DCIT, CHENNAI vs. MS. A.P. SANDHYA, CHENNAI

आदेश / O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

These two appeals filed by the Revenue are directed separate, but

identical orders of the Commissioner of Income Tax (Appeals)-2, Chennai,

both dated 29.06.2016 and pertains to AY 2011-12. Since, the facts are

identical and issues are common, for the sake of convenient, these appeals

are heard together and are being disposed off, by this consolidated order.

No.2735/Chny/2016:

ITA Nos. 2735 & 2726 /Chny/2016 :: 3 ::

amount to actual receipt of sums, unless proved otherwise by means of Account payee cheques etc. 6. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the ld.CIT(A) may be set-aside, and that of the Assessing Officer is restored. 3. The brief facts of the case are that the assessee M/s.A P Sridhar (HUF)

filed its return of income for the AY 2011-12 on 02.02.2012 declaring total

income of Rs.3,83,91,594/-. The case was taken up for scrutiny and during

the course of assessment proceedings, it was noticed that the assessee has

computed long term capital gains from sale of property at Burkit Road, T.

Nagar, Chennai, and claimed that it has received a sale consideration of

Rs.7,61,82,000/-. The assessee has claimed indexed cost of acquisition

and indexed cost of improvement and declared net capital gain from

transfer of property at Rs.6,87,87,600/-. Further, assessee has claimed

exemption u/s.54 of the Income Tax Act, 1961 at Rs.2,53,96,006/- for

purchase of residential flat and also claimed exemption u/s.54EC of the Act

for Rs.50 lakhs in respect of investment in M/s.Rural Electrification

Corporation Ltd. (in short “REC") Bonds and finally declared long term

capital gains of Rs.3,83,91,594/-. During the course of assessment

proceedings, the AO called upon the assessee to file necessary evidences,

including copy of Sale Deed, details of investment in new residential flat

and also proof for investment in REC Bonds to claim exemption u/s.54EC

of the Act. In response, the assessee has filed the details called for by the

AO, including copy of Sale Deed, proof of investment in new residential

house property and also proof of investment in REC Bonds for claiming

exemption u/ss.54 & 54EC of the Act. The assessee further contended that

ITA Nos. 2735 & 2726 /Chny/2016 :: 4 ::

though, it had sold the property for a consideration of Rs.7,61,82,000/- but

to pay lesser stamp duty on the sale transaction, the consideration has

been shown at Rs.2.50 Crs. and the balance amount of Rs.5,11,82,000/-

has been received in cash. The assessee further contended that the sale

proceeds of property have been distributed among the members of HUF as

per their share and accordingly, computed long term capital gains from sale

of property.

by the assessee and according to the AO, though assessee’s claims to have

received sale consideration of Rs.7,61,82,000/- from the buyer, but

documentary evidence clearly shows that the property has been sold for a

consideration of Rs.2.50 Crs. Therefore, the AO opined that claim of the

assessee that the balance amount of Rs.5,11,82,000/- was received in cash

and the same has been distributed among the members of HUF, cannot be

accepted. The AO had discussed the issue in light of various evidences filed

by the assessee, including statement recorded from Mr.A.Kuberan,

purchaser of the property by the DDIT (I & CI)-II, Chennai, as per which,

the purchaser had categorically denied payment of consideration in cash

over and above what was specified in the Sale Deed. Therefore, the AO

opined that claim of the assessee that it has received sale consideration of

Rs.7,61,82,000/- is incorrect and accordingly, re-computed the long term

capital gains derived from the sale of property by taking into account sale

consideration as per Sale Deed dated 01.04.2010 at Rs.2.50 Crs and has

ITA Nos. 2735 & 2726 /Chny/2016 :: 5 ::

further allowed indexed cost of acquisition and improvement of

Rs.73,94,400/- and arrived at long term capital gains at Rs.1,76,05,600/-.

In so far as deduction claimed u/s.54 & 54EC of the Act, the AO has denied

the exemption claimed by the assessee on two grounds by observing that

the assessee has not made total consideration received from transfer of

property on or before due date for filing of return of income u/s.139(1) to

be eligible for claiming exemption u/s.54 of the Act. The AO had also

rejected the claim on the ground that the assessee (HUF) was having one

property and after sale of said property, the partition of HUF taken place

and further, after distribution of sale proceeds among the members of HUF,

ceased to exist and thus, investment made by the assessee for purchase of

another residential property in the name of M/s. A P Sridhar (HUF), is not

eligible for claiming exemption u/s.54 of the Act. The AO had also denied

deduction claimed u/s.54EC of the Act for Rs.50 lakhs on the ground that

the assessee has made investments in REC Bonds beyond stipulated period

of six months from the end of the month, in which, asset has been sold and

thus, opined that the assessee is not entitled for deduction u/s.54EC of the

Act. In so far as consideration received in cash amounting to

Rs.5,11,82,000/-, the AO after taking into consideration, the copy of Sale

Deed dated 01.04.2010 filed by the assessee, which shows payment of sale

consideration of Rs.2.50 Crs. and also statement of Mr.A.Kuberan,

purchaser of the property, opined that consideration received in cash of

Rs.5,11,82,000/- claims to have received towards sale of property, cannot

ITA Nos. 2735 & 2726 /Chny/2016 :: 6 ::

be accepted in view of specific evidences, which suggest payment of

consideration by cheque only at Rs.2.50 Crs. Therefore, rejected the

arguments of the assessee and made addition of Rs.5,11,82,000/- under

the head ‘income from unexplained sources’.

5 Being aggrieved by the Assessment Order, the assessee preferred an

appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee reiterated

its arguments before the AO in light of various evidences including copy of

final partition deed executed among the members of HUF to distribute sale

proceeds of property and argued that it has received sale consideration of

Rs.7,61,82,000/- and further, the same has been received in cash and

cheque. The assessee, further, contended that except one immovable

property at Burkit Road, T. Nagar, Chennai, the HUF does not own any

other property and nor carried out any business to generate such a huge

cash. Therefore, the AO is incorrect in coming to the conclusion that,

income declared under the head ‘long term capital gains’ is an income from

unexplained sources. The assessee had also challenged the disallowance

of exemption claimed u/s.54 of the Act and also Sec.54EC of the Act

towards payment made for purchase of another residential flat and

investment made in REC Bonds.

also taken note of various facts, deleted the addition made by the AO

towards income from unexplained sources amounting to Rs.5,11,82,000/-

by holding that although, the registered document shows payment of

ITA Nos. 2735 & 2726 /Chny/2016 :: 7 ::

consideration of Rs.2.50 Crs. only, but other circumstantial evidences

including location of the property and the Fair Market Value as on the date

of sale, clearly indicate that the claim of the assessee that it has sold the

property for consideration of Rs.7,61,82,000/- appears to be correct and

acceptable. Therefore, rejected the reasons given by the AO and directed

the AO to adopt sale consideration of Rs.7,61,82,000/- for computation of

long term capital gains derived from transfer of property. As regards,

disallowance of deduction u/s.54 of the Act towards re-investment of sale

consideration in another residential flat, the Ld.CIT(A) rejected the

arguments of the assessee and sustained the additions made by the AO by

observing that once final partition of HUF took place, the HUF ceased to

exist and thus, post distribution of assets among the members, the

question of existence of HUF, cannot be considered. Accordingly,

investment made by the assessee in another residential house property

cannot be treated as investment made by the HUF. Because, the moment

partition took place, status of HUF ceased to exist and the smaller HUF is

formed. The Ld.CIT(A) had also rejected the arguments of the assessee on

the ground that the new property has been purchased in the name of M/s.A

P Sridhar, and accordingly, rejected the arguments of the assessee and

sustained the additions made by the AO towards exemption claimed u/s.54

of the Act. In so far as deduction claimed u/s.54EC of the Act in respect of

investment made in REC Bonds, the Ld.CIT(A) has sustained the additions

made by the AO by holding that the investment made by the assessee on

ITA Nos. 2735 & 2726 /Chny/2016 :: 8 ::

31.03.2011 is beyond stipulated period of six months which expires on

30.09.2010 and thus, the assessee is not entitled for exemption u/s.54EC

of the Act. Aggrieved by the Ld.CIT(A), the Revenue is in appeal before

us.

appeal is computation of long term capital gains from transfer of property.

The Ld.DR submitted that the Ld.CIT(A) erred in directing the AO to

compute long term capital gains by adopting sale consideration of

Rs.7,61,82,000/- without appreciating the fact that the documentary

evidence including the copy of Sale Deed executed for sale of property

clearly shows that, the purchaser has paid consideration of Rs.2.50 Crs

only. The Ld.DR, further, submitted that the Ld.CIT(A) failed to appreciate

the fact that the Mr.A.Kuberan, purchaser of the property clearly denied

having paid cash consideration for purchase of property in the sworn

statement recorded u/s.131 dated 20.01.2014 by the DDIT (I & CI)-II,

Chennai, which clearly shows that the assessee has received sale

consideration of Rs.2.5 Crs. only. The Ld.DR further submitted that the

Ld.CIT(A) erred in allowing the claim of the assessee that cash credits

represent the sale consideration of the property received in cash and

therefore, to be treated as sale consideration for long term capital gains in

the hands of the HUF without appreciating the fact that the cash portion of

consideration, was not deposited in the HUF bank account, instead the

ITA Nos. 2735 & 2726 /Chny/2016 :: 9 ::

same was deposited in co-parcener bank account after a gap of six months

and the same cannot be telescoped against the sale consideration.

of the Ld.CIT(A), submitted that except a piece of immovable property at

Burkit Road, T. Nagar, Chennai, the assessee does not own any other

property or carried out any business to generate such a huge cash to be

treated as unexplained income and thus, the Ld.CIT(A) has rightly held that

the claim of the assessee that it has received sale consideration of

Rs.7,61,82,000/- to be accepted. The Ld.AR further submitted that the

assessee itself has voluntarily offered sale consideration of

Rs.7,61,82,000/- and computed long term capital gains after claiming

certain deductions. Therefore, it is incorrect on the part of the AO to allege

that the consideration received for transfer of property is income from

unexplained source, that too without any evidence to prove that the

assessee is having income from undisclosed sources. The Ld.CIT(A) after

considering necessary facts has rightly deleted the addition made by the

AO and his order should be upheld.

record and gone through orders of the authorities below. The facts borne

out from records indicate that the HUF had owned one property at Burkit

Road, T. Nagar, Chennai, which is evident from the fact that the assessee

(HUF) was disclosing rental income from the said property in the return of

income filed for earlier years. It was also admitted fact that except rental

ITA Nos. 2735 & 2726 /Chny/2016 :: 10 ::

income, the HUF does not have any source of income. Therefore, to decide

the issue whether cash consideration claims to have been received for

transfer of property or income from undisclosed source, one has to keep in

mind evidences filed by the assessee including the return of income for the

earlier assessment years. Admittedly, the assessee itself has considered

Rs.7,61,82,000/- sale consideration for computing long term capital gains.

The AO rejected arguments of the assessee that it has received Rs.5.11

Crs. consideration in cash mainly on two grounds. The first and foremost

reason given by the AO to reject the arguments of the assessee is Sale

Deed executed by the assessee for transfer of property. As per the

registered Sale Deed dated 01.04.2010, the consideration was shown at

Rs.2.50 Crs. and the same has been paid by cheque & DD. The second

reason given by the AO to reject claim of the assessee is that the buyer of

the property Mr.A.Kuberan has denied payment of cash consideration as

claimed by the assessee in the statement recorded by the DDIT (I & CI)-

II, Chennai. Therefore, the AO came to the conclusion that cash

consideration of Rs.5,11,82,000/- claimed by the assessee is nothing but

income from unexplained source.

the AO in light of arguments advanced by the assessee and we ourselves

do not subscribe to the reason given by the AO for the simple reason that

the assessee (HUF) does not own any other property except the property

sold during the impugned assessment year. Further, the assessee neither

ITA Nos. 2735 & 2726 /Chny/2016 :: 11 ::

carried out any business activity nor generated any other income from

other sources. Therefore, in the absence of any business activity which

generates undisclosed income, it cannot be alleged that the assessee has

generated income from unexplained sources. No doubt, when assessee

claims something, which is the duty of the assessee to justify its claim with

necessary evidence. Unless assessee substantiated its claim with necessary

evidences, then, the AO can infer otherwise but such inference should be

based on circumstantial evidences. In this case, the assessee claims that

it has received sale consideration in cash amounting to Rs.5,11,82,000/-

from transfer of property which is although not supported by documentary

evidences, but circumstantial evidences clearly show that there is every

possibility of generating income from that source. Therefore, when the

assessee has claimed that it has received sale consideration in cash for

transfer of property, it is for the AO to disprove the claim of the assessee

with cogent reason and sufficient evidences. In this case, the AO has

simply gone on the basis of Sale Deed executed by the assessee and also

statement of the buyer of the property. It is accepted but not admitted

fact that there is a vast difference between guideline value of the property

and market value of the property and the guideline value of the property

not necessarily be Fair Market Value of the property. In the present case,

consideration shown in the Sale Deed is more or less equivalent to guideline

value of the property fixed by the Stamp Duty Authority as on the date of

sale. Therefore, if you consider the arguments of the assessee in light of

ITA Nos. 2735 & 2726 /Chny/2016 :: 12 ::

prevailing fact that there will be a difference between guideline value of the

property and Fair Market Value of the property, then, the claim of the

assessee that it has received cash consideration of Rs.5,11,82,000/- cannot

be doubted, more particularly if you consider the location of the property.

Therefore, we are of the considered view that there is no error in the

reasons given by the Ld.CIT(A) to accept the arguments of the assessee

that it has received sale consideration of Rs.7,61,82,000/- for sale of

property, even though, the Sale Deed shown only Rs.2.50 Crs. and also the

buyer has denied having paid any cash consideration. Hence, we are

inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken

by the Revenue.

No.2735/Chny/2016 is dismissed.

No.2726/Chny/2016:

ITA Nos. 2735 & 2726 /Chny/2016 :: 13 ::

and issues which we had considered in ITA No.2735/Chny/2016 for the

assessment year 2011-12 in the case of M/s. A P Sridhar (HUF). The

assessee had deposited cash into her bank account and explained that

source for cash deposit was out of distribution of assets by M/s. A P Sridhar

(HUF) from sale consideration received for sale of property. The AO has

not accepted the claim of M/s. A P Sridhar (HUF) and accordingly, excess

consideration over and above what was shown in the Sale Deed has been

treated as income from unexplained source in the hands of M/s. A P Sridhar

(HUF). Similarly, in the present case, the AO has not accepted the

explanation of the assessee that source for cash deposit was out of

distribution of assets by HUF and accordingly, the AO assessed the total

value of the assets as on 31.03.2011 minus income declared by the

assessee for the assessment year 2011-12 as income from unexplained

sources. We find that an identical issue had been considered by us in the

case of M/s. A P Sridhar (HUF) in ITA No.2735/Chny/2016, wherein, we

ITA Nos. 2735 & 2726 /Chny/2016 :: 14 ::

had accepted the claim of the assessee that it has received sale

consideration of Rs.7,61,82,000/- from sale of property owned by HUF and

further, the assets have been distributed among the members of HUF upon

final partition. We, further, noted that as per the financial statement of

HUF final partition filed by the assessee which has been re-produced at Para

No.7 of Ld.CIT(A)’s order, the assessee, M/s. A P Sandhya had received a

sum of Rs.2,36,00,000/- from M/s. A P Sridhar (HUF) upon distribution of

assets. Therefore, once it has been accepted that M/s. A P Sridhar (HUF)

has received sale consideration of Rs.7,61,82,000/- from sale of property,

then the claim of the assessee that it has distributed assets of HUF upon

final partition to its members also needs to be accepted. If the distribution

of assets of HUF among members is accepted, then the present assessee

Ms.A.P.Sandhya had received a sum of Rs.2,36,00,000/- from M/s. A P

Sridhar (HUF) which includes cash deposit with Canara Bank amounting to

Rs.2,10,50,000/-, Post office deposit of Rs.9 lakhs and investment in LIC

amounting to Rs.16,50,000/-. The Ld.CIT(A) after taking into consideration

various facts has given categorical findings that the source for cash deposit

into assessee’s bank account is out of distribution of assets by HUF and

thus, there is no reason to the AO to disbelieve the claim of the assessee

that the source for cash deposit is out of amount received from HUF. We

find that the reasons given by the Ld.CIT(A) to delete the addition made

by the AO, cannot be faulted, because the Revenue has failed to bring on

record any evidences to counter the findings of the facts recorded by the

ITA Nos. 2735 & 2726 /Chny/2016 :: 15 ::

Ld.CIT(A). Hence, we are inclined to uphold the findings of the Ld.CIT(A)

and dismiss the appeal filed by the Revenue.

No.2726/Chny/2016 is dismissed.

No.2735/Chny/2016 & ITA No.2726/Chny/2016 are dismissed.

Order pronounced on the 23rd day of February, 2022, in Chennai. Sd/- Sd/- (जी. मंजूनाथा) (महावीर िसंह) (G. MANJUNATHA) (MAHAVIR SINGH) उपा�� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER

चे�ई/Chennai, �दनांक/Dated: 23rd February, 2022. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय �ितिनिध/DR 3. आयकर आयु� (अपील)/CIT(A) 6. गाड� फाईल/GF