The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) in a recent ruling upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] in deleting the additions made by the Assessing Officer as amounts with regard to the sale of a certain plot were not received by the assessee.
The assessee, Vaishali Pigments Pvt. Ltd., carries out the business of manufacturing and trading of dies and pigments, but no business activity was carried out during the period when the assessment proceedings were carried out.
After the search and seizure conducted under Section 132 of the Income Tax Act, 1961, at the residential premises of one of its directors, K K Sadani, the Assessing Officer (AO) made an addition of Rs. 3,79,00,000/-. The AO passed the assessment order under Section 143(3), calculating total income at Rs. 3,79,00,000 against the assessee’s declared NIL income, which was based on the documents seized from the residence of director Mr. K K Sadani.
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The assessee, being aggrieved by the order of AO, approached the Commissioner of Income Tax (Appeals) [CIT(A)]. CIT(A) allowed the appeal filed by the asseseee.
Being aggrieved by the order of CIT(A), the Revenue appealed before ITAT.
In this case, there was a Memorandum of Understanding (MOU) between Wellworth Securities Ltd. as the first party, the assessee as the second party, and the purchaser as the third party. Here the assessee, who owns the plot, is indebted to banks, and in order to free the plot from bank lien, the party of the first part has lent the assessee a certain amount.
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Thus, according to the above-mentioned agreement, the seller was to pay Wellworth Securities Ltd., who is the party to the first part, and not to the assessee.
The bench observed that the assessee was never to receive the payment, and under the above-mentioned circumstances, the addition cannot be made in the hands of the assessee.
And it is pertinent to note that the said property was sold in the Assessment Year (AY) 2014-2015 and here the AY in consideration by AO is 2011-2012.
The bench upheld the findings of CIT(A) deleting the additions made by AO, as the amount was not received by the AO and that too in the relevant year.
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The bench consisting of R. K. Panda (Vice President) and Shri Vinay Bhamore (Judicial Member)
dismissed the appeal filed by revenue with regard to this ground of appeal.
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