In ITA No. 9535 /DEL/2019 -ITAT- ITAT (Delhi) upholds addition of INR 25 lakh to Jindal Construction's income as forfeited security deposit
Member Kul Bharat (Judicial) [30-06-2023]

Read Order: Jindal Construction v. Income-tax Officer, Ward-32(2), New Delhi

Chahat Varma

New Delhi, August 1, 2023: The Delhi bench of the Income Tax Appellate Tribunal has upheld the addition of Rs. 25,00,000 to Jindal Construction's (assessee) income, considering it as a forfeited security deposit received from a developer.

The present appeal involved a case where the assessee's income tax return was not filed despite engaging in transactions of large magnitude. As a result, the case was reopened under Section 147 of the Income Tax Act, 1961. The assessee subsequently filed a return declaring Nil income. During the assessment proceedings, the Assessing Officer (AO) made an addition of Rs. 25,00,000, considering it to be a forfeited security deposit received from a developer. The assessee appealed against this decision before the Commissioner of Income Tax (Appeals), who upheld the addition.

The assessee argued that the security amount received from the developer should not be treated as income, as it was meant to be refunded upon the completion of the project. The assessee clarified that they were unable to sell their portion in the complex as they had not received the completion certificate from the appropriate authority. It was contended that the buyer also required the completion certificate before entering into a purchase agreement, which is why the security deposit of Rs. 25,00,000 had not been refunded yet. The assessee assured that they will refund the security deposit once they receive the completion certificate.

The single-member bench of Kul Bharat (Judicial) observed that there was no dispute regarding the fact that the security deposit was taken in FY 2003-04. However, the assessee failed to provide any substantial evidence or material suggesting any lapse on behalf of the developer regarding the completion certificate. Based on this lack of evidence, the bench upheld affirmed the addition of Rs. 25,00,000 to the assessee's income.