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Income Tax Officer, Ward-2(1), Ghaziabad Vs. Shri Vishal Goyal, KM-78, Kavi Nagar, Ghaziabad
July, 21st 2015
                                                           ITA NO. 835/Del/2011

                      DELHI BENCH "H", NEW DELHI
                  SHRI H.S. SIDHU, JUDICIAL MEMBER
                         I.T.A. No. 835/DEL/2011
                                A.Y. : 2006-07
Income Tax Officer,                            Shri Vishal Goyal,
Ward-2(1),                               VS. KM-78, Kavi Nagar,
Ghaziabad                                      Ghaziabad
                                               (PAN: ACWPG3686Q)
(APPELLANT)                                    (RESPONDENT)

        Department by                 :     Sh. J.P. CHANDREKAR, SR. DR
         Assessee by                  :     Sh. R.K. GAUR, FCA

                      Date of Hearing : 14-07-2015
                      Date of Order       : 20-07-2015


     Revenue has filed this appeal against the Order dated

26.11.2010 passed by the Ld. Commissioner of Income Tax

(Appeals), Ghaziabad pertaining to assessment year 2006-07 on the

following grounds:-

          1. That the Ld. CIT(A) has erred in law and on facts by not
              appreciating that the entire transaction is colorable
              where instead of three parties mentioned in the sale
              agreement only one party received the entire advance
              proceeds whereas            as per the sale agreement, it
              should have been divided on pro-rata basis.

                                          ITA NO. 835/Del/2011

2.   That the Ld. CIT(A) has erred in law and on facts by
     falling to appreciate the fact that as per the sale
     agreement the sale consideration so received was
     to be utilized for promoting the objective of the
     trust. As such the advance received should have
     also gone to the trust only but this was not done.
     This again shows the colorable transaction by the
     assessee to take        the benefit of the advance

3.   That the Ld. CIT CA) has erred in law on facts by not
     appreciating that the entire transaction is colorable
     in nature where the assessee has conveniently tried
     to colour the transaction as that of capital receipt
     taking the shadow of section 51 of the I.T. Act,
     whereas the transaction is an attempt to evade
     taxation by the assesse in the form of income from
     other sources and siphoning of funds by the paying

4.   That the Ld. CIT CA) has erred in law and on facts in
     failing to pierce the corporate veil in this case to
     expose the true nature of transaction which is
     attempt by the assessee to evade taxation till the
     final transfer of capital asset and prevent the
     advance forfeited to be considered as income from
     other sources even if the capital asset is never
     transferred In the thus preventing any taxation on
     the advance forfeited till then.

5.   That the Ld.CIT(A) has erred in law and on facts by
     not considering       the case law CIT Vs Sterling

                                                          ITA NO. 835/Del/2011

                Investment Corporation Ltd.(1979) I taxman 396:
                (1979) 12 CTR 263: (1980) 123 ITR 441 (Bom)
                whereby held by Hon'ble Bombay High Court to
                consider the forfeiture of advance money as
                revenue    receipt       and   not   capital   receipt    as
                considered by the Ld. CIT(A).

           6.   That the order of the Ld. CIT(A) deserves to be set
                aside and the order of the AO be restored.

2.    The brief facts of the case are that the return was filed on

19.1.2007 by the assessee declaring an income of Rs. 84,152/-. The

case was processed u/s. 143(1) of I.T. Act, 1961. Thereafter, the

case was selected for compulsory scrutiny and notices u/s. 142(1)

and 143(2) were issued and properly served upon the assessee.

Notice u/s. 142(1) and 143(2) was issued on 1.12.2008. In

compliance to which neither anybody attended nor any reply was

filed. On going through the documents filed by the assessee's

counsel , AO completed the assessment u/s. 143(3) of the I.T. Act,

1961 at a total income of Rs. 75,84,150/- + Rs. 57,500/- Agricultural

Income vide order dated 26.12.2008.

3.   Against the    aforesaid assessment order of the           Assessing

Officer, Assessee appealed before the Ld. First Appellate Authority,

who vide impugned order 26.11.2010 has allowed the appeal of the

assesee and deleted the addition in dispute.

                                                     ITA NO. 835/Del/2011

4.   Aggrieved by the aforesaid impugned order dated 26.11.2010,

Revenue is in appeal before the Tribunal.

5.   At the time of hearing Ld. Departmental Representative has

relied upon the order of the Assessing Officer and reiterated the

contentions raised in the grounds of appeal filed by the Revenue.

6.   On the other hand, Ld. Counsel of the assessee relied upon

the order of the Ld. CIT(A) and submitted that the order of the Ld.

CIT(A) may be upheld.

7.   We have heard both the parties and perused the records

especially the   orders of the revenue authorities, we find that the

assessee is an individual.   AO observed that an agreement dated

25.4.2005 was made to sell certain properties belonging to the trust

to M/s Raj Hans Tower Pvt. Ltd. Certain amounts in the form of part

payment were received by the Trust as well as assessee and

assessee's brother, Shri Vineet Goyal Total amount received by the

assessee was Rs. 75,00,000/-. Later on, litigation occurred due to

non approval of map by the GDA and assessee has not returned

back the amount. The AO held that the trust was created to avoid

proper taxation in disguise of Trust. The AO added receipts of Rs.

75,00,000/- as income of the assesee from other sources.            We

further find that AO neither obtained full details nor could

understand the entire sequence of transactions and has reached the

                                                        ITA NO. 835/Del/2011

conclusions in a haphazard and confused manner; the basic

agreement, which has been referred to by the AO, itself, when read

carefully, makes it amply clear that certain properties clubbed

together were subject matter of sale; the owners of these properties

were the assessee, his brother Shri Vineet Goel and Devi Dayal

Charitable Trust, which is a family trust of assessee's family. In other

words, the most important issue is as to whether the AO has erred in

concluding that the assessee is not a legal owner, while the facts on

record point out that assessee is one of the 3 legal owners of the

land under sale; the other two being Shri Vineet Goel and Devi Dayal

Charitable trust. The AO is totally wrong in assuming and, somehow

insisting in the remand report that the assessee is not a legal owner

and, therefore, the amount forfeited, if any, would be taxed in the

hands of the assessee as income from other sources. The assessee

has furnished proof of ownership of this land piece. These

documents furnished clearly show that the assessee Shri Vishal

Goyal, his brother Shri Vineet Goel and the family trust, namely,

Devi Dayal Charitable Trust are all legal owners of respective

portions of land which is the subject matter of sale advances. We

note from the records that these land owners have received

advances from M/s JMD Buildtech Private Limited and Mls Rajhans

Towers Private Limited, the share of the assessee, in total of such

advances, being Rs.75,OO,QOO/-. However, Mls Rajhans Towers

                                                         ITA NO. 835/Del/2011

Private Limited has gone in litigation: currently in the form of

arbitration proceedings pending before retired Justice J.P. Singh.

According to the assessee, he and other two legal owners have no

intention to withhold the advances, but have countered the claim of

Mls Raj Hans Towers Private Limited by saying that as Mls Raj Hans

Towers Private Limited has not fulfilled their part of commitments;

so the amount received as advance part payment was also liable to

be forfeited. As the matter is under arbitration; so the dispute is still

undecided. In view of the above fact; even if AO's presumption that

the amount has been is likely to be forfeited; section 51 will

immediately come into operation. Section 51 of I.T. Act, 1961 clearly

says that "where any capital asset was on any previous occasion the

subject of negotiations for its transfer, any advance or other money

received   and retained     ay   the    assessee in   respect of      such

negotiations shall be deducted from the cost for which the asset was

acquired in computing the cost of acquisition." Therefore, whatever

amount has been received by the assessee as advance in

aforementioned negotiations for sale and if those amounts are not

returned back; the cost of property would stand reduced by such

amount. In other words, when this sale does not materialize and the

amount stands forfeited/not returned; and assessee makes another

sale in future; then for purposes of computing the gain, cost of

acquisition would be reduced by respective amount of advances

                                                      ITA NO. 835/Del/2011

received and not returned. We further find that Ld. CIT(A) has noted

that various court cases clarified this operation of section 51; the

most recent and relevant being the case of Mls Travancore Rubber &

Tea Ltd reported in 243 ITR 158 (SC). This is further on record that

the M/s Devi Dayal Trust has not made any such conclusion (as

made by the AO of the assessee in this case) in scrutiny order

passed for the same assessment year. It is more interesting to note

that the same AO, who is also assessing Shri Vineet Goel, another

recipient and legal owner, does not take any remedial action in case

of Shri Vineet Goel. The above facts shows the inconsistent attitude

of the AO.

7.1   We find from the above, that in nutshell, as assessee is one of

the legal owners of the impugned land for sale; so the entire theory

of the AO (that the trust has been designed for tax evasion and

assessee has earned income from other sources), crumbles down.

Section 51 is found to be applicable in such cases; the assessee is

asked to reduce the amount of advance if forfeited after arbitration,

from cost of property while working out gain on any subsequent

sale. The AO is also directed to take note of this, for future

assessment purposes.     We find Ld. CIT(A) has rightly held that for

the-time being, there is no basis for any addition of,Rs.75,OO,OOO/-

and accordingly he deleted the addition in dispute.

                                                     ITA NO. 835/Del/2011

8.    In the background of the aforesaid discussions and precedent,

we do not see any reason to interfere with the well reasoned order

of the Ld. CIT(A), accordingly, we uphold the same and decide the

issue against the Revenue by dismissing this ground of appeal.

9.    In the result, the Appeal filed by the Revenue stands


      Order pronounced in the Open Court on 20/07/2015.

      Sd/-                                            Sd/-

[N.K. SAINI]                                    [H.S. SIDHU]
ACCOUNTANT MEMBER                            JUDICIAL MEMBER

Date:- 20/7/2015

Copy forwarded to: -
1.    Appellant -
2.    Respondent -
3.    CIT
4.    CIT (A)
5.    DR, ITAT                  TRUE COPY
                                                By Order,

                                                Assistant Registrar,
                                                ITAT, Delhi Benches

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