RANI GOPE ARTWANI,THANE vs. ITO WD 3(4), KALYAN

The assessee has raised two inter-connected issue without prejudice to each other. The first issue raised is whether the sale consideration received by the partnership firm will be assessed in the hand of firm or the assessee partner in the given facts and circumstances of the case. For this assessee has raised the following ground No. 1: -

Briefly stated facts are that the assessee filed its return of income for the relevant AY 2011-12 on 16.12.2011. The assessee derives income from business and other sources. The assessee is one of the partner of the firm M/s Shiv Shakti Builders and Developers having 8.33 % share in the profit and loss of the firm. The firm M/s Shiv Shakti Builders and Developers vide registered agreement dated 24.12.2010 sold and transferred commercial premises admeasuring 3066 sq. ft. on the first floor of the building Shiv Shakti complex plot No. U-99, Sheet No. 47, Ulhasnagar-2 to the Thane District Central Co-op. Bank Ltd. for a total consideration of ₹ 2,42,21,400/-. This agreement to sale dated 24.12.2010 has been executed on behalf of the partnership firm of M/s Shiv Shakti Builders and Developers through the two partners i.e. Shri Anil Pritamdas Hotchandani & Smt. Rani Gope Artwani, the assessee. The AO received information through AIR that the assessee along with Anil Hotchandani have sold certain immovable property for consideration of ₹ 2,42,21,400/-. The AO assuming the share of the assessee in the sale consideration at 50%, made addition for a sum of ₹ 1,21,10,700/- to the return income of the assessee by observing in Para 3.3. as under : - “3.3 Thus, on perusal of record, and submission, it is found that (i) there has been sale of property and the assessee has not been able to prove that the income, on account of such sale, has been offered in the hands of the firm where she claimed to be partner, in spite of the fact that she has been afforded sufficient and valid opportunities to prove her point. She has not been able to furnish the copies of return of income in the case of firm where she claims to be partner, offering the income on sale of property. This, itself, proves the fact that the firm where the assessee is said to be partner has failed to furnish the return of income for the year under consideration in support of the contention that the property in question is owned by the firm and income on account of sale of property has been offered for taxation in the hands of firm: It is pertinent to point out here that summons under section 131 of the income Tax Act, were also issued 14-02-2014 and served on the firm an another partner, Shri Anil P. Hotchandani on 17-02-2014. However, no - one attended till date and complied, with the requirements. Further, the assessee has not furnished the details of investment, i.e., copy of capital a/c as appearing in the books of 1 account of the firm. She has also not filed the copy of capital a/c and balance sheet with the return of income & to prove the fact that she has been partner in the said firm. There is no mention of being her partner in firm is made in return of income. She has also not offered any remuneration, interest on capital invested in firm and share of profit from the firm. Hence, the assessee’s explanation in this regard is not satisfactory and her contention is unaccepted. Hence the assessee is treated -as owner of the property sold and income on sale of property is assessed in her hands. Thus, an amount of Rs.1,21,10,700/-, being 50% of the sale consideration of Rs. 2,42,21,400/- is added to the income of the assessee under section 69A of the Income tax Act, 1961. Penalty proceedings u/s 271(1)(c) are initiated separately for concealing the particulars of income.”

The CIT(A) also confirmed the action of the AO by stating that the assessee has not been able to establish with documentary evidences that the said firm existed during the year under consideration. Therefore, in the absence of documentary evidences, according to CIT(A), the AO has rightly held that 50% of the property belongs to the assessee Smt. Rani Gope Artwani but the assessee before CIT(A) produced the following documents, which was recorded by CIT(A) in his order in Para 7 reads as under: - “1) Copy of the partnership deed dated 19.12.2000 2) Sale agreement dated 24.12.2010.

Before us, the learned Counsel for the assessee took us through the details of documents submitted before the AO and before CIT(A). The assessee before the AO contended that the assessee is only partner in the partnership firm of M/s Shiv Shakti Builders and Developers and for this he produced partnership deed dated 19.12.2000 of the partnership firm M/s Shiv Shakti Builders and Developer where assessee is one of the partner. The assessee drew our attention to pages 33 to 40 of the assessee’s paper book wherein the partnership deed is enclosed and the details of the partners are enclosed at Para 9 of the deed which reads as under: - “9. That the net profit and losses shall be divided by the partners in the following shares:

The learned Counsel for the assessee also drew our attention to the statement account of Canara Bank of the firm wherein the entire sale consideration of ₹ 2,41,21,400/- is deposited except a sum of ₹ 25 lacs which is retained by the purchaser as occupation certificate was not received as on the date of agreement. The learned Counsel for the assessee also drew our attention to the agreement entered into by assessee, which is enclosed at pages 5 to 18 of the assessee’s paper book which is between the partnership firm M/s Shiv Shakti Builders and Developers through the partners namely Anil P Hotchandani & Rani Gopelal Artwani, the assessee and the Thane District Central Co-op. Bank Ltd. the relevant clause of the agreement reads as under:-

In view of the above facts the learned Counsel for the assessee stated that the assessee is only in partnership firm M/s Shiv Shakti Builders and Developers and sale of property by the firm Shiv Shakti Builders and Developers, the sale consideration received cannot be assessed in the hands of the partner.

On the other hand, the learned Sr. Departmental Representative relied on the assessment order and the order of CIT(A). He only urged that the Tribunal can give direction for reopening of assessment of the firm in case addition is deleted.

We have heard the rival contentions and gone through the facts and circumstances of the case. We have gone through the facts narrated above by the learned Counsel for the assessee which are undisputed. Admittedly, the property is sold by the firm M/s Shiv Shakti Builders and Developers for a total consideration of ₹ 2,42,21,400/- but through the partners namely Anil P Hotchandani & Rani Gopelal Artwani, the assessee. But these two partners only executed the sale in favour of the Thane District Central Co-op. Bank Ltd. It means that the assessee is nowhere owner of the property, she being a partner has executed the sale deed. During the assessment proceedings and even during first appellate proceedings the assessee has produced registered agreement dated 24.12.2010 and the bank account of the assessee firm maintained with the Canara Bank which clearly evidence that the entire sale consideration is received by the firm and not the partners. Even the registered agreement clearly states that the assessee being a partner as only facilitated the sale transaction. The assessee is only partner in the firm Shiv Shakti Builders and Developers and that the income from the sale consideration of the said commercial premises to the Thane District Central Co-op. Bank Ltd. arises in the hands of the partnership firm and not in the hands of the assessee. Accordingly, we set aside the orders of the lower authorities and deleted the addition and allow this issue of assessee’s appeal.

As we have already allowed the issue on merits holding that the assessee cannot be assessed to tax in respect to firm’s income, the alternative ground raised vide ground No. 2 need not adjudication.

In the result, the appeal assessee is allowed.