Case Number: ITA 1439/DEL/2020
Appellant: ACIT Circle-2(2), New Delhi
Respondent: Ansal Landmark (Karnal) Township Pvt Ltd, New Delhi
Assessment Year: 2016-17
Case Filed On: 2020-07-23
Order Type: Final Tribunal Order
Date of Order: 2022-12-15
Pronounced On: 2022-12-15
The case of ITA 1439/DEL/2020 involves an appeal by the ACIT Circle-2(2), New Delhi, against Ansal Landmark (Karnal) Township Pvt Ltd for the assessment year 2016-17. The primary issues revolve around additions made under section 41(1) of the Income Tax Act, concerning forfeited booking amounts, security deposits, and static creditors.
Ansal Landmark (Karnal) Township Pvt Ltd is engaged in real estate development, including residential, commercial, and industrial projects. For the assessment year 2016-17, the company filed a return declaring a total loss of Rs. 6,88,46,135. The case was selected for scrutiny, and the AO assessed a total loss of Rs. 2,53,26,411 after making additions under section 41 of the Act amounting to Rs. 4,35,19,724.
The AO added Rs. 3,68,14,376, representing forfeited booking amounts. These amounts were outstanding in the company’s books for several years, with most bookings dating back to FY 2006-07 to 2008-09. The AO contended that the company failed to justify withholding these amounts and treated them as taxable income.
The AO also added Rs. 57,92,682 as security deposits, noting that the company failed to furnish confirmations for these amounts and did not provide sufficient details regarding their nature and the reasons for withholding them.
Finally, the AO added Rs. 9,12,666 related to static creditors, arguing that these liabilities had been static for several years without any confirmations from the creditors.
The CIT(A) found that these liabilities were disputed amounts of contractual liabilities and noted that the company had refunded some amounts based on court orders. The CIT(A) held that section 41 could not be invoked simply because the liabilities were outstanding for a long period. The addition of Rs. 3,68,14,376 was deleted.
The CIT(A) observed that Rs. 23,65,517 out of the disputed amount had already been repaid, as reflected in the company’s ledger and bank statements. The remaining liabilities were considered valid and outstanding due to liquidity issues and business considerations. The addition of Rs. 57,92,682 was deleted.
Regarding the static creditors, the CIT(A) held that the liabilities could not be considered ceased or remitted merely because they were outstanding for many years. The addition of Rs. 9,12,666 was deleted.
The Tribunal upheld the CIT(A)’s decision, emphasizing the need for the AO to provide concrete evidence of remission or cessation of liabilities to invoke section 41. The Tribunal noted that the liabilities were still being settled through court orders and other means, reflecting their continued existence.
This case underscores the importance of substantiating claims of remission or cessation of liabilities with concrete evidence. The Tribunal’s decision reflects a balanced approach, considering the ongoing settlement of liabilities and the legal precedents regarding the application of section 41.
In summary, the appeal by the Revenue was allowed for statistical purposes, with directions for the AO to reconsider the issues based on the evidence provided by the assessee and subsequent developments.
Order pronounced in the open court on 15th December 2022.
Judicial Member: Anubhav Sharma
Accountant Member: Shamim Yahya
ACIT vs Ansal Landmark (Karnal) Township Pvt Ltd – ITA 1439/DEL/2020
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