TaxTMI 
TaxTMI 
2025 (2) TMI 1137
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....e course of assessment proceedings. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) should have treated the amounts of Rs. 5.2 crore on the basis of lack of any evidences submitted by the assessee regarding the nature of such transactions as benefit arisen in the hands of the assessee as per the provisions of section 28(iv) of the Act on account of benefit arisen on exercising the business." 3. Fact in Brief:- The assessee is Private Limited Company is engaged in the business of construction of commercial and residential properties. For the year under consideration, the assessee filed its return of income on 15/02/2021, declaring total loss of Rs. 3,85,795. The case was selected for limited scrutiny for two reasons viz. (i) High creditors/liabilities and (ii) investment in immovable property. The Assessing Officer, during the course of assessment proceedings, noted that the assessee had shown other payable worth Rs. 14,20,00,000, from the assessment year 2015-16 onwards and in the assessment year 2019-20 and the same was increased to Rs. 15,20,00,000. However, during the assessment year 2020-21, the assessee had shown current liability at Rs. 15,20....
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....eness of the above liability. Accordingly, the Assessing Officer considered the same as cessation liability. In view of these facts, the Assessing Officer made addition of Rs. 5.20 crore on account of cession of liability under section 41(1) of the Act and completed the assessment. Being aggrieved, the assessee preferred appeal before the first appellate authority. 5. During the first appellate proceedings, the assessee made a detailed submission before the learned CIT(A), which is recorded at Page-4 to 21 of the impugned order passed by the learned CIT(A), is also reproduced below for ready reference:- "5.0 The assessee has submitted ground wise written submission vide letter dated 30/05/2024, which is reproduced as under Ground No. 1 : General in nature, hence no comments. Ground No. 2 to 4 : The assessee has filed return of income on 15/02/2021 declaring net loss of Rs. (-) 3,85,795/- vide acknowledgment No. 264362441150221 for the previous year relevant to Asstt. Year 2020-2021. The assessee encloses herewith copy of acknowledgment of return and computation of income for your kind perusal, which is on Page-1 To 4 of the Paper Book. ....
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....the parties to develop a project on land and has taken on lease basis area of 32.87 acres of land situated at Yerkheda, Kamptee Road, Nagpur. As per agreed terms and condition a company Poonam Resorts Ltd. has paid an amount of Rs. 10crores to assessee company in the year 2011. These lease deposits were the interest free deposit paid by PoonamResots Ltd to the assessee. Later on as the project was in developing state and were not completed further amount of Rs. 3 Crores were again paid by Poonam Resorts Ltd to the assessee company as lease deposit for the development purpose. Thus Poonam Resorts Ltd. company has paid total lease deposits at Rs. 13 Crores. In support it contention the assessee encloses herewith ledger account of Lease Deposits-Kamptee for your kind perusal, which is on Page-35 of the Paper Book, which clearly showing entire lease amount is old amount. The entire lease amount of Rs. 13,00,00,000/- were accepted by the department in the past assessment year and assessment was completed and assessment order was passed u/s. 143(3) dated 22/11/2019 for the previous year relevant to Asst. year 2017-2018. The assessee encloses herewith copy of assessment order u/s....
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....ther and decide fresh terms of further lease and in any case the fresh terms are not materialized within a period of 12 months the Lessee shall handover the possession and Lessor shall pay the cost of project assessed by the valuer to the lessee. The same is duly mentioned in Para 9 of the Agreement of lease which is on page 39 of the paper book. Therefore, assessee respectfully submitted that since the lease period is continued till 21 years then the lease deposits also exists and has not ceased. The said agreement of lease is binding on both the parties and hence during the previous year relevant to Asstt Year 2020-2021, the said lease deposits cannot be treated as income of the assessee. Further the sum of Rs. 3,00,00,000/- were again paid by the Poonam resorts & were duly acknowledged and confirmation were also filed by the Poonam Resorts Limited. The assessee respectfully submits that on account of following reasons appeal filed by the assessee may kindly be allowed 1. The lease deposits are old lease deposits and liability has not ceased as the same were depsoits. Therefore the same cannot be the income of the assessee. 2. There is no deduction or e....
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....by the department from assessee's case for your kind perusal. 5.1 The assessee uploaded further groundwise written submission on 12/06/2024, which is reproduced as under "Further Submission with regard to Lease deposits (Ground No. 4) : The assessee submitted that so far as the lease deposits amount is concerned, the assessee submitted that the assessee company, N.Kumar Housing & Infrastructure Pvt Ltd and Poonam Resorts Ltd company has entered into agreement of lease dated 13/09/2011 and the lease deed was executed between the parties i.e. Poonam Resorts Ltd. and assessee company Nkumar Housing & Infrastructure Pvt. Ltd in the year 2011. It was planned by the assessee company to open up a resort, Community Center, 9 hole Golf Course with apartment towers with facility of accommodation and club house having other recreational activities. The assessee company was unable to execute this project. It was then agreed between assessee company, N.Kumar Housing & Infrastructure Pvt Ltd and Poonam Resorts Ltd to develop this dream project and Poonam Resorts Ltd has taken on lease basis area of 32.87 acres of land situated at Yerkheda, Kamptee Roa....
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....in real estate for development and construction of land and buildings. It is practice in this line of business in which assessee company received advance against booking of property from various parties and shown under the head "booking advance against property". During the previous year relevant to Asstt Year 2020-2021, assessee has not received any new booking advances against property but carry forward of old advances which the assessee has received in the prior assessment years. In the books of accounts the assessee has claimed booking advance of Rs. 2,20,00,000/- and the same was shown in the audited balance sheet. In Earlier year the assessee has agreed to sold some portion of property and received advance amount against sale of property for sum of Rs. 2,20,00,000/- towards booking advance against property from various parties. The project of the assessee was not completed and badly affected by Covid-19 pandemic & hence the assessee has not executed any further document. The assessee respectfully submitted that in the past assessment year 2019-2020, assessee has opening balance of Rs. 1,20,00,000/- which were received as booking advance against property from various ....
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..... 6. It is a well settled principle of law that the liability can be remitted or ceased only by a bilateral or multilateral act between the creditor(s) on one side and the debtor on the other and not by a unilateral act. In the instant case, the amount received as advances from customers has been reflected in the audited Balance Sheet as "Booking advance received from Customers" till the date registries were executed. The amount received as advances has been reflected in the balance sheet each year till the time registries were executed in the name of customers. Therefore the liability is existing and has not ceased. Therefore there is no cessation of liability. 7. The assessee further submitted that as and when the project of the assessee is completed and sale deeds are executed the said booking advances from customers shall be transferred to Sales/revenue account. Hence there is no loss to the revenue on the above mentioned preposition. The assessee further places reliance on following judgements : 1. ITA 380/Ind/2017 (ITAT, Indore) ACIT -vs.- M/s. Sunderdeep Construction Pvt Ltd 2. (2012) 22 taxman 59 (Gujarat High Court) Commissioner....
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....ase deposits and shown the same as "other payable". Therefore the AO concluded that these liabilities are very old liability and the assessee has failed to establish the existence of liability and failed to prove the genuineness of the above liability. Therefore the AO considered the same as cessation liability. In respect of remaining sundry creditors of Rs. 2,20,00,000/-, the AO noted from the submission of the assessee that there was no opening stock, work in progress, closing stock shown by the assessee in ITR filed from AY 2015-16 onwards therefore the AO inferred that the assessee has nothing to sell in terms of stock/inventory to the persons/parties from whom the booking advances of Rs. 2.20 crores were shown under the head "other payables and under the head other current liabilities in ITR for AY 2020-21. Further the AO noted that the assessee has not submitted the details of persons/parties from whom the booking advance of Rs. 2.20 crores such as name, address, PAN number, confirmation of existence of booking advance etc. Further the AO noted the books of accounts of the assessee company are not audited from AY 2015-16 onwards. Therefore the AO concluded that thes....
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.... for limited scrutiny and the said assessment order is very cryptic order and nothing is mentioned in the said order either implicitly or explicitly that the lease deposit transaction and booking advance transactions have been examined and accepted. Therefore the explanation of the assessee is not found to be correct. However I find from the assessment order that the AO has not clearly brought out as to how the provisions of section 41(1) are applicable in the present case. In this regard, for the sake of clarity, the provisions section 41(1) of the Act are reproduced as under :- Profit chargeable to tax. 41. [(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 n 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....
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....o section 41(1) of the Act is not justified. Hence the addition made by the AO is deleted and grounds of appeal raised by assessee are allowed." 7. Since the issue was decided in favour of the assessee by the learned CIT(A), the Revenue being aggrieved filed appeal before the Tribunal. 8. Before us, the learned Departmental Representative strongly relied on the order of Assessing Officer and vehemently objected to the contents of the impugned order passed by the learned CIT(A). He submitted that the impugned order be reversed by upholding the assessment order passed by the Assessing Officer. 9. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and supported the impugned order passed by the learned CIT(A). 10. We have heard the rival arguments, perused the material available on the record and gone through the order of the authorities below. Keeping in view the overall facts and circumstances of the case, we find it to be admitted fact that the assessee company was engaged in the business of development and construction in commercial and residential properties. The assessee claimed "other current liabiliti....
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....e for lease period of 21 years as per lease agreement. The said agreement of lease is binding on both the parties. The amount was duly acknowledged and confirmation was also filed by Poonam Resorts Ltd., which is placed on record. The assessee has placed reliance on the various case laws of Hon'ble High Court as well as ITAT Bench, which also support the case of the assessee. 14. The assessee has claimed booking advance of Rs. 2.20 crore. The assessee has sold some portion of property and received sum of Rs. 2.20 crore towards booking advance in earlier year. The project of the assessee was stopped and not completed as badly affected by Covid-19 Pandemic. The amount received towards booking advance was old advance and carry forwarded to next year. 15. We find that the assessee company received advance against booking of property from various parties, which were routine practice in this line of business. During the assessment year 2019-20, the assessee was having opening balance of Rs. 1.20 crore which was received as booking advance against property. Subsequently, the assessee has further received Rs. 1 crore through proper banking channel towards booking advance during the p....