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| The Tax Publishers2021 TaxPub(DT) 0191 (Bang-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where the assessee was a firm engaged in the business of development of real estate, purchase and sale of land and other related activities had paid advance for purchase of land, which get forfeited, and the assessee claimed the sum so forfeited as business loss then since the evidence produced by the assessee were not examined at the assesseement stage, hence the matter remanded to AO.
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Business expenditure - Cancellation of sale agreement - Claim of expenditure by assessee as advance made for purchase of property forfeited -
The AO on perusal of the Profit and Loss Account found, that the assessee has claimed an expenditure of Rs. 95 lakhs as advance made for purchase of property forfeited. The AO called for the Agreement of Sale and found that the assessee had agreed to purchase a property along with commercial building for a consideration of Rs. 3,95,00,000. Out of the said amount Rs. 95 lakhs was paid as advance. Whereas, the AO found that the seller of the property had not disclosed this advance receipt for income-tax. The observations of the AO were that the transaction has to be treated as Capital Account and forfeiture loss cannot be allowed as deduction. Whereas the submissions made before the AO were that the assessee firm intended to resale the property in the course of business for higher rate and not to hold as fixed asset but due to the financial constrains and fall in the real estate business, the assessee was not in a position to purchase the property and accepted the fact that the advance paid could not be recovered. The AO had emphasized that the transaction of purchase of property was a capital asset and will not fall within the provisions of sections 30 to 37 of the Act and further observed that the main business of the assessee was in construction of flats and residential houses and not buying commercial complexes and the transaction was not in the normal course of business and hence has to be capitalized and made disallowed claim of expenditure of Rs. 95 lakhs. Held: From facts which was narrated before the Tribunal and sequence of events as referred by the assessee did not find a place in the assessment order and there was no clarity with respect to details. CIT(A) had also observed that no evidence was filed before the lower authorities in respect of serious efforts made by the assessee. On perusal of the legal notices and facts narrated by assessee the Tribunal opined that these facts were not discussed by AO or CIT(A) and assessee firm could substantiate serious efforts made for recovery of advance amount. Therefore, one more opportunity should be provided to the assessee to substantiate with the evidence before AO.
Relied:Pr. CIT v. Khyati Realtors Pvt. Ltd. (2019) 108 Taxmann.com 449 (Bom-HC) : 2019 TaxPub(DT) 3506 (Bom-HC).
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2013-14
IN THE ITAT, BANGALORE BENCH
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