SABESAN PARAMESWARAN,CHENNAI vs. ACIT NON CORPORATE CIRCLE 2, CHENNAI

The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in treating the amount of Rs.6,86,06,500/- received by Shri S. Ramaswamy as income of the assessee under the head ‘long term capital gain’.

Brief facts are that the AO during the course of assessment proceedings noticed from the computation of income filed by assessee that the assessee has disclosed long term capital gain of Rs.29,81,660/- on account of sale of land admeasuring 6462 sq.ft., comprised in survey No.2/5, block No.22, LB Road, Chennai. The AO noted that the assessee as per sale deed received sale consideration of Rs.7,43,50,000/- and the assessee submitted the details and from the perusal of sale deed, it transpired that the assessee along with his grandmother C.T. Saraswathi has executed power of attorney in favour of one Shri S. Ramaswamy, the agent in respect of the property measuring 23586 sq.ft. i.e., 9 grounds and 1986 sq.ft., at Parameswari Nagar, L.B. Road, Adyar, Chennai. This Power of Attorney (PoA) was executed on 19.02.2015 as on the date of execution of the sale deed of this land on 19.02.2015 for a Rs.7,43,50,000/-. The assessee explained that the assessee received this sum of Rs.30 lakhs only and hence, he has disclosed long term capital gain on Rs.28,81,660/-. The assessee filed a letter dated 28.11.2017 filed details of amount received as under:- “Sale deed is for a total sum of Rs.7,43,50,000/- The above sum is received by the assessee, his grandmother C.T. Saraswathi and S. Ramaswamy, the power of attorney holder on his own account as below:- 1. C.T.Saraswathi Rs.20,00,000/- 2. Sabesan Parameswaran (the assessee) Rs.30,00,000/- 3. S.Ramaswamy – the power holder Rs.6,86,06,500/- 4. Amount of TDS Rs.7,43,500/- Total Rs.7,43,50,000/- 3.1 The AO required the assessee as to why he has not declared capital gain on entire sale consideration of property of Rs.7,43,50,000/-. The assessee before AO vide letter dated 26.12.2017 claimed that he has received only a sum of Rs.30 lakhs and the relevant text of the letter reads as under:- “a) There was no sharing ratio as such between CT Saraswathi, my grandmother and me. The buyer of the property gave Rs.20 lacs to my grandmother CT Saraswathi and Rs. 30 lacs to me. My grandmother CT Saraswathi disclosed Rs.20 lacs received by her return of income for A. Y. 2015-16 and paid tax on the same. b) After my father's sudden demise on 3.8.2010 the burdern of my family came on my head. I was only 28 years old andI a Doctor by profession an anesthetist working in a hospital. I did not have and even now do not have knowledge of any business especially real estate business. My father has spent considerable energy and money in trying to evict squatters from the property in Adyar. Certain liabilities which my father had incurred for the sake of the property at Adyar that I had extinguish. No buyer was forthcoming to buy the property. At that juncture Shri.S. Ramaswamy offered to get the property sold for a good price and compensate for the money spent by my father to evict the illegal occupants with whom my father had to fight even court cases. Therefore I felt compelled to give power of attorney to Shri.Ramaswamy. The power executed in favour of Shri. Ramaswamy was with any consideration. There were illegal occupants in the land and Shri. Ramaswamy stated that he required power to find and negotiate with the prospective buyers and also to evict the illegal occupants in the land. The money he had taken in his name from the buyer of land in his own name was to his benefit only and he claimed to us orally that he had expended large sums of money to evict illegal occupants and also to fight cases instituted by some of them.

The CIT(A) concluded that the assessee being legal owner of the property and the agent or the PoA holder Shir S. Ramaswamy was never a legal holder and he has any right to claim any consideration in the property, he treated the entire amount received by assessee of Rs.7,43,50,000/- and out of his proportionate share of 2/3rd is to be assessed as long term capital gain and assessed by AO rightfully. Aggrieved, now assessee is in appeal before the Tribunal.

We have heard rival contentions and gone through facts and circumstances of the case. We noted that the PoA dated 19.02.2015 given in faovur of Shri S. Ramaswamy in connection with the property sold by assessee, the relevant clause as regards to consideration to be received by assessee reads as under:- “14 To do all other acts, deeds, incidental to and or necessary for the proper execution of acts, deeds and powers mentioned herein in relation to the said property.

Coming to another issue regarding disallowance of eviction expenses of Rs.2,90,96,260/-. The ld.AR for the assessee now before us made submission that the entire details are available with him as regards to eviction payments and eviction expenses which the assessee could not produce before the CIT(A) and hence, he requested that to that extent, the matter can be restored back to the file of the AO because the same were partly produced before the AO just before the completion of assessment. Even the AO has provided time only for 10 days and this fact is noted by the CIT(A) as under:- “As rightly pointed out by the Assessing Officer, the burden lies on the appelant to prove that expenditure was actually incurred and that all the expenditure so incurred was incidental to the transfer to be allowed as a deduction in computing the amount of capital gains. The appellant failed to furnish any evidence - either in the course of assessment proceedings before the Assessing Officer or in the appellate proceedings before me - to prove the fact that his father incurred expenditure towards eviction of the supposed encroachers of the property. In the absence of evidence to the contrary, the Aşsessing Officer rightly rejected the eviction expenses of Rs.2,90,96,260/- claimed by the appellant to have been incurred by his father. The appellant fails on this ground.”

After hearing both the sides on this issue, now we are of the view that the assessee is entitled for this claim but assessee has to prove this claim and file evidence. Hence, we restore this issue back to the file of the AO for fresh adjudication after verifying the evidences. This issue of assessee’s appeal is set aside and allowed for statistical purposes.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.