Forfeited property advance taxed only under capital-gains rules when genuine receipt is proved by banking and documentary evidence.

Forfeiture of an advance received under an agreement to sell was held not to be taxable as unexplained income or income from other sources where banking records, SBI RTGS certificates and the buyer's affidavit established genuine receipt, and the adverse bank verification rested on the wrong account. The forfeited amount was reflected in the assessee's books, and for the relevant assessment year its treatment fell under the capital-gains adjustment regime rather than as unexplained income. The addition was therefore unsustainable and was deleted; the Revenue's challenge failed.

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Issues: Whether the forfeited advance of Rs. 1.80 crore received on sale of property was taxable as unexplained income or income from other sources, or was governed by the capital-gains adjustment under Section 51 of the Income-tax Act, 1961 for the relevant assessment year.

Analysis: The advance was received under an agreement to sell and was supported by banking records, SBI certificates confirming the RTGS trail, and an affidavit from the buyer. The adverse inference drawn from the Axis Bank verification was based on the wrong bank account and therefore rested on a factual error. The forfeited amount was reflected in the assessee's accounts and could not be treated as unexplained income on the basis adopted by the Assessing Officer. For the assessment year in question, forfeiture of advance money was governed by Section 51 of the Income-tax Act, 1961, while Section 56(2)(ix) was not applicable.

Conclusion: The addition was unsustainable and was deleted; the forfeited advance was not taxable in the manner adopted by the Revenue.

Final Conclusion: The Revenue's challenge failed, and the order deleting the addition was sustained.

Ratio Decidendi: Where documentary and banking evidence establishes that an advance was genuinely received and forfeited, the amount cannot be taxed as unexplained income merely because an adverse verification is based on an incorrect bank account; for the relevant year, the forfeiture must be considered under Section 51 of the Income-tax Act, 1961 rather than treated under Section 56(2)(ix).

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