VITHALDAS MADHUSUDAN AGARWAL,CHENNAI vs. DCIT, NCC-5,, CHENNAI

This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter in short "the Ld.CIT(A)”), Chennai-18, dated 30.07.2024 for the Assessment Year (hereinafter in short "AY”) 2011-12.

The main grievance of the assessee is against the action of the Ld.CIT(A) confirming the addition of Rs.21,26,000/- despite assessee has shown before the AO/Ld CIT(A) below that assessee was only holding 40% of shareholding in the property in question.

The AO notes about a search conducted on 06.01.2012 & 07.01.2012 in the case of M/s. Shivasahai Sons (l) Ltd., and Shri Vithaldas Agarwal who was working as an Accountant in the said entity; and during the course of search, certain loose sheets/documents were found and seized. During the course of search, Shri V. Madhusudan Agarwal & Shri Vithaldas Agarwal were questioned in respect of certain investment & expenditure; and as per the documents seized, and based on that enquiry-report made by the DDIT (Investigation), Unit-II (2), Chennai, dated 25.02.2014, the assessment of the assessee was re- opened and an issue that was raised related to payment of unaccounted money (on-money) paid towards purchase of land situated at Kaveripettai, [which we are concerned in this appeal]. In respect of this issue, the AO notes that during the course of search, they found an agreement between the vendors of the land. Shri Sitaraman as one party and Shri J.Vithaldas (assessee), his father & wife as other party. And this agreement was towards purchase of land from Shri Sitaraman/vendor in (AY 2011-12) Shri Vithaldas Madhusudan Agarwal respect of a property situated at Kavaripettai near Gummudipoondy total extent of agricultural land was ‘38’ cents [6 ½ grounds] and the guideline value of the property was Rs.19 lakhs for which land was registered. The AO noted that as per the agreement each cent was sold by Shri Sitaraman to assessee & his family at the rate of Rs.4,02,000/-. Hence, he computed the sale consideration at Rs.1,52,76,000/- towards purchase of ‘38’ cents of land which includes Rs.19 lakhs (guideline value). Thus, the AO was of the opinion that assessee has paid Rs.1,33,76,000/- as on- money for purchase of the said land. The AO thereafter reproduced the relevant portion of the statement recorded by the DDIT (Investigation), Unit-II (2), Chennai, from assessee, reproduced as under:

The assessee is noted to have clearly stated that property in question was purchased in his name as well as in the name of his wife and his father, which fact is evidenced from the agreement seized by the search team. In other words the property [land situated at Kaveripettai] (AY 2011-12) Shri Vithaldas Madhusudan Agarwal is co-owned/jointly-owned property, in the name of assessee, his father & his wife. And the AO noted that assessee has offered on-money payment of Rs.1,33,76,000/- during the search, but, has only admitted a sum of Rs.1,12,50,000/- in the revised-return filed after search, hence he was of the view the balance needs to be brought to tax i.e. Rs.21,26,000/-. The AO during assessment took note of the contents of the draft balance- sheet and P&L A/c disclosing Rs.1,12,50,000/- as his “income disclosed” arrived at assessee’s total income at Rs.1,14,79,170/. And he added the difference of Rs.21,26,000/- [between the income disclosed before the DDIT (Investigation), Unit-II (2), Chennai, and income admitted in the revised RoI filed].

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) and reiterated that he is the co-owner and purchased the property at Kavaripettai along with two others, which fact is also discernable from the reply given during search reproduced (supra); and asserted that he had only 40% stake/shareholding in the property in question; and therefore, the on-money given to vendor must be taxed proportionately in the hands of the other purchasers i.e. his father, Shri J. Vithaldas and his wife Smt. Lakshmi Agrawal. Further, according to assessee, even though he had stake/shareholding of only 40% in the property, he has offered to tax 80% of the share in on-money, i.e. Rs.1,12,50,000/-. And, since he has paid tax in excess of his share-holding in the property, the addition made (AY 2011-12) Shri Vithaldas Madhusudan Agarwal by AO of Rs Rs.21,26,000/- is un-justified, unreasonable and illegal. According to Ld AR, it is trite law that the income should be taxed in the right hand, right year, and right income; and accordingly, in the facts of the transaction in question, presumption would be that co-owners as per their respective share-holding [pro-rata] would have paid on-money to purchase the property; and hence, addition if any ought to have been taxed in their hands and not in in the hands of assessee. In this regard, we find that other than assessee, there were two (2) other purchasers for the property in question; which means it is co-owned and is jointly owned property by three parties, i.e. assessee, his father and his wife. In such an event, the right course for the AO was to tax the on-money in the hands of three parties (pro-rata) as per their interest in the property in question. And since the assessee has admitted holding 40% of the shareholding in the property, he should have been taxed pro-rata i.e. 40% of the on-money of Rs.1,33,76,000/- whereas it is noted that assessee has offered Rs.1,12,50,000/- which is more than 80% of the on- money given for purchase of the land. As rightly contended by the assessee, it is trite law that the income should be taxed in the right hand, right year, and right income. It is noted that even after, the relevant facts were clear that property in question was co-owned and a jointly held property, and that assessee has offered Rs.1,12,50,000/- out of Rs.1,33,76,000/- [i.e. 80% of on-money], only on the basis of the offer (AY 2011-12) Shri Vithaldas Madhusudan Agarwal given during search to disclose as undisclosed income Rs.1,33,76,000/,- difference of Rs.21,26,000/- couldn’t have been added in the hands of assessee, unless the AO was able to rebut the assertion and averment in the purchase deeds/agreement [seized during search] that the property was co-owned/jointly held. As such, in the facts and circumstance of the case, the addition on this issue if any should have been made in the hands of the co-owners and not in the hands of assessee. Therefore, the addition of Rs.21,26,000/- is directed to be deleted.

In the result, appeal filed by the assessee is allowed.