JAYANT NARSIN RAO,MUMBAI vs. INCOME TAX OFFICER 19(1)(5), MUMBAI, MUMBAI

At the outset, we observe that there is a delay of 83 days in At the outset, we observe that there is a delay of 83 days in At the outset, we observe that there is a delay of 83 days in filing the instant appeal, for which the Assessee has sought filing the instant appeal, for which the Assessee has sought filing the instant appeal, for which the Assessee has sought condonation.

We have heard the parties on the preliminary issue of We have heard the parties on the preliminary issue of We have heard the parties on the preliminary issue of condonation of delay and perused the material available on record. condonation of delay and perused the material available on re condonation of delay and perused the material available on re The Ld. AR submitted that the delay occurred due to the Assessee’s that the delay occurred due to the Assessee’s that the delay occurred due to the Assessee’s advanced age of 88 years, dependency on others for attending to tax advanced age of 88 years, dependency on others for attending to tax advanced age of 88 years, dependency on others for attending to tax matters, difficulty in retrieving records pertaining to A.Y. 2011-12 and matters, difficulty in retrieving records pertaining to A.Y. 2011 matters, difficulty in retrieving records pertaining to A.Y. 2011 the time taken in obtaining appropriate pr the time taken in obtaining appropriate professional advice. The Ld. ofessional advice. The Ld. DR on the contrary, formally opposed the condonation of delay. formally opposed the condonation of delay. formally opposed the condonation of delay.

We find that the explanation offered by the Assessee We find that the explanation offered by the Assessee appears to appears to be bona fide and constitutes sufficient cause. The appeal was filed bona fide and constitutes sufficient cause. The appeal was filed bona fide and constitutes sufficient cause. The appeal was filed promptly upon collation of the promptly upon collation of the records and receipt of professional records and receipt of professional advice. Nothing has been brought on record to suggest that the delay advice. Nothing has been brought on record to suggest that the delay advice. Nothing has been brought on record to suggest that the delay was deliberate or mala fide or that the Assessee derived any benefit was deliberate or mala fide or that the Assessee derived any benefit was deliberate or mala fide or that the Assessee derived any benefit therefrom. In the peculiar facts of the case, the formal objection therefrom. In the peculiar facts of the case, the formal objection therefrom. In the peculiar facts of the case, the formal objection raised by the Ld. DR does not outweigh the explanation furnished by Ld. DR does not outweigh the explanation furnished by Ld. DR does not outweigh the explanation furnished by the Assessee. Thus, applying the principles laid down by the Hon’ble pplying the principles laid down by the Hon’ble pplying the principles laid down by the Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji, 167 ITR Supreme Court in Collector, Land Acquisition v. Mst. Katiji, 167 ITR Supreme Court in Collector, Land Acquisition v. Mst. Katiji, 167 ITR 471 (SC), N. Balakrishnan v. M. Krishnamurthy, AIR 1998 SC 3222, 471 (SC), N. Balakrishnan v. M. Krishnamurthy, AIR 1998 SC 3222, 471 (SC), N. Balakrishnan v. M. Krishnamurthy, AIR 1998 SC 3222, Vedabai v. Shantaram Baburao Patil, (2002) 122 Taxman 114 (SC), Vedabai v. Shantaram Baburao Patil, (2002) 122 Taxman 114 (SC), Vedabai v. Shantaram Baburao Patil, (2002) 122 Taxman 114 (SC), and CIT v. West Bengal Infrastructure Development Finance and CIT v. West Bengal Infrastructure Development Finance and CIT v. West Bengal Infrastructure Development Finance Corporation Ltd., (2011) 334 ITR 269 (SC) as relied upon by the Ltd., (2011) 334 ITR 269 (SC) as relied upon by the Ltd., (2011) 334 ITR 269 (SC) as relied upon by the Assessee specifically that sufficient cause must receive a liberal an that sufficient cause must receive a liberal and that sufficient cause must receive a liberal an justice-oriented construction, we deem it appropriate to condone the oriented construction, we deem it appropriate to condone the oriented construction, we deem it appropriate to condone the delay. Accordingly, the delay of delay. Accordingly, the delay of 83 days is condoned and the appeal days is condoned and the appeal is admitted for adjudication on merits. is admitted for adjudication on merits.

Coming to the merits of the case, Coming to the merits of the case, we observe that brief facts, rief facts, relevant for adjudication of the present appeal, are that the or adjudication of the present appeal, are that the or adjudication of the present appeal, are that the assessment of the Assessee was reopened u/s 147 of the Act. During assessment of the Assessee was reopened u/s 147 of the Act. During assessment of the Assessee was reopened u/s 147 of the Act. During the reassessment proceedings, the Assessing Officer {AO} noticed the reassessment proceedings, the Assessing Officer {AO} noticed the reassessment proceedings, the Assessing Officer {AO} noticed substantial cash deposits in the bank accounts of the Assessee and substantial cash deposits in the bank accounts of the Assessee and substantial cash deposits in the bank accounts of the Assessee and also found that the Assessee had purchased a residential flat during found that the Assessee had purchased a residential flat during found that the Assessee had purchased a residential flat during the relevant previous year. Since the Assessee, according to the Ld. the relevant previous year. Since the Assessee, according to the Ld. the relevant previous year. Since the Assessee, according to the Ld. AO, failed to satisfactorily explain the source of the cash deposits and AO, failed to satisfactorily explain the source of the cash deposits and AO, failed to satisfactorily explain the source of the cash deposits and the investment made in the residential property, t the investment made in the residential property, the AO treated the he AO treated the cash deposits of Rs.86,26,702/ Rs.86,26,702/- as unexplained and further made as unexplained and further made an addition of Rs.20,98,658/ Rs.20,98,658/- towards unexplained investment in towards unexplained investment in the residential flat, vide assessment order dated the residential flat, vide assessment order dated 27.12.2018 27.12.2018 passed u/s 143(3) r.w.s. 147 of the Act. s 143(3) r.w.s. 147 of the Act.

Thus, the Assessee, being aggrieved, preferred the first appeal Thus, the Assessee, being aggrieved, preferred the first appeal Thus, the Assessee, being aggrieved, preferred the first appeal before the Ld. Commissioner. The Ld. Commissioner, vide the before the Ld. Commissioner. The Ld. Commissioner, vide the before the Ld. Commissioner. The Ld. Commissioner, vide the impugned order, affirmed both the additions by observing that the impugned order, affirmed both the additions by observing that the impugned order, affirmed both the additions by observing that the Assessee failed to establish, through cogent documentary evidence, Assessee failed to establish, through cogent documentary evidence, Assessee failed to establish, through cogent documentary evidence, the source of the cash deposits and the investment made in the the source of the cash deposits and the investment made in the the source of the cash deposits and the investment made in the residential property.

Before us, the Ld. Counsel efore us, the Ld. Counsel thus submitted that the Authorities that the Authorities below failed to appreciate the true facts of the case. below failed to appreciate the true facts of the case. Further the cash deposits were intrinsically con intrinsically connected with the consideration received nected with the consideration received on surrender of tenancy rights, which on surrender of tenancy rights, which was thereafter utilized utilized for acquiring another residential property. acquiring another residential property.

It was further submitted that the purchaser er submitted that the purchaser directly directly paid substantial amounts to the builder on behalf of t substantial amounts to the builder on behalf of the Assessee and, he Assessee and, therefore, the investment cannot be treated as unexplained. therefore, the investment cannot be treated as unexplained.

The Ld. Counsel further submit The Ld. Counsel further submitted that the Assessee is a super that the Assessee is a super senior citizen and furnishes all the details available with him, senior citizen and furnishes all the details available with him, senior citizen and furnishes all the details available with him, however, the same were were not properly appreciated by the Authorities by the Authorities below. It was also contended that the Ld. AO himself notices also contended that the Ld. AO himself notices also contended that the Ld. AO himself notices discrepancies in the figures of cash deposits, which demonstrates that discrepancies in the figures of cash deposits, which demonstrates that discrepancies in the figures of cash deposits, which demonstrates that the assessment is completed without proper verification of the the assessment is completed without proper verification of the the assessment is completed without proper verification of the material available on record. material available on record.

On the contrary, the Ld. DR relie contrary, the Ld. DR relied upon the orders passed by upon the orders passed by the Authorities below and submit the Authorities below and submitted that the Assessee fail that the Assessee failed to discharge the onus cast upon him under the discharge the onus cast upon him under the relevant provisions of the relevant provisions of the Act and therefore the additions the additions were rightly confirmed by the Ld. rightly confirmed by the Ld. Commissioner.

We have heard the Ld. DR, perused the material available on We have heard the Ld. DR, perused the material available on We have heard the Ld. DR, perused the material available on record and considered the rival submissions. The controversy record and considered the rival submissions. The controversy record and considered the rival submissions. The controversy primarily concerns the source of the cash deposits in the Assessee’s primarily concerns the source of the cash deposits in the Assessee’s primarily concerns the source of the cash deposits in the Assessee’s bank accounts and the corresponding investment made in the bank accounts and the corresponding investment made i bank accounts and the corresponding investment made i residential property.

The consistent stand of the Assessee is that the funds The consistent stand of the Assessee is that the funds The consistent stand of the Assessee is that the funds emanated from the consideration received on surrender of tenancy emanated from the consideration received on surrender of tenancy emanated from the consideration received on surrender of tenancy rights and that part of the consideration payable for the new property rights and that part of the consideration payable for the new property rights and that part of the consideration payable for the new property was directly remitted by the purchas was directly remitted by the purchaser to its vendor.

The Assessee claims to have surrendered tenancy rights in The Assessee claims to have surrendered tenancy rights in The Assessee claims to have surrendered tenancy rights in respect of premises situated in Mumbai for a stated consideration of respect of premises situated in Mumbai for a stated consideration of respect of premises situated in Mumbai for a stated consideration of Rs.500/-. Though surrender or relinquishment of tenancy rights Though surrender or relinquishment of tenancy rights Though surrender or relinquishment of tenancy rights constitutes a transfer of a capital asset, how constitutes a transfer of a capital asset, however, the transaction transaction cannot be examined, cannot be examined, merely with reference to the nominal merely with reference to the nominal consideration recorded in the document and must be appreciated in consideration recorded in the document and must be appreciated in consideration recorded in the document and must be appreciated in its entirety.

According According According to to to the the the Assessee, Assessee, Assessee, the the the tenancy tenancy tenancy rights rights rights were were were surrendered for an overall consideration of surrendered for an overall consideration of Rs.1,08,00,000/ Rs.1,08,00,000/-, out of which the purchaser directly paid which the purchaser directly paid Rs.22,26,000/- by crossed cheque by crossed cheque to the vendor of the property subsequently acquired by the Assessee to the vendor of the property subsequently acquired by the Assessee to the vendor of the property subsequently acquired by the Assessee for Rs.1,02,00,000/-. Such payment, if established, constitutes a . Such payment, if established, constitutes a . Such payment, if established, constitutes a benefit received by the Assess benefit received by the Assessee and forms part of the consideration, ee and forms part of the consideration, notwithstanding that the amount did not pass through the Assessee’s notwithstanding that the amount did not pass through the Assessee’s notwithstanding that the amount did not pass through the Assessee’s bank account.

The direct payment of The direct payment of Rs.22,26,000/- towards acquisition of towards acquisition of the new property, coupled with the surrounding circumstances, prima the new property, coupled with the surrounding circumstances, prima the new property, coupled with the surrounding circumstances, prima facie supports the Assessee’s explanation that the surrender of facie supports the Assessee’s explanation that the surrender of facie supports the Assessee’s explanation that the surrender of tenancy rights formed part of a composite commercial arrangement tenancy rights formed part of a composite commercial arrangement tenancy rights formed part of a composite commercial arrangement and was not confined to the nominal and was not confined to the nominal consideration of Rs.500/ consideration of Rs.500/-.

The principles laid down by the Hon’ble Supreme Court in CIT The principles laid down by the Hon’ble Supreme Court in CIT The principles laid down by the Hon’ble Supreme Court in CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)] and Sumati Dayal v. v. Durga Prasad More [(1971) 82 ITR 540 (SC)] and Sumati Dayal v. v. Durga Prasad More [(1971) 82 ITR 540 (SC)] and Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)] require a transaction to be examined CIT [(1995) 214 ITR 801 (SC)] require a transaction to be examined CIT [(1995) 214 ITR 801 (SC)] require a transaction to be examined in the light of surrounding cir in the light of surrounding circumstances, ordinary human conduct cumstances, ordinary human conduct and and and commercial commercial commercial probabilities. probabilities. probabilities. Applying Applying Applying these these these principles, principles, principles, the the the Assessee’s explanation cannot be rejected merely because the Assessee’s explanation cannot be rejected merely because the Assessee’s explanation cannot be rejected merely because the document records a nominal consideration, particularly when a document records a nominal consideration, particularly when a document records a nominal consideration, particularly when a substantial payment is claimed to hav substantial payment is claimed to have been made directly for the e been made directly for the Assessee’s benefit.

However, the agreement, payment trail and nexus between the However, the agreement, payment trail and nexus between the However, the agreement, payment trail and nexus between the surrender of tenancy rights and the direct payment of Rs.22,26,000/- surrender of tenancy rights and the direct payment of Rs.22,26,000/ surrender of tenancy rights and the direct payment of Rs.22,26,000/ require factual verification. The assessment order also contains require factual verification. The assessment order also contains require factual verification. The assessment order also contains inconsistencies in the quantification of the cash deposits, though the cies in the quantification of the cash deposits, though the cies in the quantification of the cash deposits, though the impugned additions are founded upon the actual deposits and their impugned additions are founded upon the actual deposits and their impugned additions are founded upon the actual deposits and their source.

We further observe that the Authorities below did not We further observe that the Authorities below did not We further observe that the Authorities below did not meaningfully verify the surrender documents, flow of consideration, meaningfully verify the surrender documents, flow of consideration meaningfully verify the surrender documents, flow of consideration bank statements, direct payment made to the vendor of the new bank statements, direct payment made to the vendor of the new bank statements, direct payment made to the vendor of the new property and the capital gain disclosed by the Assessee in the return property and the capital gain disclosed by the Assessee in the return property and the capital gain disclosed by the Assessee in the return filed in response to the notice u/s 148 of the Act. Such payment, if filed in response to the notice u/s 148 of the Act. Such payment, if filed in response to the notice u/s 148 of the Act. Such payment, if verified, would also have a direct bearing upon the a verified, would also have a direct bearing upon the addition made ddition made towards unexplained investment. towards unexplained investment.

Thus, the issues require comprehensive factual verification. At Thus, the issues require comprehensive factual verification. At Thus, the issues require comprehensive factual verification. At the same time, the materia the same time, the material presently available on record, l presently available on record, is insufficient to conclusively delete the additions. insufficient to conclusively delete the additions.

Thus, considering the peculiar Thus, considering the peculiar facts and circumstances in facts and circumstances in totality, we set aside the impugned order of the Ld. Commissioner on totality, we set aside the impugned order of the Ld. Commissioner on totality, we set aside the impugned order of the Ld. Commissioner on the issues under consideration and remand the case to the file of the the issues under consideration and remand the case to the file of the the issues under consideration and remand the case to the file of the JAO for fresh adjudication. The JAO shall examine: for fresh adjudication. The JAO shall examine:

The JAO may also also examine the transferee, landlord, broker, examine the transferee, landlord, broker, builder or any other concerned pers builder or any other concerned person and consider comparable on and consider comparable transactions in the same building or locality. However, any addition transactions in the same building or locality. However, any addition transactions in the same building or locality. However, any addition shall be based upon cogent evidence brought on record and shall not shall be based upon cogent evidence brought on record and shall not shall be based upon cogent evidence brought on record and shall not be made merely on the basis of the market value, ready be made merely on the basis of the market value, ready- -reckoner value or inadequacy of the s value or inadequacy of the stated consideration.

The Assessee shall extend full cooperation and furnish the The Assessee shall extend full cooperation and furnish the The Assessee shall extend full cooperation and furnish the relevant documents and explanations as may be called for. relevant documents and explanations as may be called for.

Considering the advanced age of the Assessee, the JAO is Considering the advanced age of the Assessee, the Considering the advanced age of the Assessee, the specifically directed to complete the fresh assessment within directed to complete the fresh assessment within six directed to complete the fresh assessment within months from the date of receipt of this order, without months from the date of receipt of this order, without any delay and any delay and default.

In the result, the In the result, the Assessee’s appeal is allowed for Assessee’s appeal is allowed for statistical purposes.