The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the addition can not be made on the amount not yet received by the assessee for non-fulfillment of obligations set out in the sale deed.
The assessee, Amarjeet Kaur is an individual and filed her return of income declaring total income. During the course of assessment proceedings, the Assessing Officer noted that during the year the assessee sold a property at Rs.39.30 crores. But, in computation, the sale consideration of this property is taken at Rs.37,59,20,845/-. On being asked by the Assessing Officer, it was submitted that an amount of Rs.1.50 crores was forfeited by the buyer M/s Hero Corporate Services Ltd. and that Rs.20,79,155/- was paid as brokerage on the sale of the property.
The Assessing Officer noted that in reply to requisition under section 133(6), the buyer M/s Hero Corporate Services Ltd., submitted that an amount of Rs.1,29,51,720/- is still payable to the assessee.
The AO rejected the claim of forfeiture of an amount of Rs.1.30 crores and added the same to the total income. The Assessing Officer accordingly determined the total income of the assessee at Rs.11,01,32,106/- as against the returned income of Rs.7,69,01,809/-.
The assessee submitted that the amount of Rs.1.30 crores was not received by the assessee from the buyer due to non-compliance with the terms of the agreement to sell i.e., to regularize the unauthorized construction. The buyer has the condition of the agreement to sell that this amount will only be released after the regularization of the additional construction which is impossible and ultimately Rs.1.30 crores were forfeited by the buyer was not considered as part of sale consideration.
The Coram of Judicial Member, Suchitra Kamble, and Accountant Member R.K.Panda noted that the assessee could not fulfill a part of the obligation as per the sale deed, therefore, the sale consideration to the extent the obligations are not performed cannot be the part of the apparent consideration.
The ITAT opined that CIT(A) was not justified in sustaining the addition of Rs.1.30 crore made by the AO.
However, the court clarified that in case the assessee receives any amount out of the forfeited amount of Rs.1.30 crores on a future date, the same shall be taxed in the year of receipt.
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