ITO, THENI vs. SHRI M. ASOKAN, THENI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -1, Madurai, dated 25.04.2016 and pertains to assessment year 2012-13.

Shri M. Mathivanan, the Ld. Departmental Representative, submitted that during the course of survey in the case of Dr.N.R.T.R. Thiagarajan on 28.11.2013, it was found that the assessee entered into an agreement with Dr. N.R.T.R. Thiagarajan. As per the sale agreement impounded, the assessee agreed receipt of ₹1,14,00,000/-. Subsequently, according to the Ld. D.R., the power of attorney issued by the owner in favour of the assessee was cancelled and another power of attorney was executed in favour of the mother of Dr. N.R.T.R. Thiagarajan and on the same day, the sale deed was also executed in favour of said Dr. N.R.T.R. Thiagarajan. Therefore, according to the Ld. D.R., the Assessing Officer found that there was a transfer of property and the assessee received ₹1,14,00,000/- and computed the profit. On appeal by the assessee, the CIT(Appeals) found that it is for the parties to file civil suit for recovery of ₹1,14,00,000/- and it cannot be assessed in the hands of the present assessee. According to the Ld. D.R., when the assessee received the money and retained the same and there was no liability to refund, the same has to be assessed as income of the assessee. Therefore, according to the Ld. D.R., the CIT(Appeals) is not justified in allowing the claim of the assessee.

On the contrary, Shri R. Srinivasan, the Ld.counsel for the assessee, submitted that the assessee is not the owner of the land and he is only a power of attorney agent, therefore, there cannot be any assessment in the hands of the assessee. According to the Ld. counsel, when the assessee is not the owner of the property, there was no question of any transfer. As a power of attorney agent, the assessee has not paid any money to the owner of the property.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the agreement said to be entered into between the assessee and two others with Dr. N.R.T.R. Thiagarajan was found. As per the material found during the course of survey, the assessee received a sum of ₹1,14,00,000/-. The said amount was not returned by the assessee to the land owner or to anybody else. The assessee appears to be in the business of real estate. Therefore, when the gain arises in the course of real estate business, it is not known why it should not be treated as business profit. When Dr. N.R.T.R. Thiagarajan entered into an agreement with the assessee and two others, the circumstances under which the said agreement was cancelled and another power of attorney was executed in favour of Dr. N.R.T.R. Thiagarajan’s own mother after cancelling the power of attorney in favour of the assessee and others was cancelled, needs to be examined and brought on record. Therefore, orders of both the authorities below are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the Revenue is allowed for statistical purposes.