ACIT, NEW DELHI vs. SMT. SUCHITA VEMURI, NEW DELHI

The assessee preferred appeal before the ld CIT(A), who held that Rs. 45 lakhs is not an undisclosed income but chargeable to tax as sale proceeds of the property as capital gain. He further deleted the disallowance of Rs. 670677/- of expenses. Consequently, the income offered by the assessee of Rs. 181084/- was directed to be taxed. Therefore, revenue aggrieved with the order of the ld CIT(A), has preferred this appeal.

The ld DR vehemently contested that the assessee was found in possession of Rs. 45 lakhs at the Airport and therefore, the Assessing Officer should charge the above amount in her hand as unexplained income. It was further submitted that assessee could not prove that this sum was actually the same sum, which was received by her Page 3 of 6 from Dr. Pradeep Govil or was from some other source. He further referred to page No. 9 to 11 of the order of the Assessing Officer and vehemently supported it.

The ld AR submitted that the ld CIT(A) has correctly dealt with the whole issue and submitted that assessee has shown sale consideration of the property being ½ of Rs. 1.70 crores at Rs. 85 lakhs and computed the changeable capital gain of Rs. 5673787/-. As the assessee has invested in new residential house and her share being half share she has claimed exemption u/s 54 of the Act of Rs. 5058537/- and offered capital gain of Rs. 615250/-. He therefore, submitted that as assessee has consistently stated that the property was sold at Rs. 1.70 crores and not at Rs. 1.25 crores and therefore, impugned sum is correctly offered for taxation under the head capital gain and cannot be held to be income from undisclosed sources. With respect to the expenditure he submitted that assessee has offered a gross receipt of Rs. 851761/- and income is offered u/s 44AD of the Act at 21.26% showing profit of Rs. 181084/-. There is no evidence with the AO that assessee has not incurred the expenditure. As the return is filed u/s 44AD the disallowance made by the Assessing Officer is incorrect.

We have carefully considered the rival contentions and also perused the orders of the lower authorities. The impugned transaction is sale of property by M/s. Suchitra Vemuri and Smt. Sonali Mehra to Mr. Pradeep Govil and Dr. Nilam Prasad Govil on 23.03.2010 of property situated at Flat No. C-16/3, Category SFS 3 with scooter garage situated at Malaviya Nagar extension now known as Saket, New Delhi 17. According to the sale deed executed the agreed consideration of the property is Rs. 1.25 crores. The buyer paid the above sum by eight different cheque starting from 08.09.2010 to 20.11.2010. Subsequently, the assessee was intercepted while travelling from Delhi to Mumbai along with a cash of Rs. 35 lakhs and as a source of the above sum she stated that actually the impugned property was sold at Rs. 1.70 crores out of which Rs. 1.25 crores was consideration stated in the sale deed, received by cheque from the buyer and the balance sum of Rs. 45 lakhs was received in cash from buyer. To substantiate her claim that said sum forms part of the consideration, she submitted an affidavit dated 09.07.2013 stating that over and above the cheque consideration she received Rs. 1 lakhs on 02.09.2010 and Rs. 44 lakhs on 16.11.2010 in cash from the buyer. She further stated that one Shri Sudhanshu Sharma and another Shri SK Dhamija were the brokers in the above stated transaction and both are witnessed to the above transaction. To substantiate her claim she also produced a receipt cum agreement to sale dated 02.09.2010 between the seller and the buyer where a sum of Rs. 1.70 crores was mentioned as Page 4 of 6 a consideration. She further produced a receipt of Rs. 44 lakhs issued by the assessee in favour of the buyer wherein these two brokers have signed as a witness. The above receipt cum agreement to sale was also shown to have been signed by the buyer. One of the broker u/s 131 of the Act also confirmed the above statement. Even during the course of assessment proceedings, she submitted in response to summons u/s 131 dated 14.03.2011 the above facts. However, the buyer obviously, in response to summons u/s 131 on 14.03.2011 confirmed the transaction price of the property at Rs. 1.25 crores only. In nutshell buyer denied to have paid any sum over and above Rs. 1.25 crores to the assessee. The ld CIT(A) in view of the above overwhelming documents and confirmation by the broker as well as the statement u/s 132(4) of the Act of the assessee herself has held that a sum of Rs. 45 lakhs received by the assessee is in fact towards sales consideration of the property and therefore cannot be taxed as undisclosed income of the assessee. He further held that there is no inconsistency in the statement of the assessee with respect to the source of the above sum at various times. In view of this, we do not find any infirmity in the order of the ld CIT(A) in holding that such sum cannot be taxed as undisclosed income of the assessee but is considered as sales consideration of the property sold and chargeable to tax under the head capital gain. The above view is further correct because of the reason that revenue could not prove its allegation that the sum found in possession of the assessee was not the same money, which was part of the sales consideration. The assessee was caught at the airport 21.02.2011 whereas the assessee on 16.11.2010 received the sum of money of Rs. 45 lakhs, therefore, there was only three months time between the time of receipt of sum and money seized from the assessee. The revenue could not show that money received by the assessee was utilized somewhere else and the money found from the assessee was form different source. In view of this, we fully concur with the views of the ld CIT(A) with respect to taxation of the above sum under the head capital gain only. Hence, we dismiss ground No. 1 to 4 of the appeal of the revenue on this aspect.

Ground No. 5 of the appeal was with respect to the disallowance deleted by first appellate authority of Rs. 670677/-. The assessee has filed a return of income u/s 44AD of the Income Tax Act, 1961 showing gross receipt of Rs. 851761/- and offered profit there from at 21.26% amounting to Rs. 181084/-. During the assessment preceding the assessee’s claim was that the assessee is a communication expert and works as a ‘ghostwriter’ for various public relations firm and therefore income is offered u/s 44AD of the act. She also does not maintain Page 5 of 6 any books of account. It was submitted that 21% of the gross receipt is offered as an income, which is higher than 8% provided by the act. The ld Assessing Officer rejected the contention of the assessee as assessee did not produce any books of account or any proof of expenditure incurred. He further held that as TDS certificate issued in the name of the assessee u/s 194J shows that assessee is a professional; assessee should have maintained books of account. On appeal before the ld CIT(A), he held that as the gross receipt is below Rs. 10 lakhs the appellant was not required to maintain books of account u/s 44AA of the Act and therefore he directed the Assessing Officer to delete the disallowance as the profit offered by the assessee is more than 8% prescribed u/s 44AD of the Act.

The ld DR vehemently contested the finding of the ld CIT(A) and submitted on what basis the assessee has computed profit @21.26% of income is not known. He further submitted that section 44AD provides minimum profit of 8% and not the maximum profit. It is also stated that the assessee is required to maintain books of account. He further submitted that any person offering income u/s 44AD is required to produce certain information as mentioned u/s 139 of the Act. Therefore, he stated that ld CIT(A) has wrongly deleted the disallowance without verification.

We have carefully considered the rival contentions and also perused the orders of the lower authorities. It is apparent that assessee is providing some professional consultancy services however, the nature of services is not known. It is also an accepted fact that the assessee has shown profit @21.26% of the gross receipt shown by her. On perusal of the section 44AD of the Act it is apparent that 8% net profit rate provided by the statute is the minimum sum chargeable to tax and if assessee is earning higher than 8% then such higher percentage of profit is chargeable to tax. Provisions of section 44AD further provide section 44AA also do not apply in such cases. However, on reading of the provision of clause (f) to Explanation to section 139 provides that where the assessee do not maintain regular books of account, the return shall be required to be accompanied by statement indicating the amount of turnover or gross receipt, gross profit, expenses and net profit and the basis on which such amount have been computed. It was also further provided to disclose the amount of total sundry debtor, sundry creditor, stock in trade, cash balance on hand as at the end of the year, otherwise, and the return shall be regarded as defective return. In view of this, it is apparent that assessee is required to produce all these details before the Assessing Officer despite the fact that she has offered income u/s 44AD of the Act. Hence, we do not concur with the opinion of the ld CIT(A) in deleting the addition without verifying the information