ACIT, New Delhi v. DLF Commercial Project Corporation, New Delhi

ITA 4271/DEL/2010 | 2007-2008
Pronouncement Date: 09-09-2011 | Result: Dismissed

Appeal Details

RSA Number 427120114 RSA 2010
Bench Delhi
Appeal Number ITA 4271/DEL/2010
Duration Of Justice 11 month(s) 23 day(s)
Appellant ACIT, New Delhi
Respondent DLF Commercial Project Corporation, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 09-09-2011
Date Of Final Hearing 20-07-2011
Next Hearing Date 20-07-2011
Assessment Year 2007-2008
Appeal Filed On 16-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 4271(DEL)2010 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF INCOME TAX DLF CO MMERCIAL PROJECT CIR. 31(1) NEW DELHI. V. CORPORATION DLF CENTRE SANSAD MARG NEW DELHI. (APPELLANT) (RESP ONDENT) APPELLANT BY: SHRI KRISHNA CIT/DR RESPONDENT BY: SHRI PRAD EEP DINODIA/SHRI R.K. KAPOOR & SHRI S.K. SHARMA CA ORDER PER A.D. JAIN J.M . THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER DATED 7.6.2010 OF COMMISSIONER OF INCOME TAX (APPEALS)XXVI NEW DELHI CONTENDING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 30 37 15 779/- MADE ON ACCOUNT OF SALE OF DEVELOP MENT RIGHTS TO M/S. DLF LTD. & M/S. NEW GURGAON HOME DEVELOPMENTS PVT. LTD. 2. THE FACTS ARE THAT THE ASSESSEE FIRM WAS FORMED IN 1984-85. SINCE THEN IT WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. THE ASSESSEE FILED THE RETURN OF INCOME SHOWING INCOME OF ` 1 67 95 360/-. ITA 4271(DEL)2010 2 DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED T HAT THE ASSESSEE FIRM HAD SHOWN IN THE BALANCE SHEET STOCK OF ` 34 55 60 19 667/- AND ALSO THE CURRENT LIABILITIES OF ` 34 86 09 08 730/- . THE AO PERUSED THE CASH FLOW STATEMENT FURNISHED BY THE ASSESSEE FIRM FOR THE YE AR ENDING 31 ST MARCH 2007. THE ASSESSEE FIRM HAD DEDUCTED STOCK OF ` 34 55 54 73 615/- WHILE SHOWING ADJUSTMENT IN WORKING CAPITAL AND THE CURRE NT LIABILITIES WERE SHOWN AT ` 34 85 91 89 394/-. THE AO ASKED THE ASSESSEE TO E XPLAIN THE TRANSACTION IN RESPECT OF WHICH ADVANCE OF ` 3038.65 CRORES WERE RECEIVED FROM DLF LTD. AND ALSO TO EXPLAIN THE TRANSACTION O F ` 446.30 CRORES WITH M/S. CAITLIN BUILDERS AND DEVELOPERS PRIVATE LIMITE D (LATER KNOWN AS DLF GURGAON HOME DEVELOPERS LTD.). THE ASSESSEE FIRM INFORMED THAT IT WAS ENGAGED IN THE BUSINESS OF DEVELOPING LAND FOR M/S. DLF LTD. WHO HAD MADE THE ABOVE REFERRED ADVANCE TO IT. FOR THIS PURPOSE THE ASSESSEE FIRM HAD ALSO ADVANCED SUMS TO CERTAIN LAND OWING COMPANIES (LOC) WHICH WERE ENGAGED IN THE WORK OF ACQUIRING LAND FROM VARIOUS LAND-HOL DERS WHICH WERE TO BE DEVELOPED UPON OBTAINING THE LICENCES FOR DEVELOPI NG THE LAND FROM THE RELEVANT LAND AND TOWN PLANNING AUTHORITIES. 3. ON PERUSAL OF DEVELOPMENT AGREEMENTS BETWEEN THE ASSESSEE FIRM AND THE LOCS AND ALSO THE AGREEMENT BETWEEN ASSESSEE FI RM LAND DLF THE AO ITA 4271(DEL)2010 3 OBSERVED THAT AS PER SCHEDULE 7 FORMING PART OF THE FINANCIAL STATEMENT OF THE ASSESSEE FOR THE YEAR ENDING 31 ST MARCH 2007 SALE OF DEVELOPED PLOT WAS RECOGNIZED IN THE FINANCIAL YEAR ON THE BASIS OF AG REEMENT TO SELL EXECUTED. IT WAS ALSO OBSERVED BY THE AO THAT M/S. DLF LTD. VIDE SCHEDULE 8 OF ANNUAL ACCOUNT FOR THE FINANCIAL YEAR ENDING 31.3.2 007 HAVE ALSO TREATED THE ADVANCE TO THE ASSESSEE FIRM OF ` 3038.65 CRORES AS STOCK THERE IS MONEY AND PART PAYMENTS IN AGREEMENT TO PURCHASE AND/CONS TRUCTED PROPERTIES TO FIRM IN WHICH COMPANY AND/OR ITS SUBSIDIARY COMPANI ES ARE PARTNERS. SIMILARLY THE AO OBSERVED THAT DLF GURGAON HOME DE VELOPERS LTD. HAD ALSO SHOWN THE SAME TREATMENT IN SCHEDULE 3 OF THE ANNUAL ACCOUNTS FOR THE YEAR ENDED 31.3.2007 RELATED TO MONEY AND ADVANCE- ADVANCE FOR LAND PURCHASED. 4. ON THE BASIS OF THE ABOVE OBSERVATIONS THE AO A SKED THE ASSESSEE FIRM TO EXPLAIN AS TO WHY ADVANCES FROM M/S. DLF LT D. AND M/S. DLF NEW GURGAON HOME DEVELOPERS LTD. MAY NOT BE TREATED AS SALE PROCEEDS AGAINST WHICH THE AMOUNT PAYABLE TO THE LOCS COULD BE TREAT ED AS EXPENSES OF THE ASSESSEE AND ACCORDINGLY PROPOSED AS TO WHY ADDITIO N OF ` 30 37 15 779/- (CURRENT LIABILITIES STOCKS) MAY NOT BE MADE TO TH E INCOME OF THE ASSESSEE FIRM. IN RESPONSE THE ASSESSEE FIRM HAD SUBMITTED THAT AS PER CASH FLOW STATEMENT THE AMOUNT OF REALIZATION UNDER AGREEME NT TO SELL HAS BEEN ITA 4271(DEL)2010 4 SHOWN AT RS. NIL. FURTHER CITING THE RELATIVE CL AUSE OF THE BUSINESS DEVELOPMENT AGREEMENT DATED 2.8.2006 M/S. DLF LTD. THE FIRM SUBMITTED BEFORE THE AO THAT DURING THE YEAR NO DEVELOPMENT R IGHTS WERE ACQUIRED BY THE ASSESSEE FIRM FROM THE LOCS THAT COULD HAVE BEE N ASSIGNED OR TRANSFERRED TO M/S. DLF LTD. FURTHER ALSO CITING FROM MOU DATED 6.12.2006 WITH DLF GURGAON HOME DEVELOPERS LTD. TH E ASSESSEE PLEADED THAT THE AMOUNT OF ` 446.30 CRORES WAS ONLY IN THE NATURE OF ADVANCE AN D NO DEVELOPMENT RIGHTS WERE TRANSFERRED TO THE SAID CON CERN. FURTHER THIS ADVANCE WAS LATER REFUNDED IN THE SUBSEQUENT YEAR. THE ASSESSEE FIRM ALSO CLARIFIED THE REVENUE RECOGNITION PRINCIPLE ON THE BASIS OF SCHEDULE 7 OF THE FINANCIAL STATEMENT FOR THE YEAR ENDING 31.3.2007 BY WHICH IT WAS OBSERVED BY THE AO THAT SALE OF DEVELOPED PLOTS IS RECOGNI ZED IN THE FINANCIAL YEAR IN WHICH THE AGREEMENT TO SELL IS EXECUTED. IT WAS A LSO INFORMED TO THE AO THAT THE ASSESSEE FIRM ITSELF WAS IN THE FINAL STAG ES OF NEGOTIATIONS FOR ACQUISITION OF DEVELOPMENT RIGHTS WITH LOCS MOST O F WHOM HAD NOT BEEN ABLE TO ACQUIRE ANY LAND DURING THE YEAR AND HENCE THERE WAS NO QUESTION OF SALE OF EXISTING DEVELOPMENT RIGHTS BY THE FIRM TO M/S. DLF LTD. OR DLF GURGAON HOME DEVELOPERS LTD. 5. THE AO ON PERUSAL OF THE DEVELOPMENT AGREEMENT OF THE ASSESSEE FIRM WITH THE LOCS AND THE RESPECTIVE AGREEMENT WIT H M/S. DLF AND M/S. ITA 4271(DEL)2010 5 DLF GURGAON HOME DEVELOPERS LTD. REACHED THE CONC LUSION THAT SINCE IT WAS THE BUSINESS OF THE ASSESSEE FIRM TO SELL AND P URCHASE DEVELOPMENT RIGHTS IN RESPECT OF LANDS THE ASSESSEE HAD SOLD D EVELOPMENT RIGHTS. ACCORDINGLY ON COMPARING THE BALANCE SHEET FIGURE S AND THE FIGURES AS PER CASH FLOW CHART WITH RESPECT TO STOCK AND CURRENT L IABILITIES THE AO OBSERVED THAT THERE WERE LESSER STOCKS AND LESSER CURRENT LI ABILITIES APPEARING IN THE CASH FLOW CHART WITH RESPECT TO STOCK AND CURRENT L IABILITIES. THE AO OBSERVED THAT THERE WAS LESSER STOCKS AND LESSER CU RRENT LIABILITIES APPEARING IN THE CASH FLOW STATEMENT COMPARED TO THE BALANCE SHEET WHICH IN HER VIEW SHOWED THAT THE ASSESSEE HAD ACTUALLY SOLD TH E DEVELOPMENT RIGHTS DURING THE YEAR BUT HAS NO ACCOUNTED FOR THE SAME I N ITS SALES. ACCORDINGLY THE AO WORKED OUT THE DIFFERENCE BETWEEN THE FIGURE S IN THE STOCK AND CURRENT LIABILITIES AS SHOWN IN THE CASH FLOW STATE MENT SUBMITTED BY THE ASSESSEE AS THE CREDIT OF THE ASSESSEE FIRM DURING THE YEAR. ACCORDINGLY ADDITION OF ` 30 37 15 779/- WAS MADE TO THE INCOME OF THE ASSESS EE FIRM. 6. BY VIRTUE OF THE IMPUGNED ORDER THE LD. CIT(A) DELETED THE ABOVE ADDITION MADE BY THE AO. 7. AGGRIEVED THE DEPARTMENT IS IN APPEAL. 8. CHALLENGING THE IMPUGNED ORDER THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION RIGHTLY M ADE; THAT WHILE DOING SO ITA 4271(DEL)2010 6 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT PERUSA L OF THE INCOME TAX RETURN FILED ALONG WITH VARIOUS DOCUMENTS IT REVEALED THA T ASSESSEE HAD SHOWN STOCK OF ` 34 55 60 19 667/- AND CURRENT LIABILITIES HAVE BEEN SHOWN AT ` 34 86 09 08 730/- IN THE BALANCE SHEET. WHILE GOI NG THROUGH THE CASH FLOW STATEMENT SUBMITTED FOR THE YEAR ENDING 31 ST MARCH 2007 IT REVEALED THAT WHILE SHOWING ADJUSTMENT FOR WORKING CAPITAL STOCK OF ` 34 55 54 73 615/- HAS BEEN DEDUCTED AND CURRENT LIABILITIES HAVE BEEN SHOWN AT ` 34 85 91 89 394/-; THAT THE LD. CIT(A) HAS ALSO FAI LED TO TAKE INTO CONSIDERATION THIS SPECIFIC OBSERVATIONS OF THE AO TO THE EFFECT THAT IN VIEW OF THE FACTS THAT AS PER ACCOUNTING POLICIES OF THE ASSESSEE WHICH IT HAS DISCLOSED IN SCHEDULE 7 FORMING PART OF THE FINANCI AL STATEMENT RELEVANT FOR THE YEAR UNDER CONSIDERATION SALE OF DEVELOPED PLO TS IS RECOGNIZED IN THE FINANCIAL YEAR ON THE BASIS OF AGREEMENT TO SELL IS EXECUTED. SIMILARLY REVENUE FROM CONSTRUCTED PROPERTIES IS RECOGNIZED O N PERCENTAGE OF COMPLETION METHOD AND SALE CONSIDERATION HAS BEEN R ECOGNIZED AS PER AGREEMENT TO SELL. IN VIEW OF THESE FACTS AND CIRC UMSTANCES OF THE CASE AGREEMENTS DATED 2.8.2006 ENTERED INTO WITH M/S. DL F LIMITED AGREEING TO ASSIGN OR TRANSFER THE DEVELOPMENT RIGHTS TO DLF OR ANY OF ITS AFFILIATE NOMINEES AND FURTHER THE MOU DATED 6.12.2006 ENTERE D INTO WITH CAITLIN BUILDERS & DEVELOPERS (P) LIMITED NOW KNOWN AS DLF NEW GURGAON ITA 4271(DEL)2010 7 HOMES DEVELOPERS (P) LIMITED IT IS ESTABLISHED THA T BY WAY OF ENTERING INTO THE ABOVE AGREEMENTS AND MOU THE ABOVE SUMS ARE NO THING BUT SALE PROCEEDS OF SALE OF DEVELOPMENT RIGHTS BY THE ASSES SEE TO THESE COMPANIES. 9. THE ASSESSEE FIRM HAS COMPLETED SALE ALSO GETS S TRENGTH FROM THE FACT THAT M/S. DLF LIMITED HAS SHOWN THE ABOVE IN ITS ST OCK AND M/S. DLF NEW GURGAON HOME DEVELOPERS (P)LIMITED HAS SHOWN THE SA ME AS ADVANCE AGAINST PURCHASE OF LAND. FURTHER IT IS PERTINEN T TO MENTION HERE THAT VIDE LETTER DATED 14 TH OCTOBER 2009 IT HAS CLEARLY BEEN MENTIONED BY THE AR OF THE ASSESSEE THAT A SUM OF ` 4 46 30 00 000/- HAS BEEN RECEIVED AGAINST SALE OF DEVELOPMENT RIGHTS; AND THAT THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE THAT IT IS A CLEAR CASE WHERE THE BUSINESS ACTIVITY OF THE ASSESSEE IS SALE AND PURCHASE OF DEVELOPMENT RIGHTS DURING THE YEAR UNDE R CONSIDERATION AND THROUGH TWO AGREEMENTS DISCUSSED ABOVE IT HAS SOLD THE DEVELOPMENT RIGHTS AND HAS RECEIVED THE MONEY FOR THE SAME DURI NG THE YEAR FOR WHICH ASSESSEE IS LIABLE TO INCLUDE THE ABOVE RECEIPTS I N ITS TAXABLE INCOME FOR THE YEAR UNDER CONSIDERATION. THE SUBMISSIONS OF THE ASSESSEE THAT THE SAME IS BEING SHOWN IN THE RETURNS OF INCOME FOR THE SUBSEQ UENT ASSESSMENT YEARS IS NOTHING BUT DEFERMENT OF TAX LIABILITY TO OTHER YEA RS. 10. THE ASSESSEE HAS NOT FURNISHED COMPLETE DETAILS IN RESPECT OF COST OF PURCHASE OF DEVELOPMENT RIGHTS WHICH IT HAS SOLD DU RING THE YEAR. IT IS ITA 4271(DEL)2010 8 EVIDENT FROM THE TWO AGREEMENTS TO SELL THE DEVELOP MENT RIGHTS ENTERED INTO BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION THAT THE DEVELOPMENT RIGHTS PURCHASED BY THE ASSESSEE TILL 6 TH DECEMBER 2006 WERE SOLD TO M/S. DLF LIMITED FOR WHICH IT HAS RECEIVED THE PAYMENT WHICH ASSESSEE IS CLAIMING AS AN ADVANCE. SIMILARLY TH E DEVELOPMENT RIGHTS WHICH ASSESSEE HAS PURCHASED AFTER DEC. 2006 WERE S OLD TO M/S. DLF NEW GURGAON HOMES (P) LIMITED FOR WHICH ALSO ASSESSEE H AS RECEIVED CONSIDERATION DURING THE YEAR. IN THE BALANCE SHE ET ASSESSEE HAS SHOWN STOCK OF ` 34 55 60 19 667/- WHICH ASSESSEE IS CLAIMING AS ADV ANCE PAYMENT TO LAND OWNING COMPANIES. WHILE ASSESSEE IS SHOWI NG CURRENT LIABILITIES OF ` 34 86 09 08 730/- IN THE BALANCE SHEET. HOWEVER FROM THE CASH FLOW STATEMENT SUBMITTED BY THE ASSESSEE ALONG WITH RETU RN OF INCOME IT IS SEEN THAT ASSESSEE HAS DEDUCTED THE FIGURE OF ` 34 55 54 73 615/- FROM THE STOCK AND CURRENT LIABILITIES HAVE BEEN SHOWN AT ` 34 85 91 89 394/-. ON COMPARISON OF BALANCE SHEET AND CASH FLOW CHART VIS --VIS STOCK AND CURRENT LIABILITIES IT CAN BE SEEN THAT THERE IS LESSER ST OCK AND LESSER CURRENT LIABILITIES APPEARING IN THE CASH FLOW STATEMENT AS COMPARED TO BALANCE SHEET WHICH INDICATES THAT ASSESSEE IN HIS CASH FLOW CHART IS TAKING THE FIGURES OF DECREASED STOCK TO THE EXTENT IT HAS ACTUALLY SOLD THE DEVELOPMENT RIGHTS DURING THE YEAR AND THEREFORE THE CURRENT LIABILIT IES SHOWN IN THE CASH FLOW IS ITA 4271(DEL)2010 9 NOTHING BUT THE RECEIPT AGAINST THIS DECREASE OF ST OCK THE ASSESSEE IS SHOWING THEIR SALE PROCEEDS AS CURRENT LIABILITIES BECAUSE IT HAS NOT ACCOUNTED THE SAME AS ITS SALES. THEREFORE IT WOULD BE JUSTIFI ED TO TAKE THE DIFFERENCE BETWEEN THE DECREASE IN STOCK AND CURRENT LIABILITI ES SHOWN IN THE CASH FLOW CHART SUBMITTED BY THE ASSESSEE AS THE PROFIT OF TH E ASSESSEE FOR THE YEAR AND ADDITION OF ` 30 37 15 779/- [CURRENT LIABILITIES (34859189394) STOCK (34555473615)] IS BEING MADE TO TAXABLE INCOME OF T HE ASSESSEE. 11. THE LD. DR HAS SOUGHT TO PLACE RELIANCE ON THE FOLLOWING CASE LAWS:- 1. ANSAL PROPERTIES & INDUSTRIES LTD. V. DCIT 115 I TD 443(DEL); 2. CIT V. MANGAL TIRTH ESTATES LTD. 303 ITR 366(MAD) ; AND 3. CIT V DHIR AND CO. COLONISERS P. LTD. 288 ITR 5 61(P&H). 12. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OT HER HAND HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN CONTEND ED THAT AS CORRECTLY NOTED BY THE LD. CIT(A) NO SALE OR AGREEMENT TO SELL HA S BEEN ENTERED INTO BY THE ASSESSEE IN RESPECT OF DEVELOPED PLOTS AS WOULD ALS O BE CLEAR FROM SCHEDULE 3 OF THE BALANCE SHEET. THEREFORE THE RELIANCE O F THE AO TO THAT EXTENT IS COMPLETELY OUT OF CONTEXT AND THE AO HAS NO BASIS T O APPLY THE SAME LOGIC IN RESPECT OF DEVELOPMENT RIGHTS. 13. IT WAS ALSO INFORMED TO THE CIT(A) THAT AN AMOU NT OF ` 446.36 CRORES RECEIVED FROM DLF GURGAON HOME DEVELOPERS LTD. (FOR MERLY KNOWN AS CAITLLIN BUILDERS AND DEVELOPERS PVT. LTD.) WAS REC EIVED AS AN ADVANCE ITA 4271(DEL)2010 10 DURING THE FINANCIAL YEAR 2006-07. HOWEVER THE S AME WAS REFUNDED TO THEM IN THE IMMEDIATELY SUCCEEDING YEAR 2007-08. I N VIEW OF THIS IT WAS SUBMITTED THAT THE TREATMENT GIVEN BY THE AO OF TRE ATING THIS LIABILITY AS INCOME WAS WITHOUT ANY BASIS AND AGAINST THE LEGAL AND FACTUAL BASIS. IN THIS REGARD COPIES OF THE ACCOUNT OF THE ASSESSEE IN DLF GURGAON HOME DEVELOPERS LTD. FOR FINANCIAL YEAR 2006-07 AND 2007 -08 WERE FURNISHED BEFORE THE CIT(A). IT WAS ALSO SUBMITTED THAT DUR ING THE CURRENT YEAR THE ASSESSEE FIRM HAD MADE ADVANCE TO THE LAND OWNING C OMPANIES (LOC). HOWEVER MAJORITY OF THESE COMPANIES COULD NOT ACQU IRE LAND AND OBTAIN THE LICENCE/APPROVAL AS STATUTORILY REQUIRED FOR DEVELO PMENT OF LAND FROM THE CONCERNED TOWN AND COUNTRY PLANNING AUTHORITIES CH ANDIGARH(HARYANA). IT WAS SUBMITTED THAT IN VIEW OF THIS SINCE THE SA ID LOCS DID NOT HAVE THE LAND OR THE APPROVAL FOR DEVELOPING THE LAND THERE WAS NO QUESTION OF THE ASSESSEE HAVING ACQUIRED SUCH DEVELOPMENT RIGHTS. IN VIEW OF THE SAME IT WAS SUBMITTED THAT SINCE THERE WAS NO DEVELOPMENT R IGHTS PER SE THERE IS NO QUESTION OF ITS ACQUISITION FROM THE LOCS AND ITS S UBSEQUENT SALE TO M/S. DLF LTD. AS WAS PRESUMED BY THE AO. THE LEARNED C OUNSEL SUBMITTED IN VIEW OF THIS THERE WAS NO SALE OF DEVELOPMENT RIGH TS BOOKED BY THE ASSESSEE FIRM. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSES SEE THAT APB-7 CONTAINS LIST OF SUNDRY CREDITORS; THAT THE AMOUNTS SHOWN TH ERE AT REPRESENT EARNEST ITA 4271(DEL)2010 11 MONEY; THAT THE STATEMENT OF PARTICULARS FURNISHED U/S 44AB OF THE ACT DOES NOT SHOW ANY SALE OF DEVELOPED PLOTS DURING THE YEA R UNDER CONSIDERATION; THAT WHEREAS IN THE NEXT YEAR SALE HAS BEEN SHOWN; THAT THE CASE LAWS RELIED ON BY THE DEPARTMENT ARE NOT APPLICABLE ON FACTS. 14. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. UNDENIABLY AS OBSERVED BY THE LD. CIT(A) THE AO H AS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO SHOW THAT DURING THE YE AR THE ASSESSEE ACQUIRED ANY DEVELOPMENT RIGHTS. NOW IN THE ABSENCE OF ACQ UISITION OF DEVELOPMENT RIGHTS AS TO HOW ANY DEVELOPMENT RIGHTS COULD HAVE BEEN TRANSFERRED OR ASSIGNED TO M/S. DLF IS BEYOND COMPREHENSION. THE OBSERVATIONS/FINDINGS OF THE AO IN THIS REGARD WERE CORRECTLY HELD BY THE CIT(A) TO BE WRONG. SUCH DEVELOPMENT RIGHTS DID NOT GET TO BE ACQUIRED SINCE THERE WAS NO ACQUISITION AT ALL DURING THE YEAR OF LAND BY THE LAND OWNING COMPANIES LOCS. IN THE ABSENCE OF ACQUISITION OF LAND TH E APPROVAL/LICENCE FROM THE TOWN AND COUNTRY PLANNING AUTHORITIES COULD NOT EVEN BE APPLIED FOR MUCH LESS OBTAINED. THEREFORE BY NO STRETCH OF I MAGINATION CAN IT BE SAID THAT THERE WERE ANY DEVELOPMENT RIGHTS IN EXISTENCE AT ALL DURING THE YEAR WITH THE LOCS. THERE BEING NO SUCH DEVELOPMENT RI GHTS IN EXISTENCE THERE ARISES NO QUESTION OF ANY SUCH RIGHTS BEING TRANSFE RRED. MOREOVER THE AO ALSO DID NOT BRING ON RECORD ANY DETAILS APROPOS TH E RIGHTS ALLEGEDLY ITA 4271(DEL)2010 12 TRANSFERRED THE LOCS CONCERNED THE DETAILS OF LIC ENCE OBTAINED FROM THE CONCERNED AUTHORITIES WITH REGARD TO THE DEVELOPMEN T RIGHTS. 15. IT WOULD BE APPROPRIATE TO REPRODUCE HERE THE FINDINGS RECORDED BY THE LD. CIT(A):- 5.5 ON CAREFUL CONSIDERATION OF THE ABOVE FACT S I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT THAT DURING TH E YEAR THE APPELLANT FIRM DID NOT ACQUIRE ANY DEVELOPMENT RIGHTS THAT CO ULD HAVE BEEN TRANSFERRED/ASSIGNED TO M/S. DLF LTD. AS WAS CLEA RLY RECOGNIZED BY THE LEARNED AO AS WELL SUCH TRANSFERS/ASSIGNMENT O F DEVELOPMENT RIGHTS ON THE PART OF THE APPELLANT FIRM DEPEND UPO N THE ACT OF VARIOUS LOCS WHO HAD TO ACQUIRE LAND IN SELECTED TEHSILS O F DISTRICT GURGAON IN ACCORDANCE WITH THE SPECIFICATIONS IN T HE BUSINESS DEVELOPMENT AGREEMENT WITH M/S. DLF LTD. IN RESPEC T OF WHICH DEVELOPMENT RIGHTS WERE TO BE TRANSFERRED/ASSIGNED TO THE APPELLANT FIRM ONCE THE APPROVAL/LICENCE FROM THE TOWN AND C OUNTRY PLANNING AUTHORITY DISTRICT GURGAON WERE OBTAINED. SINCE DURING THE YEAR THE CORRESPONDING LOCS DID NOT ACQUIRE LAND HENCE COUL D NOT APPLY/OBTAIN THE SAID LICENCES/APPROVALS IT CANNOT BE IMAGINED THAT THE DEVELOPMENT RIGHTS WERE IN EXISTENCE WITH THE L OCS AT ALL THAT COULD HAVE BEEN TRANSFERRED/ASSIGNED TO THE APPELLA NT FIRM FOR ONWARD SALE TO DLF. NO SPECIFIC EVIDENCE WAS BROUGHT ON R ECORD BY THE LEARNED AO TO REFUTE THIS FINDING AND TO SUBSTANTIA TE THAT THE DEVELOPMENT RIGHTS WERE IN EXISTENCE IN RESPECT OF ANY PARTICULAR LAND THAT WERE TRANSFERRED BY THE APPELLANT TO M/S. DLF LTD. WITHOUT HOWEVER DISCLOSING TAXABLE PROFITS FROM IT. FURT HER THE LEARNED AO DID NOT BRING ON RECORD ANY SPECIFIC DETAILS IN RES PECT OF THE LAND IN RESPECT OF WHICH DEVELOPMENT RIGHTS WERE ALLEGED TO HAVE BEEN TRANSFERRED NOR THE NAMES OF THE LOCS THE DETAILS RELATING TO APPROVAL/LICENCE FROM RELEVANT AUTHORITIES IN RESPE CT OF THE DEVELOPMENT RIGHTS THAT WERE CONSTRUED BY HER HAVI NG BEEN TRANSFERRED TO M/S. DLF LTD. IN THE ABSENCE OF ANY OF THE SPECIFIC FACTS INDICATING EXISTENCE OF DEVELOPMENT RIGHTS WITH THE LOCS THE ENTIRE EXERCISE UNDERTAKEN BY THE LEARNED AO WAS ARBITRARY AND BASELESS. THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT CASH FLOW STATEMENT ONLY REFLECTS TRANSACTIONS MADE IN CASH AND THEREF ORE THE FIGURES OF CURRENT LIABILITIES AND STOCK WILL MATCH WITH THE B ALANCE SHEET ONLY IF ITA 4271(DEL)2010 13 ALL TRANSACTIONS WERE MADE IN CASH. HOWEVER IT I S NOT NECESSARY IN VIEW OF THE SAME THE OBSERVATION MADE BY THE AO IS NOT RELEVANT FOR ASSUMING THAT DEVELOPMENT RIGHTS WERE ACQUIRED AND THEN TRANSFERRED BY THE APPELLANT FIRM WITHOUT ASCERTAINING WHETHER ANY RIGHTS HAD BEEN CRYSTALLIZED OR NOT. THEREFORE IN THE ABSEN CE OF ANY EVIDENCE WHATSOEVER THE ADDITION MADE BY THE LEARNED AO IS BEING DELETED. 16. NOW COMING TO THE CASE LAWS SOUGHT TO BE RELIE D ON BY THE DEPARTMENT. 17. IN ANSAL PROPERTIES & INDUSTRIES LTD.(SUPRA) IT WAS HELD THAT ONCE A CONTRACT IS ENTERED INTO IN ORDINARY COURSE OF BUSI NESS ANY COMPENSATION RECEIVED FOR ITS TERMINATION WOULD BE A REVENUE REC EIPT IRRESPECTIVE OF WHETHER ITS PERFORMANCE WOULD CONSIST OF A SINGLE ACT OR A SERIES OF ACTS SPREAD OVER A PERIOD. THESE CLEARLY ARE NOT THE FACTS INVOLVED IN THE PRESENT CASE. HEREIN NOTHING HAS COME ON RECORD TO SHOW THAT THE ASSESSEE ACQUIRED ANY DEVELOPMENT RIGHTS. IN SUCH A SITUATI ON OBVIOUSLY NO DEVELOPMENT RIGHTS COULD HAVE BEEN TRANSFERRED BY T HE ASSESSEE. ANSAL PROPERTIES & INDUSTRIES LTD.(SUPRA) IS THEREFORE NOT APPLICABLE. 18. IN MANGAL TIRTH ESTATES LTD. (SUPRA) DEALIN G WITH THE ISSUE AS TO IN WHICH YEAR THE INCOME WAS ASSESSABLE WHERE THE ASSE SSEE HAD CONSTRUCTED OFFICE CUM- SHOPPING COMPLEX AND HAD MADE PROVISI ON FOR AIR- CONDITIONING AND CAR PARKING FACILITIES FOR THE PUR CHASERS THE HONBLE MADRAS HIGH COURT HELD THE INCOME RECEIVED BY THE A SSESSEE TO BE ASSESSABLE IN THE YEAR OF RECEIPT AND NOT CAPABLE O F BEING SPREAD OVER SEVERAL ITA 4271(DEL)2010 14 YEARS. HERE AGAIN THE FACTS BEFORE US ARE NOT S IMILAR TO THOSE OF MANGAL TIRTH ESTATES LTD. (SUPRA). SINCE NO DEVELOPMENT RIGHTS HAVE BEEN ESTABLISHED TO HAVE BEEN SOLD/ASSIGNED/TRANSFERRED BY THE ASSESSEE DURING THE YEAR THERE IS NO QUESTION OF TAXING ANY AMOUNT WIT H REGARD THERETO. 19. IN DHIR AND CO. COLONISERS P. LTD. (SUPRA) THE ASSESSEE WAS IN THE COLONIZATION BUSINESS. POSSESSION OF PLOTS OF LAND WAS TRANSFERRED. THE TRANSFEREES EVEN MADE THE CONSTRUCTION THEREON. D OMAIN OVER THE PROPERTIES PASSED ON TO THE TRANSFEREES. THE ASSESSEE RECEIV ED AMOUNTS AS ADVANCE OR EARNEST MONEY UNDER AGREEMENT TO SELL PLOTS. DETE RMINING THE ISSUE OF THE NATURE OF THE RECEIPT AS TO WHETHER IT WAS CAPITAL OR REVENUE THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT THE PROPERTY TRANSFERRED COULD NOT TO BE HELD TO BE THE STOCK IN TRADE OF THE ASSESSEE AN D THAT THE RECEIPT WAS REVENUE RECEIPT. HERE TOO THE APPLICABILITY OF TH E FACTS OF THAT CASE TO THOSE PRESENT HEREIN DOES NOT STAND MADE OUT AT ALL. IN THAT CASE THE PROPERTY WAS ESTABLISHED TO HAVE BEEN TRANSFERRED WHEREAS IN TH E CASE BEFORE US NO DEVELOPMENT RIGHTS WERE EVEN ACQUIRED BY THE ASSESS EE WHAT TO TALK OF THERE BEING TRANSFERRED BY THE ASSESSEE. 20. NONE OF THESE CASE LAWS AS SUCH AIDS THE CAUS E OF THE DEPARTMENT. ITA 4271(DEL)2010 15 21. IN VIEW OF THE ABOVE FINDING NO ERROR WHATSOEV ER WITH THE ORDER OF THE LD. CIT(A) WE HEREBY UPHOLD THE SAME REJECTING TH E GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT BY WAY OF GROUND OF APPEAL TAKEN. 22. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.09.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09.09.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR