RAJAN SRINIVASAN HUF,BANGALORE vs. DCIT, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE

BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER

ITA No.470/Bang/2015 Assessment Year : 2006-07 Shri Rajan R. Srinivasan (HUF), The Deputy No. 2965, 4th Cross, Commissioner of Income 12th Main, HAL II Stage, Vs. Tax, Indiranagar, Circle – 7 (1), Bangalore – 560 008. Bangalore. PAN: AAJHR1684Q APPELLANT RESPONDENT Assessee by : Shri Narendra Sharma, Advocate Revenue by : Dr. P.V. Pradeep Kumar, Addl. CIT (DR) Date of hearing : 04.10.2018 Date of Pronouncement : 12.10.2018 O R D E R Per Shri A.K. Garodia, Accountant Member This appeal is filed by the assessee and the same is directed against the order of ld. CIT (A)-LTU, Bangalore dated 28.07.2014 for Assessment Year 2006- 07. 2. The grounds raised by the assessee are as under. “1. The order of the learned CIT (A) in so far as it is against the appellant is opposed to law, equity, and weight of evidence, probabilities, facts and circumstances of the case.

ITA No. 470/Bang/2015 Page 2 of 8 disallowance of Rs.83,63,315/- made by the learned assessing officer in respect of sale proceeds of agricultural land as receipts for other expenses other than the consideration for agricultural land which was sold by the appellant under the facts and circumstances of the case. 5. The learned authorities below failed to appreciate that the entire consideration received was only for the sale of agricultural land and no part of the same requires to be considered under the head 'other sources' as the entire amount is exempt from tax under the facts and circumstances of the case. 6. Without prejudice the learned authorities below are not justified in law in treating the entire amount of Rs. 83.63 lakhs as income from other sources as the said sum included the cost of registration and commission and the net consideration received was only to the extent of Rs. 81.04 Lakhs under the facts and circumstances of the case. 7. Without further prejudice the learned authorities are not justified in law and on facts in not reducing the amount attributable to agricultural land of Rs. 4,95,000/- from the sum of Rs. 83.63 Lakhs to arrive at the taxable income, and further considering the said amount of Rs. 4,95,000/- as consideration towards sale of agricultural land and again as income from other sources amounts to double addition under the facts and circumstances of the case. 8. Without prejudice to the right to seek waiver of interest the appellant denies itself to be liable for interest under section 234B and 234D of the Act under the facts and circumstances of the case. 9. The appellant craves leave to add, alter, modify, delete or substitute any or all of the grounds and to file a paper book at the time of hearing the appeal. 10. In view of the above and other grounds that may be taken at the time of the hearing the appeal, the appellant prays that the appeal be allowed in the interest of justice and equity.” 3. At the very outset it was submitted by ld. AR of assessee that this appeal is filed by the assessee after a delay of 108 days and the assessee has moved an application for condonation of this delay. He submitted that the delay is caused for the time consumed in seeking professional opinions as to whether the appeal should be filed before the Tribunal or not and further

ITA No. 470/Bang/2015 Page 3 of 8 because of this reason also that the assessee’s karta was a practicing professional who had to travel intensely in connection with the profession carried on by him and this has also caused some delay in filing of appeal. It was submitted that reliance has been placed on judgment of Hon’ble Apex Court rendered in the case of Collector, Land Acquisition Vs. MST. Katiji and Others as reported in 167 ITR 471. The ld. DR of revenue opposed the condonation of delay but in the facts of present case as discussed and by respectfully following this judgment of Hon’ble Apex Court, we condone the delay and admit the appeal. 4. Regarding the merit of the case, it was submitted by ld. AR of assessee that the copy of written submissions filed before CIT (A) is available on pages 1 to 5 of paper book and the same should be considered by Tribunal also for deciding the present appeal. He pointed out that case of the assessee is this that the assessee has received an amount of Rs. 83.63 Lakhs towards sale of agricultural land although as per the sale deed available on page nos. 6 to 16 of paper book, the sale consideration has been stated to be Rs. 4.95 Lakhs only. He also submitted that on page no. 35 of the paper book is letter of the buyer Shri P.H. Ramaswamy which is dated 23.12.2008 and in this letter, it has been stated by him that he has purchased agricultural land from the present assessee in November 2005 for a sum of Rs. 83.63 Lakhs and this sum was paid by telegraphic transfer directly by his daughter and son-in-law in America on two dates i.e. 22.09.2005 and 07.11.2005. He submitted that this certificate of the buyer was furnished before the AO as well as before the CIT(A) but both these authorities have not taken cognizance of the same. In this regard, he drawn our attention to Para no. 9 of the written submissions filed before CIT(A) as available in page no. 3 of the paper book. He submitted that the entire amount of Rs. 83.63 Lakhs should be accepted as sale proceeds of agricultural land and therefore, no addition is justified.

ITA No. 470/Bang/2015 Page 4 of 8 5. As against this, ld. DR of revenue supported the orders of authorities below. He also placed reliance on the following judicial pronouncements. a) CIT Vs. Balbir Singh Maini, [2017] 86 taxmann.com 94 (Supreme Court) b) Shagan Lal Vs. ITO, (2018) 89 taxmann.com 177 (Amritsar -Trib) c) CIT Vs. Jumramal Sons. (1986) 25 Taxman 242 (All) 6. He further submitted that reliance on these judicial pronouncements is made in support of his contention that the sale proceeds of agricultural land can only be to the extent of sale consideration noted in the sale deed and the extra amount received by the assessee cannot be accepted as sale consideration of agricultural land. 7. We have considered the rival submissions. We find that as per Para no. 9 of the written submissions filed by the assessee before CIT(A), it has been stated that the assessee has submitted the letter of buyer Shri P.H. Ramaswamy before the AO in which it has been stated by him that the sale consideration of Rs. 83.63 Lakhs is for the agricultural land and this copy of letter from the buyer was made available to the CIT(A) also. The decision of CIT(A) on this issue is available in Para nos. 7 to 7.3 of his order which are reproduced herein below for ready reference. “7. I have considered the AO's conclusions, the evidences available to her and the submissions of the appellant before me. The nature of the transferred land as being `agricultural' in character is undisputed. The central ground to be adjudicated, therefore, is whether the appellant received a consideration of Rs. 83.63 lakh or Rs. 4,95,000 as sale consideration for the agricultural land sale. Going strictly by law and the declarations made in a sale document registered before a statutory authority, being the Sub-Registrar, Hosur, the AO's conclusions are clearly supported. The receipt of consideration in the sale deed dt. 10.11.2005 is mentioned as being in cash and it has been attested in front of two witnesses. If the sale consideration is taken as Rs.83.63 lakhs as per the appellant's version both

ITA No. 470/Bang/2015 Page 5 of 8 the amount as well as the mode mentioned before a statutory authority and witnesses would have to be thrown aside as incorrect. This cannot be legally accepted, especially when the vendor and the purchaser have both made a statutory declaration under the Tamilnadu Stamp (Prevention of undervaluation of instruments) Rules, 1968 that the market value of the said land was Rs.8,78,976. To think that against this market value, a transaction would be affected at Rs.83.63 lakhs is to cross all bounds of credulity and legality. 7.1 The appellant has not made a categorical assertion that it had under-valued the transaction for any illegal or unethical purposes such as paying lower than mandated stamp duty, and has instead sought to push the responsibility on to the Sub-Registrar by stating that he refused to register the sale at Rs.83.63 lakhs. No evidence has been adduced for this claim. It is also improbable given that if the Sub-Registrar could permit a down ward variation (Rs.4,95,000) from the prevailing market price (Rs.8,78,976) as the sale consideration to be registered there was nothing to prevent an upward variation (Rs.83.63 lakh). In fact, registering the property at Rs.83.63 lakh would've fetched much higher revenue for the state government which cannot conceivably have been prevented by any lawfully inclined Sub Registrar. 7.2 The appellant has claimed that the AO's conclusions are not founded on the rational behavioral expectations from Ramaswamy. The issue of rationality or otherwise of Sri Ramaswamy is not to be adjudicated by me in this appeal. As mentioned, the conduct of Sri Ramaswamy in declaring lawfully in a statutorily appropriate manner about the giving of Rs.4,95,000 in cash as per the registered sale deed signed by him in front of witnesses and a statutory authority (akin to the rationality of the appellant) is legally validated and I have no ground to question the same. As to why Sri Ramaswamy preferred to speak in a forked tongue in a later "Confirmation" given for the purpose of income tax assessment of the appellant is for him to explain, which has not been done before me. Considering the entirety of facts, therefore, I hold that the appellant's claim is not legally credible and I find no reason to differ with the AO's conclusions

ITA No. 470/Bang/2015 Page 6 of 8 7.3 Even on facts, the AO's conclusion that the amount of Rs.83.63 lakhs was received for purposes other than land sale consideration is borne out from the extract of the agreement between Clover Estates and P.H. Ramaswamy reproduced at Para 4 supra. The recital does not state that the sum of Rs.83.63 lakhs represents consideration for land sale. It is only described as a consideration for the "development of the infrastructure" in Para 2 and in Para 3 clarifies that only "a portion of this amount" was meant for purchase of the agricultural unit. Since the portion has not been specified and the consideration is already found to have been paid in cash attested by two witnesses as recorded in the registered sale deed, the AO has correctly concluded that the entire impugned amount was received through telegraphic transfer for purposes other than land sale. Once this is accepted, it is difficult to accept the appellant's ground no.6 that the AO should have reduced the amount attributable to agricultural land sale of Rs.4,95,000 from the amount of Rs.83.63 lakhs. The matter raised in ground no. 5 that the net consideration received was only Rs 81.04 lakh, after deducting commission and registration cost, also cannot be accepted for the very same reason. In ground no. 7 it is contended that the cost incurred in earning the income from other sources should have been allowed by the AO. The details of these expenses with evidence, however, has not been furnished and, hence, the ground cannot stand. These grounds, therefore, are dismissed and the AO's conclusion in the matter is affirmed.” 8. From the above paras reproduced from the order of CIT (A), it is seen that this certificate from the buyer is considered and examined by CIT(A) and decision of CIT(A) is after considering this aspect of the matter. In fact, ld. CIT(A) has referred to the extract of agreement between the Clover Estates Pvt. Ltd. and P.H. Ramaswamy reproduced in Para no. 4 of his order and a categorical finding has been given that as per Para 2 of this agreement, it has been clarified that only portion of this amount will go towards the cost of purchase of the agricultural unit but since the portion has not been specified and

ITA No. 470/Bang/2015 Page 7 of 8 the buyer already paid cash as recorded in the registered sale deed, the entire amount of Rs. 83.63 Lakhs has been considered in addition to Rs. 4.95 Lakhs. 9. In Para 13 of the written submissions filed before CIT (A) as available on pages 3 & 4 of the paper book, reliance has been placed on a judgment of Hon’ble apex court rendered in the case of E. D. Sassoon & Co. vs. CIT, 26 ITR 27. We find that this judgment is not applicable in the facts of the present case because the dispute & facts in that case were different. In that case, the assessee company was managing agents of a company and the commission was payable at the end of the year but managing agency rights were transferred during the year and this was the dispute as to whether the managing agency commission up to the date of transfer accrued in the hands of the assessee and the assessee was liable to pay tax on that. It was held that where managing agency rights have been transferred by managing agents to another company during the accounting year, the whole of the agency commission is liable to be taxed in the hands of the assignee-company as right to receive the commission in terms of the agreement accrues only at the end of the accounting year. 10. Hence, this judgment does not help the case of the assessee and in view of this categorical finding of CIT (A) that this receipt of Rs. 83.63 Lakhs is not on account of sale of agricultural land and since the ld. AR of assessee could not controvert this categorical finding of CIT (A), we hold that no interfere is called for in the order of CIT (A). 11. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on the date mentioned on the caption page.

Sd/- Sd/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) Judicial Member Accountant Member Bangalore, Dated, the 12th October, 2018. /MS/

ITA No. 470/Bang/2015 Page 8 of 8 Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file

By order

Assistant Registrar, Income Tax Appellate Tribunal, Bangalore.