ACIT-21(3), MUMBAI v. M/S.SANTOSH ENTERPRISE, MUMBAI

ITA 5887/MUM/2018 | 2015-2016
Pronouncement Date: 04-03-2021 | Result: Dismissed

Appeal Details

RSA Number 588719914 RSA 2018
Assessee PAN AAAFS1100K
Bench Mumbai
Appeal Number ITA 5887/MUM/2018
Duration Of Justice 2 year(s) 4 month(s) 22 day(s)
Appellant ACIT-21(3), MUMBAI
Respondent M/S.SANTOSH ENTERPRISE, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 04-03-2021
Last Hearing Date 07-12-2020
First Hearing Date 07-12-2020
Assessment Year 2015-2016
Appeal Filed On 12-10-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL ) G BENCH MUMBAI BEFORE SHRI RAJESH KUMAR AM & SHRI AMARJIT SINGH JM ITA NO. 5887 /MUM/ 20 18 ( ASSESSMENT YEAR : 2015 - 16 ) ASST. COMMISSIONER OF INCOME TAX - 21(3) ROOM NO.209 2 ND FLOOR PIRAMAL C HAMBERS LALBAUG MUMBAI 12 VS. M/S. SANTOSH ENTERPRISES 1 MANSHANTI CHS LTD. D.L.VAIDYA ROAD DADAR (W) MUMBAI 400 028 PAN/GIR NO. AAAFS1100K (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI MANOJ MISHRA ASSESSEE BY SHRI DEVENDRA JAIN DATE OF H EARING 15/12/2020 DATE OF PRONOUNCEMENT 04 / 03 /202 1 / O R D E R PER RAJESH KUMAR ACCOUNTANT MEMBER: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 27/07/2018 PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS) - 33 MUMBAI (HEREINAFTER REFERRED TO AS CIT(A ) FOR THE ASSESSMENT YEAR 2015 - 16 . ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 2 THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 53 97 45 000/ - MADE ON ACCOUNT OF BUSINESS INCOME FROM TRANSFER OF DEVELOPMENT RIGHTS BY TREATING THE FLAT BOOKING ADVANCE RECEIVED BY THE ASSESSEE AS COMPENSATION TOWARDS ABSOLUTE TRANSFER OF THE BUSINESS ASSET IN THE NATURE OF DEVELOPMENT RIGHTS. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 53 97 45 000 / - MADE ON ACCOUNT OF BUSINESS INCOME FROM TRANSFER OF DEVELOPMENT RIGHTS BY TREATING THE FLAT BOO KING ADVANCE RECEIVED BY THE ASSESSEE AS COMPENSATION TOWARDS TOWARDS ABSOLUTE TRANSFER OF THE BUSINESS ASSET IN THE NATURE OF DEVELOPMENT RIGHTS IGNORING THE FACT THAT ACCORDING TO THE AGREEMENT M/S. RICHA HOUSING PVT. LTD. HAS BECOME THE ABSOLUTE OWNER O F THE RIGHT WITH THE ROLE OF THE ASSESSEE BEING REDUCED TO OBTAINING PERMISSIONS SANCTIONS AND LIASIONING MERELY AS THE RIGHTS WERE ORIGINALLY CONFERRED TO THE ASSESSEE AND TRANSFERRING THE SAME STATUTORILY SHALL LEAD TO FURTHER PROCEDURE WHICH CAN BE ALL EVIATED BY KEEPING THE ASSESSEE AS JOINT PROMOTER.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 53 9 7 45 000/ - MADE ON ACCOUNT OF BUSINESS INCOME FROM TRANSFER OF DEVELOPMENT R IGHTS BY TREATING THE FLAT BOOKING ADVANCE RECEIVED BY THE ASSESSEE/AS COMPENSATION TOWARDS ABSOLUTE TRANSFER OF THE BUSINESS ASSET IN THE N ATURE OF DEVELOPMENT RIGHTS IGNORING THAT THE PROVISIONS OF SECTION 43CA OF THE INCOME TAX ACT 1961 WOULD BE APPLIC ABLE TO THE INSTANT CASE AS THE CONSIDERATION RECEIVED BY THE ASSESSEE TOWARDS TRANSFER OF DEVELOPMENT RIGHTS IS LESS THAN THE STAMP DUTY VALUE AS ON THE DATE OF AGREEMENT.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 53 97 45 000/ - MADE ON ACCOUNT OF BUSINESS INCOME FROM TRANSFER OF DEVELOPMENT RIGHTS BY TREATING THE FLAT BOOKING ADVANCE RECEIVED BY THE ASSESSEE AS COMPENSATION TOWARDS ABSOLUTE TRANSFER OF THE BUSINESS ASSET IN THE NATURE OF DEVELOPMENT RIGHTS IGNORING THE RATIO OF JUDGMENT LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF A.L.A. FIRM V. CIT (SUPREME COURT) (1991) 189 ITR 285 . 5. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASI DE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 3 2. THE ONLY ONE COMMON ISSUE RAISED IN ALL THE GROUNDS OF APPEAL BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A) DELETING T HE ADDITION OF RS.53 97 45 000/ - AS MADE BY THE AO TOWARDS THE ADVANCE RECEIVED BY THE ASSESSEE AS COMPENSATION TOWARDS ABSOLUTE TRANSFER OF THE BUSINESS ASSET IN THE NATURE OF DEVELOPMENT RIGHTS DESPITE THE FACT THAT THE ENT IRE PROJECT HAS BEEN TRANSFERRED HOWEVER BOOKING ADVANCES RECEIVED STILL REMAIN S WITH THE ASSESSEE. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 30/09 /2015 DECLARING INCOME OF RS. 30 49 380/ - . THE CASE OF THE ASSESSEE WAS SELECT ED UNDER SCRUTINY AND STATUTORY NOTICE S WERE DULY ISSUED AND SERVED ON THE ASSESSEE. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED FROM AI R INFORMATION THAT ASSESSEE HAS SOL D AN IMMOVABLE PROPERTY VALUE OF WHICH WAS RS.35 47 84 000/ - DURING THE YEAR HOWEVER NO SUCH TRANSACTION WAS DIS CLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED. THE AO ALSO NOTICED FROM THE BALANCE SHEET THAT ASSESSEE HAD EXCLUDED W .I.P OF RS.16 75 76 9 45.50 / - WHICH WAS HITHERTO APPEARING IN ITS ASSETS AND ACCORDINGLY CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS IN CONNECTION THEREWITH. THE AO NOTICED FROM THE DETAILS FURNISHED BY THE ASSESSEE THAT ASSESSEE HA S ENTERED INTO AN DEVELOPMENT AGR EEMENT WITH RICHA HOUSING PROJECT PVT. LTD. VIDE DATED 21/07/2014 FOR A TOTAL CONSIDERATION OF RS.18 CRORES THE STAMP VALUE THEREOF WAS RS.35 47 84 000/ - . 4. THE ASSESSEE HAS ACQUIRED DEVELOPMENTAL RIGHTS FOR DEVELOPMENT OF PROPERTY AT DADAR NAMELY PARK MIST ON A PLOT MEASURING 1925.60 SQ.MTR WHICH ORIGINALLY BELONG ED TO MCGM AND WAS OCCUPIED BY TENANTS AND ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 4 UNAUTHORIZED OCCUPANTS. THE SAID OCCUPANTS FORMED A PUBLIC SOCIETY IN THE NAME OF MANSHATI CO - OPERATIVE SOCIETY AND APPOINTED THE ASSESSEE AS DEVELOP ER TO DEVELOP THE PROPERTY . MCGM PURSUANT TO REQUEST FOR DEVELOPMENT OF THE PROPERTY APPROVED THE SAME AND LEASE D THE LAND TO THE CO - OPERATIVE SOCIETY FOR A PERIOD OF 30 YEARS RENEW ABLE FOR A FURTHER PERIOD OF 30 YEARS AS PER THE TERMS AND CONDITIONS. THE ASSESSEE WAS TO PAY COMPENSATION TO MCGM OF CAPITALIZED VALUE OF THE LAND WHICH WAS RS.7 37 19 700/ - OUT OF WHICH 10% WAS TO BE PAID BEFORE GRANTING COMMENCEMENT CERTIFICATE AND 90% BEFORE OBTAINING OCCUPATION CERTIFICATE. THE PLAN OF THE PROPERTY WAS SUB MITTED IN 2009 AND APPROVED ACCORDINGLY. HOWEVER THE PROJECT COULD NOT TAKE OFF DUE TO CERTAIN DEVIATION S / INFRACTION S OF THE ABOVE PLAN AND CONSEQUENTLY THE WORK WAS STOPPED BY MCGM AND THUS THE ORIGINAL APPROVE D PLAN WAS LAPSED. IN THE MEANTIME IN V IEW OF THE MODIFIED DEVELOPMENTAL RULE S THE ASSESSEE BECAME ELIGIBLE FOR FSI OF 3 I.E. ASSESSEE WAS ELIGIBLE TO CONSTRUCT MORE AREA EQUAL TO 7 798 . 6 8 SQ.MTR FOR WHICH ADDITIONAL COMPENSATION OF RS.9 62 87 000/ - WAS PAYABLE. THE ASSESSEE WAS FINDING IT DI FFICULT TO GO AHEAD WITH THE PROJECT AND APPROACHED ANOTHER DEVELOP ER M/S. RICHA HOUSING PVT. LTD. AND ENTERED INTO JOINT DEVELOPMENT . IT IS HELD THAT 47 EXISTING TENEMENTS TO WHOM FLAT S / COMMERCIAL PREMISES WERE TO BE PROVIDED AND AFTER THAT AREA OF 5 48 2 .52 SQ.MTR WAS AVAILABLE FOR SALE. IT WAS ALSO CONVEYED THAT 10% OF PLO T VALUE WAS ALREADY PAID AND BALANCE OF RS.5 89 74 760/ - WAS PAYABLE TO M CGM AND FURTHER AMOUNT OF RS.9 6 2 80 000/ - WAS PAYABLE FOR ADDITIONAL FSI UNDER THE SAID DEVELOPMENT AGREEMEN T AND THE ASSESSEE WAS TO BE PAID RS.18 CRORES. THE CLAUSE NO.5.1 OF THE JOINT AGREEMENT PROVIDES THAT M/S. RICHA HOUSING PVT. LTD. SHALL PAY TO THE ASSESSEE A FIXED AMOUNT O F RS.18 CRORE BY WAY OF CONSIDERATION FOR GRANT OF DEVELOPMENT RIGHTS . THE AO OB SERVED THAT ASSESSEE HAS TRANSFERRED WORK IN PROGRESS RELATING TO THE SAID PROJECT ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 5 TO THE DEVELOPER HOWEVER THE ADVANCE S RECEIVED AGAINST ADVANCE BOOKING OF FLATS OF RS.54 19 95 000/ - HAS NOT BEEN TRANSFERRED TO THE SAID DEVELOPER AND ALSO THERE IS NO MENTION ABOUT THE UTILIZATION OF THE SAID MONEY . ACCORDINGLY A SHOW - CAUSE NOTICE WAS ISSUED TO THE ASSESSEE THAT AGAIN ST THE STAMP VALUE OF RS.35 .48 CRORES THE A SSESSEE HAS ALREADY RECEIVED RS.54 19 95 000/ - TOWARDS SALE OF PROPERTY AND THERE IS NO MENT ION OF THAT IN THE SAID JOINT DEVELOPMENT AGREEMENT AND AS TO WHY THE TOTAL CONSIDERATION OF RS.72.20 CRORES WHICH COMPRISED OF RS.54.20 CRORES AS ADVANCED FROM SALE OF BOOKING OF FLATS AND RS.18 CRORES RECEIVED BY THE ASSESSEE AS SALE C ONSIDERATION OF D EVELOPMENTAL RIGHTS SHOULD NOT BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM BUSINESS AFTER ALLOWING THE EXPENSES ALREADY INCURRED. THE SAID SHOW - CAUSE NOTICE WAS RE PLIED BY THE ASSESSEE VIDE LETTER DATED 07/11/2017 STATING THAT THE SAID ADVANCE OF RS.54 19 95 000/ - WAS RECEIVED IN THE EARLIER YEARS THROUGH BANKING CHANNEL S AND ACCEPTED AS LIABILITY IN THE EARLIER ASSESSMENTS. THE ASSESSEE SUBMITTED THAT THE SAID BOOKING ADVANCE S HA VE TO BE R EFUNDED TO THE PURCHASER S ON CANCEL ATION OF BOOKING AND THEREFOR E IT WOULD NOT BE CORRECT TO ADD LIABILITY INCURRED IN THE EARLIER YEARS TO THE INCOME OF THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE AO THAT ASSESSEE ENTERED INTO JOINT DEVELOPMENT AGREEMENT AND NOT THE AGREEMENT TO S ELL . HOWEVER AO WAS NOT FINDI NG THE CONTENTIONS OF THE ASSESSEE AS TENABLE AND ADDED THE ENTIRE AMOUNT OF BOOKING AMOUNT S OF RS.54 19 95 000/ - AS BUSINESS INCOME OF THE ASSESSEE TOWARDS TRANSFER OF DEVELOPMENTAL RIGHTS BY OBSERVING AND HOLDING AS UNDER: - 4.14 THE ASSESSEE HAS NOT B EEN ABLE TO REFUTE THE SAID FINDINGS AND CONSEQUENTLY IT IS HELD THAT THERE IS TRANSFER OF DEVELOPMENT RIGHTS. IT IS SEEN THAT EVEN THE STAMP DUTY AUTHORITIES HAVE VALUED THE TRANSACTION AT RS.35 47 84 000/ - WHICH IS OBVIOUSLY/ SH ALL NOT BE INCLUSIVE OF THE EXPENSES INCURRED BY THE ASSESSEE WHICH IS ONLY IN THE NATURE OF COMPENSATION TO TENANTS PAYMENT TO MCGM ETC. ACCORDINGLY EV EN ON SUCH BASIS THE NET GAIN AS PER STAMP DUTY VALUE SHOULD HAVE BEEN RS.35 47 84 000/ - AS THE ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 6 ASSESSEE HAS NOT INCURRED ANY EXPE NSE TO OBTAIN DEVELOPMENT RIGHTS . THE P ROVISIONS OF THE INCOME TAX ACT IS CLEAR THAT WHEN A BUSINESS ASSET IS TRANSFERRED TO ANOTHER ENTITY THE SAME HAS TO BE AT THE MARKET VALUE AND THE SAID LEGAL POSITION HAS BEEN ENDORSED EVEN BY THE HONORABLE APEX COURT IN THE CASE OF A.L.A FIRMS REPORTED IN 189 ITR 285 . IN VIEW OF THE FACTS INVOLVED HEREIN THE ONLY INFERENCE THAT CAN BE DRAWN IS THAT THE ACTUAL COMPENSATION RECEIVED BY THE ASSESSEE FOR THE TRANSFER OF THE DEVELOPMENT RIGHTS IS TH E RETAINED AMOUNT OF ADVANCE RECEIVED FOR SALE OF FLAT OF RS.54 19 95 000/ - AND THE AMOUNT RECEIVED OF RS.18 00 00 000/ - IS MERELY THE REIMBURSEMENT OF THE EXPENSES ALREADY INCURRED BY THE ASSESSEE FOR THE PROJECT CONSEQUENT TO WHICH THERE IS A LOSS OF RS .84 59 469/ - DUE TO SHORT REIMBURSEMENT OF THE CONSIDERATION .IT IS PERTINENT TO OBSERVE THAT EVEN AS PER THE PROVISIONS OF SECTION 43CA THE STAMP DUTY VALUE WOULD HAVE BEEN ADOPTABLE AS THE CONSIDERATION IF THE ASSESSEE'S CONTENTION WAS TO BE ACCEPTED THA T THE ADVANCE RETAINED BY IT IS NOT PART OF THE COMPENSATION RECEIVABLE BY THE ASSESSEE. HOWEVER DUE TO REASONS ENUMERATED HEREIN ABOVE THE ADVANCE RETAINED BY THE ASSESSEE IS VERY MUCH A PART OF THE COMPENSATION RECEIVED BY THE ASSESSEE AND ACCORDINGLY TH E SAID AMOUNT OF RS.54 19 95 000/ - IS ADOPTED AS THE CONSIDERATION FOR THE TRANSFER OF THE DEVELOPMENT RIGHTS OF THE PROPERTY HELD AS A BUSINESS ASSET BY THE ASSESSEE . 5. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSE SSEE BY DELETING THE ADDITION TO THE EXTENT OF RS.53 97 45 000/ - WHILE SUSTAINING THE ADDITION TO THE EXTENT OF RS.22 50 000/ - AFTER TAKING INTO CONSIDERATION THE SUBMISSION S OF THE ASSESSEE AND THE CONTENTIONS RAISED DURING THE COURSE OF APPELLATE PROCEED INGS BY OBSERVING AND HOLDING AS UNDER: - 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE LD. AR OF THE APPELLANT ARGUMENTS OF THE AO DURING THE APPELLATE PROCEEDINGS THE IMPUGNED ASSESSMENT ORDER AND THE MATERIAL AVAILABLE ON RECORD. MY OBSER VATIONS ARE AS UNDER. 10. THE ISSUE TO BE DECIDED HERE IS WHETHER THE BOOKING ADVANCES OF RS.54 19 95 000/ - RECEIVED BY THE APPELLANT UPTO THE DATE OF JOINT DEVELOPMENT AGREEMENT WHICH IS NEITHER A PART OF THE AGREEMENT NOR PASSED ON TO M/S RICHA HOUSIN G PROJECTS PVT. LTD. WILL PARTAKE THE CHARACTER OF TAXABLE INCOME OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION. ACCORDING TO THE AO THE LIABILITY OF RS. 54 19 95 000 / - IS A PART OF COMPENSATION RECEIVED BY THE APPELLANT FOR ENTERING INTO THE AGREEMENT FOR JOINT VENTURE AND HENCE IT IS THE CONSIDERATION FOR TRANSFER OF DEVELOPMENT IN THE NATURE OF BUSINESS INCOME OF THE APPELLANT FOR THE INSTANT YEAR. ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 7 ON THE OTHER HAND THE APPELLANT HAS TAKEN THE GROUND THAT THE SAID AMOUNT REPRESENTS ADVANCES RECEIVED AGAINST THE FLATS BOOKING WHICH IS TO BE REFUNDED. THE AMOUNT IS SHOWN AS LIABILITY IN THE BALANCE SHEET OF THE APPELLANT AS ON 31 MARCH 2015 WHICH THE APPELLANT HAS NOT ABSOLVED BY THE END OF THE RELEVANT FINANCIAL YEAR AND TREATING THE SAID AMOUNT AS INC OME IS CONTINGENT UPON THE COMPLETION OF THE PROJECT. 11. ACCORDING TO THE LD. AR THE APPELLANT WAS APPOINTED AS THE DEVELOPER OF THE PROPOSED REDEVELOPMENT OF THE SAID PROPERTY BY THE SOCIETY ON 9.03.2005. PURSUANT TO THAT THE SOCIETY SUBMITTED A PROPOS AL FOR REDEVELOPMENT OF THE PROPERTY WHICH WAS APPROVED BY THE MCGM ON 13.11.2006. MCGM ISSUED LETTER OF INTENT (LOI) DATED 12.12.2006 GRANTING PERMISSION FOR REDEVELOPMENT OF THE PROPERTY SUBJECT TO CERTAIN CONDITIONS. THE APPELLANT ACQUIRED THE DEVELOPME NT RIGHTS OVER AND IN RESPECT OF THE PROPERTY VIA DEVELOPMENT AGREEMENT DATED 09.05.2007 ENTERED INTO BETWEEN THE SOCIETY AND THE APPELLANT. ON 4.11.2008 MCGM ISSUED COMMENCEMENT CERTIFICATE FOR 'COMMENCEMENT OF THE CONSTRUCTION UPTO THE PLINTH LEVEL ON T HE PROPERTY FN PURSUANCE TO THE COMMENCEMENT CERTIFICATE THE APPELLANT STARTED DEVELOPMENT WORK AND COMPLETED CONSTRUCTION TILL PLINTH LEVEL. THERE WERE 33 FLOORS TO BE COMPLETED AS PER THE AMENDED PLANS SUBMITTED FOR APPROVAL ON 12.01.2009. HOWEVER THE RE WERE SOME COMPLAINT TO THE MCGM ON 20.03.2009 TO THE EFFECT THAT THE RESERVATION UNDER TOWN PLANNING (TP) SHOWS THAT THE PLOT OF THE SAID PROPERTY IS RESERVED FOR SCHOOL WHILE DEVELOPMENT PLAN (DP) SHOWS THE SAME BEING RESERVED FOR PLAY GROUND. THE SAID COMPLAINT WAS ON THE BASIS OF JUDGMENT D A TED 07.06.2010 PASSED IN W.P. NO. 1731 OF 200 9 . (JAIN SHRAVAK SANGH VS. BMC). IN SLP NO. 24350/2010 THE HON'BLE SUPREME COURT O N 14.10.2011 REMANDED BACK THE MATTER TO THE HON'BLE BOMBAY HIGH COURT. FURTHER DURIN G THE SITE VISIT BY THE OFFICERS OF MCGM IT WAS OBSERVED THAT THE PLINTH WAS NOT IN ACCORDANCE WITH THE SANCTIONED PLAN. THEREFORE MCGM ISSUED A STOP W ORK NOTICE DATED 30.06. 2010 UNDER SECTION 354(A) OF THE MUMBAI MUNICIPAL CORPORATION ACT 1888. ON 16.1 1.2010 THE APPELLANT MADE AN APPLICATION TO THE CHIEF ENGINEER (D.P) OF MCGM WITH A REQUEST TO PROCEED THE PROPOSAL AS PER GOVERNMENT DIRECTIVES. FINALLY HONORABLE BOMBAY HIGH COURT COMMENTED THAT THE DEVELOPMENT ON THE SAID PROPERTY IS NOT ILLEGAL AND RE MOVED THE STOP WORK NOTICE VIDE RESOLUTION DATED 26.06.2012. THE PLAN WAS FURTHER AMENDED AND THE NEW PLANS WERE PROPOSED FOR G+23 FLOORS (FOR REHAB.) AND G+STILT+31 FLOORS (FOR SALE). ACCORDINGLY NOC WAS PROCURED ON19.01.2Q13. 12. IT IS FURTHER EXPLAINED THAT SINCE F.Y. 2007 - 08 THE APPELLANT HAD TAKEN ADVANCES AGAINST THE FLAT BOOKING TOTALLING TO RS. 54 19 95 0007 - FROM FEW PERSONS TOWARDS PURCHASE OF FLATS IN THE BUILDING TO BE DEVELOPED ON THE SAID PROPERTY. THE DETAILS OF THE SAID BOOKING ARE MENTION ED YEARWISE AS UNDER: SR.N O. NAME OF THE CUSTOMERS FYO7 - O8 FY 08 - 09 FY 09 - 10 FYI0 - 11 FY 11 - 12 FY 12 - 13 FY 13 - 14 FY 14 - 15 1 RAJESH & SHALLY SRIVASTAV 3 40.250 ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 8 2 RAKESH Z CHANDOLIA & UMA RAKESH CHANDOLIA 1 00 000 1 00 000 1 00 000 1 00 000 1 00 000 1 00 000 3 TARABAI D. GITE (MAINTENANCE DHURU.) 2 04 740 2 04 740 2 04 740 2 04 740 2 04 740 4 ANANT DHOTRE 4 60 000 4 60 000 4 60 000 4 60 000 2 10.000 2 10 000 5 G.S.KAMAT 3 09 000 6 MAHENDRA WAGH 93 500 7 MAINTENANCE DEPOSIT (DHURU) 8 84 947 8 NITIN GANDHI - ADVANCE 95 00 000 9 SURESH WAUGH 2 00 000 10 UDAY TRIBAKKAR 5 50 000 11 VIJAY WAGH 36 .000 12 ANTONY JOSEPH & SHINY ANTONY 1 1 00 000 14 00 000 14 00 000 14 00.000 14 00 000 13 RICHA REALTORS 75 00 000 75 00 000 14 RAGUVENDRA MANOHAR 14 ; KULKAMI 10 00 000 10 00 000 10 00 000 15 BHAVES H NAVINCHANDRA SHAH (HUF) 25 00 000 25 00 000 25 00 000 16 WADILAL (ITS CREATION) 25 00 000 25 00 000 5 00 000 5 00 000 5 00 000 5 00 000 17 BHAVESH ESTATES (I) PVT.LTD 25 00 000 1 00.00.000 1 00 00 000 1 00 00 000 18 KIRITKUMAR NAVINCHANDRA SHAH & JIGISHA SHAH 10 00 000 10 00 000 10 00.000 10.00 000 10 00 000 10 00 000 19 BHARAT JAIN & MEENA JAIN 5 00 000 18 00 000 18 00 000 18 00 000 20 VINOD JAIN & SHAKUNTALA JAIN 13 00 000 1 3 00 000 13 00 000 21 DEEPAK SOHANANDANI 12 50 000 12 50 000 12 50 000 12 50 000 22 DEEPAK SHETE & ORS 1 23.50.000 1 23 50 000 23 ANURADHA SHETE & ORS 75 00 000 1 42 50 000 1 42 50 000 24 DHANJAY VIJA Y GUPTE 64 50 000 64 50 000 64 50 000 9 50.000 25 ASHWIN S SHETH 15.00 000 15 00 000 15 00.000 15 00 000 15 00 000 15 00 000 26 NITIN S. SHETH (HUF) 15 00 000 15 00 000 15 00 000 15.00 000 15.00 000 15 00 000 27 VI JAY VIRJI PATEL & PUNJIBEN PATEL 27 00.000 ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 9 28 RAJIBEN MANJIBHAI MANDORA 24 00 000 24 00 000 24 00 000 29 JIGNESH ANIL SHAH 27 00 000 27 00 000 27 00 000 27 00 000 27 00 000 30 YOGESH MEHTA 6.00 000 6 00 .000 6 00 000 6 00 000 6 00 000 6 00 000 31 HEMANT CHITAMANI SAMANT 66 20 000 66 20 000 66 20 000 66 20 000 66 20 000 66 20 000 32 CHANDULAL D. VORA/DHIRAJLAL D. - VORA 27 00.000 27 00 000 27 00 000 27 00 000 27 00 000 42 25 000 33 BHADRA K. JUTHANI & XISHOR J. JUTHANI 9 00 000 9 00 000 9 00 000 9 00 000 9 00 000 9 00 000 34 RITA BHAVESH SHAH 25.00 000 25 00 000 25 00 000 35 RAMAKANT R. JADHAY HUF 25 00 000 40.00 000 52 50 000 1 69 50 000 1 69.50 000 1 99 50.000 1 99 50 000 1.99 50 000 36 PRAKASH V AJGAONKAR (HUF) 44.00 000 54 00 000 1 66 50 000 1 69 50 000 2 22 50.000 3 42 50 000 3 42 50 000 3 42 50 000 37 SANTOSH D. MITHBAWKAR 24 00 000 24 00 000 24 00 000 24 00 0 00 24 00 000 24 00 000 38 B.R. INTERNATIONAL 45 00 00 000 45 00 00 000 45 00 00 000 39 JAYASHREE V. KHARCHE & VITAS P. KHARDIE 2 00 000 10 00 000 10 00 000 10 00 000 10 00 000 10 00 000 40 M.K.SHELTERE 20.00 000 20 00 000 20 00 000 41 M/S SAKSHI ADVOCATES & ASSOCIATES 2 50.000 2 50.000 2 50 000 2 50 000 42 TARITA REALTORS PVT LTD 60 00 000 40 00 000 30 00 000 15 00 000 15 00 000 15 00 000 15.00 000 43 VILA S P. KHARCHE & JAYASHREE V. KHARCHE 2.00 000 10 00 000 10 00 000 10 00 000 10.00 000 10 00.000 TOTAL / 1 94 78.437 1 58 60 000 7 71 64 740 11 67 84 740 11 85 84 740 54 75 84 740 54 18 70 000 54 19 95 000 ACCORDING TO THE APPELL ANT SINCE THE PROJECT WAS PROLONGED BY A LONG PERIOD AND THE APPELLANT DID NOT HAVE SUFFICIENT FINANCIAL AND MARKETING VIABILITY THE APPELLANT IN THE YEAR UNDER APPEAL ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH M/S RICHA HOUSING PROJECTS PRIVATE L IMITED (HEREINAFTER REFERRED AS 'RICHA') ON 21.07.2014 FOR A TOTAL CONSIDERATION OF RS. 18 00 00 000/ - . VIDE THE SAID JOINT DEVELOPMENT AGREEMENT BOTH THE PARTIES HAVE AGREED TO JOINTLY DEVELOP THE SAID PROPERTY ON CERTAIN TERMS AND CONDITIONS AS MENTIONE D IN THE SAID JOINT DEVELOPMENT AGREEMENT. ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 10 14. FROM THE DETAILS AND PAPER BOOKS FILED BY THE APPELLANT I FIND THAT THE APPELLANT HAD RECEIVED THE AMOUNT OF RS. 54 19 95 000/ - AS FLAT BOOKING ADVANCES FROM FY 2007 - 08 TO FY 2014 - 15. THE BOOKING ADVANCE SO RECEIVED ARE CREDITED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND REFLECTED IN THE BALANCE SHEET OF THE APPELLANT FOR ALL THE RELEVANT YEARS AS CURRENT LIABILITY. IT IS ALSO OBSERVED THAT BEFORE THE AO THE APPELLANT HAS SUBMITTED CONFIRMATION OF LIABILI TIES FROM ALL FLAT PURCHASERS EXCEPT FROM 3 PERSONS FOR AN ADVANCE OF RS. 22 50 000/ - ON FURTHER VERIFICATION OF THE ADVANCES RECEIVED OF RS. 54 19 95 0007 - IT IS NOTICED THAT THE APPELLANT HAD RECEIVED RS. 45 00 00 000/ - FROM ONE CONCERN M/S B. R. INTE RNATIONAL ('BRI') AND REMAINING ADVANCES OF RS. 9 19 95 000/ - WERE FROM OTHER PERSONS AS LISTED IN THE PRECEDING PARAGRAPH. THERE EXIST AN AGREEMENT DATED 21.12.2012 BETWEEN M/S.B.R.INTERNATIONAL AND THE APPELLANT WHEREIN M/S B.R. INTERNATIONAL HAD BOOKED 27 FLATS FOR A TOTAL AMOUNT OF RS. 50 62 50 000/ - WITH THE PROMISE TO RECEIVE THE POSSESSION OF THE FLATS BY 31.03.2017.THE APPELLANT HAS RECEIVED RS. 45 00 00 000/ - AS PSRT CONSIDERATION AGAINST 27 FLATS FROM M/S.B.R.INTERNATIONAL. 15. THE LD. AR HAS ALSO BROUGHT ON RECORD THAT THESE LIABILITIES WERE VERIFIED AND ACCEPTED IN THE SCRUTINY PROCEEDINGS OF A.YS. 2008 - 09 2009 - 10 2011 - 12 AND 2013 - 14. FROM THE DETAILS AND RECORDS SUBMITTED IT IS FOUND THAT THE DEPARTMENT HAS NEVER DOUBTED THE GENUINENESS OF THE SAID BOOKING ADVANCES INCLUDING IN THE INSTANT YEAR WHERE THE AO HAS ALSO NOT MADE ANY ADVERSE REMARKS ABOUT THE TRUTHFULNESS OF THE BOOKING ADVANCES RECEIVED IN EARLIER YEARS. ACCORDING TO THE LD. AR NO INCOME WAS RECOGNIZED IN EARLIER YEARS BECAUSE T HE PROJECT HAS NOT GONE BEYOND PLINTH LEVEL. THEREFORE NO INCOME CAN BE RECOGNIZED IN THE INSTANT YEAR QUA THE ADVANCES OF RS. 54 CRORES SINCE THERE IS NO MATERIAL CHANGE IN THE IMPLEMENTATION OF THE PROJECT EVEN AFTER THE EXECUTION OF THE JOINT DEVELOPME NT AGREEMENT. THE STATUS OF THE PROJECT HAS REMAINED THE SAME TILL TODAY AS IN THE EARLIER YEARS. THE ONLY CHANGE BROUGHT IN BY THE JOINT DEVELOPMENT AGREEMENT IS THAT CERTAIN RIGHTS IN RESPECT OF DEVELOPMENT OF THE IMPUGNED PROPERTY HAS BEEN TRANSFERRED T O M/S RICHA AGAINST WHICH CERTAIN CONSIDERATION/WAS RECEIVED WHICH HAS BEEN REDUCED FROM WIP AND THE DIFFERENCE IS OFFERED TO TAX. THE APPELLANT IS A JOINT DEVELOPER UNDER THE JOINT DEVELOPMENT AGREEMENT AND EQUALLY LIABLE AND RESPONSIBLE FOR THE DEVELOPME NT WORK AND TO THE PROSPECTIVE FLAT BUYERS. 16. IN THIS REGARD I FIND THAT THE APPELLANT HAS ENTERED INTO THE JOINT DEVELOPMENT AGREEMENT WITH M/S RICHA HOUSING PROJECTS PRIVATE LIMITED ON 21.07.2014 FOR A TOTAL CONSIDERATION OF RS. 18 00 00 000/ - . ACCOR DING TO THE AO ALTHOUGH IT WAS A JOINT DEVELOPMENT AGREEMENT ALL THE RESPONSIBILITIES OF DEVELOPING THE PROJECT AND SUBSEQUENT BOOKING REST WITH M/S.RICHA THE NEW DEVELOPER OF THE PROJECT. THE APPELLANT'S ROLE WAS NEGLIGIBLE. ON THE OTHER HAND THE APPE LLANT HAS CONTENDED THAT THE SAID AGREEMENT CLEARLY REVEALS THAT THE PROJECT IS TO BE JOINTLY DEVELOPED BY THE APPELLANT AND M/S.RICHA. THE JOINT DEVELOPMENT AGREEMENT CLEARLY SHOWS THAT THE ENTIRE JOINT DEVELOPMENT RIGHT OF THE PROJECT HAS NOT BEEN HANDED OVER TO M/S.RICHA. 17. ACCORDING TO THE LD. AR THE AO HAS MISINTERPRETED THE ENTIRE JOINT DEVELOPMENT ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 11 AGREEMENT BY READING BETWEEN THE CLAUSES WHILE IGNORING REST OF THE ASPECTS OF THE AGREEMENT. A HOLISTIC READING OF THE SAID AGREEMENT WOULD SUGGES T THAT THE APPELLANT HAS PARTED WITH SOME OF THE DEVELOPMENT RIGHTS TO M/S RICHA. THERE IS NO COMPLETE OR OUTRIGHT TRANSFER OF DEVELOPMENT RIGHTS TO M/S RICHA. IN THIS REGARD THE APPELLANT HAS BROUGHT TO THE ATTENTION OF THE UNDERSIGNED VARIOUS CLAUSES OF THE AGREEMENT WHICH CLEARLY BRING OUT THAT M/S.RICHA AND THE APPELLANT ARE JOINTLY RESPONSIBLE FOR DEVELOPMENT OF THE PROJECT. FOR THE SAKE OF CLARITY THESE CLAUSES OF THE AGREEMENT ARE REPRODUCED BELOW - CLAUSE 2.1 - IN CONSIDERATION OF E ACH PARTY PROVIDING ITS/THEIR EXPERTISE AND OTHER RESOURCES AS SET OUT HEREINAFTER THE PARTIES HEREBY AGREE THAT THE PROJECT SHALL BE DEVELOPED BY THE DEVELOPER AND RICHA ON THE TERMS AND CONDITIONS SET OUT IN THIS AGREEMENT AND THE DEVELOPER HEREBY AGREE S THAT RICHA SHALL BE JOINTLY ENTITLED TO ALL RIGHTS BENEFITS AND INTEREST OF THE DEVELOPMENT UNDER THE SAID DEVELOPMENT AGREEMENTS. CLAUSE 2.2 - RICHA HAS; RELYING ON THE REPRESENTATIONS AND WARRANTIES OF THE DEVELOPER AS PROVIDED FOR IN THIS AGREEMENT AND SUBJECT TO THE DEVELOPER FULFILLING ITS OBLIGATIONS UNDER THIS AGREEMENT AGREED TO JOINTLY DEVELOP THE PROJECT WITH THE DEVELOPER. CLAUSE 2.3 - THE DEVELOPER SHALL BRING IN THE SAID PROPERTY ALONGWITH ALL RIGHT UNDER THE LOI REVISED LOI AND DEVELOP MENT AGREEMENTS WITH THE SOCIETY AND ALSO BENEFIT OF ALL THE APPROVALS AND PERMISSIONS FREE OF ALL DISPUTES FOR THE PURPOSE OF DEVELOPMENT OF THE PROJECT AND RICHA SHALL AT ITS OWN RISK AND COST DEVELOP THE PROJECT ON THE SAID PROPERTY IN ACCORDANCE WIT H THE DEVELOPMENT AGREEMENTS AND THIS AGREEMENT AND THE DEVELOPER SHALL BE ENTITLED TO RECEIVE THE DEVELOPER'S CONSIDERATION AS DESCRIBED HEREUNDER: IN PURSUANCE OF THE AFORESAID THE DEVELOPER AND RICHA SHALL UNDERTAKE A JOINT DEVELOPMENT OF THE PROJECT BY : (I) DEMOLISHING THE EXISTING BUILDINGS DWELLING IN USES STRUCTURES STANDING ON THE SAID PROPERTY ; (II) CONSTRUCTION OF THE TRANSIT CAMP/TEMPORARY REHABILITATION OF THE MEMBERS OF THE SOCIETY DURING THE PERIOD OF REDEVELOPMENT SHIFTING OF MEMBERS IN THE TEMPORARY ACCOMMODATION CONSTRUCTION OF REHAB UNITS AND DEVELOPING DP RESERVATION AREA (PLAY GROUND) AS PROVIDED FOR IN THE DEVELOPMENT AGREEMENTS AND RELOCATING THE MEMBERS IN THE REHAB UNITS SO CONSTRUCTED; AND ' (III) CONSTRUCTING ON THE SAID PR OPERTY IN ACCORDANCE WITH APPROVALS SANCTIONS AND PERMISSIONS OF THE CONCERNED AUTHORITIES THE FREE SALE BUILDING/S BY UTILIZING THE MAXIMUM AVAILABLE FSI AREA. CLAUSE 2.4 - THE DEVELOPER HEREBY HANDS OVER PASSION TO AND GRANTS RICHA FROM THE DATE OF TH IS AGREEMENT A RIGHT TO ENTER UPON THE SAID PROPERTY AS A JOINT ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 12 DEVELOPER AND DEVELOP THE SAME TOGETHER WITH THE DEVELOPER AND EXECUTE THE PROJECT IN TERMS OF THIS AGREEMENT. CLAUSE 2.7 - AS FAR AS FREE SALEABLE AREA OR THE PREMISES ARE CONCERNED RICHA SHALL HAVE THE SOLE ABSOLUTE AND EXCLUSIVE DISCRETION IN CONCEPTUALIZING THE SCHEME OF DEVELOPMENT OF THE PREMISES AND UNDERTAKING THE PROJECT AS PER THE AGREED TERMS AND IN THIS REGARD RICHA SHALL BE FREELY ENTITLED TO DEVELOP THE SAID PROPERTY IN ANY MANNER IT DEEMS FIT AS PER THE REVISED SANCTIONS PLANS AND SUBJECT TO ALL APPLICABLE LAWS. IT IS AGREED BETWEEN THE PARTIES THAT THE DEVELOPER SHALL BE RESPONSIBLE FOR ALL THE LIAISONING WORK FOR THE DEVELOPMENT OF THE SAID PROJECT AS PER THE PLANS DESIG NS CONCEPT SCHEDULE PREPARED BY RICHA AS PER APPLICABLE LAWS. CLAUSE 2.9 - THE DEVELOPER SHALL ALSO ENSURE TO FACILITATE TIMELY RELEASE OF FSL FOR DEVELOPMENT OF THE PREMISES SO THAT THE PROJECT IS NOT STALLED OR STOPPED FOR WANT OF FURTHER SANCTION FOR RELEASE OF FSL FROM MCGM AND REDEVELOPMENT SHALL KEEP RICHA INDEMNIFIED FOR ANY LOSS OR DAMAGE THAT MAY BE CAUSED TO RICHA DUE TO THE FAILURE OF THE DEVELOPER. CLAUSE 2.11 - RICHA MAY COMMENCE IMPLEMENT AND COMPLETE THE DEVELOPMENT OF SAID PROPERTY OR AN Y PART/S THEREOF IN ANY PHASES AND AT ANY INTERVALS AS IT MAY DEEM FIT AND PROPER SUBJECT TO PROVISIONS OF THE DEVELOPMENT AGREEMENTS AND THIS AGREEMENT. THE PARTIES SHALL BE RESPONSIBLE TO CONSTRUCT AND HANDOVER REHAB UNITS TO THE SOCIETY AND DEVELOPED DP RESERVATION I.E. PLAY GROUND TO THE MCGM AS PER THE TIME SCHEDULE AND SPECIFICATIONS MENTIONED IN THE DEVELOPMENT AGREEMENTS AND RESPECTIVE APPROVALS. CLAUSE 2.15 - PARTIES SHALL CARRY OUT THE DEVELOPMENT/CONSTRUCTION ACTIVITIES WITH A VIEW TO MAXIMIZ ING THE REVENUE FROM THE PROJECT. RICHA SHALL BE FREE TO DEVELOP THE SAID PROPERTY IN SUCH MANNER AS IT DEEMS FIT BUT ALWAYS IN ACCORDANCE WITH THE APPLICABLE LAWS AND THE SPECIFICATIONS AND AS PER THE PROVISIONS OF THIS AGREEMENT AND DEVELOPMENT AGREEME NTS. CLAUSE 4.4 - THE DEVELOPER SHALL BE RESPONSIBLE TO SHIFT THE MEMBERS TO THE REHAB UNITS AT THE COST OF RICHA AND HAND OVER THE DEVELOPED DP RESERVATION I.E. PLAY GROUND TO MCGM ONCE THE REHAB UNITS AND DP RESERVATION IS READY FOR HAND OVER AS PER THE TERMS OF DEVELOPMENT AGREEMENT. 18. FROM THE AFORESAID CLAUSES IT IS OBSERVED THAT THE APPELLANT ALONG WITH M/S RICHA WILL BRING THEIR RESPECTIVE EXPERTISE FOR JOINT DEVELOPMENT OF THE PROJECT. THE APPELLANT WILL BRING RIGHTS UNDER VARIOUS LOL DEVELOPM ENT AGREEMENTS ETC. IN ITS POSSESSION AND M/S RICHA WILL DEVELOP THE PROJECT AT ITS OWN COST. THUS BOTH THE PARTIES HAVE .; PARTICIPATION IN THEIR OWN RIGHTS FOR THE DEVELOPMENT OF THE PROJECT. CLAUSE 2.7 SPECIFIES \ THAT THE APPELLANT IS RESPONSIBLE FOR ALL THE LIASONING WORK FOR THE SAID PROJECT AS PER THE PLANS DESIGN ETC. SIMILAR STIPULATIONS ARE THERE IN CLAUSE 2.8. CLAUSE 2.9 STATES THAT THE DEVELOPER WILL ENSURE TIMELY RELEASE OF FSL FOR THE DEVELOPMENT OF THE PREMISES. IN CLAUSE 2.11 IT IS MENTI ONED THAT BOTH THE PARTIES ARE RESPONSIBLE FOR CONSTRUCTION AND HANDOVER OF THE REHABILITATION UNITS TO THE SOCIETY AND DEVELOPED DP RESERVATION ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 13 I.E. PLAY GROUND TO MCGM AS PER THE TIME SCHEDULE. CLAUSE 2.15 CLEARLY STATES THAT THE APPELLANT ALONG WITH M/S RICHA WILL CARRY OUT THE DEVELOPMENT WITH A VIEW TO MAXIMIZE THE REVENUE FROM THE PROJECT. IN CLAUSE 4.4 IT IS SPECIFIED THAT THE APPELLANT SHALL BE RESPONSIBLE FOR SHIFTING OF THE MEMBERS TO THE REHABILITATION UNITS AT THE COST OF M/S. RICHA AND HAND OV ER THE DEVELOPED DP RESERVATION I.E. PLAY GROUND TO MCGM ONCE THE REHABILITATION UNITS AND DP RESERVATION ARE READY FOR HAND OVER. IT IS FURTHER OBSERVE -- FROM THE AGREEMENT THAT THE CLAUSES 8 AND 9 DEAL WITH THE REPRESENTATION AND COVENANTS OF THE APPELLAN T AND THE OBLIGATIONS OF THE APPELLANT. IN MY CONSIDERED OPINION A COMPREHENSIVE READING OF ALL THE CLAUSES AND SUB CLAUSES OF THE JOINT DEVELOPMENT AGREEMENT ESTABLISHES THAT THE PROJECT IS TO BE JOINTLY DEVELOPED BY THE APPELLANT AND M/S/RICHA AND IT IS NOT THE CASE THAT THE ENTIRE JOINT DEVELOPMENT RIGHT HAS BEEN HANDED R TO M/S RICHA. THEIR ROLE AND RESPONSIBILITIES WILL CERTAINLY DIFFER. 9. I FIND THAT THERE ARE TWO ASPECTS OF JOINT DEVELOPMENT AGREEMENT QUA THIS PROJECT: A. THE FIRST ONE IS RE HABILITATION OF EXISTING TENANTS AND OCCUPANTS HANDING OVER OF THE PLAYGROUND TO MCGM AS PER THE DP RESERVATION AND LIASONING WITH VARIOUS GOVERNMENTAL AUTHORITIES TO GET THE PROPER PERMISSIONS AND APPROVALS B. CONSTRUCTION OF THE NEW BUILDING FOR EFFECT ING SALE OF FREE AREA IT APPEARS THAT THE AO HAS COMPLETELY OVERLOOKED THE FIRST ASPECT WHICH IS CONCERNED WITH THE ROLE AND RESPONSIBILITY OF EFFECTING AND FULFILLING THE SAME THAT STILL REMAINS WITH THE APPELLANT EVEN AFTER ENTERING INTO THE JOINT DEVEL OPMENT AGREEMENT. THE/SECOND PART RELATES TO THE COST TO BE INCURRED FOR DEVELOPMENT AND CONSTRUCTION OF THE/PROJECT WHICH HAS BEEN UNDERTAKEN BY M/S RICHA. 20. IN THIS REGARD LD. AO HAS CONTENDED THAT THERE ARE CERTAIN INACCURATE OBSERVATIONS MADE OF T HE AO IN THE ASSESSMENT ORDER. FOR EXAMPLE THE AO HAS STATED THAT THERE IS ABSOLUTE TRANSFER OF DEVELOPMENT RIGHT AND THAT THE ROLE OF THE APPELLANT HAS BEEN REDUCED TO MERE OBTAINING OF PERMISSIONS. AS STATED IN THE PRECEDING PARAGRAPHS THE APPELLANT IS STILL A JOINT DEVELOPER AND RESPONSIBILITIES HAVE BEEN CASTED UPON IT UNDER THE AGREEMENT AND IT CANNOT BE SAID THAT ENTIRE WORK RELATED TO THE PROJECT IS TO BE CARRIED OUT BY M/S RICHA ONLY. ACCORDING TO THE LD. AR THE CONSIDERATION OF RS. 18 CRORE RELA TES TO ONLY THAT PORTION OF RESPONSIBILITIES WHICH ARE PARTED WITH KEEPING THE RIGHT TO JOINTLY DEVELOP THE PROJECT WITH THE APPELLANT THAT HAS BEEN OFFERED TO TAX IN THE YEAR UNDER CONSIDERATION. FURTHER THE AO IS NOT CORRECT IN CALCULATING CERTAIN NOT IONAL VALUE OF THE SALEABLE AREA OF PROJECT. IT IS ARGUED THAT THE PROJECT IS UNDER LITIGATION AND TILL DATE THERE IS NO PROGRESS IN THE PROJECT. THE MARKET VALUE OF THE PROJECT WOULD BE REALIZED ONCE THERE IS SOME CONSTRUCTION. THEREFORE SUCH NOTIONAL CA LCULATION HAS NO RELEVANCE. THE AO HAS FURTHER OBSERVED THAT UNDER THE PROVISIONS OF INCOME TAX ACT WHEN A BUSINESS ASSET IS TRANSFERRED TO ANOTHER PERSON THE SAME HAS TO BE TAXED AT MARKET VALUE AS HELD BY THE HON'BLE APEX COURT IN CASE OF ALA FIRM. IN THIS REGARD ON CAREFUL STUDY OF THE FACTS OF THE CASE I AGREE WITH THE LD. AR THAT THE RATIO OF THE JUDGMENT IN CASE OF ALA FIRM WILL NOT BE APPLICABLE AS IN THAT CASE THE STOCKS WERE DIRECTED TO BE VALUED AT MARKET RATE ON THE DISSOLUTION OF ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 14 THE FIRM W HERE THERE WAS NO CONTINUATION OF THE BUSINESS OF THE FIRM. THE FACTS OF THE PRESENT CASE ARE ENTIRELY DIFFERENT. AS HELD IN THE JUDGMENTS OF THE APEX COURT IN CASES OF CIT VS. SURJI VALLABHDAS & CO [46 ITR 144 (SC)] AND CIT VS. A. RAMAN & CO. [67 ITR 11(S C) ONLY REAL INCOME CAN BE TAXED IN CONTRAST TO THE NOTIONAL INCOME. THE LD. AR HAS ALSO HIGHLIGHTED THAT THE OBSERVATION OF THE AO TO THE EFFECT THAT EVEN AS PER SECTION 43CA STAMP DUTY VALUE HAD TO BE ADOPTED IS ALSO INCORRECT. IT IS ARGUED THAT SECTI ON 43CA WOULD HAVE NO APPLICABILITY IN THE PRESENT CASE. WHAT HAS BEEN TRANSFERRED IN NOT LAND OR BUILDING OR BOTH BUT A RIGHT IN THE LAND. THE AO HAS HIMSELF ACCEPTED IN PARA 4.12 THAT THE LAND DOES NOT BELONG TO THE ASSESSEE BUT TO MCGM AND THEREFORE T HE LAND HAS NOT BEEN TRANSFERRED BUT THE DEVELOPMENT RIGHTS IN THE LAND IS THE SUBJECT MATTER OF THE AGREEMENT. IN SUCH A SCENARIO THE PROVISIONS OF SECTION 43CA DO NOT APPLY. THE APPELLANT HAS RELIED UPON THE JUDGMENTS OF HON'BLE MUMBAI ITAT IN CASES OF ITO VS. PRADEEP STEEL RE - ROLLING MILLS (P) LTD. (155 TTJ 294) ITO VS. HEMANT TANDEL (44 CCH 55) AND SHRI ATUL G. PURANIK IN ITA NO. 3051/M/10 WHEREIN IT HAS BEEN HELD THAT LAND OR BUILDING OR BOTH DOES NOT INCLUDE LEASEHOLD RIGHT IN THE LAND. ALTERNATIVE LY IT IS ALSO ARGUED DURING THE APPELLATE PROCEEDINGS THAT THE STAMP DUTY VALUE IS DETERMINED AT RS. 35.47 CRORE. THE APPELLANT HAS RECEIVED RS. 18 CRORE AS CONSIDERATION. FURTHER THE APPELLANT HAD TO INCUR EXPENDITURE TO THE TUNE OF RS. 22.58 CRORE AS P ER THE AGREEMENT WHICH IS ALSO ACCEPTED BY THE AO IN PARA 4.3 OF THE ASSESSMENT ORDER. AFTER ENTERING INTO THE SAID AGREEMENT M/S RICHA HAS AGREED TO PAY THE SAID EXPENSES. THEREFORE THE TOTAL CONSIDERATION FOR THE TRANSFER OF PARTIAL DEVELOPMENT RIGHT W OULD BE RS. 40.58 CRORE (RS. 18 CRORE + RS. 22.58 CRORE). SUCH CONSIDERATION WOULD BE HIGHER THAN THE SDV. ALSO THE CORRESPONDING COST FOR THE APPELLANT WOULD BE RS. 18.84 CRORES + RS. 22.58 CRORES WHICH WOULD ULTIMATELY LEAD TO A LOSS OF RS. 84 LAKH. T HUS EVEN THE PROVISIONS OF SECTION 43CA ARE NOT GETTING ATTRACTED. AFTER CAREFUL CONSIDERATION I FIND MERIT IN THE ABOVE ARGUMENTS OF THE APPELLANT LOOKING TO THE FACTS OF THE INSTANT CASE AND JUDICIAL DECISIONS RELIED UPON. 21. UPON CAREFUL VERIF ICATION OF THE ACCOUNTS OF THE APPELLANT TOGETHER WITH VARIOUS CLAUSES OF THE JOINT DEVELOPMENT AGREEMENT I DO NOT AGREE WITH THE AO THAT THE. % LIABILITIES OF THE APPELLANT TOWARDS THE PERSONS WHO HAVE BOOKED THE FLATS IN THE PROPOSED PROJECTS HAS EXTIN GUISHED. IT IS BEYOND COMPREHENSION THAT THE APPELLANT WHICH HAS RECEIVED THE ADVANCE OF RS. 54 CRORE FROM VARIOUS PERSONS AGAINST FLAT BOOKING WOULD DO NOTHING IN RETURN AND STILL ALLOWED TO SAFELY KEEP THE ENTIRE MONEY TREATING FT AS ITS INCOME. AS EXP LAINED IN THE PRECEDING PARAGRAPHS EVEN AFTER EXECUTING THE AGREEMENT THE APPELLANT IS STILL A JOINT DEVELOPER OF THE PROJECT AND THEREFORE HAS A RESPONSIBILITY TOWARDS THE PROSPECTIVE BUYERS AS WELL AS PAST ADVANCES RECEIVED. THE EFFECT OF THE AGREEMEN T AS SET OUT ABOVE IS TO MAKE M/S RICHA A JOINT DEVELOPER IN THE PROJECT FOR THE PURPOSE OF CONSTRUCTION OF FREE SALEABLE AREA AND HANDING OVER TO THE PROSPECTIVE BUYERS. THIS WOULD IN NO SCENARIO LEAD TO THE CONCLUSION THAT QUA THE EXISTING BOOKINGS T HE APPELLANT CEASES TO HAVE ANY LIABILITY. IN MY CONSIDERED OPINION THE APPELLANT IS FULLY RESPONSIBLE FOR EITHER REFUND THE ADVANCES OR TO HAND OVER THE FLATS AS PER THE AGREED TERMS. TILL SUCH TIME IT CANNOT BE SAID THAT THE APPELLANT HAS BECOME OWN ER OF RS. 54 CRORE ON ITS OWN RIGHTS WITHOUT DOING ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 15 ANYTHING ELSE. THE AO HAS COMPLETELY OVERLOOKED THE FACT THAT UNDER THE INCOME TAX ACT ONLY REAL INCOME IS TAXABLE NOT AN IMAGINARY OR HYPOTHETICAL INCOME UNLESS CLEARLY SPECIFIED IN THE STATUTE. THE SA ID AMOUNT OF RS 54 CRORES CANNOT BE SAID TO BE THE REAL INCOME OF THE APPELLANT SINCE THE APPELLANT HAS YET NOT GOT THE RIGHT TO RETAIN THE SAME AS AN OWNER. THE ADVANCES SO RECEIVED HAVE TO BE EITHER REFUNDED OR THE FLAT BUYERS OR TO BE GIVEN FLATS. IN CA SE THE ADVANCES ARE REFUNDED THERE WOULD ARISE NO QUESTION OF TAXING THE SAME. AND IN CASE THE BUYERS ARE ALLOTTED THE FLATS THEN ON THE DATE OF ALLOTMENT INCOME FROM THE SALE PROCEEDS WOULD BE RECOGNIZED NOT BEFORE THAT. IT IS BROUGHT ON RECORD THAT TIL L DATE THE PROJECT HAS NOT PROGRESSED EVEN AFTER THE INVOLVEMENT OF M/S RICHA. 22. I ALSO FIND THAT UNDER THE DOCTRINE OF 'PRIVITY IN CONTRACT' IT IS ONLY APPELLANT WHO IS UNDER AN OBLIGATION TO PERFORM HIS PART OF CONTRACT UNDER THE SAID AGREEMENT AGAIN ST THE ADVANCES RECEIVED OF RS. 54 CRORES SINCE THE PARTIES TO THE CONTRACT CAN SUE UNDER THE CONTRACT AND A THIRD PART DERIVES NO SUCH RIGHT OR OBLIGATION UNDER SUCH CONTRACT UNDER THIS DOCTRINE A CONTRACT CANNOT CONFER RIGHTS OR IMPOSE OBLIGATIONS ARISIN G UNDER IT ON ANY PERSON OR AGENT EXCEPT THE PARTIES TO IT. THEREFORE THERE IS NO BASIS FOR THE AO TO STATE THAT THE APPELLANT WAS NO LONGER REQUIRED TO REFUND THE MONEY NOR WAS IT REQUIRED TO HAND OVER THE FLAT AND THAT ALL THE LIABILITY/ OBLIGATION UND ER THE CONTRACT WAS THAT OF M/S. RICHA. IN THIS REGARD SECTION 40 OF THE INDIAN CONTRACT ACT 1872 IS WORTH MENTIONING HERE - '// IT APPEARS FROM THE NATURE OF THE CASE THAT IT WAS THE INTENTION OF THE PARTIES TO ANY CONTRACT THAT ANY PROMISE CONTAIN IN I T SHOULD BE PERFORMED BY THE PROMISOR HIMSELF SUCH PROMISE MUST BE PERFORMED BY THE PROMISOR. IN OTHER CASES THE PROMISOR OR HIS REPRESENTATIVES MAY EMPLOY A COMPETENT PERSON TO PERFORM IT.' IN THE PRESENT CASE THE ONUS TO HAND OVER THE FLAT TO THE BUY ERS WAS ON THE APPELLANT AS IT HAD ENTERED INTO CONTRACT WHILE RECEIVING ADVANCES AND AT THAT POINT OF TIME WHEN THE ADVANCES WERE RECEIVED THROUGH ENTERING INTO AGREEMENT OR BY ISSUE OF ALLOTMENT LETTER M/S RICHA WAS NOT IN THE PICTURE. THE PROMISE UNDE R THE AGREEMENT TO SALE HAS TO BE PERFORMED BY THE APPELLANT ONLY. HENCE I DO NOT AGREE WITH THE AO THAT THE AMOUNT RECEIVED BY THE APPELLANT AS FLAT BOOKING OF RS. 54 19 95 000/ - WILL BECOME ITS INCOME INSTEAD OF LIABILITY OF THE APPELLANT AS RECOGNIZED TILL THE END OF THE RELEVANT F.Y. AND APPELLANT DOES NOT REQUIRE TO PERFORM ITS PART OF CONTRACT OR TO REFUND THE SAID AMOUNT. 23. THE LD. AR HAS ALSO BROUGHT ON RECORD AN AGREEMENT ENTERED INTO WITH M/S B R INTERNATIONAL DATED 15.10.2015 THE CONCERN WH ICH HAS ADVANCED RS. 45 CRORE OUT OF TOTAL ADVANCE OF RS. 54 CRORE. THIS IS A TRIPARTITE AGREEMENT WITH THE APPELLANT M/S B. R. ENTERPRISE AND M/S RICHA. AS PER THE AGREEMENT THE THREE PARTIES HAVE AGREED TO CANCEL THE BOOKING OF M/S B R ENTERPRISE AND T O REFUND THE ENTIRE ADVANCE RECEIVED FROM IT ALONG WITH A FURTHER COMPENSATION OF RS. 40 CRORE. AS PER THE AGREEMENT THE ENTIRE PAYMENT OF RS. 85 CRORE (RS. 45 CRORE ADVANCE + RS. 40 CRORE COMPENSATION) IS TO BE MADE JOINTLY BY THE APPELLANT AND M/S RICHA . ALTHOUGH THE AGREEMENT WAS ENTERED IN THE SUBSEQUENT F.Y. IT FURTHER ESTABLISHES THAT THE APPELLANT IS STILL A JOINT DEVELOPER OF THE PROJECT EVEN AFTER ENTERING INTO THE JOINT DEVELOPMENT AGREEMENT WITH M/S RICHA. IT ALSO PROVES THAT THE APPELLANT IS S TILL LIABLE TO THE PERSONS WHO HAD BOOKED THE FLATS AND GIVEN THE ADVANCE. ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 16 24. FROM THE DOCUMENTS SUBMITTED BY THE APPELLANT IT IS ALSO OBSERVED THAT APART FROM M/S B R INTERNATIONAL OTHER BUYERS TOO WHO FURNISHED ADVANCES TO THE APPELLANT IN PAST YEAR S ALSO ENTERED INTO AGREEMENTS WITH THE APPELLANT AND WERE ISSUED ALLOTMENT LETTERS ON DIFFERENT DATES WITH A PROMISE TO DELIVER THE FLATS WITHIN SPECIFIED DATES. UNDER SUCH AGREEMENTS THE APPELLANT JS UNDER AN OBLIGATION TO PERFORM IT'S PART OF CONTRACT . M/S RICHA WAS NOT A PARTY TO THE ORIGINAL AGREEMENT/ALLOTMENT LETTERS WITH M/S BR INTERNATIONAL OR WITH OTHER BUYERS. THEREFORE M/S B R INTERNATIONAL AS WELL AS OFTER BUYERS CAN ENFORCE SPECIFIC PERFORMANCE ONLY AGAINST THE APPELLANT AND NOT WITH M'S RI CHA. THE APPELLANT HAS PRIMARY LIABILITY TOWARDS M/S B R INTERNATIONAL AND OTHER BUYERS AND THE SAME CANNOT BE SAID TO HAVE BEEN SHIFTED OR CANCELLED BECAUSE OF THE TRANSFER OF CERTAIN DEVELOPMENT RIGHTS IN FAVOUR OF M/S RICHA UNDER THE JD AGREEMENT. M/S R ICHA HAS SPECIFICALLY NOT UNDERTAKEN THE SAID LIABILITY/ OBLIGATION/ DUTY OF THE APPELLANT MEANING THEREBY THAT THE APPELLANT WOULD HAVE TO DISCHARGE THE SAME. IT IS ALSO FOUND THAT THE SAID JOINT DEVELOPMENT AGREEMENT WAS NOT IN THE KNOWLEDGE OR CONNIVANC E OF THE BUYERS AND THEY WERE NOT MADE PARTY TO THE AGREEMENT. IN SUCH A SCENARIO IT IS NOT CORRECT ON THE PART OF THE AO TO TREAT SUCH ADVANCES AS INCOME OF THE APPELLANT FOR THE INSTANT YEAR ON THE GROUND THAT THE APPELLANT IS NO LONGER ANSWERABLE TO SU CH BUYERS. 25. THE LD. AR HAS FURTHER ARGUED THAT AS PER SECTION 8 OF MAHARASHTRA OWNERSHIP FLAT ACT ('MOFA') IN THE EVENT OF FAILURE TO DELIVER THE POSSESSION WITHIN THE PRESCRIBED TIME 9% SIMPLE INTEREST ALONG WITH PRINCIPLE AMOUNT HAS TO BE REFUNDED. THE SECTION 8 OF MOFA IS REPRODUCED HEREIN BELOW: - 'SECTION 08: REFUND OF AMOUNT PAID WITH INTEREST FOR FAILURE TO GIVE POSSESSION WITHIN SPECIFIED TIME OR FURTHER TIME ALLOWED IF (A) THE PROMOTER FAILS TO GIVE POSSESSION IN ACCORDANCE WITH THE TERMS OF HIS AGREEMENT OF A FLAT DULY COMPLETED BY THE DATE SPECIFIED OR ANY FURTHER DATE OR DATES AGREED TO BY THE PARTIES OR (B) THE PROMOTER FOR REASON BEYOND HIS CONTROL AND OF HIS AGENTS IS UNABLE TO GIVE POSSESSION OF (HE FLAT BY THE DATE SPECIFIED OR A FURTHER AGREED DATE AND A PERIOD OF THREE MONTHS THEREAFTER OR A FURTHER PERIOD OF THREE MONTHS IF THOSE REASONS STILL EXIST THEN IN ANY SUCH CASE THE PROMOTER SHALL BE LIABLE ON DEMAND (BUT WITHOUT PREJUDICE TO ANY OTHER REMEDIES TO WHICH HE MAY BE L IABLE) TO REFUND THE AMOUNTS ALREADY RECEIVED BY HIM IN RESPECT OF THE FLAT (WITH SIMPLE INTEREST AT NINE PERCENT PER ANNUM FROM THE DATE HE RECEIVED THE SUMS TILL THE DATE THE AMOUNTS AND INTEREST THEREON IS REFUNDED) AND THE AMOUNTS AND THE INTEREST SHA LL BE A CHARGE ON THE LAND AND THE CONSTRUCTION IF ANY THEREON IN WHICH THE FLAT IS OR WAS TO BE CONSTRUCTED TO THE EXTENT OF THE AMOUNT DUE BUT SUBJECT TO ANY PRIOR ENCUMBRANCES.' ACCORDING TO THE LD.AR SIMILAR PROVISIONS EXIST IN THE REAL ESTATE REGUL ATION ACT 2016. UPON APPRECIATION OF THESE PROVISIONS I FIND THAT THE AMOUNT RECEIVED BY THE APPELLANT OF RS. 54 19 95 000/ - TOWARDS FLAT BOOKING ADVANCES STILL CONSTITUTE LIABILITY OF THE APPELLANT. 26. IT IS ALSO FOUND THAT DURING THE ASSESSMENT PROCEE DINGS CONFIRMATIONS FROM 40 PARTIES OUT OF TOTAL 43 PARTIES WHO HAVE GIVEN ADVANCES TO THE APPELLANT ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 17 CONFIRMING THAT THE RESPECTIVE AMOUNT IS STILL PAYABLE TO THEM ARE SUBMITTED. THE APPELLANT HAS AGAIN FILED THE DETAILS VIZ. LEDGER CONFIRMATIONS FROM 4 0 PARTIES ITR BALANCE SHEET ETC. THESE DETAILS CLEARLY SHOW THAT THE SAID LIABILITIES ARE STILL PAYABLE. THE SUMMARY OF THE DETAILS ARE AS UNDER - PARTICULARS AMOUNT LEDGER CONFIRMATIO N BANK STATEME NT BALANCE SHEET ITR ACK AUDIT REPORT ASHWIN S . SHETH 15 00.000 RECEIVED B.R. INTERNATIONAL 4500 00 00 0 RECEIVED RECEIVED BHADRA K. JUTHANI & KISNOR J. JUTHANI 9 00.000 RECEIVED RSCE IVED RECEIVED BHAVESH ESTATE PVT. LTD. 100.00 000 RECEIVED RECEIVED RECEIVED RE CEIVED CHANDULAL D. VORA/DHIRAJLAL VORA 42 25 000 RECEIVED JIGNESH ANIL SHAH 27 00 000 RECEIVED RECEIVED RECEIVED RECEIVED KJRITKUMAR NAVINCHANDRA SHAH & JIGISHA SHAH 10 00 000 RECEIVED M.K - SHELTERS 20.00.000 RECEIVED NITIN S SHETH (HUF) 15 00.000 RECEIVED PRAKASH AJGAONKAR HUF 172 00.000 RECEIVED RECEIVED RECEIVED RECEIVED PRAKASH V. AJGAONKAR (HUF) 97 00.000 RECEIVED RECEIVED RECEIVED RECEIVED PRAKASH V. AJGAONKAR (HUF) 73 50 000 RECEIVED RECEIVED RECEIVED RECEIVED RAKESH 2 CHANDOLIA 8 UMA RAKESH CHANDOLIA 1.00 000 RECEIVED RECEIVED RECEIVED RAMAKANT R. JADHAV (HUF) 30 00.000 RECEIVED RECEIVED RECEIVED RECEIVED RAMAKANT R. JADHAV HUF 139 50 000 RECE IVED RECEIVED RECEIVED RECEIVED RAMAKANT R. JADHAV HUF 30 00 000 RECEIVED RECEIVED RECEIVED RECEIVED SANTQSH D. UITHBAWKAR 24 00 000 RECEIVED RECEIVED RECEIVED RECEIVED TARITA REALTORS PVT LTD 15 00 000 RECEIVED RECEIVED RECEIV ED RECEIVED RECEIVED YOGESH MEHTA 6 00 000 RECEIVED RECEIVED RECEIVED HEMANT CHINTAMANI SAMANT/LEENA HEMANT SAMANT 66 20 000 RECEIVED ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 18 JAYASHREE V. KHARCHE & VILAS P. KHARCHE 10 00 000 NOT REVIVED M/S SAKSHI ADVOCATES & ASSOCIATES 2.50 000 NOT RECEIVED WAS P. KHARCHE & JAYASHREE V. KHARCHE 10.00 000 NOT RECEIVED WDILAL (ITS CREATION) 5 00 000 RECEIVED 27. IN THE LIGHT OF THE DETAILED DISCUSSION MADE IN THE PRECEDING PARAGRAPHS I CONCLUDE T HAT THE AO IS NOT CORRECT IN TREATING THE ADVANCES RECEIVED AGAINST THE BOOKING OF THE FLATS IN THE PROPOSED PROJECT AS INCOME OF THE APPELLANT OF THE YEAR UNDER CONSIDERATION. HOWEVER SINCE CONFIRMATIONS OF EXISTING LIABILITIES FROM MS. JAYASHREE V. KHAR CHE & MR. VILAS P. KHARCHE AND M/S SAKSHI ADVOCATES & ASSOCIATES TO THE EXTENT OF RS. 22 50 000/ - ARE NOT SUBMITTED EITHER DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS NO BENEFIT FOR TREATING THE AMOUNT AS LIABILITY CAN BE GIVEN TO THE APPELLANT. HENCE THE ADDITION OF RS. 22 50 0007 - IS CONFIRMED WHILE BALANCE ADDITION OF RS.53 97 45 000/ - DELETED. THUS THE GROUNDS OF APPEAL RAISED IN THE APPEAL ARE PARTLY ALLOWED. 28. IN RESULT THE APPEAL OF THE APPELLANT FOR A. Y. 2015 - 16 IS PARTLY ALLOWED. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE IMPUGNED ORDER AND JOINT DEVELOPMENT AGREEMENT ALONG WITH VARIOUS EVIDENCES FILED BY THE ASSESSEE IN THE PAPER BOOK. WE FIND THAT ASSESSEE HAS ENTERED INTO JOINT DEVELOPMENT AGREEMENT WITH RICHA HOUSING PROJECT PVT. LTD. ON 21/07/2014 FOR WHICH A CONSIDERATION OF RS.18 CRORES WERE RECEIVED. T HE ASSESSEE TRANSFERRED THE W I P INCURRED AND SHOWN IN THE BALANCE SHEET OF RS.16 75 76 94 5 .50/ - HOWEVER THE ADVANCE RECE IVED FROM BOOKING OF FLATS OF RS.54 19 95 000/ - WAS RETAINED AND CONTINUED TO BE SHOWED IN THE BALANCE SHEET OF THE ASSESSEE . THE SAID BOOKING ADVANCE S AGAINST THE BOOKING OF FLAT W ERE RECEIVED FROM THE F.Y.2007 - 08 TO 2014 - 15 AND WERE CREDITED IN THE BOOKS OF ACCOUNTS AND APPEARING IN THE LIABILITY SIDE OF THE BALANCE SHEET AND WAS BEING BROUGHT FORWARD SINCE THEN . THE PROJECT COULD NOT GET THROUGH AND ASSESSEE FINALLY DECIDED TO DEVELOP THE SAID ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 19 PROPERTY OWNED JOINTLY WITH RICHA HOUSING PROJECT PVT. LTD. AND HENCE THIS AGREEMENT WAS EXECUTED. 7. THE LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT AO HAS NOT A PPRECIATED THE FACTS IN THE CORRECT P ERS PECTIVE. THE LD. AR SUBMITTED THAT THE AMOUNT OF BOOKING ADVANCE S W ERE RET AIN BY THE ASSESSEE AS THE SAME WAS TO BE REFUNDED TO THE PURCHASER S OF FLATS AND THIS LIABILITY WAS NOT TRANSFERRED UNDER THE JOINT DEVELOPMENT AGREEMENT. THE LD. AR DREW ATTENTION TOWARDS REFUND MADE BY THE ASSESSEE IN SOME CASES HOWEVER DUE TO THE STRESSED AND STRAINED FINANCIAL CONDIT ION OF THE ASSESSEE THE ENTIRE MONEY COULD NOT BE REFUNDED. THE LD. AR STATED BEFORE US THAT THIS LIABILITY HAS NOT BEEN TRANSFERRED AS THE PURCHASER S WHO BOOKED THE FLAT OF THE ASSESSEE WOULD NO LONGER BE ENTITLED FOR ALLOTMENT IN THE PROPERTY DEVELOPED JOINTLY BY THE ASSESSEE AND RICHA DEVELOPMENT HOUSING PROJECTS PVT. LTD. AND REFUND OF BOOKING ADVANCE S WERE THE SOLE RESPONSIBILITY OF THE ASSESSEE. THE LD. AR ALSO TOOK US THROUGH VARIOUS MORTGAGE DEEDS EXECUTED BY THE ASSESSEE TO CREATE SECURITY IN FA VOUR OF THE PURCHASERS AND TO GUARANTEE T HE REFUND TO THE PURCHASERS WHOSE FLATS BOOKING WAS CANCELLED VIDE AGREEMENT DATED 15/10/2015 THE COPY OF WHICH IS PLACED IN PAGE NOS.130 - 137 WHICH WAS EXECUTED BETW EEN SANTOSH ENTERPRISES AS THE FIRST PART RICHA HOUSING PROJECT PVT. LTD. AS THE S ECOND PART AND B. R INTERNATIONAL WHO BOOKED THE FLAT AT RS.45 CRORE AS FOURTH PART. THEREAFTER AGREEMENT FOR CANCELLATION WAS ENTERED INTO ON 27/11/2015 BETWEEN THE SAME PARTIES WHEREIN PAYMENT WAS PROVIDED WAS TO COMM ENCE AS UNDER: - ON OR BEFORE 31 ST MARCH 2016 R S. 1 00 00 000/ - ON OR BEFORE 1 ST OCTOBER 2016 RS. 13 00 00 000 / - ON OR BEFORE 1 ST APRIL 2017 RS.15 00 00 000 / - ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 20 ON OR BEFORE 1 ST OCTOBER 2017 RS.10 00 00 000/ - ON OR BEFORE L SL APRIL 2018 RS. 15 00 00 000 / - ON OR BEFORE 1 ST OCTOBER 2018 RS.15 00 00 000 / - ON OR BEFORE 1 ST APRIL 2019 RS. 16 00 00 000 / - 8. THEREAFTER SECOND AMENDMENT TO THE AGREEMENT DATED 09/02/2016 WAS EXECUTED BETWEEN THE SAME PART IES WHEREIN CERTAIN TERMS AND CONDITIO NS WERE MODIFIED. THE A SSESSEE ALSO EXECUTED THE MORTGAGE DEED DATED 25/06/2016 IN FAVOUR OF BR INTERNATIONAL WHICH IS SENT BY THE PARTY WHEREIN THE MORTGAGE TO THE TUNE OF RS.45 CRORES WAS DELETED WHEREBY 22 OF THE SALABLE FLATS WERE MORTGAGED AS SECURITY FOR THE PAYMENT. WE NOTE THAT ASSESSEE HAS ALREADY REFUNDED RS.12 CRORES TO THE BUYER S . THE LD. AR FURTHER SUBMITTED THAT THE SAID LIABILITY IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT TO BE CONSIDERED AS A COMPENSATION TOWARDS TRANSFER OF DEVELOPME NTAL RIGHTS BY THE ASSESSEE. THE LD. AR TOOK US TO THE VARIOUS OBSERVATIONS AND CONCLUSION DRAWN BY THE LD. CIT(A) WHILE PASSING THE ORDER AND SUBMITTED THAT ALL THE FACTUAL AS WELL AS LEGAL ASPECTS HAS BEEN EXAMINED IN DETAILED BY THE FIRST APPELLATE AUT HORITY AND CONSEQUENTLY HAS ARRIVED AT A CORRECT CONCLUSION. 9. THE LD. DR ON THE OTHER HAND STRONGLY OPPOSED TO THE ARGUMENT S OF THE LD. AR BY SUBMITTING THAT THIS IS NOT PRACTICALLY POSSIBLE THAT BOOKING ADVANCE S OF RS.54 19 95 000/ - HA VE NOT BEEN TR ANSFERRED WHILE TRANSFERRING THE DEVELOPMENTAL RIGHTS UNDER THE JOINT DEVELOPMENT AGREEMENT. THE LD. AR ALSO SUBMITTED THAT THE COST OF WORK IN PROGRESS IS STANDING IN THE BOOKS OF ASSESSEE W AS ALSO BEEN TRANSFERRED UNDER THE JOINT DEVELOPMENT AGREEMENT. ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 21 10. AFTER TAKING DUE CONSIDERATION THE FACTS OF THE CASE AND THE RIVAL SUBMISSIONS ESPECIALLY THE CANCELLATION OF PURCHASE AGREEMENT WITH BR INTERNATIONAL AND REFUND OF MONEY OF RS.12 CRORES BY THE ASSESSEE TOWARDS THE BOOKING ADVANCE RECEIVED WE ARE L EFT WITH NO CONFUSION OR AMBIGUITY THAT ASSESSEE HAS ONLY EXECUTED THE JOINT DEVELOPMENT AGREEMENT WITHOUT TRANSFERRING THE MONEY RECEIVED TOWARDS BOOKING OF FLAT S WHICH W AS THE SOLE RESPONSIBILITY OF THE ASSESSEE TO REFUND AND THEREFORE THE SAME CANNOT B E ADDED TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS PASSED A VERY REASONED AND CONVINCING ORDER AFTER TAKING THE ACCOUNT ALL THE ASPECTS OF THE ISSUES. WE ARE THEREFORE INCLINED TO UPHELD THE SAME BY DISMISSING THE APPEAL. 11. IN THE RESULT APPEA L OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON 04 / 03 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( AMARJIT SINGH ) SD/ - ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04 / 03 / 2021 KARUNA SR.PS ITA NO . 5887/MUM/2018 M/S. SANTOSH ENTERPRISES 22 COPY OF THE ORDER FORWARDED TO : BY ORDER ( ASSTT. REGISTRAR) ITAT MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) MUMBAI. 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY//