MUKESH M WADHWANI,MUMBAI vs. ITO 19(3)(3), MUMBAI

In ground no.1, the assessee has challenged addition of ` 88,83,000, on account of long term capital gain as well as denial of exemption under section 54 of the Act.

Brief facts are, the assessee is an individual. Since, the assessee did not file any return of income under section 139(1) of the Act for the impugned assessment year, the Assessing Officer re–opened the assessment under section 147 of the Act and issued notice under section 148 of the Act on 21st March 2013, directing the assessee to file its return of income. As alleged by the Assessing Officer, neither the assessee complied to the notice issued under section 148 of the Act nor appeared before him in the assessment proceedings. On the basis of information received from HDC Bank, the Assessing Officer found that during the period from 1st April 2005 to 31st March 2006, the assessee has made deposits and withdrawals. Since, the assessee did not explain the source of deposit by appearing before him, the Assessing Officer added the amount of ` 10,02,677 on peak basis. Further, on the basis of AIR information available on record the Assessing Officer found that the assessee had invested a sum of ` 93 lakh in an immovable property vide sale deed registered with Jt. Sub Registrar, Andheri, Mumbai, on 26th July 2005. Since, the assessee neither appeared nor explained the source of such deposits, the Assessing Officer added back the amount of ` 93 lakh in the hands of the assessee by treating it an unexplained] investment. Being aggrieved of the addition made, the assessee preferred appeal before the first appellate authority.

Before the first appellate authority, the assessee produced certain evidences to explain the source of ` 93 lakh in purchase of the house property. The assessee also explained the reason for non–filing of return of income even in pursuance to section 148 of the Act. Before the first appellate authority, the assessee explaining the source of ` 93 lakh submitted that the assessee along with his father were the owners of house property at 1st January 2002, Dr. Ambedkar Road, Pali Naka, Bandra (West), Mumbai, which was sold and the consideration of ` 93 lakh was received. It was submitted, the assessee has invested his 50% share out of sale proceed in purchase of a new residential house and accordingly, claimed exemption under section 54 of the Act. On the basis of evidences filed and submissions made by the assessee, the learned Commissioner (Appeals) called for a remand report from the Assessing Officer. After perusing the remand report and considering the submissions of the assessee, the learned Commissioner (Appeals), though, observed that the Assessing Officer has not made any adverse inference in respect of the evidences furnished by the assessee, however, on a perusal of the bank statement of Oriental Bank of Commerce belonging to the assessee he found that only one cheque amounting to ` 46,50,000 was deposited on 30th July 2005. The learned Commissioner (Appeals) alleging that the assessee did not establish the fact that the balance amount of `

The learned Authorised Representative, at the very outset, acceded to the fact that the assessee neither filed any return of income nor appeared in the course of re–assessment proceedings for which the assessment was completed ex–parte. However, he submitted, assessee along with his father was a joint owner of a flat which was sold for a total sale consideration of ` 93 lakh. In this 5 Mukesh M. Wadhwani context, he drew our attention to copy of registered sale deed at Page–28 of the paper book. Learned Authorised Representative submitted, both the assessee and his father being joint owners have equal share in the property. Therefore, the buyer issued two separate cheques towards the sale consideration, one in the name of the assessee and the other in the name of his father. The learned Authorised Representative submitted, while the sale consideration received by the assessee is credited in his bank account, the sale consideration received by his father through a separate cheque was credited in father’s bank account. Learned Authorised Representative submitted, before the first appellate authority the assessee had produced documentary evidences in support of his claim that he has received 50% of the sale consideration. Learned Authorised Representative submitted, the learned Commissioner (Appeals) never asked the details of payment made to the father along with supporting evidence. He submitted, without seeking further details the learned Commissioner (Appeals) has concluded that the assessee is beneficiary of the entire sale consideration of ` 93 lakh which is contrary to facts on record. The learned Counsel for the assessee submitted, while considering assessee’s claim of indexation benefit on account of cost of acquisition, learned Commissioner (Appeals) has restricted it to the amount paid by the assessee whereas, for the purpose of capital gain

The learned Departmental Representative submitted, in spite of reasonable opportunity being given to the assessee, he did not appear before the Assessing Officer and co–operate with the assessment proceedings. Therefore, the Assessing Officer proceeded to complete the assessment ex–parte on the basis of material available on record. Before the first appellate authority, though, the assessee produced certain evidences, however, he could not fully establish his claim either with regard to receipt of 50% of the sale consideration by his father or with regard to cost of acquisition. Therefore, the learned Commissioner (Appeals)’s finding on the issue are proper. As regards assessee’s claim of deduction under section 54 of the Act, he submitted, the assessee having not filed any return of income claiming such deduction, claim cannot be allowed.

We have heard the rival submissions and perused material on record. Though, it may be a fact that the assessee did not comply to the notice under section 148 of the Act nor appeared before the Assessing Officer during the assessment proceedings, however, perusal of the assessment order reveals that on the basis of information obtained and available on record, the Assessing Officer was aware of the fact that the immovable property in respect of which ` 93 lakh was received was jointly held by the assessee. Only because the identity of the co–owner was not provided the Assessing Officer added back the entire sale consideration of ` 93 lakh at the hands of the assessee. Before the first appellate authority, the assessee has produced documentary evidence by way of registered sale deed, bank statement, etc., to substantiate its claim that the property sold was jointly owned by the assessee with his father and his share in the property is only to the extent of 50%. The assessee also produced evidence before the learned Commissioner (Appeals) to support his claim that assessee’s share in the sale consideration was to the extent of ` 46,00,500 which is received through cheque and the balance sale consideration was received by his father through cheque. Only because the payment details of assessee’s father was not available, the learned Commissioner (Appeals) considered the entire sale consideration at the hands of the assessee. In our view, the aforesaid approach of the 8 Mukesh M. Wadhwani learned Commissioner (Appeals) is improper and unjustified. It is evident from the registered sale deed that the property was jointly owned by the assessee with his father. Further, the registered sale deed also revealed that the buyer of the property issued two separate cheques amounting to ` 46,50,000 each on 19th July 2005 in the name of assessee’s father and assessee. The details of cheque numbers are also available in the registered sale deed. Even PAN details of assessee and his father were also available in the sale deed. Therefore, when the assessee has furnished documentary evidence to demonstrate that he is having 50% share in the property sold and has also received 50% of the sale consideration, there is no valid reason to consider the entire sale consideration at the hands of the assessee for computing capital gain. More so, when the learned Commissioner (Appeals) is allowing indexation benefit only to the extent of consideration paid by the assessee for purchase of the property. If the learned Commissioner (Appeals) had any doubt with regard to the real beneficiary of the balance sale consideration, he should have called upon the assessee to furnish necessary evidence for removing his doubts. Instead of doing that the learned Commissioner (Appeals) only on presumption and surmises has concluded that the assessee has received the entire sale consideration. In view of the aforesaid facts, we are inclined to restore the issue relating to the addition of long

As regards assessee’s claim of deduction under section 54 of the Act, in our view, non–filing of return of income before the Assessing Officer raising the claim of deduction under section 54 of the Act will not prevent the assessee from raising such claim before the appellate authority. Hon'ble Supreme Court in case of Goetz India Ltd. v/s CIT, [2006] 284 ITR 323 (SC), has clearly laid down the ratio that the restriction with regard to fresh claim through a revised return of income is only applicable to the Assessing Officer and not to the appellate authority. In view of the aforesaid, we also restore the issue relating to assessee’s claim of deduction under section 54 of the Act to the Assessing Officer for denovo adjudication after verifying assessee’s claim with due regard to evidence produced and only after providing reasonable opportunity of being heard to the assessee. Ground no.1 is allowed for statistical purposes.

In ground no.2, the assessee has challenged the addition of ` 10,02,677 under section 69 of the Act. As discussed earlier, during the assessment proceedings, the Assessing Officer having found that the assessee has made certain deposits in an account held with HDC Bank added the aforesaid amount on peak basis, since, the assessee failed to explain the source of investment. The learned Commissioner (Appeals) also sustained the addition.

We have heard rival submissions and perused material on record. It is evident, before the Assessing Officer assessee did not appear and explain the source of deposits in the bank account, however, before the first appellate authority the assessee had submitted copy of the bank account and explained the source of deposit to be out of the sale proceed from his proprietary concern M/s. Clear Clothing Co. However, since, the assessee was not maintaining regular Books of Account, learned Commissioner (Appeals) rejected the claim of the assessee.

Before us, the assessee has simply reiterated the stand taken before the learned Commissioner (Appeals) and drew our attention to the copy of the bank account submitted in the paper book. After due consideration of the submissions made before us, we are inclined to restore the issue to the file of the Assessing Officer for denovo adjudication after due opportunity of being heard to the assessee.

In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 25.04.2018