INCOME TAX OFFICER-16(3)(1), MUMBAI, MUMBAI vs. MS. SHABNAM LAIQ AHMED KHAN , MUMBAI

The ld. DR submitted that the claim of the assessee that the flats registered in her name are originally booked by her father and the payments were made by her father is not substantiated properly. The ld. DR further submitted that there was no agreement to sale between assessee's father and the builder in support of the claim that it is her father who has booked the flats originally from the builder. Therefore, the ld. DR argued that assessee was included in the sale document only for namesake cannot be accepted. The ld. DR also submitted that the CIT(A) while allowing the appeal in favour of the assessee has simply relied on the submissions of the assessee and has not recorded any independent finding. Therefore, the ld. DR argued that the additions made by the AO be sustained.

The ld. AR on the other hand vehemently argued that assessee has submitted all the relevant documents to substantiate that her father has purchased the 7 flats. The ld AR drew our attention to the bank statement of assessee's father where the payment made to the builder in FY 2012-13 is reflected (page 11 of PB) and the letters of allotments all dated 11.09.2012 issued by the builder in the name of assessee's father (page no. 41 to 52 of PB). The ld AR further drew our attention to the financial statement of the father for FY 2012-13 in which the advance payment to the builder is reflected (page no. 175 of PB) to submit that all the aforesaid documents were submitted before the AO to substantiate the claim that assessee's father is the real purchaser of the flats. The ld. AR submitted that in the case of other co-owners whose name were part of the sale-deed entered into on 26.12.2017, the department has accepted the submissions and made no additions and in this regard our attention was drawn to the assessment orders (page 186 to 189 of PB).

With regard to the addition made under section 56(2)(vii)(b) the ld. AR submitted that the assessee is not a purchaser and therefore the said section cannot be invoked in assessee's case. Without prejudice to the said submissions, the ld. AR further submitted that even otherwise as per proviso to section 56(vii)(b)(ii) the date of allotment i.e.11.09.2012 should be considered for the purpose of the said section and therefore the addition made based on stamp duty value in the year in which the sale-deed was executed is not tenble. The ld. AR drew our attention to the valuation of the impugned flat in FY 2012-13 (page 55 of PB) to submit that if the value on the date of allotment which is less than the registered value is considered, then no addition under section 56(2)(vii)(b) is warranted.

On the addition made by the AO towards STCG on sale of one of the flats the ld. AR drew our attention to the computation statement of assessee's father for AY 2019-20 (page 185 of PB) where the capital gain on sale of the flat has been offered to tax. The ld. AR also drew our attention to the fact that the rental income from the 7 flats have been offered to tax in the hands of assessee's father in the statement of computation (page 179 of PB). The ld. AR submitted that this would also substantiate the fact that assessee's father is the real owner and assessee is included in the sale-deed only for namesake.

We heard the parties and perused the material on record. During the year under consideration Mr. Laiq Ahmed Rafiq Shaikh (assessee's father) has entered into agreement of sale with the developer M/s Atul Projects India Pvt. Ltd. towards purchase of 7 flats namely flat Nos. 501, 506 on 5th floor, 601 in 5th floor, 701 & 702 in 7th floor, and 801 & 802 in 8th floor in building "Blue Fortuna" dated 26.12.2017. In the said agreement besides Mr. Laiq Ahmed Rafiq Shaikh the names of the assessee, Mr. Ubaidullah Laiq Shaikh and Mr. Amjad Laiq Shaikh have also been included. On the basis of information that the assessee has purchased certain flats during the year under consideration, the AO called on the assessee to furnish the relevant information with regard to the purchase of flat. The assessee claimed before the AO that the flat was originally booked by her father during FY 2012-13 and that the payments were made out of her father's account. The assessee further submitted that she is included in the agreement for sale only for namesake since her father is 90 years old. Accordingly, the assessee has submitted that she is not a purchaser of the property and therefore the source for purchase of flat by her father is not out of her income. The AO however did not accept the submissions of the assessee and held that the claim of the assessee that it is her father who has purchased the flats is not substantiated. The AO made addition towards unexplained investments, under section 56(2)(vii)(b) and also STCG. The CIT(A) deleted the additions based on the submissions made by the assessee before him. The assessee submitted the below listed documents to substantiate that it is assessee's father who has actually purchased the 7 flats out of his funds – (i) Bank statement of assessee's father evidencing the payment towards purchase of flats to the builder - page 11 of PB. (ii) Allotment letter dated 11.09.2012 issued by M/s Autl Projects India Ltd. to assessee's father - page 41 to 52 of PB.

A combined perusal of all the above documents clearly establishes the fact that it is the assessee's father who has purchased the 7 flats out of funds transferred from his bank account to the builders. It is further noticed that assessee's father has been offering the rental income from the 7 flats in the statement of computation. It is also noticed that during the AY 2019-20 the assessee's father has offered the capital gains on transfer of flat no. 701 which was sold for a considered of Rs. 1.3 crores to tax. In our considered view the AO is not correct in making addition towards 1/4th of the purchase cost as unexplained investments in the hands of the assessee since the consideration is entirely paid by the father and the same is reflected in his financial statements. Further the addition made by the AO under section 56(2)(vii)(b) is also not tenable for the reason that it is not the assessee who has purchased the flats but her father. Even assuming that the said provisions are applicable for the impugned transaction the addition can be done only in the hands of assessee's father and not in assessee's and the proviso to section 56(vii)(b)(ii) has to be kept in mind while invoking the said section. With regard to the addition made by the AO towards STCG on sale of flat, from the perusal of the documents as listed above it is clear that the assessee's father has already offered to capital gains to tax he being the real owner of the flat and therefore the same cannot be sustained in the hands of the assessee. It is also relevant to mention that the assessee's father has been offering the rental income from the flats to tax. Further we notice that in the case of others who are included in the Agreement of sale along with assessee’s father, the revenue has accepted the submissions and assessment have been completed u/s. 143(3) without making any addition. In view of these discussions and considering the facts of the case, we are of the view that the additions made by the AO in the hands of the assessee are not sustainable and therefore we see no infirmity in the order of CIT(A) in deleting the additions.

In the result, the appeal of the revenue is dismissed.