRITI CONSTRUCTIONS PVT. LTD. AS BUSINESS INCOME. THEREFORE, NO ADDITION ON ACCOUNT OF SALE OF THE 2ND FLOOR IS LIA BLE TO BE MADE IN THE APPELLANT'S HANDS EVEN THOUGH THE SALE DEED FOR THE 2ND FLOOR H AS BEEN EXECUTED BETWEEN THE APPELLANT IN TERMS OF CLAUSE 10 OF THE MEMORANDUM O F AGREEMENT BETWEEN THE APPELLANT AND M/S. AKRITI CONSTRUCTIONS PVT. LTD. A S REPRODUCED BELOW:- '10. THAT AFTER COMPLETION OF THE AGREED CONSTRUCT IONS, TO THE SATISFACTION OF THE FIRST PARTY, THE SECOND PARTY SHALL BE ENTITLED TO GET EXECUTED SALE DEED OF THE LOWER GROUND FLOOR AND SECOND FLOOR FROM THE FIRST PARTY IN HIS OWN NAME OR IN THE NAME OF ANY OTHER PERSON OF THE CHOICE OF SECOND PARTY. THE COST AND EXPENSES WILL BE BORNE BY THE SECOND PARTY. THIS FACT IS ALSO BORNE OUT FROM THE RETURN OF IN COME WHERE IN THE COMPUTATION OF LONG TERM CAPITAL GAIN, NO LONG TERM CAPITAL GAIN HAS BEEN SHOWN IN RESPECT OF THE 2ND FLOOR. ONLY SALE OF ROO F RIGHTS OF RS.1,75,000/- HAS BEEN SHOWN IN RESPECT OF THE 2ND FLOOR. A LETTER DATED 2 3.10.2004 ADDRESSED BY M/S. AKRATI CONSTRUCTIONS PVT. LTD. TO THE APPELLANT HAS BEEN FILED, HE CONTENTS OF WHICH ARE REPRODUCED BELOW:- THIS IS TO CONFIRM THAT WE HAVE BEEN RE-IMBURSED T HE AMOUNT DUE TO US AGAINST SALE OF SECOND FLOOR AREA OF BUILDING CONST RUCTED BY US ON YOUR LAND FACING NAMNAIR ROAD, AGRA (BEING OUR SHARE OF THE BUILDING AS PER AGREEMENT), AS UNDER: AMOUNT OF SALE CONSIDERATION VIDE SALE DEED DATED 23.07.04 IN FAVOUR OF RAJ KUMAR JAIN AND SMT. SUNITA JAIN RS. 14,16,000/- LESS : A. AMOUNT DUE TO BE REFUNDED TO YOU FOR COMPOUNDING FEE PAID TO ADA103,670.00 B. AMOUNT DUE TO YOU FOR SALE OF 1,75,000.00 RS. 2,78,670/- ROOF RIGHTS BALANCE AMOUNT DUE TO US RS. 11,37,330/- AMOUNT HAS BEEN RECEIVED BY US AS UNDER: 1. CHEQUE NO. 488903 DATED 27.07.04 ON SBI RS. 7, 00,000/- 2. CHEQUE NO. 483904 DATED 30.07.04 ON SBI RS. 4, 15,000/- 3. CHEQUE NO. 483905 DATED 02.08.04 ON SBI RS. 20 ,000/- 4. CHEQUE NO. 488912 DATED 23.10.04 ON SBI RS. 2, 330/- TOTAL RS. 11,37,330/- RS. ELEVEN LAKHS THIRTY SEVEN THOUSAND THREE HUND RED AND THIRTY ONLY. IN VIEW OF THE ABOVE FACTS, THE ADDITION OF RS.8,5 6,875/- ON ACCOUNT OF THE SALE OF THE 2ND FLOOR IS NOT SUSTAINABLE AND ACCORD INGLY, DELETED. 5 5. ADDITION OF RS.10,52,230/- RELATING TO THE SALE OF THE FIRST FLOOR WAS ALSO DELETED BY THE CIT(A) OBSERVING AS UNDER - AS REGARDS THE IST FLOOR SOLD BY THE APPELLANT DUR ING THE YEAR TO SHRI BRAJESH KUMAR JAIN AND SMT. SARALA JAIN, DETAILS AS PER SALE DEED EXECUTED ON 22.07.2004 ARE AS UNDER :- SALE DEED PRICE RS. 14.00 LACS CIRCLE RATE FOR LAND RS. 2,400/- PER SQ. MT. CIRCLE RATE FOR LAND RS. 600 PER SQ. MT. (25% FOR IST FLOOR) CIRCLE RATE FOR BUILDING RS. 550/- PER SQ. MT. STAMP RS. 1,40,000/- ACCORDINGLY, THE APPELLANT HAS RECEIVED A CONSIDER ATION OF RS. 14,00,000/- TOWARDS SALE OF THE IST FLOOR WHICH IN A ACCORDANCE WITH THE CIRCLE RATES PRESCRIBED BY THE STAMP VALUATION AUTHORITY. THE SC HEDULE OF CIRCLE RATES HAS BEEN FURNISHED BY THE APPELLANT BEFORE THE AO TO S HOW THAT CIRCLE RATE HAS BEEN ADOPTED BY APPELLANT AS PRESCRIBED AT RS. 2,400/- PER SQ. MT. HOWEVER, THE AO HAS ADOPTED THE CIRCLE RATE OF RS. 16,500/- AS PER THE SALE DEED OF LAND SOLD BY THE APPELLANT TO SHRI SUMIT MITTAL. THE AO HAS ERRED IN SUBSTITUTING THE CIRCLE RATE OF THE IMPUGNED PROPERTY BY THE SALE RATE OF THE ADJOI NING PROPERTY FOR THE REASONS THAT- A) ADOPTION OF ANY VALUE OTHER THAN THE ACTUAL CO NSIDERATION IS PERMITTED ONLY WITHIN THE AMBIT OF SECTION 50C OF T HE ACT. B) SECTION 50C PRESCRIBES AS UNDER 1. WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING L AND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSES BY ANY A UTHORITY OF A STATE GOVERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. 2. WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (1), WHERE- (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OF FICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT Y UNDER SUB-SECTION(1) EXCEEDS THE FAIR MARKET VALUE OF THE VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED BY THE STAM P VALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUT ED IN ANY 6 APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF T HE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTIONS (2), (3), (4), (5) AND (6) OF SECTI ON 16A, CLAUSE (I) OF SUB- SECTION(1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957), SHALL WITH NECESSARY MODIFICATIO NS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFER ENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION(1) OF SECTION 1 6A OF THAT ACT. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, VALUATION OFFIC ER SHALL HAVE THE SAME MEANING AS IN CLAUSE (R) OF SECTION 2 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957). (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION(2), WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION(2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SE CTION (1), THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAKE N AS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THUS, SUBSTITUTION OF THE RELEVANT CIRCLE RATE BY T HE SALE RATE OF AN ADJOINING LAND IS IN CONTRAVENTION OF SECTION 50C O F THE ACT. THEREFORE, THE ADDITION OF RS.10,52,230/- MADE BY THE AO BY APPLYI NG THE SALE RATE OF ANOTHER LAND IS NOT SUSTAINABLE AND ACCORDINGLY, DELETED. 6. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF T HE CIT(A) WHILE THE LD. A.R. RELIED ON THE ORDER OF THE AO. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD ALONGWITH ORDERS OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 50C OF THE ACT. WE NOTED THAT THE ASSESSEE HAS ENTERED INTO A MEMORANDUM OF AGREEMENT ON 01.08.2002 WITH M/S. AKRITI CONSTRUCTIONS P. LTD . TO CARRY OUT THE CONSTRUCTION OF FOUR STORIED BUILDING ON ITS LAND ADJOINING TO NAMNAIR ROAD. AS PER THE AGREEMENT THE ASSESSEE IS ENTITLED FOR UPPER GROUND FLOOR AND FIRST FLOOR AND M/S. AKRITI CONSTRUCTION P. LTD. WILL BE ENTITLED FOR THE 7 LOWER GROUND FLOOR AND SECOND FLOOR AND WAS ALSO EN TITLED TO GET THE SALE DEED EXECUTED FROM THE ASSESSEE IN HIS NAME OR IN THE NAME OF ANY OTHER PE RSON. THUS, SO FAR AS THE SALE OF THE SECOND FLOOR IS CONCERNED THAT IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE AND THE CIT(A) HAS RIGHTLY APPRECIATED THE FACTS. IT IS NOT THE CASE OF THE R EVENUE THAT THE MEMORANDUM OF AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S. AKRITI C ONSTRUCTIONS P. LTD. WAS A BOGUS AGREEMENT. ONCE THE AGREEMENT IS GENUINE ONE, THE ASSESSEE HAD ONLY EXECUTED THE SALE DEED FOR THE SECOND FLOOR IN TERMS OF THE AGREEMENT ON BEHALF OF M/S. A KRITI CONSTRUCTION PVT. LTD. THEREFORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE ADDITIO N OF RS.8,56,875/-. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. 8. SO FAR AS THE SALE OF FIRST FLOOR IS CONCERNED, UNDER THE AGREEMENT THE ASSESSEE IS ENTITLED FOR THE CONSTRUCTION AND SALE AND SALE HAS BEEN MAD E BY THE ASSESSEE AT ITS OWN RIGHT. THE CIT(A) HAS GIVEN THE CLEAR CUT FINDING THAT THE ASS ESSEE HAS FURNISHED COPY OF THE CIRCLE RATE AND THE CIRCLE RATE HAS BEEN PRESCRIBED AT RS.2,400/- P ER SQ. MTR. THE A.O. HAS ADOPTED THE CIRCLE RATE @ RS.16,500/- ON THE BASIS OF THE LAND SOLD BY THE ASSESSEE TO SHRI SUMIT MITTAL. SECTION 50C NO WHERE AUTHORIZE THE A.O. TO ADOPT THE CIRCLE RATE O F THE ADJOINING LAND. SECTION 50C CLEARLY LAYS DOWN THAT THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY THE ASSESSEE OF A CAPITAL ASSET IF LESS THAN THE VALUE ADOPTED OR ASS ESSED BY THE STAMP VALUATION AUTHORITY FOR THE PURPOSE OF THE PAYMENT OF THE STAMP DUTY, THE VALUE SO ADOPTED OR ASSESSED SHALL FOR THE PURPOSE OF SECTION 48 WHICH DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER, THE REVENUE HAS NOT BROUGH T OUT ANY EVIDENCE OR COGENT MATERIAL BEFORE US WHICH MAY PROVE THAT THE CONSIDERATION RECEIVED OR ACCRUED SHOWN BY THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE STAMP DUTY VALUATION AUTHORITY . ONCE THE STAMP VALUATION AUTHORITY HAS ACCEPTED THE VALUE @ RS.2,400/- PER SQ. MTR., IN OU R OPINION THE A.O. HAS EXCEEDED HIS 8 JURISDICTION BY TAKING A VALUE WHICH SECTION 50C DO ES NOT PERMIT. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.10,52,230/-. THUS, THE GROUND NO.1 STANDS DISMISSED. 9. GROUND NO.2 RELATES TO THE DELETION OF THE ADDIT ION OF RS.89,25,061/-. 10. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT ON 30.05.1989 FOR THE SALE OF SOME OF ITS LAND TO M/S. PARMAR BUILDERS PVT. LTD. AGRA WHICH PARTY FAILED TO HONOUR BY STIPULATED DATE AND, THEREFORE, THE AGREEMENT STOOD TERMINATED. HOWEVER, THE BUILDER HAS COMMENCED SOME ACTIVITIES OF CONSTRUCTI ON AND MADE CERTAIN ALLOTMENTS TO THEIR PROSPECTIVE BUYERS BY TAKING THE ADVANCES FROM THEM . THE ASSESSEE FILED A CIVIL SUIT IN WHICH THE HONBLE COURT HELD THAT THE ASSESSEE WAS THE OW NER OF THE COMPLEX AND THE ASSESSEE WOULD COMPENSATE TO M/S PARMAR BUILDERS P. LTD FOR THEIR INVESTMENT IN THE COMPLEX. ACCORDINGLY, ON 31.03.1998 THE ASSESSEE TOOK OVER THE STOCK IN TRAD E AND ADVANCES AS PER THE BOOKS OF M/S. PARMAR BUILDERS P. LTD. THE A.O. DURING THE ASSESS MENT YEAR 1998-99 ACCEPTED THAT THE ASSESSEE HAD BECOME THE OWNER OF THE COMMERCIAL COMPLEX PART LY CONSTRUCTED BY MA/S PARMAR BUILDERS P. LTD. AND ACCORDINGLY REFLECTED ITS CREDITORS AND DEBTORS AND STOCK IN TRADERS IN ITS BOOKS OF ACCOUNTS. THE SUM OF RS.89,25,061/- WAS SHOWN AS C REDITORS IN THE BOOKS OF THE ASSESSEE. EVEN THOUGH IT REPRESENTED THE SALE CONSIDERATION IN RES PECT OF THE SHOPS, THE POSITION OF WHICH WAS ALREADY GIVEN TO THE BUYERS AND SALE DEED WAS NOT E XECUTED. THE A.O. TREATED THE SAID CREDITORS AS ITS INCOME AND ADDED THE SAME UNDER SECTION 68 O F THE ACT. WHEN THE MATER WENT BEFORE THE CIT(A), THE CIT(A), CONSIDERING THE WRITTEN SUBMISS IONS OF THE ASSESSEE ALONG WITH COPIES OF THE COURT DECREE, FINANCE NOTE APPENDED WITH THE RETURN FOR THE A.Y. 1998-99, COPY OF ASSESSMENT ORDER FOR THE A.Y. 1998-99, DELETED THE ADDITION BY OBSERVING AS UNDER :- 9 THUS, THOUGH THE ADVANCES COLLECTED BY PARMAR BUILD ERS PVT. LTD. CONSTITUTE TRADING RECEIPTS IN THE APPELLANT'S HAND S, ONLY THE PROFIT ARISING OUT OF CONSTITUTE TRADING RECEIPTS IN THE APPELLANT'S HAND , ONLY THE PROFIT ARISING OUT OF SUCH TRADING RECEIPTS IS TAXABLE IN THE APPELLANT'S HANDS AND NOT THE ENTIRE RECEIPTS ON RS. 89,25,062/-. FURTHER, AS EVIDENT FR OM THE ACCOUNTS OF THE APPELLANT, THE RECEIPTS ARE ONLY TO THE EXTENT OF R S. 89,25,061/- AGAINST THE TOTAL COST OF RS. 1,26,07,376.68 COMPRISED OF CONSTRUCTIO N COST OF RS. 89,25,061/- AND LAND COST OF RS. 42,29,060.12. THUS, SINCE THERE IS NO APPARENT EXCESS OF RECEIPTS OVER EXPENDITURE, THERE IS NO TAXABLE PROFIT IN THE APPELLANT'S HANDS IN THIS YEARS. IF ANY TRANSACTION OF SALE WAS COMPLETED PRIOR TO T AKE-OVER OF THE PROJECT BY THE APPELLANT FROM PARMAR BUILDERS PVT. LTD., THE PROFI T THEREON WAS TAXABLE IN A.Y. 1998-99. PROFIT ON COMPLETED SALES HAS BEEN OFFERED FOR TAX BY THE APPELLANT IN THE RESPECTIVE YEARS. AS REGARDS THE SHOPS REPRESENTING STOCK-IN-TRADE OF LAURIES COMMERCIAL COMPLEX, THEIR SALE WOULD BE COMPLETED O NLY WHEN THE TOTAL CONSIDERATION WOULD BE RECEIVED BY THE APPELLANT. I N THAT EVENT, PROFIT WOULD BE TAXABLE AS UNDER: A. CAPITAL GAINS ARISING ON CONVERSION OF THE PERTI NENT PLOT OF LAND INTO STOCK-IN-TRADE WOULD BE LIABLE FOR TAX AS PER SECTI ON 45(2) OF THE ACT, AS FORMING PART OF THE CAPITAL GAINS RESERVE ACCOUNT O F RS. 42,29,060.12. B. ANY FURTHER SURPLUS BEYOND SUCH CAPITAL GAINS WO ULD BE LIABLE FOR TAX AS BUSINESS INCOME. THUS, SURPLUS/PROFIT IN EACH COMPLETED SALE TRANSA CTION OR ON COMPOSITE COMPLETED SALE OF THE ENTIRE PROJECT IS A PREREQUIS ITE FOR TAXATION. THE APPELLANT HAS FURNISHED THE BALANCE SHEET OF P ARMAR BUILDERS PVT. LTD. AS ON 31.03.1997. HOWEVER, THE SAME ONLY SHOWS PARTY-WISE ADVANCE RECEIVED, BUT DOES NOT SHOW PARTY-WISE TOTAL SALE - CONSIDERATION RECEIVABLE AND BALANCE SALE - CONSIDERATION RECEIVABLE, AFTER CONS IDERING ADVANCES RECEIVED. THE APPELLANT HAS FILED A SUIT FOR EVICTION OF THE UNAU THORIZED SHOP ALLOTTEES AND HAS CLAIMED TO BE IN THE PROCESS OF ISSUING LEGAL NOTIC ES TO BALANCE ALLOTTEES WHO HAVE NOT COME FORWARD FOR SETTLEMENT IN TERMS OF THE COU RT DECREE. IN VIEW OF THESE FACTS, THE SALE OF THE REMAINING SHOPS CANNOT BE SA ID TO BE COMPLETE AND NO TAXABLE PROFITS IN RESPECT OF SUCH ALLOTMENTS BY PA RMAR BUILDERS PVT. LTD. CAN BE WORKED OUT. IN ANY CASE, THERE IS NO PROFIT ARISING AT ALL IN THE YEAR UNDER CONSIDERATION IN VIEW OF THE ABOVE, THE ADDITION OF RS.89,25,061/ - IS NOT SUSTAINABLE AND HENCE DELETED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME ALONGWITH THE ORDERS OF THE TAX AUTHORITIES BELOW. NO COGENT MAT ERIAL OR EVIDENCE WAS BROUGHT TO OUR 10 KNOWLEDGE BY THE LD. D.R. WHICH MAY COMPEL US TO TA KE A VIEW DIFFERENT FROM THE ONE WHICH HAS BEEN TAKEN BY THE CIT(A). THE CIT(A) HAS GIVEN FI NDING OF FACT THAT THE RECEIPTS WERE TO THE EXTENT OF RS.89,25,061/- WHILE THE TOTAL COST WAS R S.1,26,07,376./- AND THUS THERE WAS NO TAXABLE PROFIT IN ASSESSEES HANDS IN THE YEAR UNDER CONSID ERATION. EVEN OTHERWISE ALSO THIS AMOUNT MERELY REPRESENTS TO PARTY-WISE ADVANCES RECEIVED B UT DO NOT SHOW PARTY-WISE TOTAL SALE CONSIDERATION ACCEPTABLE. THE BALANCE CONSIDERATIO N RECEIVABLE AFTER CONSIDERING ADVANCE RECEIPT A SUIT FOR THE EVICTION OF THE UNAUTHORIZED SHOPS A GAINST ALLOTTEES HAS BEEN FILED. THE ALLOTTEES HAVE NOT COME FORWARD IN TERMS OF THE COURT DECREE. THE SALES AND THE RECEIPTS OF PAYMENTS IN SHOPS CANNOT BE SAID TO BE COMPLETE. THEREFORE, NO QUESTION OF PROFIT ARISING IN THE YEAR UNDER CONSIDERATION. EVEN OTHERWISE, THE SUM CANNOT BE A DDED UNDER SECTION 68 OF THE ACT AS THE MONEY HAS NOT BEEN RECEIVED BY THE ASSESSEE DURING THE YEAR. THE AMOUNT WAS RECEIVED ONLY DURING THE A.Y. 1998-99 BY M/S. PARMAR BUILDERS P. LTD. THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRIDEVI ENTERPRISES, 192 ITR 165 (KAR) IN WHICH THE PRONOUNCEMENT OF LAW IS THAT THE AMOUNT RECEIVED IN THE EARLIER YEAR CANNOT BE ADDED IN THE SUBSEQUENT YEAR. WE, THEREF ORE, ARE OF THE VIEW THAT IT IS NOT A FIT CASE WHICH WARRANTS OUR INTERFERENCE. WE ACCORDINGLY CO NFIRM THE ORDER OF CIT(A). 12. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.06.2010 ). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH JUNE, 2010. PBN/* 11 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY