TaxTMI 
TaxTMI 
2011 (3) TMI 574
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....r 2005-06, it had been stated that the assessee had forfeited certain trading advances which were received by it from certain parties against sale of flats. The total amount forfeited was stated to be at Rs. 1,63,20,000. On query by the Assessing Officer, the assessee submitted vide reply dated 27-8-2007, that it had entered into a collaboration agreement for sale of flats to be built on the property, 'L- 1/7, Hauz Khas Enclave, New Delhi'; that however, the applicants, to whom the letters of allotment were issued, did not pay the agreed amounts in time; that therefore, the amounts received were forfeited; that these were amounts of Rs. 50,10,000 from Damson Chemicals Pvt. Ltd., Rs. 18,10,000 from Roopanshi Vinlyog Pvt. Ltd., Rs. 20,00,000 from Suncity Fin-con Pvt. Ltd., Rs. 15,00,000 from Suncity Fin-lease Pvt. Ltd. and Rs. 60,00,000 from Surakshit Exports Pvt. Ltd.; that these parties had filed suits against the assessee, alleging that the amounts had been given to the assessee as loans for purchase of land and claiming refunds; and that the assessee had denied these allegations in the suits. 3. On this, the Assessing Officer required the assessee to explain as to why this for....
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....peal of the assessee, the learned CIT(A) observed, inter alia, that the amounts/advances shown received by the assessee, in the accounts for assessment year 2000-01, were of Rs. 1,63,20,000, under Current Liabilities and Provisions, within Schedule D of the Audited Accounts; that in the accounts for the year under consideration, i.e., assessment year 2005-06, under Schedule E of the Accounts, advances from customers had been shown under Current Liabilities at Rs. 1,92,68,000; that these advances included those shown in the Accounts for the assessment year 2000-01; that in the Accounts for the year under consideration, under Schedule 5 thereof, the assessee had made a disclosure, stating the amounts received as advances received for sale of flats, to have been forfeited, since the applicant companies, to whom letters of allotment had been issued, did not pay the agreed amount at the agreed time, which forfeiture had been challenged by the parties in legal suits, seeking refunds, the reply of the assessee to which had been that of denial and the matter being sub-judice, no financial entries had been passed for the forfeited amount of Rs. 1,63,20,000; that as such, there was no cessat....
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....er hand, has placed strong reliance on the impugned order. It has been contended that the learned CIT(A) has rightly deleted the addition wrongly made; that in fact, as rightly considered, there was no cessation of liability; that there is no denying the fact that in the Notes to the Accounts, the assessee had declared the forfeiture; that however, undisputedly, no financial entries were made in the Account with regard to the amount of Rs. 1,63,20,000, since the matter was pending in the Court, in the suits filed by the parties against the assessee-company; that no applicability of the provisions of section 41 of the Act can be envisaged in a case where there is no cessation of liability, as is the fact herein; that moreover, as rightly observed by the ld. CIT(A), it is only concerning assessment year 2000-01, that the provisions of section 41(1) of the Act could have been sought to be invoked, if at all, since it was in assessment year 2000-01, that the disclosure was first made in the Accounts; and that there being no force therein, the appeal filed by the Department be dismissed. 10. We have heard both the parties and have perused the material on record. The facts are not dis....
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....The matter had hitherto not attained finality and when the assessee was before the ld. CIT(A), appeals in the said suits were pending disposal. It was, as such, that the assessee did not pass any financial entries for the amount of Rs. 1,63,20,000. 13. Section 41(1) (relevant portion) of the Income-tax Act runs as follows :-- "Profit chargeable to tax - (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first mentioned person) and, subsequently, during any previous year, - (a) The first-mentioned person 'has obtained', whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and, accordingly, chargeable to Income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made i....