ITO 19(1)(2), MUMBAI vs. BAKIRHUSSAIN FAKHRUDDIN KANOREWALA, MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the STCG to be taken in the ratio of 74:26 in the hands of the A.Y. 2011-12 assessee and his wife respectively without remanding back the documentary evidence which was is in the possession of the Ld CIT(A) to the file of the Assessing Officer?", 2. "Whether on the facts and in the circumstances of the case in law, the Ld. CTT(A) erred in deleting the addition of Rs. 52,41,020/- out of addition made of Rs.56,11,020/- made by the assessing officer on account of purchase paid have not remanded back the matter to the file of the Assessing Officer which was in possessing of the Ld CIT(A) during appellate proceedings'", 3. "Whether on the facts and in the circumstances of the case in law, the Ld CIT(A) erred in deleting the addition of Rs.28,00,000/- out of addition made of Rs.28,00,000/- made by the assessing officer on account of sales consideration received have not remanded back the matter to the file of, the Assessing Officer which was in appellate possession of the Ld CIT(A) during proceedings?".

4. The appellant prays that the order of the Ld CTT(A) on the above ground be set side and that of the AO be restored,

5. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

3. The brief facts of the case are that the assessee filed his return of income on 29.09.2011 declaring a total income to the tune of Rs.4,92,385/-. The return was selected for scrutiny through CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. During the year under consideration, the assessee derived his income from business and profession, Capital Gain and income from other sources. The assessee is the proprietor of M/s. Bharat Electric & General Stores engaged in the business of trading in the electric & allied material. The assessee has shown sales to the tune of Rs.60,94,239/- and arrived at net profit to the tune of Rs.4,60,087/-. In the year under consideration, the assessee purchased the flat in ITA. No. 3375/M/2016 A.Y. 2011-12 consideration of Rs.53,30,000/- vide agreement dated 26.10.2010 in Krypton Tower, Wing-A. Thereafter, the assessee sold the said flat in sale consideration of Rs.60,00,000/-. The assessee was asked to submit the computation of capital gain & also source of funds from purchase of the said property. The assessee submitted the computation by virtue of letter dated 05.02.2014. Accordingly, the assessee has shown the consideration of Rs.44,10,000/- and purchased at cost of Rs.39,30,000/- and shown the capital gain to the tune of Rs.1,01,015/. After considering the reply, the short term capital gain was assessed to the tune of Rs.3,88,980/-. The computation of short term capital gain is hereby reproduced below.: - (i) Total Sale Consideration Rs.60,00,000/- Less: Purchase cost Rs.53,30,000/- Stamp Duty Paid Rs.2,50,000/- Registration Charge Rs.31,020/- Rs.56,11,020/- Short Term Capital Gain Rs.3,88,980/-

4. The assessee was asked to explain the source to purchase the said property which was not properly explained, therefore, an amount of Rs.56,11,020/- was treated as unexplained investment u/s 69C of the Act and added to the income of the assessee. On appraisal of the bank account of the assessee, it was noticed that the assessee received an amount of Rs.28,00,000/- from M/s. Krypton Corporation Bank, therefore, show cause notice in this regard given. However, the assessee explained about the amount as advanced money but the same A.Y. 2011-12 was treated as unexplained cash credit, therefore, an amount of Rs.28,00,000/- was added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs.92,79,360/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.

ISSUE NO. 1

ITA. No. 3375/M/2016 A.Y. 2011-12 6:2 ' During the appellate proceedings the appellant his submitted before me that the-flat sold on which capital gain has arisen was jointly owned by the assesse with his wife ln the. ratio of 74:26. Though the share is not clearly 'mentioned in the agreement entered with the builder, the agreement. Dated 36-10- 2010 clearly. mentioned that the appellant entered the agreement jointly with his wife Mrs Tasneem Bakir Hussain Kanorewala., The appellant submitted clear cut documentary, evidences for the consideration paid by him as well as his wife and the of his wife for A.Y.2011-12 wherein she has offered her share of capital gain income arising out of the sale of flat has to be divided and is to be taxed in the hands of both of them. Whereas, the AO has taken the full amount of capital gains income of Rs.3,88,980/- which is arrived in para 5.4.5 of page no. 5 of the assessment order, in the hands of the appellant only, which is not a correct proposition. Therefore, I direct the AO to calculate the share of the capital gain as per the ratio of investment in the said property ie. 74.26. However, on verification of the copies of the returns filed by the appellant as well as his wife and the computation of income enclosed, it is noticed that an amount of Rs.1,04,015/ was declared by the appellant as short term capital gain in his hands and an amount of Rs.1,75,985/- by his wife. The amounts declared in the returns are not in tune with proportion of investments i.e. 74.26. In view of the Rs.3,88,980/- in the hands of the appellant without considering the amount excess declared under the head short term capital gains in the hands of his wife in her return. With this direction the ground of appeal is decided treating the same as allowed.”

6. On appraisal of the above mentioned finding, we noticed that the flat was under the joint ownership of the assessee as well as his wife in the ratio of 74.26. The short term gains of Rs.3,88,980/- on the sale of flat was added in the hands of the assessee. The appellant had already been furnished the details of joint ownership on 05.02.2014. The sale agreement was furnished to the AO in which the share of the appellant was to the tune of Rs.44,24,015/- out of Rs.60,00,000/-. The A.Y. 2011-12 AO did not consider the material produced before him and wrongly added all the short term capital gains in the hand of the assessee. On appraisal of the documents on record, the CIT(A) has directed the AO to devide the short term capital gains between the assessee as well as his wife on the basis of ratio of ownership to the extent of 74% and 26%. It is not unjustifiable. The documents produced before the CIT(A) was already available before the AO but these documents were not taken into consideration. Taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the issue correctly and justifiably which is not liable to be interfere with at this appellate stage. Accordingly, we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue. ISSUE NO. 2 7. Under this issue the revenue has challenged the deletion of the addition of Rs.52,41,020/- out of addition made of Rs.56,11,020/- on account of purchase of the flat from Krypton towers in sum of Rs.56,11,020/-(including stamp duty and registration charges). Out of which the assessee paid a sum of Rs.42,11,020/- and the balance amount of Rs.14,00,000/- was paid by his wife Mrs.Tasneem Kanorewala in view of letter dated 05.02.2014. The Assessing Officer asked the source to purchase the said flat in sum of Rs.56,11,020/-. The explanation of the assessee is that he purchased the flat after the A.Y. 2011-12 sale of flat at Byculla in the month of April 2009 and remaining amounts was received from family members and others. The said contention was not accepted by the AO being not supported by documents and treated all the investment to the tune of Rs.56,11,020/- as unexplained and added to the income of the assessee. The CIT(A) after going through the documents relied by the assessee deleted the addition of Rs.52,41,020/- out of addition of Rs.56,11,020/-. It is necessary to go through the finding of the CIT(A) in which circumstances, the CIT(A) has deleted the addition to the extent of 52,41,020/-. The relevant paras of the decision of the CIT(A) are hereby reproduced below.:-

“8.4 I support of the first item i.e. sale consideration received from Byculla flat at Rs.30 lakhs by him and his wife utilized as source for acquisition of the flat, appellant furnished one 'agreement for safe' copy dated 16-04-2009 which contains the payment safe or the flat From toe Byculla flat sale proceeds an.amount of Rs 7.5 lakhs belongs to his wife and Rs 22.5 lakhs was his share which was by them for acquiring the 'Krypton Towers' property. The appellant also enclosed the copies of the returns filed for the year by him and his wife, declaring, the sale 'Byculla' flat under the head 'capital gains/loss. In view of the evidences produced the amount of Rs. 22.5 lakhs out of the amount of Rs. 42,11,020/- to acquire the-'Krypto Tower property', is treated as explained. 8.5 With regard to the amount of Rs.6.5 lakhs, the appellant submitted the details as under: - Name of the party Amt. Tough Electricals Rs.1,00,000 Yusuf Kanorewala Rs. 45,000 - A.Y. 2011-12 Murtaza Kanorewala Rs. 45,000 Zainab Kanorewala Rs.45,000 Hasanali Rs.90,000 Kanorewafa" Drawings from Rs.2,80,000 business As seen from the above Rs. One lakh was taken from one concern by name ‘Tough Electricals on 07.05.2009. The appellant furnished copies of the confirmation along with PAN of that concern. However, the appellant could not furnish the returns of income filed proofs of the concern or the capital account reflecting the amount of loan given to the appellant. In view of the same the amount received from M/s. Tough Electricals is not acceptable as genuine loan transaction. Apart from this loan, an amount of Rs.45,000 each from four persons was taken on 11.05. 2009 and Rs.90,000/- from one person was taken on 12.05.2009. From the names of the parties, it appears that all of them belongs to their family as the same surname appears is all of their names as in the name of the appellant. The appellant also furnished -confirmations in all the cases but failed to furnish the return copies in proof of their creditworthiness and identity except in two cases i.e. tarier Kanorewala and Yusuf kanorewala, in whose cases the appellant furnished copies of filing their returns for the last two years. However, on verification of the copies of the returns filed by them for the two years furnished along with the submissions filed on 25- 02-2016, it is noticed that the returns are filed on the same day i.e. on 16-12-2015- From this it is very clear that the appellant tried only to show these loan transactions genuine, the returns were filed during the ongoing proceedings. Apart from that, on verification of the bank account copy furnished in support of the loans it is also noticed that cash was paid just before issuing the cheque towards the loan amount. In view of the same, the confirmations filed for the loans taken from the six family members amounting to 2,70,000/- were also not acceptable as genuine loan transactions since the appellant failed to prove their creditworthiness and also they are having sufficient sources to give such loans. In view of the same, the addition to the extent of 2.70 lakhs also deserves to be A.Y. 2011-12 confirmed. Out of the 6.5 lakhs, balance amount of 2,80,000/- was shown as "drawings from the business". In support of the same, vide the-submissions Hated of his business concern .'Bharath Electric and General Stores'. On verification of account, it Is noticed there is sufficient balance in the account and as such the explanation given towards such withdrawal is acceptable. From the above discussion, it is concluded that out of the amount of 6.5 lakhs, addition made to the extent of f 3,70 lakhs is confirmed and the balance amount of 2.80 lakhs is deleted. 8.6 .With regard to the other amounts, an amount of Rs. 5,00,000/- is as advance on 08-01-2010 towards the sale of 'Krypton Flat'. An agreement of sale was registered On 30-12-2010 with one Mr. Ghadiali and his other family members, for sate of the that purchased from 'Krypton Construction with his wife. The agreement copy enclosed in the submissions containing the date wise -payments received from Ghadiali family starting from 08-04- 2010. to 28-12-2010 totaling to Rs.60,00,000/- The appellant received an amount of 7 5,00,000/- on 08-04-20 which is said to be used as the source for purchase of the flat. In view of the documentary evidence, produced, the amount of Rs 5 lakhs is treated as explained. '8.7 With regard to the other-amounts, an. amount of Rs. 5,30,000/- which is stated to be adjusted on 30-04-2010 towards the sale of electrical goods to 'Krypton Constructions Pvt Ltd'. In support of the same the appellant furnished a confirmation from the said concern containing the date wise safes on credit basis allowed to then and stated that 'the same amount is adjusted in purchase of flat. In view of the clear evidences and the confirmation the amount of Rs 5.30 lakhs, stands explained. 8.8 ' Remaining amount of Rs 2.50 lakhs paid towards stamp duty and Rs 31,020/- paid towards registration-charges, the same are met out of the amounts paid fry his Smt. Tasneem on his behalf. His wife being separately assessed to lax having taxable incomes, the explanation offered is accepted and no addition needs to be mad on this count. 8.9 From the above, out of the amount added by the AO of Rs.56,11,020/- AO on the ground that investment in Krypton Towers, his share of investment is only Rs.44,11,0207- and the Balance amount of Rs. 14 lakhs are treated as the share belongs to his wife. Out of the amount of Rs.44.11 lakhs. the appellant failed to explain the sources to the extent of Rs 3.70 and accordingly, the A.Y. 2011-12 same is confirmed and the balance amount is deleted, since the same was. explained with proper documentary evidences. Ground No. 3(a) is partly allow.”

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10. On appraisal of the above mentioned finding, we noticed that the CIT(A) has scrutinized the transaction. It is not in dispute that the flat was sold to Ghadiali Family for a consideration of Rs.60,00,000/- and the amount was received starting from 8th April 2010 to 28 Dec, 2010. The bank account, copy furnished also confirmed that such amount was received from them on sale of flats. The transaction has duly been reflected in the bank account and cheque numbers and short term capital gain on such transaction was offered. Therefore, no doubt in the said circumstances, the receipt of 28,00,000/- by the assessee has wrongly been added u/s 69C of the Act. The CIT(A) has rightly deleted the said addition on the basis of record and allowed the claim of the assessee. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has rightly allowed the claim of the assessee in accordance with law and the finding of the CIT(A) is not liable to be disturbed at this stage. In view of the said circumstances, A.Y. 2011-12 we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue.