TaxTMI 
TaxTMI 
2026 (7) TMI 818
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.... Tax Act, 1961 (hereinafter referred to as 'the Act') is filed by the Revenue, challenging the order of the Income Tax Appellate Tribunal, Bengaluru Bench (hereinafter referred to as 'the Tribunal') dated 08.10.2020 in ITA No.28/Bang/2020 for the assessment year (hereinafter referred to as 'AY') 2015-16. 2. The brief facts giving rise to the appeal are as follows: The assessee/respondent herein is involved in the business of procurement of lands and real estate. A return of income (hereinafter referred to as 'ITR') was filed by the assessee declaring total income of Rs. 25,74,540/- for the AY 2015-16. The assessee's case for AY 2015-16 was selected for scrutiny and notices under sections 143(2) and 142(1) of the Act were issued ....
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....sessing authority in the hands of the assessee without appreciating the fact that the Advance received by the assessee was utilized for purchase of assets in his name and not for procuring land on behalf of promoter and said amount is shown as outstanding in the books of assessee without any claim being made by promoters for nearly 8 years regarding advance given to the assessee which invariably amounts to forfeiture, thus satisfying the condition laid down under Section 56(2)(ix)(a) of the Act? ii. Whether on the facts and in the circumstances of the case and in law, the impugned order is perverse in Tribunal failed to appreciate that assessing authority rightly made addition in terms of section 56(2)(ix)(a) of the nature as Act a....
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.... Per contra, learned senior counsel Sri. A Shankar on behalf of the assessee has submitted in favor of the order passed by the Tribunal and contended that the Tribunal has rightly allowed the appeal filed by the assessee. It is contended on behalf of the assessee that the provisions of section 56(2)(ix) would not be attracted to the facts of the present case. It is submitted that in the present case there is no negotiation for the transfer of a capital asset and there is no forfeiture, and hence, it is submitted that the 2 of the conditions to attract section 56(2)(ix) of the Act are not satisfied. It is further submitted that the advances received by the assessee was for the purpose of identifying, procuring and acquiring lands, which woul....
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....d without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely: - xxxxxxxx (ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if,- (a) such sum is forfeited; and (b) the negotiations do not result in transfer of such capital asset." 9. A plain reading of the aforesaid provision would indicate that any sum of money received as an advance or otherwise in the course of negotiations for transfer of capital asset shall be chargeable to income tax under the head 'Income from Other Sources', if such sum is forfeited and t....
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....;s business, the lands proposed to be acquired would partake the character of stock-in-trade and not capital assets. Section 2(14) of the Act defines 'capital asset' to mean property of any kind held by an assessee, whether or not connected to the business or profession, but does not include stock-in-trade. Hence, the said advances cannot be said to have been received in the course of transfer of a capital asset; rather, they pertain to transactions involving stock-in-trade. Thus, the first limb of section 56(2)(ix), i.e. receipt of advance in the course of transfer of capital asset, would not be satisfied. 11. Since the transaction itself was not one involving negotiation for transfer of a capital asset, the question of examining forfei....
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....tence of the liability, it be treated as cessation of the liability and therefore, section 41(1) could be invoked. Further, stand of the Revenue is that, when in respect of debt in question, confirmation was called for, a letter was produced of the creditor with its address but, when the same was verified, the report was that, the party could not be traced and therefore, it was not verifiable. 9. In our view, even if we accept the contention of the Revenue that the party could not be traced and therefore debt could not be verified then also, by no stretch of imagination can it be held that it would satisfy the requirement of cessation of liability. In legal parlance, merely because the creditor could not be traced on the date when ....