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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM:
These two appeals preferred by different assessees emanates from the
common order of Ld. CIT(Appeals)-9, Pune dated 07.02.2017 for the
assessment year 2008-09 as per grounds of appeal on record.
These cases relates to two partners of a partnership firm and it is the
grievance of the assessees herein that when sale consideration is received by
partnership firm and the same is reflected in the books of account of the
partnership firm and has been offered to tax then whether the same amount
can be assessed in the hands of the individual partners for the purpose of
taxation.
These cases were heard together. Since facts are similar and issues are
common, these appeals are being disposed of vide this consolidated order. For
the sake of convenience, we would refer to the facts appearing in ITA
No.1028/PUN/2017.
The brief facts in this case are that the assessee filed return of income for
assessment year 2008-09 on 30.07.2008 showing return income at
Rs.2,70,271/-. The return was processed u/s.143(1) of the Income Tax Act,
1961 (hereinafter referred to as ‘the Act’) accepting the returned income.
Thereafter, search and seizure action u/s.132 of the Act along with survey
u/s.133A of the Act was conducted in the case of M/s. Pooja Exports group,
Mumbai. Various documents were seized under relevant provisions of the
Income Tax Act, wherein it was observed that Shri Sunil Kothari of M/s. Pooja
Exports who was a Director in the M/s. Cornerstene Estates Pvt. Ltd. has paid
cash of Rs.7,88,63,213/- for the purchase of land situated at village Wakad
3 ITA Nos.1028 & 1029/PUN/2017 A.Y.2008-09
Plot 143 R ( 153868 Sq. ft.) over and above the agreement value of
Rs.5,94,00,000/- to M/s. B.U. Bhandari Real Estate Development Corporation
which was the seller of above mentioned land. Mr. Sunil Kothari, in his
statement recorded on oath during the course of search/survey proceedings
accepted to have paid Rs.7,88,63,213/- to M/s. B.U. Bhandari Real Estate
Development Corporation. He disclosed this set of fact on the basis of seized
documents.
After perusing the facts, the Assessing Officer took a view that
Rs.7,88,63,213 was the cash component received by M/s. B.U. Bhandari Real
Estate Development Group towards the sale of land situated at Wakad, Plot
No.143R from M/s. Cornetstene Estate Pvt. Ltd. of M/s. Pooja Export Group.
The Assessing Officer formed an opinion that since Shri C.U Bhandari (HUF) is
the partner in M/s. B.U. Bhandari Real Estate Coporation and along with 8
others as per agreement dated 29.11.2007 received the cash of
Rs.7,88,63,213/- and not shown his share of cash receipt in his return of
income and therefore, notice u/s.148 of the Act was issued to the assessee.
The assessee in his submissions stated that Shri Sunil Kothari in his
statement nowhere asserted that he paid the cash amount to the assessee and
other. The statement only stated that cash has been paid to the vendors. The
assessee further stated that the transaction of sale of property has been carried
out by B.U Bhandari Real Estate Corporation. The assessee submitted that no
cash has been received by the assessee. The contention of the assessee did not
find favour with the Assessing Officer. It was observed by the Assessing Officer
that assessee is one of the beneficiary of cash received in this land transaction.
Since the assessee is the partner in M/s. B.U. Bhandari Real Estate
Corporation and as per agreement dated 29.11.2011, there are 9 individual
persons. Hence, there are total 10 beneficiaries in this transaction in which
4 ITA Nos.1028 & 1029/PUN/2017 A.Y.2008-09
cash of Rs.7,88,63,213/- has been received out of which the assessee’s share
is 10% i.e. Rs.78,86,321/- which he has not shown in his return of income and
therefore, same was added to the total income of the assessee u/s.68 of the
Act.
During First Appellate proceedings, the Ld. CIT(Appeals) also has upheld
the findings of the Assessing Officer. According to the Ld. CIT(Appeals) in the
entire land transaction done by the partnership firm, there were 10
beneficiaries and accordingly, their share of income should have been reflected
in their individual return of income which they have not done. It was explained
before the Ld. CIT(A) that as per books of accounts, the land that was sold
belongs to the partnership firm and that the entire consideration received was
received in the books of account of the partnership firm. The income from the
said transaction was also offered to tax in the hands of the partnership firm.
That being further aggrieved, the assessee preferred appeal before us.
The Ld. AR of the assessee at the time of hearing demonstrated that the
transactions pertains to the firm M/s. B.U. Bhandari Real Estate Corporation
in which the assessee is a partner. This is evident from statement of the
account of the said firm annexed in the paper book as Annexure-6. The
transaction is duly reflected in the books of account of the firm having received
money from M/s.Cornerstene Estates Pvt. Ltd. The land at village Wakad which
has been sold by the partnership firm is already reflected in the books of
account of the partnership firm and the sale consideration that has been
received at Rs.5,94,00,000/- and that income has already been offered to tax in
the hands of the partnership firm. The Ld. AR further contended that when the
transaction being done by partnership firm, the amount received by
5 ITA Nos.1028 & 1029/PUN/2017 A.Y.2008-09
partnership firm and it has been offered to tax in the return of income of the
partnership firm, then in no possible manner, the amount could be made
taxable in the hands of the assessee. The Ld. AR of the assessee has placed
reliance on the decision of the Hon'ble Supreme Court of India in the case of
ITO Vs. Ch. Atchaiah reported at 218 ITR 239 (SC) and decision of the Hon'ble
Karnataka High Court in the case of ACIT Vs. Prabhakar Kamath and 3 others
reported as 68 taxmann.com 359 (Kar.) wherein the proposition of law laid
down by these judgments is that assessment has to be done in the right hands.
On the other hand, the Ld. DR has placed reliance on the orders of the
Sub-ordinate Authorities.
We have perused the case records and heard the rival contentions. We
have also analyzed the judicial pronouncements placed before us and gone
through the books of account of the assessee as well as partnership firm. It is
demonstrated that cash payment was made by the M/s. Pooja Export and
credited to the firm M/s. B.U. Bhandari Real Estate Corporation. Transaction
of the amount was assessed in the hands of the M/s. B.U. Bhandari Real
Estate Corporation. In such scenario, terming the assessee as ultimate
beneficiary is not appropriate as evident through the facts on record. That the
Hon'ble Supreme Court in the case of ITO Vs. Ch. Atchaiah (supra.) has clearly
held that assessment has to be done in the right hands. Therefore, in the
present case, when sale of land transaction has been done by the partnership
firm, addition cannot be made in the hands of the individual assessee even
though he is a partner of the firm.
In view of the matter, we set aside the order of the Ld. CIT(Appeals) and
allow the appeal of the assessee.
6 ITA Nos.1028 & 1029/PUN/2017 A.Y.2008-09
In the result, appeal of the assessee in ITA No.1028/PUN/2017 is allowed.
In other appeal filed by the assessee in ITA No.1029/PUN/2017, the facts and circumstances of the case are identical except the amounts. Since all other facts, arguments of the parties are same and similar, the same ruling as in ITA No.1028/PUN/2017 shall apply mutatis-mutandis to other appeal herein also. Therefore, for this case also, we set aside the order of Ld. CIT(Appeals) and allow the appeal of the assessee on the same examination of facts and circumstances.
In the combined result, appeals of the assessees in ITA Nos.1028 & 1029/PUN/2017 are allowed.
Order pronounced on 07th day of March, 2019. Sd/- Sd/- R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 07th March, 2019. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-9, Pune. 4. The Pr. CIT-5, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
7 ITA Nos.1028 & 1029/PUN/2017 A.Y.2008-09
Date 1 Draft dictated on 06.03.2019 Sr.PS/PS 2 Draft placed before author 07.03.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order