TaxTMI 
TaxTMI 
2023 (3) TMI 664
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....before the CIT(A). The CIT(A) upheld the additions/disallowances, except for giving a marginal relief with regard to the disallowance made u/s. 14A. The assessee is in appeal before the Tribunal, aggrieved by the order of the CIT(a). The assessee raised the following grounds of appeal:- "1. The learned CIT(A) erred in passing the order in the manner he did. 2. On the facts and in the circumstances of the case, the learned CIT (A) erred in upholding the disallowance of bad debt as made by the AO, as the conditions specified under Section 36(1)(vi) were not fulfilled by the Appellant. 3. Even otherwise, the learned CIT (A) ought to have appreciated that the claim of the Appellant was liable to be allowed, in the alternative under Section 28 or 37 of the Act as business loss/expenditure. 4. The learned CIT (A) ought to have appreciated the explanation as offered by the Appellant with regard to the business expenditure under the head of professional and consultancy charges to the tune of Rs.2,00,00,000/- when the supporting evidence of payment is duly filed and explained the same completely. 5. The learned CIT (A) grossly erred in treating t....
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.... nature of business losses and therefore should be allowed as a deduction. 7. The AO did not accept the submissions of the assessee and disallowed the bad debts with the following observation:- "3.2 The assessee has made the said claim of expenses without any documentary evidence. Primary facts like address of the above persons. date on which the money was given, the mode of payment description of the property for which the amount was paid in advance etc. have not been furnished with documentary proof. Hence the authenticity that these expenses have been incurred has not been proved. Under the said circumstances of facts, claiming these as bad debts is factually incorrect. a) The claim that sum of Rs. 13,00,000/- was paid to Mr. Anbuvel Ranjan towards property advance is only a mere statement and is not supported by any documentary evidence. There is no document which evidences that the assessee has entered into land transaction deal with the said person and payment has been made of the said amount for the purpose of buying the land. As matter of fact, there is no disclosure of even the primary facts such as the identity of the person and his address of abode, ....
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....under consideration nor in any other earlier or subsequent year. Therefore in the hands of the assessee it amp:,. clear that it is a personal loss and cannot be considered as business loss under Section 28 of the Income-tax Act, 1961. The fact that these expenses cannot be considered as business expenses, render them ineligible to be treated as bad debts. The nature of the above expenses as explained is such that these would have not been taken into account in computing the income of the assessee. The conditions stipulated in subsection 2 of section 36 have not been fulfilled. For ready reference the relevant portion of the said subsection is reproduced below. In making any deduction for a bad debt or part thereof; the following provisions shall apply - no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money - lending which is carried on by the assessee." Under the said circumstances of facts, claiming these as bad debts is factually....
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....e said expenditure is incurred in the due course of business and tax has been deducted on the said payment. 11. The AO did not accept the submissions of the assessee and disallowed the same by making the following observations on the facts of the issue:- "4.2 A careful study of the above explanation purported by the assessee reveals the following discrepancies. (ii The explanation given by the assessee in this regard is very vague and lacks clarity of facts. The assessee's version that Ms. Sheetal Ranka is working in Ranka Jewellers and during her tenure of working she had come in contact with the director of M/s Kolte Patil Developers Limited and that Ms. Sheetal Ranka agreed to identify a party and brokered the deal with M/s Kolte Patil Developers Ltd. which resulted in the Joint Development Agreement appears to be just a mere narration in the absence of any documentary evidence. Generally speaking it is not in practice that a person employed in an establishment of trading in jewellery showroom will negotiate with another party for real estate business in the course of her work is not conceivable. In other words, the feasibility that Ms. Sheetal Ranka wil....
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....f the construction activity of the residential apartment. However this particular transaction is not found in the said JDA. The claim of 2 crores of Rupees as an expenditure is not a small amount that can be submerged or ignored and be excluded from being part of the Joint Development Agreement. (vi) As a matter of fact, it is to be noted that when details of expenses connected/linked to the Joint Development Agreement was called for u/s 133(6) of the Income-tax Act, 1961 vide this office letter dated 08.01.2014, M/s Kolte Patil Developers in their letter dated 24.01.2014, vide annexure 2, has given a statement of only two expenditures Viz. one of Rs. 5 crores paid on 24.02.2010 to the assessee and another of Rs. 1 crore also paid to the assessee on 08.10.2010at the instance of the Supplementary Agreement. However the payment made to Ms. Sheetal Ranka is not mentioned. (vii) As can be seen from the above, M/s Kolte Patil Developers have paid to the assessee Rs. 5 Crores on 24.02.2010 which falls in the Financial Year 2009-10. This is reflected in the balance sheet under loans (Liability) of the assessee filed with the return of income for A. Y. 2010-11. According ....
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.... assessee paid Ms. Sheetal Ranka Rs. 2 crores is absolutely mistaken and proved wrong. (x) Another factor material for attention is that when the scheduled land property itself cost Rs. 2 crores 50 lakhs as per the sale deed dated 05th December. 2006, it is not plausible to spend Rs. 2 crores just for referring the assessee to the Developer. It can only be visualized as an act of sheer absurdity and no business man logically will commit such a folly to reduce his profit by such an extent. (xi) In the balance sheet, payment claimed to have made to Sheetal V. Ranka is shown under "loans and advances (Asset)". How can this accounted in this manner when the assessee is claiming it as expenses under professional charges. (xii) It is also found from the travelling expenses details furnished by the assessee that no expenditure has been claimed for any travel made to Pune during the period 01.04.2010 to 03.04.2010 when the JDA was made. Hence it is skeptical as to whether the assessee met Ms. Sheetal Ranka in Pune in connection with the JDA as claimed. The above factors, coupled with the fact that there is not a single document to substantiate effectivel....
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....ssee is based out of Bangalore and would not have utilised the services of a person based in Pune is not factually correct since the business of the assessee is situated in Pune. The ld. AR further submitted that the AO's observation that for a transaction of Rs.2.5 crores, a brokerage of Rs.2 crores would not have been paid is not correct since the value of the joint development agreement is very high and the value quoted by the AO is only with regard to the land. The ld. AR further submitted that the amount is paid in accordance with the invoice raised by Mr. Sheetal Ranka on which the assessee has deducted tax at source. It is also submitted that Mr. Sheetal Ranka has filed the return of income declaring the professional charges received as part of the income for the AY 2011-12. Therefore, the ld AR submitted that the payment of professional charges is incurred wholly for the purpose of business and the lower authorities are not correct in disallowing the same. 14. We heard the parties and perused the material on record. We notice that the AO has disallowed the claim of the assessee based on analysing various facts as can be seen from the relevant observations extracted in th....
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....imed to have been paid for the services rendered to identify the developer when the assessee has already taken the advance towards the JDA from the developer before coming to contact with Mr.Sheetal 15. The alternate contention of the ld AR is that there is no loss to the revenue since Mr.Sheetal has offered the said professional charges to tax and that disallowing the same in the hands of the assessee would amount to taxing the same income twice. In this regard we notice that the Hon'ble Supreme Court has considered the similar issue in case of ITO vs. Ch. Atchaiah [TS-5044-SC-1995-O], has held that "In our opinion, the contention urged by Dr. Gauri Shanker merits acceptance. We are of the opinion that under the present Act, the Income Tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Assessi....
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....e capital gains on account of Joint Development Agreement executed with the Developer. The capital gain was determined as short term capital gain to the tune of Rs.5,65,24,370/-. The assessing authority had observed that the JDA was executed on 3.4.2010 between the appellant and the Developer for the development of 7 acres and 39 guntas located in Survey No.71, Horamavu Agara Village, K.R.Puram Hobli, Bangalore East Taluk. The assessing authority applied the provisions of Sec.53A of the Transfer of Property Act rws 2(47)(v) of the IT Act to hold that there was transfer amenable to capital gains tax. The property in question was acquired by Sri.Dharmesh Ranka vide Sale Deed dt.5.12.2006 through a registered document from one Mr.Venkataswarny Muniyellappa and Munirajappa, all being the sons of Dodda Yamanna. Mr.Dharmesh Ranke had also obtained an order dated 13.2.2009 from the Tahasildar, K.R.Puram bearing No.024/08-09 permitting alienation of the Schedule Property. Sri.Dharmesh Ranka obtained confirmation from Bangalore Development Authority and KIADB that the property in question was not been notified for acquisition. Sri.Dharmesh Ranka with a view to develop the property for resid....
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....al gains as made by the assessing authority is accordingly opposed to law and the impugned addition is liable to be deleted." 20. The ld DR supported the orders of lower authorities. 21. We heard the parties and perused the material on record. We notice that the assessee has entered into a joint development agreement (JDA) on 3.4.2010 with Kolte Patil Developers Ltd. for development of a property at K.R. Puram measuring 7 acres 39 guntas. It is further noticed that the assessee has received a sum of Rs. 5 crores on 24.2.2010 as a refundable deposit and a sum of Rs.1 crore as non-refundable deposit on 8.10.2010. It is also noticed that the AO has computed the capital gain by considering the guideline value of Rs.7,17,75,000 and the non-refundable deposit of Rs.1 crore as the full value of consideration. In this regard, it is important to peruse the terms of the JDA, the relevant clauses are extracted as under:- "3. LICENCE Upon execution and registration of this Agreement, the Owner hereby permits the Developers to enter into the Schedule Property under the Agreement with a right to construct on the Schedule Property and to do all such acts and deeds necessar....