2016 (9) TMI 848

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....A) has erred in directing the A.O. to delete the addition of Rs. 3,74,00,000/- on account of cessation of liability ignoring the fact that the said liability did not exist in the books of accounts of M/s, Dawat-E-Hadiyah Trust as confirmed during the course of enquiry u/s. 133(6) of the I.T.Act." 1. The solitary issue raised by the revenue by way of this appeal is with regard to deletion of the addition which was made by the AO on account of cessation of liability on account of advance received from M/s Dawat-EHadiyah. 3. The brief background of the issue and the facts of this case are that during the year under consideration, the assessee company had shown income mainly from rent under the head 'Income from house property' and also 'Inc....

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....the assessee as well as M/s Dawat-E-Hadiyah Trust, have contended that the transaction was in respect of transfer of property, but this fact was not substantiated by the assessee with any cogent evidence. Both the parties were separately asked to furnish the evidence in this regard but both the parties failed to furnish any proof that the transaction was for an immovable property. Without any documentation, a property transaction of the magnitude of Rs. 3.74 crores in the year 1995 was beyond comprehension. Since there was no supporting evidence, the AO held that the advance received by the assessee from M/s Dawat-E-Hadiyah Trust was an interest-free unsecured deposit in the course of the business of the assessee company. Thus, on the groun....

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....the said party. After considering the entire submissions and material placed on record, it was held by Ld.CIT(A) that impugned amount was not taxable in the hands of the assessee either u/s 41(1) or section 28(iv) or any other provisions of the Act. After holding so, the Ld. CIT(A) examined the provisions of section 51 and held that whenever the impugned property is sold by the assessee, the cost of acquisition of the property shall be reduced by the amount of Rs. 3.74 crores for the purpose of computation of capital gains in view of provisions of section 51 of the Act. Under these circumstances and with these directions, the addition made by the Assessing Officer was directed to be deleted. 6. We have considered the submissions made by bo....

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....eady reference, section 51 is reproduced hereunder: "51. Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition: Provided that where any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such sum be ded....