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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI AMARJIT SINGH & SHRI O.P.MEENA
Jay Prakash K. Aswani & Rajubhai Lakhabhai Bharwad /ITA No.709 & 708/AHD/2011 for A.Y. 2008-09 Page 1 of 12
आयकरअपील�यअ�धकरण,सुरत�यायपीठ,सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI AMARJIT SINGH, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A No.709/AHD/2011 �नधा�रण वष�/Assessment Year: 2008-09 The Dy.Commissioner of V Shri Jaiprakash K Aswani, Income Tax, Central Circle-1, s. J-18, J.J. A/c. Market, Ring Surat. Road, Surat. [PAN: AASPA 3016 C] अपीलाथ� / Appellant ��यथ�/Respondent आ.अ.सं./I.T.A No.708/AHD/2011 �नधा�रण वष�/Assessment Year: 2008-09 The Dy.Commissioner of V Shri Rajubhai Lakhabhai Income Tax, Central Circle-1, s. Bharwad, Surat. At & Post Laskana, Kamrej, Surat. [PAN: AFKPB 9356 B] अपीलाथ� / Appellant ��यथ�/Respondent �नधा�रतीक�ओरसे /Assessee by Shri Rajesh Shah – CA राज�वक�ओरसे /Revenue by Shri O.P.Singh – CIT-DR सुनवाईकीतारीख/ Date of hearing: 24.10.2019 उ�घोषणाक�तार�ख/Pronouncement on: 10.12.2019 आदेश /O R D E R PER O.P.MEENA, AM: 1. These two appeals by the Revenue are directed against the separate orders of Ld.Commissioner of Income Tax(Appeals)-II, Surat dated 23.12.2010 for the assessment year 2008-09.
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Grounds raised by the Revenue in ITA No.709/Ahd/2011 read as under: “i) On the facts and circumstance of the case and in law, the Ld CIT(A) erred in law and in facts in deleting the addition at Rs.6,79,10,000/- made on account of unaccounted investment in land as per MOU seized vide Annexure-S-4 during the course of search. ii) On the facts and circumstances of the case and in law, the Ld CIT(A) erred in law and in facts in holding that as per the MOU, the additional payment was to be made on fulfillment of the title clearance and that there was no proof of additional payment made to the seller ignoring that as per the MOU, the initial 50% of the total consideration was to be made before the sale deed and that the balance 50% was to be made on fulfillment of the title clearance and accordingly the assessee has to make the payment of Rs.11,47,50,000/- but the assessee gave only the details of payment of Rs.4,68,40,000/- and claimed that balance amount of Rs.6,79,10,000/- as not made to the seller without giving any evidence to prove it. iii) On the fact and circumstance of the case and in law, the Ld CIT(A) erred in law and in facts in holding that as per the MOU, the additional payment was to be made on fulfillment of the title clearance and that there was no proof of additional payment made to the seller ignoring that the addition made on the capital gain on the full amount of the sale value of the land in the case of the seller i.e Shri Manubhai Naik , has been confirmed by the Ld CIT(A), but not appreciated the same fact in the case of the assessee. iv) On the facts and circumstances of the case and in law, it is prayed that the order of the Ld CIT(A) be set aside and that of the Assessing Officer may be restored.” 3. Briefly stated facts of the case are that a search in the residential premises of the assessee on 18.02.2008. During the course of search, a Memorandum of Understanding in original was found and seized as pages 129 to 133 of BS-4 in which Shri Rajubhai Lakhabhai Bharwad was agreed to purchase the land property survey No.393, Moje Vesu, Dist. Surat on behalf of the assessee from Shri Manubhai Naik. A registered sale deed was also found dtd. 15.05.2007 regarding sale of this very property. The condition for transfer of possession of the land, as per para 7 of MOU found was that the second party Manubhai Kalyani
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Naik will have to hand over the possession of the said property in peaceful, vacant and physically to the first party (Rajubhai Lakhanbhai Bharwad). For full payment, condition laid down in para 9 of MOU was that the first party (Rajubhai Lakhanbhai Bharwad) shall pay 50% amount of total consideration (including the payment already made) to the 2nd party (Manubhai Kalyanji Naik) within 3 months period of MOU and balance 50% within 6 months of sale deed after title clearance and receiving non disputed land. The AO observed that the total area of the land was 16385 sq.yd and out of this 1385 sq. yd. have to be returned back to the seller. So as per MOU, the agreement for sale of land was for 15000 sq. yd. only. The rate on which the land was agreed to be sold was Rs.15,300/- per sq. yd. So the total value of land agreed to be sold was Rs.22,95,00,000/-. The Assessing Officer further observed that, As per terms and conditions, 50% part has to be paid within 3 months and balance 50% will be paid within 6 months after clearing the title and clearance of all the disputes. As the dispute for the clearance of the title of the land was still not decided, and various suits were pending in the court. Therefore, it is clear that balance 50% part has not been paid, as the terms and conditions of the MOU were not fulfilled. For the initial 50% part which has to be paid within 3 months was without any condition, so this part is definitely completed and paid by the purchaser party to the seller party. It is seen that Rs.26 lakh cash was paid before
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MOU. Rs.27.40 lakh was paid as per sale deed and Rs.46.60 lakh cash was paid on the date of MOU. All these payments are covered in the initial 50% payment which has to be paid within 3 months of the sale agreement. So it is clear that 50% part of the total value including the above payments had been paid by the assessee to the seller party. Further as per para 12 & 13 of the MOU, first party (Rajubhai Lakhanbhai Bharwad) shall sell one farm house block No.33, taluka Kamrej, Mojre Navi Pardi, dist. Surat to the 2nd party (Manubhai Kalyanji Naik) for sale amount of Rs.2,16,00,000/- on today i.e. on 15.05.2007 and the 2nd party will pay Rs.66 lakhs to the 1st party and balance consideration will be adjusted from initial 50% payment. As this agreement was executed and Shri Rajubhai Lakhanbhai Bharwad transferred this land which belonged to his father Mr. Manubhai K.Naik. Therefore, it is clear that Rajubhai Lakhanbhai Bharwad did not paid this sum of amount and adjusted towards initial 50% payment.
Further, as per para 14 to 17 of the MOU – First party (Rajubhai Lakhanbhai Bharwad) shall sell one land Tal. Kamraj, Moje Ladvi, Survey No.149, Dist. Surat, paikee property, to the 2nd party (Manubhai Kalyanji Naik), total 5 bhigas as the rate of Rs.32,55,000/- per bhiga on today i.e. on 15.05.2007 only and the consideration will be adjusted from 50% payment afterwards. As this deal was not finalized and also this payment has to be adjusted towards later part of 50% which was
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not finalized and even not paid. So no reduction is allowed to determine the total investment paid by the assessee. Accordingly, the Assessing Officer has calculated the unexplained investment made in the purchase of the above property as under: Total value of land agreed to be Rs.22,95,00,000/- sold 15000 x Rs.15300/- Less: As per agreement 50% (-) Rs.11,47,50,000/- amount have to be within 6 months after clearing the title and undisputed land. As this part no complete so accordingly this amount not paid Less: Reduction from the cost of (-_ Rs.2,16,00,000/- land, as farm block No.33, taluka kamraj, Moje Navi pardi, Dist. Agreed to transfer and adjusted from initial payment 50% part. Less: Cash paid to Manubhai (-) Rs.2,35,00,000/- K.Naik and shown in as advance given to Rajubhai lakhanbhai Bharwad Less: Cheque payment as per Rs.6,79,10,000/- registered sale shown in books as advance given to Raju Lakhanbhai Bharwad. Total unaccounted and Rs.6,79,10,000/- unexplained investment 5. The Assessing Officer further held that the unexplained investment was made by Shri Jaiprakash Aswani and not by Shri Rajubhai Bharwad. The reasons given by the Assessing Officer are as follows. “Shri Jaiprakash Aswani is a builder and has construction business by profession. A search was carried out at the business as well as residential premises. From past several years, he has a prominent
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role in developing various residential as well as commercial projects like Surya Palace, Surya Enclave, Surya Darshan, Ascon City and many others. At the time of search also, he disclosed around 20 crores inhis various firms and companies as undisclosed income from his construction business. During the course of search action at his residential premises, the land documents were found from the possession and control. Shri Manubhai K.Naik, the original owner of the land and seller party had sold many times this land to various persons and also concealed the same by cancellation deed. Many other had filed suits against Manubhai for clearance of the title of the land. Out of this, the last deal was finalized the RajubhaiLakhanbhai Bharwad through MOU and registered sale agreement. It is very tital evidence that Mr. Jaiprakash Aswani i.e. the assessee was found to be possessed and control of not only the MOU and registered purchase deed in original copy for the land under question as done by Rajubhai Lakhanbhai Bharwad and Manuhhai K.Naik but also was found to be possessed all the old sale agreements and cancellation agreement in original copy as agreed by Manubhai naik with various other parties. This fact clearly shows that the assessee was the real purchaser and he purchased the property in the name of Rajubhai Lakhanbhai Bharwad. Further, Rajubhai LakhanbhaiBharwad was summoned and statement was recorded, wherein reply to Q.No.15: The object of purchasing the land
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was that I have to transfer the land to Mr. Jaiprakash Aswani so that after doing contract with Jaiprakash Aswani, I purchased the land from Manubhai K.Naik. Further, Shri Jaiprakash Aswani had only provided the sources and assistance in financial terms to Rajubhai Lakhanbhai Bharwad for purchasing the property. Possessing all old, as well as current sale agreement inoriginal copy by Shri Jaiprakash Aswani, is a credential evidence that Shri Jaiprakash Aswani invested his unaccounted money by purchasing this land and used the name of Rajubhai Lakhanbhai Bharwad.” Accordingly, the amount of Rs.6,79,10,000/- was added to taxable income u/s.69 of the I.T.Act as substantive addition in the hands of Shri Jaiprakash Aswani and same amount was added as protective addition in the hands of Shri Rajubhai Lakhanbhai Bharwad.
Being aggrieved that assessee carried the matter before the ld.CIT(A) wherein the above arguments were repeated. The ld.CIT(A) after going through the above has given his finding in para 5 of the appellate order which is reproduced as under: “5. I have considered the facts and the submissions. I agree with the appellant’s views for the following reasons.: a) The land property at survey No.393, Moje Vesu, Dist. Surat was sold by Shri Manubhai Kalyanji Naik to Shri Rajubhai Lakhanbhai Bharwad by registered sale deed agreement dtd. 15.05.2007 and as per the registered sale deed, the payment by cheque was made for Rs.27,40,000/-. There was also Memorandum of Understanding signed between Shri Manubhai Kalyanji Naik and Shri Rajubhai Bharwad. As per the MOU, the payment in addition to Rs.27.40 lakc, the amount mentioned in the registered sale deed. The final payment was to be made @ Rs.15300/- per sq. yd. The total area of the land
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was 16385 sq. yd. out of which 1385 sq. yd. was to be returned back. Thus, the net area was 15000 sq. yds. Giving the amount of Rs.22,95,00,000/-. Out of this total consideration, Rs.27.40 lacs was already paid by cheques, Rs.235 lacs was pad by cash to Shri Manubhai Nai, and amount of Rs.216 lacs was paid in the form of transfer of farm house block No.33, Taluka Kamrej, Moje Navi Pahadi, Surat. Thus, the balance amount of Rs.18,16,60,000/- was also to be paid. However, the amount was payable with the condition that the seller will make the title deed clear and if any expenditure has to be incurred, he will do so on his own. b) It is a fact that the title of the said land was defective, not clear and not marketable. The court cases are still pending and litigation going on and no construction work is commenced on the project.Even the Assessing Officer was convinced that the title is not clear and various cases are pending in different courts that is why he has accepted that all the amounts agreed in the MOU has not passed to the seller from the purchaser and for this the addition was not made for the whole amount. c) The MOU was made on 15.05.2007 and the sale deed was registered on the same date i.e. on 15.05.2007 and not on 02.12.2007 which is mentioned by the Assessing Officer. Had it been the case that MOU was signed on 15.05.2007 and sale deed was registered on 02.12.2007, it could have been presumed that the additional amount agreed in the MOU is paid before getting the sale deed registered. However, the fact is that the sale deed was also registered on 15.05.2007 and the additional amount was to be paid in future on fulfillment of the condition that the title will be cleared and clear possession of the land will be given. If any expenditure was to be incurred for this purpose, the same was to be borne by the seller and was to be adjusted in this additional price. As the condition of getting the tile cleared is not fulfilled, the normal presumption will be that the additional amount promised was not paid unless there is any proof of payment of the additional amount found in the search or in the post search enquiries. The fact is that there is no proof of payment of the additional amount found in the search or in the post search enquiries. d) I also agree with the appellant’s view that a prudent business person will stop immediately further payment when he finds that the second party is not in a condition to fulfill the promise and in near future not going to fulfill the promise of getting the title clear. Hence, it cannot be presumed that the appellant had made the payment of 50% of the agreed additional amount within 3 months’ period from the date of signing the MOU even without any possibility in near future of getting the title clear.”
Being aggrieved, the Revenue filed this appeal before us. The ld.CIT-DR submitted that as per the MoU, 50% payment was to be made within 3 months and balance part was to be made within six months after clearance of title and disputes. Further, the MoU also laid down a
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condition that all titles should be cleared before 15.11.2007. The deed of MoU was 15.05.2007 and the three months period ends on 15.08.2007 and six months period ends on 15.11.2007. In the MoU, for the first 50%, there was no condition and initial 50% part was to be paid by the purchaser even before the clearance of dispute. Therefore, the assessee is very likely that the 50% of the amount as occurred as per MoU. Therefore, the Assessing Officer(AO) has correctly considered the 50% of the total amount of Rs.22,95,00,000/- [calculated @15,304 per 15000 sq.yd. land agreed to purchased to MoU]. The AO, therefore has allowed deduction of 50% of the amount of Rs.20.95 crore i.e. Rs.11.47 crore and after allowing the deduction of the amount of cost of land as from of Rs.2.16 crores, and cash paid to Manubhai Kalyani Naik of Rs.2.75 crore and the amount of Rs.27.40 lakhs paid by cheque. Therefore, the ld.CIT(A) was not justified in deleting the addition, hence the ld.CIT-DR vehemently supported the order of the ld.AO.
Per contra, the ld.Counsel for the assessee submitted that the investment made as per the MoU amounting to Rs.27.40 lakhs by cheque and the amount of Rs.2.35 crore by cash has been accepted by the assessee as advance given to Rajubhai Lakhanbhai Bharwad and Rajubhai Lakhanbhai Bharwad has also accepted the same. Further, set off for consideration of Rs.2.16 crore in exchange of form no.33 was also agreed and allowed as reduction of cost. The assessee has also
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disclosed the amount of Rs.2.35 crore in his Return of Income. Further, the MoU dated 15.05.2007 and sale agreement has also dated 15.05.2007, therefore, it could not be said that the agreed amount in MoU’s paid before getting the sale deed registered. The amount was to be paid in furtherance on fulfillment of the condition that the title will be cleared and possession of the land will be given. However, since the title of the land was could not be cleared, therefore no additional amount was paid by the assessee. Further, there is no evidence on record that the assessee has paid over and above the amount has mentioned in the MoU and has agreed by the assessee. Therefore, the ld.CIT(A) has correctly allowed the relief to the assessee.
We have heard the rival submissions and material available on the record. We find that as per the MoU dated 15.05.2007, the payment was to be made in next three and six months on getting the title cleared for the deal. The assessee has made payment of 27.40 lakhs by cheque + 2.35 crore by cash which has been duly admitted on which tax has been paid. There is no material or circumstantial evidence on record to suggest that the assessee has made payment other than as admitted by him and recorded in the books of accounts. The MoU was prepared of 15.05.2007 laying the condition to make payment in next three and six months, on fulfillment of certain conditions cannot be sufficient to presume that the payment was made as per terms of MoU, particularly,
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when the legal cases were pending before various courts and also title was not clear on nor the possession was handed over to the assessee. Therefore, the whole addition made on presumption basis and without corroborating evidences. Therefore, we are of the considered opinion that the ld.CIT(A) has been rightly deleted. Therefore, we are in the agreement of the findings recorded by the ld.CIT(A) as reproduced in the earlier part of this order. Accordingly, same is upheld. In view of this, the Ground No.I to IV of the Revenue are therefore dismissed.
In the result, appeal of the Revenue is dismissed.
ITA No.708/Ahd/2011 for A.Y. 2008-09 in the case of Shri Rajubhai Lakhabhai Bharwad:
We have heard the rival submissions, both the parties have agreed that the facts of the case are same as in the case of Jai Prakash K.Aswani in ITA No.709/Ahd/2011 for A.Y. 2008-09 wherein substantiative addition has been deleted by the ld.CIT(A). The appeal of the Revenue in the case of Jai Prakash K.Aswani has been dismissed by us in the earlier part of this order in ITA No.709/Ahd/2011. Therefore, the findings given therein would mutatis-mutandis apply to this case also, wherein protective addition was made. Therefore, considering all these facts and findings recorded in the case of Jai Prakash K.Aswani in ITA
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No.709/Ahd/2011 for A.Y. 2008-09, this appeal of the Revenue is accordingly dismissed.
In the result, both the appeal of the Revenue in ITA No.709/Ahd/2011 and in ITA No.708/Ahd/2011 are dismissed.
The order is pronounced by listing the case on the Notice Board under Rule 34(4) of Income Tax Appellate Tribunal Rules 1963.
Sd/- Sd/- (AMARJIT SINGH) (O.P.MEENA) (�याियक सद�यतथा/JUDICIAL MEMBER) (लेखा सद�यकेसम� /ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 10th Dec, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat