SH.DIDAR SINGH,PHAGWARA vs. INCOME TAX OFFICER, PHAGWARA

The assessee has raised the following grounds of appeal: “A. That the CIT(A) was not justified in upholding the action of the AO initiating the reassessment proceedings u/s 147/148 of the Income Tax Act, 1961. B. That the CIT(A) failed to appreciate that the verification letters u/s 133(6) were issued by the ITO Ludhiana who had no jurisdiction on the case of the assessee. C. That the CIT(A) has wrongly upheld the addition of Rs.15960000/- made by the ITO u/s 69 without appreciating the submissions made by the appellant. D. That the order of the CIT(A) and the ITO is against the law and facts of the case.”

The brief facts as of the case as per written submissions of the Assessee are as under That the assessee is working with Kabana Infrastructure (P) Ltd. as an assistant at a salary of Rs. 12000/- per month and is barely meeting his own & family's expenses out of that salary. Other than the salary income there is no other income of the assessee and hence he was not filling any return of income. As per the AO he had AIR information available with the department that assessee has entered into a financial transaction of Rs. 15960000/- and to verify that transaction the AO claims that ITO Ward-3(5) Ludhiana issued a verification letter u/s 133(6)(Copy enclosed) . The AO recorded the reasons for initiating the proceedings u/s 147 on 21.03.2017 . The assessee filed objections to the reasons

It was further contended no payment was made by the assessee to the alleged seller Sulkhan Ram , in fact he had executed a Sworn Affidavit dated 27.07.2010 before Executive Magistrate Ludhiana and in clause 2 of the Affidavit he deposed before the Magistrate that the stamp paper of Rs. 1180000/- has been purchased by him and also in clause no. 3 of the Affidavit he has deposed again that no money transaction in respect of that sale deed has taken place and in clause 4 of the Affidavit he has stated that since he was living abroad, he executed the sale deed for the maintenance and supervision of the property.

It was further submitted that this property was sold by Didar Singh at the behest of Raunaki Ram to Gurmeet Chahal for Rs. 16225000/- vide sale deed dated 10.08.2010. If we look at that sale deed Mr. Sulkhan Ram who is son of Raunaki Ram is the witness which clearly proves that Mr. Raunaki Ram had the Benami interest in this property. Further Mr. Sulkhan Ram opened a Saving Bank account of Didar Singh in HSBC Bank Chandigarh and directly got the sale proceeds of Rs. 16225000/- transmitted to that account on 16.11.2010 and immediately on the same date transferring the amount of Rs. 16125000/- to his own account with HSBC Bank. He had to leave the balance of Rs. 1 lac in the account since it was the minimum balance to be maintained as per the rules of HSBC which is a foreign bank .Further copy of the transaction confirmation by the bank dated 06.09.2018.

On the basis of the above it was submitted that entire series of transaction were Benami sale was made by Sulkhan Ram of his own property by using the name of the assessee. The opening of the bank account in HSBC Bank is also not understandable when the assessee has his own saving bank account with PNB Phagwara where his salary is being credited. Copy of account is enclosed.

This fact was duly brought to the notice of the AO by the assessee vide his letter dated 17.05.2017 in respect of the objections to the reasons recorded and despite this proven Benami transaction no action was taken or no notice was issued to Mr. Sulkhan Ram for the reasons best known to the department.

From the facts stated above it appears that Mr. Raunaki Ram has carried out these transactions to avoid the Capital Gain Tax on the property sold and also to avoid enquiry in respect of this property by the department. It is again reiterated that when the department had an information of this cash transaction of Rs. 15960000/- therefore in that case why no notice was issued to the alleged seller Mr. Raunki Ram regarding Capital Gain and utilization of this huge cash.

Ld Ar had further submitted in the Ws that on the recent enquiry made by the assessee it has been found that Sulkhan Ram has made a palacious house at village Masani TehslPhillaour Distt. Jalandhar and also he is constructing a Mall at village Apra, Tehsil Phillaour . Out of the sale proceeds of Rs. 16225000/- which were transferred to his account from the account of Didar Singh. The recent photographs of the house and the Mall are enclosed herewith for your ready reference. Further the Sulkhan Ram has 7K 14M Agriculture Land in village Apra Tehsil Phillaur. Copy of Zamabandialongwith English translation is enclosed herewith. This clearly shows that Mr. Sulkhan Ram is a man having considerable wealth in his name and action for his benami deeds must be taken against him. Ld Ar rerlied upon the decision in the matter of 82 ITR 540 - CIT Vs Durga Parsad More , 214 ITR 801 — SumatiDval Vs. CIT , 306 ITR 414 — Som Nath Maini Vs. CIT(A)

The Ld. AR had submitted that during the course of assessment proceedings, the assessee has submitted to the Assessing Officer that the assessee was merely a name lenders for the purchase of the property as is clear from the affidavit given by the seller namely Sh. Ram Lakhan S/o Sulakhan Ram before Executive Magistrate. It was further submitted by the Ld. AR that at the time of purchase of the land, no consideration was paid by the assessee which is also clear from the affidavit filed by Sh. Sulakhan Ram dated 27.07.2010. The Ld. AR had also drawn our attention to the copy of the sale deed dated wherein Sulakhan Ram S/o Rounki Ram has been shown as witness of the sale deed. It was further submitted that immediately after the receipt of the sale consideration for the same plot no. 2949-37 sq. Ft. Red Color Naksha , the entire sale consideration after except Rs. 1 lacs was transferred from the newly open bank account namely HSBC bank account of Sh. Sulakhan Ram.

On the basis of the above, it was submitted that the assessee being the innocent person had been wrongly implicated from his Benami transaction of Sh. Sulakhan Ram and this has been done by Sh. Sulakhan Ram with the view to implicate the assessee and also to defraud the Revenue Department. It was submitted that the sale document in favour of the assessee was executed by Sulakhan Ram on 12.08.2009 though the sale consideration has been mentioned as Rs. 1,47,50,000/- which was allegedly received by Sulakhan Ram on spot. However, the above said facts had been contradicted by the affidavit of Sulakhan Ram filed before Executive Manager on 27.07.2010, it was submitted that the nature of the whole transaction was required to be examined by the Ld. Assessing Officer and the reopening made by the Assessing Officer against the assessee was without any basis. In fact, it was submitted that the proceedings under the Benami Property Act 1986 along with the other necessary inquiry should have been made by the Assessing Officer from Sh. Sulakhan Ram to bring the unaccounted money of long term capital gain, arising on account of the transaction archested by Sh. Sulakhan Ram by growing the sham transaction of the sale of the property on 12.08.2009.

The Ld. AR had submitted that the above said transactions has not been examined by the lower authorities and therefore the matter is required to remand back to the file of the Assessing Officer and the examining officer for the denova of the above said charge, the Ld. AR that she has no objection for remanding back to the file of the Assessing Officer however she paid and gave a suitable direction be issued by the bench so that the actual person liable for paying the tax should be brought to the book.

The Ld. DR for the revenue relied upon the order passed by the lower authorities. It was submitted that the registered purchase deed and sale deed were exhibited in favour of and by the assessee. Therefore the assessee was required to explain the source of investment and was also liable for any short-term or long-term capital gain. It was further submitted that on the basis of the chain of events, it appears that the real owner of the property was Sulakhan Ram, not the assessee., however this fact was required to be ascertained . it was further contended that the onus is on the assessee to prove that the assessee was not the owner of the property in terms of the Transfer Of Property Act. On the aspect, finding out the real nature of the transaction and infringement of the provisions of, Benami Property Act , the Ld. DR had submitted that she had no objection in remanding back the matter to the file of the assessing officer, as she was of the opinion that the tax is to recovered from the right person who was liable to pay the tax on the income under income Tax Act.

We have heard the rival contention, the parties and perused the material available on record. Undoubtedly the chain of events narrated before us clearly shows that the sale deed was executed by Sulakhan Ram on 12.08.2009 in Favour of the assessee for a consideration of Rs. 1,47,50,000/-. The said consideration of Rs. 1,47,50,000/- was allegedly received by Sulakhan Ram from the assessee in cash.

The said Sulakhan Ram had given an affidavit before the Executive Manager on 27.07.2010 wherein he had categorically mentioned that the land was transferred in favour of the assessee only for the purpose of “taking care”( Rakh Rakhav) and there was no exchange of consideration between the Sulakhan Ram and the assessee.

The sale deed was executed by the assessee in favour of Sh. Gurmeet Chahal for a consideration of Rs.1,62,25,000/- in the said sale deed of Sh. Sulakhan Ram was the witness of the sale transaction.

Immediately after the registration of sale deed, the amount of Rs. 1,62,25,000/- was transferred from the account of the assessee to the account of Sh. Sulakhan Ram on 6th November, 2010.

It was alleged that Sh. Sulakhan Ram was introducer of assessee for opening of the account with HSBC .

From the above said chain of events, it appears that sale document were executed by Sh. Sulakhan Ram in favour of the assessee with a view to avoid long term capital gain of the property , therefore which is clear from the affidavit filled by him before the Executive magistrate and subsequent transfer of entire sale consideration into his account immediately after the sale of land by the asseesee .

In our considered opinion, this is a case and where innocent citizen seems to have been duped by Sulakhan Ram and therefore in dept inquiries were required to be made by the Assessing Officer. However despite the above said facts were brought to the notice of the Assessing Officer /CIT(A) . Nothing has been done and in a cryptic and stereotype manner, the additions are made by the Assessing Officer and confirmed by the Ld. CIT(A).

In the light of the above, the case of the assessee is remanded back to the file of the assessing officer with the following directions

In the result, the appeal of the assessee is allowed for statistical purposes.