Land Owner cannot be Taxed for difference amount contained in Form 26AS and Profit and Loss Account: ITAT [Read Order]

Form 26AS - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Chennai bench has recently held that in pursuance of a joint development business, the landowner cannot be subject to income tax for the difference amount contained in form 26AS and shown in Profit and Loss Account.

The appellant firm is engaged in the business of real estate, filed The return of income disclosing total income of Rs.1,32,31,560/-. After the completion of the scrutiny assessment proceedings, the Assessing Officer made an addition of B88,11,291/- being the difference in the amount shown in the Profit and Loss Account and of B10,43,02,409/- and the amount is shown in form 26AS B11,31,13,700/-.

The assessee contended that it had entered into a joint development agreement with M/s. Dugar Housing Limited on 16.03.2012. In terms of the joint development agreement, the assessee had contributed land towards his share. It was further submitted that the joint development agreement is entered between assessee, land developer, and the landowners. The share of the land was not transferred to the developer. The sale proceeds of the built-up area were shared between the developer and the landowner in the agreed ratio. It was, therefore, contended that addition cannot be made, when the assessee has been following the Percentage of Completion Method.

After hearing the rival contentions, the Tribunal noted that the joint development agreement was entered to develop a property situated at Ayanambakkam Village, Rajankuppam Hamlet, Ambattur Taluk, Thiruvallur Dist.

“It is the case of the assessee that agreement was entered with an intention of developing above property jointly as a business venture and the income from the said activity was offered to tax by following Percentage of Completion Method. However, the Assessing Officer was of the view that assessee cannot adopt the Percentage of Completion Method as it is not in the business of developing the property but only was the landowner of the property. Therefore, the difference amount contained in form 26AS and shown in Profit and Loss Account was brought to tax. This is an issue which requires to be decided having regard to terms of the joint development agreement and the intention of the parties to the agreement. Thus, the intention of the parties can be gauged from the entries made in the books of accounts,” the Tribunal said.

While concluding the matter in assessee’s favor, the Tribunal also added that “Entries in the books of accounts clearly goes to show that assessee is the only partner in the development of scheduled property of the agreement. In any event, no addition can be made based on a mere difference between form 26AS and the amount shown in the profit and loss account and in the absence of any reconciliation and corroborative evidence. In any event, it is not the case of the Revenue that there is leakage of revenue during the period of joint development, it is a case of tax neutral. Therefore, we are of the considered opinion that no addition is warranted and the Assessing Officer is directed to delete the addition.”

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