2013 (2) TMI 74

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....roperty at 37, Friends Colony, New Delhi. On 28.01.2007 the respondent entered into an agreement to sell the said property to Shinestar Buildcon (P) Ltd. The sale consideration of the property was agreed upon at Rs. 150 crores. Earnest money under the agreement was determined to be Rs. 36 crores. In respect of the said earnest money of Rs. 36 crores the respondent/ assessee received six cheques as under: - Date Cheque No. Bank Amount 28.01.2007 022114 UTI Bank Ltd. 9,00,00,000/- 28.01.2007 022115 -do- 9,00,00,000/- 28.01.2007 022119 -do- 5,00,00,000/- 28.01.2007 022120 -do- 5,00,00,000/- 28.01.2007 022121 -do- 5,00,00,000/- 28.01.2007 022122 -do- 3,00,00,000/-       36,00,00,000/....

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....made an addition of Rs. 18 crores. 6. Being aggrieved, the respondent/ assessee preferred an appeal before the Commissioner of Income Tax (Appeals) which was allowed. At this juncture it would be relevant to note that prior to the assessment being framed, directions under section 144A of the Income Tax Act, 1961 had been given by the Addl. Commissioner on a reference being made by the assessee under that provision in relation to the proceedings for the assessment year 2007-08. The directions given were, inter alia, as under: "In the light of above observation, forfeited amount is not liable to be taxed as income or chargeable gain under the provisions of the act till there is sale of property. The legal position to this effect is su....

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....al receipt. Assessing Officer was not satisfied, therefore, a reference was made to Addl. Commissioner of Income Tax, u/s 144 of the IT Act. The Ld. Commissioner of Income Tax (Appeals) has given a categorical finding that in respect of the issue of forfeiture of earnest money, the Addl. Commissioner of Income Tax, after taking into consideration the provisions of section 51 of the IT Act and decision of the Hon'ble Supreme Court in the case of Travancore Rubber and Tea Company Ltd., issued directions that forfeited earnest money is not liable to tax and the same is to be considered as charge against the property and value of the property is to be suitably adjusted for the purpose of computation of capital gain, as and when the property is ....