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Income Tax Appellate Tribunal, AHMEDABAD BENCH ‘D’, AHMEDABAD
Per Pramod Kumar, Vice President:
This appeal, as also related cross-objection, are directed against the order dated 26th March 2013 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income-tax Act, 1961 for the assessment year 2009-10.
In ground no.1, the appellant has raised the following grievance:-
“1. The Ld. CIT(A) has failed to appreciate the fact that sale of the property was made by the assessee at Rs.74,86,800/- on the basis of registered sale deed but the sale price was taken at Rs.25 lakh on the basis of notarized sale agreement for the purpose of calculating STCG.”
Briefly stated, the relevant material facts are as follows. The assessee before us is a non resident. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has offered to tax short term capital gain of Rs.94,325/-. When he probed the matter further,
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it was found that the assessee had purchased, alongwith Bharat Tyres Gujarat Pvt Ltd and K.C. Patel, a piece of land admeasuring 18,717 sq. mtrs. for Rs.72,17,025/-. This purchase was effected on 26th March 2008. The assessee thus became 1/3rd owner for the said land for a consideration of Rs.24,05,675/-. A little later, on 24th June 2008, the assessee entered into agreement to sell his share, i.e. 6,305 sq. mtrs. for a consideration of Rs.25,00,000/- to Kalpesh B. Verma and K.C. Patel. This agreement was entered into a stamp paper of Rs.100/- and the consideration of Rs.25,00,000/- was received through account payee cheques. The assessee also gave possession of his land to K.B. Verma. Finally, however, this land was sold by K.B. Verma to Bharat Tyres Gujarat Pvt Ltd but as the assessee continued to have his name in the land records, the sale deed was entered into by the assessee, through KB Verma – his power of attorney holder, and sale proceeds of Rs.74,86,800/- was received. As beneficial owner, Shri K B Verma offered the short term capital gain to tax in his own hands. The Assessing Officer, however, proceeded to take entire sale consideration of Rs.74,86,000/- as sale consideration in the hands of the assessee and recomputed the capital gains accordingly. Aggrieved, assessee carried the matter in appeal before the CIT(A) who reversed the action of the Assessing Officer and observed as follows:-
“6.3 I have gone through the facts of the case, the assessment order, the two submissions made by the appellant and the case law. It is observed that the acquisition of one third share in the impugned property by the appellant according to agreement dated 26/03/2008 from Mrs. Smita Jayant Pandya and others for a total consideration of Rs.72,17,025/-; is not disputed.
The cost of the appellant's undivided share in the aforesaid property comes to Rs.24,05,675/-. Subsequently the appellant is claimed to have decided to withdraw from the joint ownership and claim to have agreed to transfer his undivided interest (equivalent of 6305 sq mtrs) in the aforesaid property in favour of Mr K B Verma. The same was claimed settled for a consideration of Rs.25,00,000/-. In this respect, to prove its case , Agreement to sale (Banakhat) dated 24/06/2008 duly notarized and registered before Notary Public Shri Kalpesh H. Shah on 24/06/2008, was submitted before the AO. As per this written agreement, w.e.f 24/06/2008, Shri K.B. Verma acquired beneficial ownership of undivided share (equivalent to 6305 sq mtrs ) in the land.
I agree with the appellant, that nothing has been brought on record to prove this duly notarized Agreement to sale (Banakhat) dated 24/06/2008 was not genuine. As per the agreement the possession of the land has been transferred on the same date. Therefore, the transfer of the property by allowing of the possession of any immovable
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property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 was legally complete on this date as per the Transfer of Property Act . I also agree that the provision of Section 50C as prevailing at that time was applicable only to the transactions in which the "value adopted or assessed" by Stamp Duty Authority of the State Government was actually there and it did not cover the transactions which are not registered i.e. where the stamp duty value is "assessable". The provisions of Section 50C of the Act has been amended by the Finance (No.2.) Act, 2009 w.e.f. 1st October 2009 to cover such cases.
Therefore, the provisions of section 50C would also be not applicable. No under hand dealing or payment beyond the consideration shown has been proved. The subsequent registered sale agreement also is in conformity with the transaction claimed in between. I have also noted the fact that the period between the agreement to purchase by the appellant and subsequent agreement to transfer the right to the property; is very small. In the entirety of facts, the addition made by the AO ignoring the notarised agreement and transfer of land in between cannot be sustained; which is against the ratio of the judgment of the Hon'ble Supreme Court in the case of K. P. Varghese vs ITO (Supra). The addition in the Short Term Capital Gains is therefore, directed to be deleted.”
The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We have noted that the genuineness of the agreement dated 24th June 6. 2008 is not in dispute and yet the Assessing Officer has proceeded to adopt Rs.74,86,000/- as sales consideration in the hands of the assessee, as against Rs.25,00,000/- actually received by the assessee – particularly when the short term capital gains in the hand of KB Verma, being difference between Rs.74,86,000/- and Rs.25,00,000/-, has already been brought to tax in the hands of KB Verma. Clearly, the stand of the Assessing Officer results in double taxation of the same capital gains in two different hands. That approach cannot be sustained in law. In any case, the money actually received by the assessee, on his own account, was only Rs.25,00,000/-. Once it is not in dispute that actual amount reaching the assessee was only Rs.25,00,000/-, there cannot be any good reason to bring to tax Rs.74,86,000/- in his hands. In view of these discussions, as also bearing in
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mind entirety of the case, we approve well reasoned conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
Ground no.1 is thus dismissed.
In ground no.2, the Assessing Officer has raised the following grievance:-
“2. The CIT(A) has erred in deleting the addition of Rs.6,14,000/- as unexplained cash credits on presumptions and without any substantive evidence.”
As far as the above grievance of the Assessing Officer is concerned, it is sufficient to take note of only a few facts. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown capital accretion of Rs.50,26,600/- which included Rs.24,88,000/- said to be received from Raj Organic Farm and gifts of Rs.1,72,000/- from DR Patel and of Rs.1,14,000/- from others. Not satisfied with the explanation of the assessee, the Assessing Officer added the entire amount as unexplained credits. In appeal, however, learned CIT(A) accepted the explanation to the extent of Rs.6,14,000/-. The reasoning which prevailed with the CIT(A) in accepting the above explanation is as follows:-
“However, I observe that the agricultural land of Shri Akshay Patel, the appellant and his wife is 7.3 acres which has been purchased in the period June, 2005 to October, 2006. Even taking a lenient view, the total accumulated money (The income from the first one or two years is not believed to be accumulated) in form of agricultural income ; with the appellant himself being a NRI cannot be held reasonably to be more than Rs.5 lac. Therefore, I uphold an addition of Rs.19,88,000/- as unexplained accretion to capital account/unexplained deposits in the bank accounts rejecting the explanation to the extent as decided. (Ill) As far as the amount credited in the name of Shri Dinesh R. Patel (Father in Law) of Rs.1,72,000/-, from Dharmendra Patel (Brother) of Rs.1,06,908/- and from Lalitaben Patel (Mother) of Rs.7,092/-, the appellant has submitted that they all are direct relatives of the appellant and the amounts received is treated as gift which is not taxable U/s 56 of the Act. The appellant has also submitted that the amount received, looking to the status of the family, custom of the caste (Patel Family), etc. is very reasonable. I have gone through the facts. Shri Dharmendra Patel is real brother, has got 4.8 acres of agricultural land and the confirmation from him has been filed; and looking to the amount of Gift claimed I don't see any reason to disbelieve it. The explanation is accepted. Similarly, the gift
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claimed from mother is also accepted looking to the small amount of Rs.7,092/- and the relationship. As far as claimed gift from father in law Shri Dineshbhai Patel is concerned; I find that no confirmation was filed during the assessment proceedings; gifts were claimed not on any occasion but on different dates without any reason. No immediate source is claimed except claiming that it is from accumulated agricultural income. I find that the father in law has only a very meager land i.e. 0.7 acre from which it would be even difficult to get any income because very small land holdings are difficult to manage and have substantial fixed expenses as a percentage. The explanation of this gift is not accepted and the corresponding addition is confirmed.”
Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us.
11 We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We have noted that the assessee had agricultural land of 7.3 acres and that the assessee was an NRI. In these circumstances, we see no infirmity in the CIT(A)’s accepting availability of Rs.5,00,000/- as cash in hands of the assessee as explained. In any case, no specific defects are pointed out in the action of the CIT(A). As regards the gifts of Rs.1,06,908/- from brother and of Rs.7,092/- from mother, we find that looking to the means of the brother and smallness of the amount received from mother, there is no perversity in learned CIT(A)’s accepting the explanation to that extent. Learned Departmental Representative’s bland reliance on the stand of the Assessing Officer is not of any avail. In view of these discussions, and bearing in mind entirety of the case, we are inclined to approve the order of the CIT(A) on this point as well. We decline to interfere.
Ground no.2 is thus dismissed.
In ground no.3, the Assessing Officer has raised the following grievance:-
“3. The CIT(A) has erred in deleting he addition of Rs.6,71,063/- being cash deposited in bank on presumptions and without any substantive evidence.”
So far as this grievance of the Assessing Officer is concerned, the relevant material facts are as follows. During the course of the assessment
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proceedings, the Assessing Officer made addition of Rs.44,23,500/- on account of unexplained cash deposits in the bank account. When the matter was carried in appeal before the CIT(A), the CIT(A) mainly accepted the explanation to the extent of Rs.1,00,000/- as opening cash balance, Rs.1,72,000/- which has been brought to tax by rejecting the explanation of gift anyway, Rs.7,092/- in mother’s account as gift accepted to be genuine, Rs.2,00,000/- as redeposits out of earlier withdrawals from bank and Rs.1,06,908/-, Rs. 98,000/- as redeposits out of withdrawals in bank account. While doing so the CIT(A) has observed as follows:- “8.2 I have gone through the facts on the issue, the assessment order and the submissions. The explanations for the deposits of cash, my observations and decisions are as under: (I) The first source claimed is the opening cash in hand of Rs.2,98,253/-. The appellant is having bank accounts and was doing numerous transactions. Such high cash in hand is not accepted to be reasonable without the appellant disclosing the immediate source. Looking to the entirety of facts and circumstances, the status of the appellant etc., I accept the cash in hand at the beginning of the year of Rs.1,00,000/- and the remaining amount being claimed to be the source of cash deposits in bank is not accepted. The addition of Rs.1,98,253/- is sustained rejecting the explanation, to the extent as discussed above. (II) The other source of cash deposit claimed is Rs.24,88,000/- which is claimed to represent accumulated agricultural income from "Raj Organic Farm". The same explanation was given for explaining the accretion to capital. In para.7.2 (11) of this order, I have decided the issue; where I have substantially rejected the explanation of the appellant. However, the same being again added as unexplained source of cash deposit, actually results in a double addition as claimed by the appellant. The addition is therefore, not justified once it has been considered for making the addition as discussed and decided earlier. This double addition is therefore, directed to be deleted. (Ill) The other sources of cash which have been rejected are : From Dharmendra. R Patel Rs. 5,05,092/- Gift from Dinesh Patel Rs. 1,72,000/- From Lalitaben Patel Rs. 5,30,092/- As far as gift claimed from Shri Dinesh Patel is concerned, it is also a double addition. That addition has been confirmed while discussing and deciding the additions based on accretion to capital. The double addition of Rs.1,72,000/- is therefore, directed to be deleted.
As far as Shri Dharmendra R. Patel is concerned, out of| Rs.5,05,092/-, Rs.1,06,908/- also added as unexplained addition to Capital claimed as gift
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has already been accepted in para.7.2 of this order. Therefore, this addition being double and on the same ground here, is also to be deleted. The remaining Rs.398184/- (5,5,092 minus 1,06,908) is in fact claimed re- deposited out of the withdrawals from joint bank accounts in cash by Shri Dharmendra R. Patel. Although, certain amounts may be re-deposited; it cannot be the case that the person always withdraws money and re-deposits it without any use/expenditure whatsoever. The explanation is accepted to the extent of Rs.2 lac and the remaining amount is treated as unsatisfactory explanation to the source of deposit of cash. Therefore, the addition of Rs.1,98,184/- is confirmed.
Similar is the case as far as Smt Lalitaben Patel (mother) is concerned, out of Rs.5,30,092/-, Rs.7,092/- also added as unexplained addition to Capital claimed as gift has already been accepted in para.7.2 of this order. Therefore, this addition being double and on the same ground here, is also to be deleted. The remaining Rs.5,23,000/- (5,30,092, minus 7,092) is in fact claimed re- deposited out of the withdrawals from joint bank accounts in cash by Smt. Lalitaben Patel. Although, certain amounts may be re-deposited; it cannot be the case that the person always withdraws money and re-deposits it without any use / expenditure whatsoever. The explanation is accepted to the extent of Rs.2 lac and the remaining amount is treated as unsatisfactory explanation to the source of deposit of cash. Therefore, the addition of Rs.3,23,000/- is confirmed.
To sum up, further addition of Rs. 5,21,184/-(Rs.1,98,184/- + Rs.3,23,000/-) is confirmed (besides the addition confirmed for unexplained accretion in capital in para.7) on this account.
(IV) With regard to the amount of Rs.4,45,000 claimed received from Shri Atush Patel, the appellant has accepted its inability to submit necessary confirmation with regard to the said transaction. The appellant had already accepted and not pressed the addition based on the gifts claimed from this person as discussed in para.7 of this order. This additional amount though not claimed as gift is also unexplained and the addition is confirmed.
(V) Another explanation given was cash withdrawn from bank of Rs. 1,98,000/- being claimed used for deposits in other bank accounts. The appellant has submitted that the AO has not established that this cash has been used for other purpose. I do not accept the explanation of the appellant fully. He is an NRI who comes to India for short periods. He has not established/even claimed having brought any cash being brought from abroad. He requires money to be spent in the country and looking to the fact that he had purchased lands in 2005 and 2006 and again in 2008 and also deals in shares; I cannot agree that he redeposits the money without any expenditure. The redeposit is accepted to the extent of Rs.98,000/- after treating Rs.1,00,000/- being spent (besides the expenses
ITA No. 1708/Ahd/2013 & CO No. 196/Ahd/2013 ADIT (Int. Taxn) vs. Akshay Rajnikant Patel Assessment year: 2009-10 Page 8 of 9 paid directly from the bank). Therefore, the addition is confirmed to the extent of Rs.1,00,000/- rejecting the explanation to this extent. (VI) As far as the remaining source claimed as refund of advance of Rs.9,000/- from employee Shri Bharat Mistry is concerned; I do not find the explanation unreasonable looking to the amount and the entire facts and circumstances of the case. The explanation is accepted. To sum up, besides the double additions where the additions have already been confirmed or decided while deciding the issue of unexplained accretion to capital account; the additions required for unexplained cash deposits in bank account are confirmed to the extent of Rs.12,64,437/- (Rs.1,98,253/- plus Rs.5,21,184/- plus Rs.4,45,000/- plus Rs.1,00,000/-). The ground is decided accordingly.” 16. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
As learned CIT(A) rightly observes, the relief granted above pertains mainly to the double addition which have been confirmed while dealing with capital accretion and the availability of funds as redeposits. The reasoning adopted by the CIT(A) is thus based on material on record and rather undisputed factual aspects. Having perused the material on record, we see no need to interfere in the matter nor, in any event, any specific infirmities were pointed out by the learned Departmental Representative. In view of these discussions and bearing in mind entirety of the case, we approve the conclusions arrived on this point as well, and decline to interfere in the matter.
Ground no.3 is thus dismissed.
The Cross-Objection filed by the assessee was not pressed. 21. In the result, the appeal as also the Cross-Objection are dismissed. Pronounced in the open court today on the 26th day of February, 2019.
Sd/- Sd/-
Justice P P Bhatt Pramod Kumar (President) (Vice President) Ahmedabad, dated the 26th day of February, 2019 *bt
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Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File
By order etc