DCIT, CEN. CIR-2, VADODARA vs. SHRI BANKIM V. PANDYA, VADODARA

These two appeals filed by the Department are against the order of the ld. CIT(A)-12 Ahmedabad. in Appeal nos. CIT(A)-12/242/CC 2/Baroda/15- 16 & CIT(A)-12/250/CC 2/Baroda/15-16 vide orders dated 22/02/2017 & 23/02/2017 passed for the assessment year 2013-14. Since common issues are involved in both the appeals and both appeals are arising out of additions made in respect of the same property held jointly by the appellants, we are disposing of both the appeals together.

Department has taken the following grounds of appeal:

Department has taken the following grounds of appeal:

We shall first discuss the case of Shri Bankim Pandya, which shall serve as the lead case, and the ratio thereof shall also apply the case of Shri Ketan Pandya, since the additions/issues are emanating out of additions made in respect of common property jointly held by the two assessees.

The brief facts of the case are that that the search was conducted on the assessee on 09-01-2013. Accordingly, the case was selected for scrutiny as per provisions of section 153B(2) of the Act and accordingly notice under section 143(2) of the Act was served upon the assessee on 11-11-2014. During the course of search proceedings, various incriminating documents were found from the residential premises of Shri Bankim Pandya /Ketan Pandya. As per the seized documents, the assessee, Shri Bankim Pandya along with his brother Ketan Pandya had purchased a land at Tandalja Village, Atladara. As per the copy of Banakhat obtained during search, the purchase price was finalised at � 9,52,54,515/-, out of which � 4,00,31,000/-was to be paid by way of cheque and the remaining amount of � 5,52,23,515/- was to be paid in cash as per the schedule mentioned in the Banakhat. The AO observed that as per the revenue records, the assessee Bankim Pandya and his brother Ketan Pandya purchased the above land by way of registered Banakhat dated 24-07-2012 for � 4,00,31,000/-. Subsequently, registered sale deed was entered between the assessee and the seller on 05-08-2012. The AO observed that it has not been disputed by the assessee that the possession of the land has been transferred in favour of the assessee at time of registration of sale deed. Thus, it is a reasonable presumption that the entire amount as mentioned in the registered sale deed (coupled with the fact that the assessee has not disputed that possession of the land was transferred to him and his brother at the time of registration of sale deed) supports the fact that the entire amount as mentioned in the registered sale deed of � 9,52,54,515/- (out of which � 4,00,31,000/- has been paid by way of cheque and balance amount of � 5,52,23,515/- is paid by cash) has already been paid at the time of registration of sale deed itself. Accordingly, the assessee was asked as to why sum of � 5,52,23,515/- should not be treated as unaccounted money of the assessee (and his brother), and the proportionate share in relation to the assessee and his brother be taxed in their respective hands.

In response, the assessee submitted that the above registered sale deed which has been referred to by the Ld. Assessing Officer has been recalled/cancelled for the reason that the assessee came to know that 40% of the land area was being considered by the State government for the development reservation by way of TP scheme dated 31-07-2012, and accordingly it was decided between the parties vide agreement dated 28-06- 2013, that since the assessee and his brother had paid a total amount of � 90,51,000/- (� � 30 lakhs by cheque and balance amount of 60.51 lakhs in cash) till such time the above TP scheme had come to be notified, only the proportionate amount of land in relation to total amount of � 90,51,000/- which had been paid thus far would be transferred to the assessee and his brother, and the seller would not press for any further amount from the assessee or his brother. This is also for the reason that the seller was not in a financial position to refund the amount of � 90,51,000/- which was received till date of TP notification to the assessee and his brother. The assessee submitted that the return deed was registered on 24-06-2013, as per which the assessee retained land of 2090 square metres (proportionate to the sum of Rs. 90,51,000/- paid to the seller) and the remaining land of 7420 square metres was returned back to the seller. Accordingly, no additional cash payment of � 5,52,23,515/- is made in cash by the assessee, since as per the terms of “return deed” referred to above, the assessee got possession only of the amount of land proportionate to � 90,51,000/- which was the only amount which was paid at the time of registration of sale deed and the balance amount of land was returned back to the seller (and no further payment was made over and beyond the amount mentioned above).

The AO, however was not convinced with the arguments of the assessee for the reason that date of passing of resolution of TP scheme for Tandalja village was 31-07-2012. The assessee, Bankim Pandya and his brother Ketan Pandya entered into a registered sale deed with the buyer on 05-08-2012 and possession of the land was transferred to the buyers. This means that at the time of signing of registered sale deed on 05-08-2012, both the assessee and the seller were well aware about the TP scheme and conditions of registered sale deed were drafted taking into consideration that the TP scheme would be implemented. The search operation was conducted at the premises of the assessee on 09-01-2013 in which the evidences regarding unexplained investment of the assessee were found. In the statement recorded on oath of the assessee dated 10-01-2013, during the post search proceedings, there was no mention of cancellation of sale deed or revising the terms of the agreement. The assessee thereafter entered into “return deed” with the seller on 24-06-2013, in terms of which land of 2090 square metres was retained by the assessee and his brother and the remainder land of 7420 square metres was returned back to the seller. Accordingly, the subsequent return agreement was only an afterthought to account for the unexplained cash paid by the assessee in respect of the above transaction amounting to � 5, 52,23,515/- at the time of entering of registered sale deed. Accordingly, the AO held the above sum of � 5, 52,23,515/- is the unaccounted investment made in the property, and added a sum of � 2,40,31,757/- in the hands of the assessee, in proportion to his share in the property.

In appeal, Ld. CIT(Appeals) in principle agreed with the Ld. Assessing Officer to the extent that the “cancellation return deed” dated 28- 06-2013 has been executed as an afterthought to avoid being taxed on the whole unaccounted cash of �5,52,23,515/-. He also agreed with the contention of the AO that there is no reason to believe that the appellant was not aware of the notified TP scheme on 31-07-2012 at the time of entering of sale deed. However, Ld. CIT(Appeals) was of the considered view that the when the Banakhat dated 05-08-2012 is giving a detailed schedule both of payment by cheque and payment by cash and also in the absence of categorical evidence of actual cash payments over and above the amount mentioned in the Banakhat referred to above, it is not possible to conclude in law that the purchasers (Bankim and Ketan Pandya) were in possession of or had made payments of amounts scheduled to be paid in cash after the date of search. Accordingly, Ld. CIT(Appeals) restricted the addition to cash payments totaling to � 140.23 lakhs which was scheduled to be made as per the registered Banakhat up to the date of search at the premises of the assessee on 09-01-2013. While passing the order, Ld. CIT(Appeals) made the following observations:

The Department is in appeal against the aforesaid order granting relief to the tune of � 1,70,20,257/- in respect of the proportionate share in the hands of the assessee, Bankim Pandya. Before us, the DR primarily relied upon the observations made by the assessing officer in the assessment order. He submitted that the circumstances clearly point to the fact that the assessee had paid cash amounting to � 5,52,23,515/- as mentioned in the assessment order at the time of possession of the land on the date of entering into the registered sale deed with the seller. In response, counsel for the assessee submitted that AO erred in making the addition by ignoring the fact that the original sale deed itself was cancelled by way of registered return deed and there is nothing on record to prove that unaccounted cash passed on to the seller after the date of search conducted on the assessee. The counsel for the assessee submitted that the registered sale deed itself contained details of cash payment (counsel for the assessee invited our attention to page 95 of the paper book), and there is no evidence with the Department to prove that any amount in cash was paid after the date of search. Accordingly, the additions made by the Ld. Assessing Officer are based only on presumptions.

We have heard the rival contentions and perused the material on record. We are in agreement with the observations of Ld. CIT (Appeals) that any additions made after the date of search on 09-01-2013 would be presumptuous, in absence of any tangible evidence with the Department that entire cash was paid by the assessee, at the time of entering into registered sale deed itself, when the original sale deed itself contains a schedule of cash payment. While we are in agreement with the observations made by the AO as well as Ld. CIT(Appeals) that the return deed subsequent to the date of search on 24-06-2013 seems to be an afterthought since no mention thereof was made at time of post search proceedings on 10-01-2013, however at the same time, it cannot be ignored that the original registered sale deed entered into between the assessee and the buyer contained a specific schedule of payment both by way of cheque and cash, and the Department has not been able to bring anything concrete to prove that the entire payment in cash as mentioned in the registered sale deed was made at the time of registration of sale deed itself i.e. entire cash payment was made prior to the scheduled date of cash payments as per the registered sale deed. We are in agreement with the view of the Ld. CIT(Appeals) that reasonably, unaccounted cash component should be restricted to scheduled cash payments (as per registered sale deed) which were supposed to be made up to such date when search was conducted at the premises of the assessee on 09-01-2013.

In the result, the appeal of the Department is dismissed.

As observed earlier, since the additions made in the hands of Bankim Pandya and Ketan Pandya are emanating out of additions made on account of unaccounted/unexplained cash in respect of same property jointly purchased by both of them together, the observations made in respect of Bankim Pandya would equally apply in case of the assessee (Ketan Pandya) as well.

In the result, for the reasons mentioned above, appeal of the Department is dismissed.

In the combined result, both the appeals filed by the Department are dismissed.