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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
These two appeals are filed by the assessee against the order of Ld. CIT(A) in quantum proceedings and penalty proceedings u/s 271(1)(c) of the Act. Since both the proceedings are related, the same are being heard together.
I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No. 2 Dr. Dilip S. Doctor vs. Dy. CIT ITA Number: 414/Ahd/2017
The assessee has taken the following grounds of appeal:
“1 The learned commissioner of income tax (appeals) has erred in law and on facts in confirming the enhancement of long capital gain on sale of immovable property on account of alleged “on money” received by the sister (power of attorney holder) of the appellant while carrying out the sale of the said property. 1.1 The learned commissioner of income tax (appeals) erred in law and on facts has further enhanced the above long term capital gain by holding that the appellant has one half share in the property CS No. 2216 as against one-third offered by the appellant and 11.48% assessed by the Assessing Officer and thereby the learned commissioner (appeals) has enhanced the assessment completed under section 143(3) of the I.T. Act.
2. The leaned commissioner of income tax (appeals) has erred in law and on facts in confirming the additions of Rs. 11,641/- on account of interest income from banks as per the arbitrary profit & loss A/c prepared by the Assessing Officer 3. The learned commissioner of income tax (appeals) has erred in law and on facts in confirming the additions of Rs. 3518/- on account of the credit entries in the bank accounts treating the same as unexplained cash deposit in the bank account.
4. The learned commissioner of income tax (appeals) officer has erred in law on facts in confirming the additions of Rs. 2,638/- on account of the alleged short term capital gain on mutual funds.
The appellant craves leave to add to alter, delete or modify any of the above grounds of appeals either before or at the time of hearing of this appeal.”
Grounds Numbers 1 and 2: Computation of Long Term Capital Gains:
The brief facts relating to these grounds of appeal
are that the assessee’s father purchased two properties 1961 in the name of the assessee I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No.
3. Dr. Dilip S. Doctor vs. Dy. CIT and his brother Harish Doctor (Zaveri), who at the time were minor children. After the death of the further, the aforesaid properties vested with both the sons in equal proportion as per the will of their Father. The aforesaid properties (two) were sold by the assessee and his brother, with his sister (Mrs Shaila Atul Patel acting as a power of attorney holder) vide sale deed dated 30-03-2010. In the assessment order, the AO computed capital gains in hands of assessee by showing sales consideration amounting to � 1,31,00,000/- in respect of the aforesaid properties (� 72.58 lakhs with respect to plot situated at CS number 2214, 11.48% of consideration of � 2.21 crores with respect to plot situated at CS number 2216 and 1/3rd share of on-money amounting to � 1.06 crores). While computing the capital gains tax on sale consideration received by the assessee, the AO also allocated a part of the sale consideration (to the sister of the assessee on account of her being the power attorney holder and considering the active role played with respect to the sale of the aforesaid properties).Accordingly, the AO computed the long-term capital gains in the hands of the assessee at � 90,60,256/- (after reducing the indexed cost of acquisition and brokerage expenses). However, in appellate proceedings, Ld. CIT(A) observed that as per the terms of the will of the Father, the property was to be divided only amongst the two brothers i.e. the assessee and his brother Dr. Harish Zaveri, and the allocation with respect to part of the sales consideration to the sister of the assessee by the Ld. Assessing Officer during the course of assessment proceedings was factually and legally incorrect in the instant set of facts. Accordingly, Ld. CIT(A) re-computed the long-term capital gains in the hands of the assessee and enhanced the sale consideration by holding that the sale consideration of the property CS number 2214 (amounting to � I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No.
4. Dr. Dilip S. Doctor vs. Dy. CIT 72.58 lakhs) belongs exclusively to the assessee, 50% of sale consideration with respect to property CS number 2216, amounting to � 2,21,45,000/- also belongs to the assessee and further the on-money received of � 1.06 crores and the corresponding brokerage expenses of � 7 lakhs were apportioned between the two brothers and the proportion of � 1,83,30,500/- and � 1,10,72,500/- between the assessee and his brother and long-term capital gains on the hand the assessee and his brother were re-computed accordingly. The relevant extracts of the order of Ld. CIT(A) is reproduced below for reference:
“7.2 The two properties were purchased in 1961 by Shri Shikharchand Zaveri inthe name of his two minor sons, Dilip and Harish and the purchase documents were signed by Shri Shikharchand Zaveri as parent of minors. Thus the actual and absolute owners of the property as per the document were Shri Dilip Zaveri and Shri Harish Zaveri. After the death of Shri Shikharchand Zaveri as per his will also, the ownership was vested with Shri Dilip Zaveri and Shri Harish Zaveri and there was no mention of any share or benefit of ownership in share of any kind given to Dr. Shaila Atul Patel. All the facts mentioned above suggest and go to prove that Dr. Shaila Atul Patel was never an actual or absolute owner of the properties or had any rights therein. 7.3 Dr. Shaila Patel never held the capital asset since she did not have any right over the properties. She does not figure as the owner of the properties in the sale deeds. Further, she does not have any interest in the properties and has not shown these properties as asset in her Balance Sheet of any of the years. As regards her claim that she had a right in the properties which was extinguished by her, this claim too is not acceptable. Further, if she had any rights at all in the properties as an absolute or beneficial owner, her name would have been there as a 'seller' in the sale deed and if she had any beneficial rights bestowed upon her by inheritance or any other means, she would have been a 'confirming party' in the sale deed. Dr. Shaila Patel has failed to produce any evidence of any family settlement and thus her share in the properties. Neither the property was of HUF. Accordingly, amount received by Dr. Shaila Atul Patel could not be treated as consideration received for the purpose of LTCG in her hands. This has been dealt in the separate assessment order and the separate appellate order in the case of Dr. Shaila Atul Patel.
I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No. 5 Dr. Dilip S. Doctor vs. Dy. CIT
7.4 Levy of income-tax on income under the head 'Profit & Gains arising from transfer of Capital Asset' applies to a person who is owner of the property which is subject matter of transfer and it is the owner (the person in whom the title invests) who only can transfer the property directly or through attorney. Accordingly, in the assessment order in the case of Dr. Shaila Patel, the AO is correct in holding that the capital gain tax will be leviable on transfer of properties CS No.2224 and CS No.2216 in the hands of Dr. Dilip S. Zaveri and Dr. Harish S. Zaveri strictly as per the Sale Deeds made by their father and as sold by them in the year under .consideration but the AO has gone wrong in the case of the appellant in treating only 3rd share of the appellant in combined two properties. 7.5 Also as per T. V. Sundaram lyengar & Sons Ltd. Vs. CIT 37ITR 26 (Madras), capitt gains tax is attracted the moment the assessee has acquired the right to receive the profits and it is not necessary that the assessee should have actually received the consideration. Section 45 creates a fiction for an item of an "artificial income" and the provisions related to capital gain have to be strictly applied. The essence is owner and seller of property who sells/transfers the property which leads to profits & gains. There is o requirement of section 45 that consideration of transfer should necessarily flow from the buyer (transferee) to the seller (transferor). Mere recognition of consideration or right to receive the consideration is enough. Under the circumstances, the sale consideration of the two properties (irrespective of the fact that Rs.98,01,000/- only was remitted by the purchaser and received by the appellant and Rs.98,01,000/- remitted to Dr. Shaila Patel and Rs.7,00,000/- paid to Shri Chandubhai Patel, the broker in the deal) the entire amount (the consideration received by cheque and the consideration admitted to have been received in cash) will go towards computation of capital gain in the hands of the owner of the properties i.e. Dr. Dilip S. Zaveri and Dr. Harish S. Zaveri. 7.6 Thus, in view of the position of law and facts of the case, both the appellant (and his Ld. AR) and the AO are found not correct in computation of LTCG on sale of two properties. As per the Income Tax provisions, the only treatment that is tenable in the case is that the sale consideration of the property CS No.2224 has to be considered entirely in the hands of Dr. Dilip S. Zaveri alone and the sale consideration of the property CS No.2216 has to be considered in the hands of Dr. Harish S. Zaveri and Dr. Dilip S. Zaveri in equal proportion that is 50-50. Thus out of the aggregate considerations as per the two sale deeds Rs.l,83,30,500/- (i.e. Rs.72,58,000/- plus 50% of Rs.2,21,45,000/-) is of Dr. Dilip S. Zaveri and Rs. 1,10,72,500 (i.e. 50% of Rs.2,21,45,000/-) is of Dr. Harish S. Zaveri and not Rs.98,01,000/- as being made out and offered to tax by each of them. In absence of any material to the contrary, only it will be appropriate that further consideration by way of on-money amount of Rs. 1,06,00,000/- and expense of the brokerage paid of Rs.7,00,000/- should be apportioned between the two brothers in the proportion of Rs.1,83,30,500/- and I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No. 6 Dr. Dilip S. Doctor vs. Dy. CIT
Rs.1,10,72,500/- between Dr. Dilip S. Zaveri and Dr. Harish S. Zaveri and the Long Term Capital Gains in the hands of Dr. Dilip S. Zaveri and Dr. Harish S. Zaveri should be computed accordingly. It is irrespective of and independent of the actual receipts by Dr. Dilip S. Zaveri, Dr. Harish , SL Zaveri and Dr. Shaila Atul Patel or anybody else.”
In addition to the above, Ld. CIT(A) also computed unexplained credits amounting to � 3,518/- in the hands of assessee, interest income of � 11,641/- and short-term capital gains on mutual funds amounting to � 2,638/- in the hands of assessee, with the following observations in the appellate order:
“8. Appeal of the appellant on, this ground fails and the income under the head Capital Gains will be enhanced as discussed in paragraph 7.6. The AO shall however adopt the correct figure (if any correction of figure required) but adhere to the principle laid at paragraph 7.6.
The AO obtained the details of bank accounts of the appellant with various banks - Citi Bank, Baroda, Bank of India, Alkapuri Branch and Bank of Baroda, Bank of India, Alkapuri Branch and discovered that the appellant had three FDR accounts with Bank of Baroda. Verification of bank statements revealed investment in Mutual Funds and Fixed Deposits in joint with his wife Smt. Dipika Dilip Doctor and receipt of redemption amounts and interest. In addition there were various cash/cheque receipts in these bank accounts and sources thereof, as per the AO, were not explained/substantiated. The transactions in these accounts were collated by the AO and the statements of Suspense Account and P & L Account were prepared by the AO and unexplained credits/deposits/receipts of the appellant were worked out for the purpose of computation of total income in the case. 9.1 The unexplained credits/deposits/receipts of the appellant worked out for the AY 2010-11 is Rs.3,518/-, interest income received is Rs,ll,641/-, dividend on mutual fund is Rs.99,205/- and STCG on Mutual Fund is Rs.2,638/- to be taxed at special rate) and they have been treated appropriately towards computation of total income of the appellant.
On the grounds of appeal related these additions - on account of interest income from banks, on account credit entries in the bank accounts and on account of Short Term Capital Gain (STCG) on mutual funds - common for other assessment years, the appellant submits that the bank entries appearing in the I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No. 7 Dr. Dilip S. Doctor vs. Dy. CIT
bank statements are only inter-bank transfers and under no circumstances can be treated as appellant's unexplained income. In this regard, bank statements have been furnished to show that the initial money is remittance from appellant's USA account made for meeting various expenses during his visit to India and for treatment of his mother Smt. Ramaben Shah staying in Baroda. In this regard, affidavit has been filed explaining the remittances for Assessment Years 2006-07, 2008-09, 2011-12 and 2013-14. Rs. 8.00 lakh for the Financial Year 2005-06 was remitted from USA account for the purpose of medical treatment of his mother. Rs. 2,90,125/- was remitted from USA account for medical treatment and other expenses of his mother in India in F.Y. 2007-08. Rs.1,87,301/-, Rs.65,320/-, Rs.10,03,157/- and Rs.1,18,000/- for the A.Ys. - 2006-07, 2008-09, 2011-12 and 2012-13 respectively are the interest incomes and dividends and taxed abroad. The Ld. AR has submitted the copy of affidavit received on his e-mail. It has been contended that no cash has been deposited in the bank accounts in India and there is no case of income to be taxed in India.”
5. The assessee is in appeal before us against the aforesaid additions confirmed by the Ld. CIT(A). In the instant case, we observe that despite a large number of opportunities, the assessee has not caused appearance before us to argue his case on merits. We observe that Ld. CIT(A) has after taking into consideration all the facts has passed a detailed and reasoned order, the relevant extracts of which have been reproduced above. The assessee has not produced any material or given any arguments to controvert any of the findings made by Ld. CIT(A). Accordingly, in our view, we find no infirmity in the order of Ld. CIT(A) and we accordingly dismissed the appeal of the assessee in light of the detailed order passed by Ld. CIT(A) considering the facts of the case.
In the result, the appeal of the assessee is dismissed.
ITA Number 1701/Ahd/2019 I.T(SS)A No. 414/Ahd/2017 & 1701/Ahd/2019 A.Y. 2010-11 Page No. 8 Dr. Dilip S. Doctor vs. Dy. CIT
The appeal of the assessee is against the penalty u/s 271(1)(c) of the Act imposed on the assessee in respect of the aforesaid additions.
The assessee has raised the following Grounds of Appeal:
“1. That on facts, and in law, the learned CIT(A)has grievously erred in confirming the levy of penalty of Rs.18,36,849/- u/s 271(1)(c) of the Act.
2. That on facts, and in law, the learned CIT (A) has grievously erred in giving directions vide para 9.1 of the order under appeal, to the AO to enhance the penalty while giving effect to the appellate order, without any initiation or recording of satisfaction by the learned CIT(A) in quantum proceedings.
3. The appellant craves liberty to add, alter, amend any ground of appeal.”
9. Since the appeal of the assessee in quantum proceedings has been dismissed, accordingly, this appeal of the assessee relating to penalty u/s 271(1)(c) of the Act is also dismissed accordingly.
10. In the combined result, both the appeals of the assessee are dismissed.