JAIKUMAR BABULAL BHANDARI,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, PUNE

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ITA 1029/PUN/2017Status: DisposedITAT Pune07 March 2019AY 2008-097 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the land sale transaction was conducted by the partnership firm and the consideration was received and offered to tax by the firm, the amount could not be taxed again in the hands of the individual partner. Assessment must be done in the correct hands.

What were the facts?

During a search, it was observed that a substantial cash payment was made for land purchase to a partnership firm in which the assessee was a partner. The Assessing Officer treated the assessee as a beneficiary and added their notional share of the cash to their income.

What were the issues?

Whether cash received by a partnership firm for a land sale can be assessed in the hands of its individual partners when the firm has already offered the income to tax.

Which sections of the Income-tax Act were involved?

Section 68,Section 132,Section 133A,Section 148

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM

For Appellant: Shri V.L. Jain
For Respondent: Shri Sudhendu Das
Hearing: 06.03.2019Pronounced: 07.03.2019

Heard together (2 matters)

ITA No.1028/PUN/2017
ITA No.1029/PUN/2017

Read from the judgment's own cause title. This page is filed under one of them.

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.

2.

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.

3.

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.

4.

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.

5.

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.

6.

That being further aggrieved, the assessee preferred appeal before us.

7.

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.

8.

On the other hand, the Ld. DR has placed reliance on the orders of the

Sub-ordinate Authorities.

9.

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

10.

In the result, appeal of the assessee in ITA No.1028/PUN/2017 is allowed.

11.

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.

12.

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

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