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ITA Nos.403 to 405/Del/2019 It was submitted that there is no privity of contract between the assessee company and the villa owners, but, has been engaged by M/s Silverline Holding Pvt. Ltd.

5. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He held that to support the fact that deposits received from M/s Silverline Holding Pvt. Ltd., pursuant to the agreement between the assessee and M/s Silverline Holding Pvt. Ltd., the assessee did not file the financial statement/details of M/s Silverline Holding Pvt. Ltd. Further, this fact is not supported by the balance sheet of the assessee, since, in the balance sheet of the assessee, it is shown as interest-free security deposits received and nowhere it is mentioned that this amount has been received from M/s Silverline Holding Pvt. Ltd. The submission of the assessee that it has received the security deposit from members of the villa owners through M/s Silverline Holding Pvt. Ltd., in the normal course of business for maintaining and operating the golf course at 'TARUDHAN VALLEY COMPLEX' was also rejected by the Assessing Officer on the ground that the assessee did not furnish any copy of agreement with buyers of the villa owners, but, it simply submitted that the security deposit received by the assessee is refundable to M/s Silverline Holding Pvt. Ltd. The argument of the assessee that there is not privity of contract between the assessee company and the villa owners, but, have been engaged by M/s Silverline Holding Pvt. Ltd., was also rejected by the Assessing Officer on the ground that it is contradictory with the statement given subsequently on 23rd December, 2016 wherein the assessee itself stated that the ITA Nos.403 to 405/Del/2019 security deposit received from members being villa owners through M/s Silverline Holding Pvt. Ltd. The Assessing Officer noted that during the course of assessment proceedings in the case of M/s Silverline Holding Pvt. Ltd., the assessee had furnished the copy of tripartite buyer's agreement, wherein the assessee company is a party, in which it is specifically mentioned that the security deposits will be non- refundable and M/s Silverline Holding Pvt. Ltd., after collecting the same will transfer to the assessee. Accordingly, M/s Silver Line Holding Pvt. Ltd. receives the security deposits from customer without passing through its account, transfers the same to the assessee and the assessee booked this amount as interest free security deposit under schedule of the balance sheet. The assessee company did not produce any document which shows/proves that this security deposit is shown as advance or receivable at the assets side or shown as liability towards customers in the balance sheet of M/s Silver Line Holding Pvt. Ltd. Hence, the contention of the assessee that this amount has been received from M/s Silver Line Holding Pvt. Ltd. as refundable liability is not supported. However, as per tri-party agreement among M/s Silver Line Holding Pvt. Ltd., customers and the assessee, the security deposits are non refundable. Actually this is a valid document which executes at the time of receiving the security deposits and the contract which the assessee has mentioned to be entered between the assessee company and M/s Silver Line Holding Pvt. Ltd., is only a modus operandi to avoid the taxability of the income/receipt and to create complexity in the transaction in order to hide the genuine nature of transaction. Finally the Assessing Officer concluded that the amount of Rs.7,00,64,800/-

12.1 So far as the merit of the case is concerned, the ld counsel for the assessee submitted that M/s Silverline Holding Pvt. Ltd. is the owner of villas and golf course and the same were sold to the prospective buyers as per buyers agreement between M/s Silverline Holding Pvt. Ltd. and the prospective buyers. In order to provide value added services, M/s Silverline Holding Pvt. Ltd., entered into operation and maintenance agreement dated 24.12.2008 with assessee and offered use of golf course facilities. The assessee was only responsible for running and maintenance of golf course and scope and area of activities was defined under the said agreement. Further the security deposit collected by M/s Silverline Holding Pvt. Ltd., from the customers was transferred to the assessee for running and maintenance of golf course and not as trading receipt. The ld. counsel for the assessee drew the attention of the bench to clause 3 of the operation and maintenance agreement and submitted that the assessee is neither the owner of the golf course nor have any legal right to collect any security refundable or otherwise from the buyers. Referring to clause 18-22 of the buyers agreement, copy of which is palced at pages 19 to 45 of the paper book, he submitted that the security deposit was received by M/s Silverline Holding Pvt. Ltd., in terms of buyer's agreement. He submitted that a perusal of the terms of buyer's agreement shows that the ITA Nos.403 to 405/Del/2019 security deposit shall be collected by M/s Silverline Holding Pvt. Ltd., and the same shall be employed by M/s Silverline Holding Pvt. Ltd., or its nominee for running and maintenance of golf course as per instructions of M/s Silverline Holding Pvt. Ltd. The right to collect and use the security deposit vests with M/s Silverline Holding Pvt. Ltd. The assessee company is only eligible for use of refundable deposit for running and maintenance of golf course as per advice and direction of M/s Silverline Holding Pvt. Ltd. and it has no legal or ownership right in respect of such deposit. Referring to copy of the audited balance sheet, he submitted that the assessee company is holding such deposit as custodian and for exclusive use of running and maintenance of golf course. Referring to the corrigendum dated 29th September, 2009, copy of which is placed at pages 50-52 of the paper book and the renewal agreement dated 27th October, 2017, copy placed at pages 53-55 of the paper book, he submitted that as per the above, the assessee company can hold the deposit only for the purpose of maintenance and running of the golf course. Once the assessee company cease to have running and maintenance right or becomes non- functional, the security deposit being liability is to be refunded to M/s Silverline Holding Pvt. Ltd.

12.2 So far as the decision in the case of Aakash Lavlesh Leisure Pvt. Ltd. (supra) relied on by the CIT(A) is concerned, he submitted that the said decision, in fact, supports the case of the assessee and reliance on the same by the CIT(A) is misplaced. He submitted that in that case, the refundable security deposit was ITA Nos.403 to 405/Del/2019 accepted by the Assessing Officer as non-taxable receipt and the dispute before the ITAT was only with regard to non-refundable deposit. However, in the present case, the security deposit received by the assessee is shown as liability and is fully refundable to M/s Silverline Holding Pvt. Ltd., and, therefore, the decision of the Mumbai bench of the Tribunal relied on by the CIT(A) is, in fact, in support of the assessee. So far as the observation of the Assessing Officer that M/s Silverline Holding Pvt. Ltd., has not recorded these entries in the balance sheet is concerned, he submitted that the Assessing Officer and the CIT(A) has not properly considered the facts of accounting and legal principles. He submitted that M/s Silverline Holding Pvt. Ltd., received the security deposit from the buyers who were willing to avail golf course facilities and receipt of security deposits being for specific purpose of maintenance of golf course the same were transferred to the assessee as the assessee was appointed as maintenance agency of the golf course. The receipt of security deposit and the transfer of the same to the assessee company is corroborated from ledger account and bank statement of M/s Silverline Holding Pvt. Ltd., copy of which is placed at pages 90-92 of the paper book. In any case, even if there is any procedural deficiency in the balance sheet of M/s Silverline Holding Pvt. Ltd., no adverse inference could be drawn against the assessee. He submitted that the Assessing Officer as well as the CIT(A) have totally disregarded the principles of real income and considered the issue of maintenance security in an illegal and arbitrary manner. He submitted that the use of the term 'non-refundable' has been misconstrued by the Assessing Officer as it is implicit that when the ITA Nos.403 to 405/Del/2019 assessee or M/s Silverline Holding Pvt. Ltd. cease to provide golf course services, the deposit is to be refunded. The concept of non-refundable is only relevant till the services of golf course are available to the members.

17. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is engaged in the business of operation and maintenance of golf course owned by M/s Silverline Holding Pvt. Ltd. It filed its return of income on 23.11.2009 declaring loss of Rs.62,12,919/-. We find the Assessing Officer, on the basis of the assessment order for assessment year 2013-14, wherein the refundable security deposit received from M/s Silverline Holding Pvt. Ltd. was considered as taxable income in the hands of the assessee, reopened the assessment by issue of ITA Nos.403 to 405/Del/2019 notice u/s 148 of the IT Act. Rejecting the various arguments advanced by the assessee, the Assessing Officer made addition of Rs.7,00,64,800/- on account of such security deposit received by the assessee during the year under consideration on the ground that such security deposit received by M/s Silverline Holding Pvt. Ltd., is non-refundable and has to be brought to tax. Further, the security deposit so received from M/s Silverline Holding Pvt. Ltd., has not been shown as advances in the balance sheet of M/s Silverline Holding Pvt. Ltd., and although the assessee in the balance sheet has shown such interest free security deposit but has not shown the same in the name of M/s Silverline Holding Pvt. Ltd. We find the ld.CIT(A) upheld the reassessment proceedings initiated by the Assessing Officer the reasons for which have already been reproduced in the preceding paragraphs. It is the submission of the ld. counsel for the assessee that the reassessment proceedings initiated u/s 147/148 are based on change of opinion and the reasons to believe are not based on any tangible material or information extraneous to the record. In sum and substance, the case of the assessee is that the reopening of the assessment is not valid since the reasons are based on change of opinion, re-appraisal of facts already on record and the reasons are not based on any tangible material.