GANPAT MUKUNDRAO MURKUTE,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

Assessee is an individual stated to be having income from

business, capital gains, agricultural income and other sources.

Assessee filed his return of income for A.Y. 2006-07 declaring total

income of Rs.48,80,420/-. Notice u/s 148 of the Act dt.30.03.2011

was served on assessee on 31.03.2011, calling the assessee for

filing the return of income. AO noted that further opportunity of

filing of return of income along with reasons for re-opening, a

notice u/s 143(2) and 142(1) of the Act were served on assessee on

19.10.2011. Thereafter, assessment was framed u/s 143(3) r.w.s.

147 of the Act vide order dt.23.12.2011 and the total income was

determined at Rs.2,35,54,420/-. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who vide order

dt.03.09.2013 (in appeal No.PN/CIT(A)-II/ACIT Cir-4/299/2011-

12) dismissed the appeal of the assessee. Aggrieved by the order of

Ld.CIT(A), assessee has raised the following grounds :

“The appellant would like to object the impugned order of the CIT (Appeals) on following grounds of appeal which are raised without prejudice to each other: 1. The learned CIT (Appeals), Pune has erred in law and on facts in confirming the additions made by the AO.

a. The appellant had ½ share in the property sold at Mahalunge. b. While completing the assessment of Mr. Mahendra Vitkar, the AO has held that the property is jointly owned by the appellant and Mr. Mahendra Vitkar. c. Addition is made in the hands of Mr. Mahendra Vitkar u/s. 143(3) for A. Y. 2006-07, after deducting the capital gain disclosed by the appellant. d. The addition to the total income of the appellant is made only on assumption and presumption

without pointing out any material or corroborative evidence. 3. The Learned CIT(Appeals), Pune has erred in law and on facts in confirming the addition by forming an incorrect opinion on following facts :

a. That the appellant was acting on behalf of Shri Jain and the appellant was solely responsible for entire transaction of land at Mahalunge. b. That the appellant has accepted that Mr.Vitkar was not directly involved in the transaction. c. That the appellant is sole beneficiary of the transactions of land at Mahalunge. 4. The learned CIT (Appeals), Pune has erred in law and on facts in confirming the action of the AO of disallowing the expenditure incurred towards development of the property amounting to Rs. 1954000/- and commission of Rs.3000000/- exclusively on assumption, and presumption basis by not considering the supporting bills and vouchers evidences submitted during the course of hearing and without assigning any valid reason for the same. 5. The learned CIT (Appeals), Pune has erred in confirming the action of the AO in levying interest under section 234B and 234C without considering the following facts: a. That interest was levied without giving any opportunity of hearing and without passing any speaking order at all to that effect and that the AO had erred in wrongly computing the same by applying erroneous rate. b. That the interest u/s. 234B and 234C is mandatory in the sense that it cannot be waived or reduced by the IT authorities. 6. Without prejudice, to the above grounds no. 1 to 4, the learned CIT (A), Pune has erred in not appreciating the fact that if it is held that the transaction was an 'adventure in the nature of trade' then the .income from the same had to be assessed in the status of AOP since all the conditions to constitute the AOP are been fulfilled as laid down in the decision of Hon'ble Supreme Court in the case of CIT vs. Indira Balkrishnan 39 ITR 546. 7. The appellant may kindly be permitted to add to or alter any of grounds of appeal, if deemed necessary.”

raised modified additional grounds which reads as under:

“1. On the facts and in the circumstances of the case and in law, the Assessment order passed by the Assessing Officer in this case was without jurisdiction, ab-initio void and illegal. 2. On the facts and in the circumstances of the case and in law, the Assessing Officer had no faithful reasons to believe that the income had escaped assessment in this case. 3. On the facts and in the circumstances of the case and in law, the re-opening of the assessment and issue of notice u/s 148 of the Income Tax Act, was without jurisdiction ab-initio void and illegal”

raised before us, Ld AR submitted that the additional grounds

raised are purely on question of law and no new facts are required

to be brought on record and therefore, deserves to be admitted and

for which reliance was placed on the decision in the cases of (i)

National Thermal Power Corporation V. CIT (229 ITR 383 (SC), (ii)

Jute Corporation of India Ltd Vs. CIT reported in 187 ITR 688 (SC)

and Ahmedabad Electricity Co., Ltd., Vs. CIT reported in 199 ITR

351 (Bom) (FB).

the Assessee, in view of the ratio laid down by the Apex Court in

the case of National Thermal (supra), we admit the additional

grounds of appeal filed by the Assessee for adjudication.

ground No.6 and therefore the same is dismissed as not pressed.

Ground No.5 is with respect to the charging of interest, which is

consequential in nature and therefore requires no separate

adjudication. The other grounds raised by the assessee being

inter-connected are considered together.

Assessee as noted in the assessment order are that the Assessee

had jointly purchased the land bearing survey no.43, Hissa

No.2/1, and 2/2 located at village Mahalunge, Haveli Taluka,

admeasuring 2 hector 63 Are and 2 hector and 63 Are respectively

for a consideration of Rs.1,10,00,000/- each with Shri Mahendra R

Vitkar (M.R. Vitkar). The assessee along with his co-owner could

not honour the payments for purchase of land as per the

agreement and hence, after making part payment (which was solely

contributed by the assessee), the assessee had to directly sell the

two pieces of land to M/s. Riverview Properties Pvt. Ltd., for a

consideration of Rs.4,85,75,000/- in the financial year relevant to

A.Y. 2006-07. It was noted that in the return of income, the

assessee had shown sale consideration of land of Rs.1,42,87,500/-

and after claiming deduction on account of cost of acquisition, he

had offered net taxable short term capital gain of Rs.48,23,210/-

only.

Shri Mahendra Vitkar for A.Y. 2006-07, Shri Vitkar was asked to

explain the source for investment in the land. It was submitted by

Shri Vitkar that he had not made any investments in the above

properties. It was further submitted that for the purpose of selling

the two plots of land, he was made to sign power of attorney in

favour of Shri Ganpat Mukundrao Murkute. It was further

submitted by him that he was forced to open a bank account, his

signatures were obtained on blank cheques and the cheque book

with his signatures were kept in the custody of Mr. Murkute. In the

assessment proceedings of Shri Mahendra Vitkar, he thus denied

of making the investment in the properties.

Assessee, it was noted by the AO that since the entire investment

was made by the assessee, the entire amount of sale consideration

of Rs.4,85,75,000/- received on transfer of land to M/s. Riverview

Properties Pvt. Ltd., and the consequent short term capital gains,

should have been offered by the Assessee to tax. Since in the

return of income, the assessee had shown gross sale consideration

received only to the extent of Rs.1,42,87,500/-, AO had reason to

believe that there was an escapement of income of

Rs.3,42,87,500/-. Accordingly, the case was re-opened.

of capital gains, assessee inter-alia submitted that the two pieces

of land were purchased from M/s. Abhi Agro Trust and M/s.

Sangram Agro Trust vide separate agreements dt.20.05.2005 for

Rs.1,10,00,000/- each and the assessee’s share was half in the

land. Out of the said consideration, assessee had paid

Rs.40,00,000/- (Rs 20,00,000/- each to M/s. Abhi Agro Trust and

M/s. Sangram Agro Trust) and had incurred Rs.5,10,290/-

towards his share of registration and stamp duty charges. It was

further submitted that after the acquisition of land, assessee had

incurred Rs.19,54,000/- towards the development of land and had

agreed to pay Mr Naresh Kamat Rs 30,00,000/- as charges for

arranging the entire purchase deed. Later on, assessee had agreed

to sell these lands to Gurumukh Sukhwani and Ghansyam

Sukhwani and had received Rs 20 lakh through cheque as earnest

money towards the sale of proposed land. Later on since

Mr. Sukhwani could not complete the transaction, the proposed

land deal was cancelled. Thereafter, assessee entered into

agreement of sale with M/s.Riverview Properties Pvt. Ltd., for sale

of these lands for a total consideration of Rs.4,85,75,000/-. It was

submitted that M/s. Riverview Properties Pvt. Ltd., had paid

Rs.1,20,00,000/- to the landowners (Rs 1,00,00,000/- to Abhi

Agro Trust/Sangram Agro Trust) and Rs.20,00,000/- to

Gurumukh Sukhwani, intervener. The assessee therefore

submitted that he has considered his share of sale consideration at

Rs 2,42,87,500 and after taking into consideration the costs

incurred, had offered to tax the short term capital gains of

Rs.48,23,210/- earned by him. The submission of the assessee

was not found acceptable to the AO. AO noted that no supporting

proof was filed by the assessee in support of his claim to have

spend Rs.19,54,000/- as development expenses nor was there any

proof of commission of Rs.30,00,000/- being paid to Shri Naresh

Kamat for the execution of sale deed. AO also noted that the

commission of Rs.30,00,000/- as said to have been paid to Naresh

Kamat, which amounts to 6% of the total consideration, was quite

unnatural compared to the market rates of 2 to 3%. AO further

noted that during the assessment proceedings of Shri Mahendra

Vitkar, it was submitted by Shri Vitkar that he had not made any

investments in the property, for purchase of property and that he

was forced to sign on power of attorney in favour of assessee, he

was forced to open a bank account and his signatures were

obtained on blank cheques, and the cheques were kept with the

assessee. AO therefore held that the entire capital gain on sale of

land was of the assessee. He accordingly worked out the capital

gain after considering the sale consideration on transfer of land of

Rs.4,85,75,000/- to have been received by the assessee and thus

made an addition of Rs.2,35,54,470/- on account of net short term

capital gains. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who upheld the order of AO by holding as

under :

“3.4 The submission made by the appellant has been considered and. material on record perused. The appellant along with Shri. Mahendra Vitkar jointly purchased and sold the land located at S. No.43 Hissa No 2/1, 2/2 at village Mahalunge. The assessment proceedings in the case of Shri Vitkar has been completed whereby the addition towards his share of the sales consideration computed as short term capital gain. The appellant though had jointly purchased the aforesaid land from Abhi Agro Trust and Sangram Agro Trust for a consideration of Rs. 1.10 crores each vide two separate agreements dated 20-05-2005, however, out of the total payment due of Rs. 2.20 crores, the appellant paid Rs. 20 lacs each to the two trust and no contribution was made by Shri. Vitkar. Subsequently, the appellant agreed to sell the aforesaid lands to Gurmukh Sukhwani and Ghanshyam Sukhwani and also received Rs. 20 lacs on 10-06-2005 as earnest money towards the proposed sale. However, the said sale could not be completed and hence was cancelled. Thereafter, the appellant entered into an agreement of sale with M/s. Riverview Properties Pvt. Ltd. vide sale deed dated 28-03-2006 for a total consideration of Rs.4,85,75,000/-. The appellant thus offered ½ share of the sale consideration of Rs. 2,42,84,500/- for the purpose of computing short term capital gain and after reducing the cost of acquisition and improvement and development cost along with the payment of commission computed the net short term capital gain at Rs. 48,23,210/- which was offered to tax. The Assessing Officer found that during the assessment proceedings of the other co-owner /partner Shri. Mahendra Vitkar for A.Y. 2006-07, Shri Vitkar in his reply submitted on 29-12-2008 had stated that he had not made any investment in the property i.e. the two lands at Mahalunge and that he was made to sign the power of attorney in favour of the appellant Shri Ganpat Murkute for the purpose of selling the two plots. It has also been submitted that Shri Vitkar was forced to open a bank account and his signature obtained on the cheques and the cheque book kept in the custody of the appellant. Thus the Assessing Officer based on the denial made by Shri Vitkar of his involvement in the entire transaction and also the denial to have made any investment held that the entire investment was been made by the appellant. The appellant has heavily relied on the assessment order completed in the case of Shri Vitkar for A.Y. 2006- 07 and. also the order of the CIT(A)-V to substantiate the fact that the transaction was made so as to justify the claim that his share is only half of the total transaction. The appellant has also filed the statement recorded u/s.131 of the concerned persons during the assessment proceedings of Shri Vitkar and also the copies of the cross examination of the appellant by Shri Vitkar. In the statement recorded u/s 131 of the appellant it is noted that the appellant Shri Murkute has clearly stated that he was introduced to Shri Vitkar by a friend Shri Sanjay Jain and that the aforesaid lands purchased jointly along with Shri Vitkar. The appellant also denied to have asked Shri Vitkar to open any account or had obtained any signature on the cheques of the bank as stated by Shri Vitkar in his statement/submission. It was explained by the appellant that the cheques issued by Shri Vitkar had bounced and hence he had made the initial payment for the purchase of the two lands. It was also stated that the share of profit in his account was 50% and for the

remaining 50% Shri Vitkar had to offer the gains as the sale proceeds of the two properties had been given by way of cheques equally between them which indicated that both the persons were equal share holders in the transaction. The appellant, however, in the submission made before the AO during the assessment proceedings vide letter dated 15-12-2011 has categorically stated that he had jointly along with the advocate Shri Sanjay Jain represented by his employee Shri Mahendra Vitkar jointly dealt in land transaction at Mahalunge. The appellant also explained that Shri. Vitkar is merely an employee of Shri. Sanjay Jain and it was his usual trade practice of Shri Jain to carry out land transaction in the name of his employees or third parties so as to avoid payment of taxes. The appellant has also reiterated time and again that the entire land deal was carried out exclusively at the instructions of Shri Sanjay Jain under his guidelines and supervision and the real beneficiary in the said land deal is advocate Sanjay Jain and that Shri Vitkar has only been working for and on behalf of Shri Jain. Thus the statement recorded u/s 131 of the appellant during the assessment proceedings of Shri Vitkar and the submission filed vide letter dated 15-12-2011 during his re-assessment proceedings contradict each other. Moreover, the contention raised by Shri. Vitkar also gets authenticated by the aforesaid submission made by Shri. Murkute during the course of the reassessment proceedings. In the aforesaid submission, the appellant has held Shri. Sanjay Jain to be the real beneficiary of the entire transaction and not Shri. M.R. Vitkar as had been held by him both during his statement recorded u/s 131 on 17-12-2008 and also his cross examination by Shri. Vitkar on 26-03-2010. Further it is noticed that Shri Sanjay Jain in his statement u/s 131 recorded on 16-12-2008 had stated that he knew Shri Vitkar as a broker indulging in purchase/sale of land for clients and beyond that he did not have any official or business dealings. Shri San]ay Jain had also denied of giving monthly commission 'of Rs.15,000/- to Shri Vitkar and also the aforesaid transactions with respect to the Mahalunge and Shri Jain also denied the deposit of cash in a/c No 318 of Jan Seva Sahakari Bank, MIDC Bhosari as stated by Vitkar that the cash deposited in the bank was by Shri Jain, which was disbelieved by the AO at that time. Thus, Shri Sanjay Jain had completely denied his involvement with Shri Vitkar or to have indulged any such transaction as stated by him. In the statement recorded u/s 131 of Shri Vitkar it becomes quite apparent on its perusal that he was acting on behalf of Shri Jain and the entire transaction relating to the two Mahlalunge lands was carried out by the appellant, Shri. Ganpat Murkute. Thus if the entire fact are taken into consideration including the submission made by the appellant dated 15-12-2011 it prima facie points out to the fact that Shri. Vitkar was just a name lender for the transaction and the entire exercise was carried out by the appellant. The submission made by the appellant also clearly indicates that the reliance placed by him on the assessment order passed and the appellate order in the case of Shri Vitkar do not justify the claim made by him. The facts brought on record now during the reassessment proceedings by the appellant, however, were not available with the AO assessing Shri Vitkar as well as with the Ld. CIT (A)-V. The Assessing Officer in the present case has not acted on .presumption and assumption as the material on record clearly point out .to the fact that the appellant was solely responsible for the entire transactions as all the evidences brought on record indicate that the appellant was-instrumental in carrying out the transactions in consultation with Shri Jain. The appellant has admittedly indicated that Shri Vitkar was not directly involved in the transaction which has now been accepted by the appellant. The burden of proof in income tax matters on question of fact ordinarily lies on the assessee since he alone has access to the information

relevant to his assessment. Tax liability in the case of suspicious transactions to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, and preponderance of probability and nature of information/evidence available on record. The statement given u/s.131 during the assessment proceedings of Shri Vitkar and the subsequent submission of the appellant and the evidence on record taken in totality on the facts and circumstances of the matter do indicate the appellant to have carried out the transaction and being its sole beneficiary and hence the Assessing Officer has rightly taxed the properties in the hands of the appellant in respect of the aforesaid said land transactions. Thus the contention raised by the appellant that the addition of Rs.1,87,31,210/- made by the A.O. on account of incorrect computation of short-term capital gain is found to be not tenable and the ground of appeal raised in this regard is liable to be dismissed.

3.5 So far as the contention raised by the appellant regarding the allowability of the expenses on account of evelopment/improvement of land amounting to Rs.19.54 lacs and Rs.30 lacs on account of commission payment for the sale of land is concerned it is noticed that the appellant has not been able to substantiate the claim made by him in this regard. The payments for the purchase of the aforesaid land at Mahalunge was made by the appellant to the extent of Rs. 40 lacs as against the cost of Rs. 2.20 crores and the said land been purchased vide two agreement dated 20.05.2005 and most of the expenditure on improvement 'has been-incurred by the appellant within a period of one month purchase which is nearly half of the purchase price given by the appellant. Moreover, the appellant has not been able to substantiate the expenditure incurred on account of development/improvement of the land within such a short period by way of supporting and cogent evidences. The appellant has not able to prove the contention raised during the appellate proceedings and has only reiterated the contention raised before the Assessing Officer. In view .of the above fact the claim of the expenses on account of improvement of land of Rs.19.54 lacs disallowed by the Assessing Officer is liable to be upheld and the ground of appeal raised in this regard is liable to be dismissed.

3.6 So far as the claim of payment of commission of Rs.30 lacs to Nilesh Kamat for the execution of the sale deed is concerned, the Assessing Officer has disallowed the aforesaid claim because of the fact that no confirmation from the aforesaid person was produced and the appellant had not been able to explain the circumstances under which the said payment of commission at such a high rate was made. During the appellate proceedings also the appellant has not been able to justify the payment of commission to the extent of Rs.30 lacs on a total receipt of Rs.2.85 crores which was the stated net sales considered received by the appellant. The appellant has not been able to justify the role of Shri. Kamat to whom the commission of Rs.30 lacs has been paid. It is also not clear nor any material has been brought on record by the appellant that the said receipt of commission has been offered for taxation by Shri. Kamat who is stated to be an employee of a private company. The Assessing Officer was also prevented from carrying out necessary verification so as to enquire into the genuineness of the said payment as the necessary address or any details have not been provided to him by the appellant. The fact and circumstances brought on record do not indicate the necessity of bringing Shri Kamat when the appellant and the related person themselves were land dealers and agent and expert in their field of land dealings. The appellant has not furnished any material so as to

justify the claim as the burden lies on the appellant to substantiate factum of expenditure and also its permissibility. In the absence of the details of the services rendered in respect of Shri Kamat to whom commission at an excessive rate was paid and also the absence of any confirmation in this regard, the Assessing Officer has rightly disallowed the claim made by the appellant and hence the ground of appeal raised by the appellant in this regard is liable to be dismissed.”

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal

before us.

grounds of appeal, which is with respect to allowing the re-opening

of assessment, it was submitted that the re-opening of assessment

has been arrived on the basis of assessment order passed in the

case of Shri Mahendra Vitkar u/s 143(3) of the Act order

dt.30.06.2010 for A.Y. 2006-07. He submitted that in the said

assessment order, half share of capital gains earned on sale of land

to M/s. Riverview Properties Pvt. Ltd., has been held to be taxable

in the hands of Mahendra Vitkar whereas in case of assessee, the

assessment has been re-opened on the ground that the entire

capital gains is taxable in the hands of the assessee. It was

submitted that when once half share of the capital gains has been

held to be taxable in the hands of Mahendra Vitkar, at the same

time, the same income cannot be held to be taxable in the hands of

assessee. It was therefore submitted that there can be no reason

on the part of the AO to form a belief that entire capital gains from

sale of land to M/s. Riverview Properties Pvt. Ltd., was taxable in

the hands of the assessee. It was further submitted that there is a

massive contradiction in the findings in the assessment order

passed in the case of Mahendra Vitkar and the reasons recorded by

the AO for issuing notice u/s 148 of the Act in the case of assessee.

He further submitted that there was no nexus between the

formation of a belief that the income has escaped and the reason

recorded of the belief held by the AO cannot be said to be in good

faith and the belief of the AO is contrary to the findings of AO in

the assessment order in the case of Mahendra Vitkar. Assessee

also placed reliance in the cases of (i) Avtec Limited reported in 370

ITR 0611 (Del), (ii) Rajesh Jhaveri Stock Brokers (P) Ltd., reported

in 284 ITR 0593 (Guj) and (iii) Adani Exports reported in 240 ITR

224 (Guj).

grounds before us, Ld.A.R. reiterated the submissions made before

AO and Ld.CIT(A) and further submitted that assessee had

acquired two pieces of land for Rs.1,10,00,000/- each jointly with

Mahendra R. Vitkar from M/s. Abhi Agro Trust and M/s. Sangram

Agro Trust against which, post dated cheques were issued from the

bank account of Mahendra R Vitkar. Ld.A.R. submitted that since

the post dated cheques issued from the account of Mahendra

Vitkar got dishonored, assessee had paid Rs.20 lakhs each to M/s.

Abhi Agro Tust and M/s. Sangram Agro Trust from his bank

account maintained with United Western Bank. He further

submitted that the mutation of land had taken place in the name

of assessee and the name of Mahendra Vitkar was entered in 7/12

extract of the revenue records. He submitted that on 10.06.2005,

assessee agreed to sell the land jointly with Mahendra Vitkar to

Shri Gurumkh Sukhwani and Shri Ghanshyam Sukhwani and had

received Rs.20 lacs towards sale consideration and assessee had

deposited the same with Oriental Bank of Commerce. He submitted

that on 14.06.2005 a Public notice was issued By Shri S.P.Lalvani,

advocate, with respect to the fact the land under reference was

owned by assessee and Shri Mahendra Vitkar and that his client

was under the process to purchase the land from the assessee.

On 15.06.2005 Mahendra Vitkar had executed the General Power

of Attorney in favour of the assessee for the sale of land in

question. On 27.03.2006 land was sold by Assessee and Shri

Mahendra Vitkar to M/s. Riverview Properties Pvt. Ltd., for a sale

consideration of Rs.4,85,75,000/- and the part of sale

consideration was given to assessee and Mahendra Vitkar by

cheques issued in their separate names. Rs.1,29,37,500/- was

paid through cheques in the name of Shri M.R. Vitkar which was

deposited by Mahendra Vitkar in his account. He submitted that

on 05.06.2007 Shri Mahendra Vitkar filed his return of income for

A.Y. 2006-07 but did not include his share of capital gains from

the sale of land. During the course of assessment proceedings of

Mahendra Vitkar, Shri Vitkar has taken a stand that he was forced

to open a bank account and his signatures were taken on blank

cheques and that he was made to sign Power of Attorney and that

the entire transaction was carried out by the assessee. The

contentions of Mahendra Vitkar were not accepted by the AO and

by assessment order dated 13.4.2010 passed u/s 143(3), the share

of capital gains amounting to Rs.1,77,97,790/- arising out of the

land was held to be taxable in the hands of Mahendra Vitkar. He

further submitted that Ld.CIT(A) vide order dt.20.06.2010 has

upheld the addition of half share of capital gains arising from the

sale of land in the case of Shri Mahendra Vitkar. He therefore

submitted that when a portion of capital gains arising on the sale

of same piece of land has been held to be taxable in the case of

Mahendra Vitkar, the same gains cannot be taxed in the hands of

the Assessee. He thereafter pointed to the working of share of short

term capital gains declared by the assessee in his return of income

and submitted that the gains were rightly offered by the assessee.

submitted that in the case of assessee, the return of income was

originally filed by the assessee on 26.03.2007 and was processed

u/s 143(1) of the Act and no assessment order was framed u/s

143(3) of the Act. He therefore submitted that since no assessment

was framed u/s 143(3) there was no question of forming any

opinion of the issue and therefore the question of change of opinion

does not arise. He thereafter pointed to the computation of total

income filed in Page 2 of the Paper Book and pointed that while

working the capital gains, assessee had shown sale consideration

of agricultural land of Rs.1,42,87,500/- as against the total sale

consideration of Rs.4,85,75,000/- and thus there was a prima facie

wrong declaration made by the assessee in the return of income.

He further submitted that when assessee had shown receipt of sale

consideration of Rs.1.42 crores as against the sale consideration of

Rs.4.85 crores and when there was no occasion by the AO to

examine these facts earlier, the AO was fully justified in re-opening

the assessment. He thereafter pointed to Page 188 of the

assessee’s Paper Book wherein assessee has stated to have worked

out correct working of short term capital gains in the case of

assessee and Mahendra Vitkar. From the aforesaid working, he

pointed out that as per the aforesaid working the net capital gains

in case of assessee has worked out at Rs.68,23,210/- as against

the capital gain of Rs.48,23,210/- shown by the assessee in the

return of income filed by the assessee. He therefore submitted that

there is inconsistency in the working of capital gains as worked out

by the Assessee himself and both the capital gains are different

and in such a situation, the A.O’s action of re-opening the

assessment cannot be faulted with. He further submitted that the

Hon’ble Supreme Court in the case of Rajesh Javeri (supra) has

held that the intimation issued u/s 143(1) of the Act can be

subject to re-opening so long as the ingredients of Sec.147 of the

Act are fulfilled because no opinion is formed at the time of

issuance of intimation u/s 143(1).

Mahendra Vitkar had stated that he has not made any investment

in the properties and he was made to sign the power of attorney in

favour of the assessee for the purpose of selling the land. It was

also submitted by Shri Mahendra Vitkar that he was forced to open

bank account and his signatures were obtained in the cheque book

and the cheque book was kept in the custody of the assessee. He

further submitted that Mahendra Vitkar was just a name lender for

the transaction and the entire transaction was carried out by the

assessee. In such a situation, the AO was fully justified in

considering the entire capital gains in the hands of the assessee.

He thus supported the order of lower authorities.

Vitkar in ITA No.1208/PUN/2010 and the relevant facts of the

case are as under :-

16.1 Assessee is an individual and stated to be working as

transporter and brick supplier. Assessee filed his return of income

for A.Y. 2006-07 declaring total income of Rs.1,54,364/-. The case

was selected for scrutiny and thereafter assessment was framed

u/s 143(3) of the Act vide order dt.31.12.2008 and the total income

was determined at Rs.2,44,33,402/- Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who vide order

dt.30.06.2010 (in appeal No.PN/CIT(A)-V/Wd.9(4)/238/09-10

(Tr.in)) granted partial relief to the assessee. Aggrieved by the

order of Ld.CIT(A), assessee and revenue are now in appeal before

us.

No.1208/PUN/2010 reads as under :

“1. The CIT(A) has erred in not concluding that whole income belonged to Mr. Gandpat Murkute and assessee (Mr. Mahendra Vitkar) was only benamidar income from sale of property at S.No.43/2/1, Mahalunge to River View Properties Pvt. Ltd., included in the hands of Mr. Vatikar may please be deleted.

appeal No.1213/PUN/2010 reads as under :

“1. Whether on the facts and circumstances of the case, and in law, the Ld.CIT(A) was justified in deleting the addition of Rs.50,00,000/- made on account of unexplained deposits.

relying on the confirmations filed by the assessee at the time of remand proceedings and in ignoring the fact that the AO has never lent credence to the genuineness of these transactions amounting to Rs.50 lacs.

are inter-connected both are considered together.

noticed that assessee had purchased two plots of Rs.1,10,00,000/-

each. The assessee was asked to explain the source of investment

in these two properties along with necessary evidence. AO noted

that assessee did not produce the required documents. Since the

assessee did not furnish the required details, Inspector was

deputed to Sub-Registrar’s office and the information was

gathered. It was noticed that assessee had issued cheques from

Seva Vikas Co-operative Bank for the deal. Further bank

statements were also obtained by the AO. The assessee was asked

to explain the source of amount in his bank account amounting to

Rs.49,65,000/- and withdrawals of Rs.48,54,750/-. It was

submitted by him that the deposits were made by Shri Sanjay Jain

and the cheques were issued at his behest. Summons u/s 131

were issued to Sanjay Jain and his statement was recorded on

08.2.2008, wherein he denied of having made any deposits

including cash in the proposed account of assessee and any

instructions to issue cheques from the bank of assessee or his

bank account. Summons u/s 131 were also issued to Shri Ganpat

Murkute and his statement was recorded on 17.12.2008. He

submitted that the plots were purchased by him jointly with the

assessee and since the cheques given to the sellers by the assessee

bounced, two cheques of Rs.20 lakhs each were issued by him. It

was further submitted by him that these two properties were sold

to M/s.Riverview Properties Pvt. Ltd., for 4,85,75,000/-. It was

also submitted by him that he has shown in his return of income

his share of capital gains of 50%. AO after considering the totality

of the facts held that out of the total capital gains earned as

Rs.2,26,21,000/- of which Ganpat Murkute had shown

Rs.48,23,210/- in his return, the remaining amount of capital

gains of Rs.1,77,97,790/- was undisclosed short term capital

gains of the assessee and accordingly made its addition.

the name of M/s. Meghali Propriety maintained with Janseva

Sahakari Bank and Seva Vikas Co-operative Bank Ltd., noticed

that there were deposits in those bank accounts. The assessee was

asked to explain the source of deposits. In the absence of any

explanation, AO considered the amount of Rs. 64,81,248/-

deposited in the bank account as unexplained deposits and made

its addition. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A).

order of AO by holding as under :

“18. I have given careful consideration to the matter. Keeping in view the facts and circumstances of the case in their totality, the picture that emerges is that as per government records, the Appellant was a joint purchaser (along with Shri Murkute) of the property in question, and also a joint seller thereof to the ultimate buyer (M/s. Riverview), an amount of Rs.l,22,17,325/- out of the consideration received from the latter flowed into his individual bank account, and another amount of Rs.7,20,175/- into his joint account with Shri Murkute, an amount of RS.13 lakhs had been paid out of his account to Mr. Naresh Kamath towards brokerage for the transaction. In the face of this factual and legal position, it is very difficult to agree with the Appellant

that he had nothing to do with the transaction and that the entire transaction had been carried out by Shri Murkute. Although the Appellant has claimed that he is not educated, implying thereby that he was an innocent party whose name has been exploited, there is every reason to believe that, in fact, he was well-versed in property transactions. Shri Sanjay Jain, in his cross- examination by the Appellant, has mentioned that he knew the Appellant as they were both estate agents and brokers. The Appellant did not contradict him in this regard. In fact, in his letter dated 07.03.2010 to the undersigned, the Appellant himself has admitted to this fact as is clear from the following extract: “Assessee Mr. Mahendra Vitkar has not returned any income in his return as whole of the transaction of property purchase and sale belongs to Mr. Ganpat Murkute. However, if said submission was not acceptable to AO, in any case it is clear that both Mr. Ganpat Murkute and Mr. Vitkar are estate brokers. It has been made clear that property transaction in joint name was for immediate sale.”[emphasis added]

deposits, Ld.CIT(A) granted partial relief to the assessee by

observing as under :

“32. I have considered carefully all the material before me. Although the Appellant taken this issue up as a ground of appeal, no details were filled at the time of filing appeal attempting to explain these cash transactions. Further, no explanation is found regarding this transaction in his detailed written submissions dated 25.11.2009, wherein he has dealt at great length on the issue of capital gains arising from the transaction jointly entered into by him and Shri Murkute. However, in his letter dated 01.04.2010 submitted

before the AO during remand proceedings, the Appellant submitted as below: “I herewith submit the source of cash deposited in Janata Sahakari Bank Ltd. and The Seva Vikas Co- Op. Bank Ltd. This cash is received from 1) Mr. Jayantilal Madanlal Dudhediya,2) Mrs. Bharati Jayantilal Dudhediya 3) Prashant Jayantilal Dudhediya and 4) Rakhi Jayantilal Dudhediya for advance for sale of my property at thergaon, which is already mentioned in my Assessment Proceedings for the Assessment year 2006-07.”

Aggrieved by the order of Ld.CIT(A), assessee and Revenue are now

in appeal before us.

The Ld.A.R. reiterated the submissions made before lower

authorities and submitted that the entire transaction was executed

by Shri Ganpat Mukundrao Murkute and assessee’s name was

merely used as name lendor for the transaction. In support of his

contention, assessee also filed a sworn affidavit, which reads as

under :

A F F I D A V I T

“THIS AFFIDAVIT IS MADE ON THE 3rd DAY OF NOVEMBER 2017 AT PUNE.

I SHRI MAHENDREA RAJARAM VITKAR ,AGE : 51 YEARS, Occ: Business, R/ at :Velthika Nagar Kaveri, Nagar Police line Road, Thergaon, Chinchwad, Pune 411033, do hereby state on solemn affirmation that:

I am residing on the above mentioned address with my family. Since 2006 I had the business under the name and style of Meghali Transport and bricks suppliers of selling bricks. From the year 2003 to 2006 I was working in the office of Shri Sanjay Jain. I have done my education upto 8th class only.

I say that Shri Sanjay Jain when was in Delhi, called up and said that Shri Ganpat Murkute would come to the office and at that time you go with him to Mahalunge and execute a sale deed in respect of the property of Shri Kirloskar in the name of yourself and Shri Murkute and also that he told me to issue cheques from my account in SevaVikas Bank and that he would arrange to deposit the amount in the account . I say that accordingly I went with Shri Murkute to Mahalunge and executed the sale deed on 16th May 2005 and on 20th May 2005 we got the same registered in our name and from my account in Seva Vikas Bank I issued three cheques dated 25/5/2005 and 20/6/2005 amounting to total amount of Rs. 55 Lakhs Only.

As Shri Jain had told me I had issued cheques to MR. Kirloskar from my account in Seva Vikas Bank but Shri Jain had not deposited the amount in my account and so the cheques returned dishonoured. Thereafter after the return of Shri Jain from Delhi, there were talks between Shri Murkute and Shri Jain regarding the payment to be made to Shri Kirloskar and at that time Shri Jain told MR. Murkute that the money cannot be arranged for and at that time Shri Jain told that even he does not want the Mahalunge land of Shri Kirloskar and that I should go with Mr. Murkute and the land purchased in my name should be transferred in the name of MR. Murkute. And so I went to hotel Radhika at Aundh to meet Mr. Murkute and told MR. Murkute that the land purchased in my name has to be transferred in your name. At that time Shri Murkute told me that for that I would have to pay a stamp duty of Rs.5,00,000/- and so instead of the sale deed on 15th June, 2005, he got a power of attorney made and on the same day i.e. 15th June 2005 I along with Mr. Murkute went to the sub registrar office at Baner and got the power of attorney executed and registered from me in the name of Shri Murkute and that the complete responsibility of the said entire transaction shall be on Mr. Murkute and that the entire sale consideration would be paid by Mr. Murkute and that all the profits and loss arising out of it shall be the responsibility of MR. Murkute. I say that the responsibility and the profit and loss arising out of the entire above transaction was that of Shri Murkute alone and he shall be responsible for the same solely and so the details of the said transaction was not shown in my income tax returns and there was no reason for showing the same.

Thereafter in June 2006 Shri Murkute again called me up and told me that the said land has been sold to Riverview Properties Pvt Ltd., and that Riverview Properties Pvt. Ltd., has issued a cheque of half of the consideration amount in my name and for that I would have to open an account in United Western Bank and accordingly Mr. Murkute made me open an account in United Western Bank and made me sign on the cheques both in the front and at the back side and again told me that the complete responsibility of the said transaction shall be solely his (Mr. Murkute).

I say that I have not invested any amount nor have I received any amount in above mahalunge land sale as well as purchase transaction.

By this affidavit I wish to bring to your notice certain important points for consideration.: 1. I have not given any amount during the purchase of the land at Mahalunge belonging to Mr. Kirloskar.

benami transaction and the transaction is solely of Shri Murkute and done by him only, In the statement recorded on oath before the income tax officer, Shri anpat Murkute had told that Shri Vitkar( i.e. myself) had not spent an single rupees ( any amount) nor have done any efforts and that I was not aware of any persons involved in the sale and purchase of the said property and transaction.

Taking into consideration all the above aspects, it is clear that Shri Murkute took advantage of my innocence/ignorance and took my signature and used those papers and took complete advantage of the said transaction for himself only. Mr. Murkute did not show the receipt of the complete income in his name but has shown in part, and thereby cheated me. I have not received any income out of this transaction hence the same needs to be deducted from my income as assessed by my income tax officer.

Considering the statement on oath made by me and Mr. Murkute and also the statements on cross examination of Mr. Murkute before my Assessing Officer, the Assessing Officer of Mr. Murkute has assessed full income of the transaction in reassessment of MR. Murkute as his income. This means income tax department has accepted that income of this transaction is not my income, therefore income from the said sale transaction needs to be deleted from my income.

The above information is true and correct to the best of my knowledge, information and belief and If the same .is found to be false, then I shall be punishable under Indian Penal Code . The above information is true and correct and I have signed hereunder today.

Dated: Mahendra Rajaram Vitkar Place : Affiant

Translated from the Marathi affidavit of Mahendra Rajaram Vitkar by the undersigned advocate.

Sd/-- Adv. Janaki Dave. (Sanad No.MAH/1216/99)”

assessee had not paid any amount for purchase of land nor has

received any amount on its sale. He therefore submitted that no

income on account of sale of land was received by him. He

therefore submitted that the addition be deleted.

submissions made before Ld.CIT(A) and submitted that out of the

deposits of Rs.64,81,248/- on account of unexplained deposits, an

amount of Rs. 50 lacs was explained to have been received towards

the advance of sale of property. He therefore submitted that when

the Assessee has explained the source of deposits, Ld CIT(A) has

rightly deleted the addition.

Ld.CIT(A) and submitted that in the absence of any explanation,

AO was fully justified in treating the deposits made in the bank

account as un-explained and that Ld.CIT(A) erred in deleting the

addition of Rs.50 lacs and submitted that the order of AO be

upheld. On the issue of taxing of capital gains, he supported the

order of Ld.CIT(A).

material on record. The issue in the present ground is with respect

to alleged unexplained deposits in the bank account of the

assessee. We find that while granting relief to the Assessee. CIT(A)

has given a finding that out of the total deposits of Rs 64.31 lacs,

assessee had given the explanation with respect to Rs 50 lakhs and

that no submissions were made by the AO in the remand

proceedings for the balance. In such a situation he has held the

deposit to the extent of Rs 50 lakhs explained and had confirmed

the addition for balance amount of Rs 14,81,248. Before us

Revenue has not pointed out any fallacy in the findings of

Ld.CIT(A). In such a situation, we do not find any reason to

interfere with the order of Ld.CIT(A) and thus, the grounds of

Revenue are dismissed.

of Shri M.R. Vitkar and Ganpat Murkute are inter-connected, we

proceed to dispose of the same by a consolidated order.

sale of piece of land situated at Village Mahalunge. The issue

which arises in the present set of appeals is the assessability of

income arising from sale of the said land. However, in order to

adjudicate the same, it is necessary to look into the factual aspects

connecting purchase of the land. The assessee Shri Ganpat

Mukundrao Murkute claims that he had jointly purchased the said

land with Shri Mahendra R. Vitkar from M/s. Abhi Agro Trust and

M/s. Sangram Agro Trust. The total consideration was Rs.2.20

crores to be paid vide two separate agreements dated 20.05.2005.

The first transaction for purchase of property was payment of

Rs.20 lakhs each to the two trusts, who owned property. Initially

cheque was given by Shri Mahendra R. Vitkar but the same could

not be honoured and thereafter, Shri Ganpat Mukundrao Murkute

paid Rs.20 lakhs each to the two trusts. No further payment was

made to the trusts. Subsequently, there was an agreement to sell

the said land to Gurumukh Sukhwani and Ghansyam Sukhwani,

against which sum of Rs.20 lakhs was received as earnest money

on 10.06.2005. However, the said sale could not be completed and

the same was cancelled. Meanwhile, Shri Ganpat Mukundrao

Murkute received Power of Attorney from Shri Mahendra R. Vitkar

for completing sale transaction. On a later date i.e. 28.03.2006

Shri Ganpat Mukundrao Murkute entered into an agreement of

sale with M/s.Riverview Properties Pvt. Ltd. for total consideration

of Rs.4.85 crores. While offering income from the said transaction,

Shri Ganpat Mukundrao Murkute declared half share of sale

consideration at Rs.2.42 crores and after reducing the cost of

acquisition and improvements and development cost and also

payment of commission for the sale transaction, computed the net

short term capital gains at Rs.48,23,210/-. It may be pointed out

herein itself that though Shri Ganpat Mukundrao Murkute offered

half share of sale consideration, but he deducted total cost of

acquisition (partly paid), improvement and commission from his

share and offered the balance to tax. The assessee Shri Ganpat

Mukundrao Murkute during the course of re-assessment

proceedings had on the other hand, re-worked the income from

short term capital gains at Rs.64,81,248. The income was declared

as short term capital gains but purchase transaction was not

complete, as balance consideration was not paid. The plea of other

alleged co-owner Shri Mahendra R. Vitkar is that he had no funds

to make the aforesaid investment for purchase of land to the extent

of Rs.2.20 crores. The transaction was completely done by Shri

Ganpat Mukundrao Murkute and even the initial earnest money

for purchasing the said property was paid by him and even the sale

consideration was received by him. He admits that a bank

account was opened in his name, wherein some money was

deposited but all that money was withdrawn from the said bank

account. In this regard, he also admits to have signed blank

cheques and handed over the same to Shri Ganpat Mukundrao

Murkute. Shri Mahendra R. Vitkar in this regard has filed an

affidavit before us, which though is self-serving is in support of his

contentions vis-a-vis transactions.

Shri Ganpat Mukundrao Murkute was the one who initiated

purchase transaction by making the payments out of his bank

account and that payment he claims to be his cost of acquisition.

He does not claim it to be payment on joint account. Thereafter,

he also has claimed development expenses entirely to his account

and even commission on account of sale transaction as deductible

from his share of capital gains. The issue of non-allowability of

development expenses and commission has already been dealt with

by us in the paras herein and in the absence of any evidence, the

same has not been allowed in the hands of Shri Ganpat

Mukundrao Murkute.

alia submitted that he has not invested any amount for the

purchase of land. He has further submitted that he was forced to

open bank account and put signatures on blank cheques and

Murkute misused the cheques and had withdrawn the amount

from his account. He further submitted that the bank account

with United Western Bank has been closed and he had never made

an application for its closure. The cheques issued by M/s.

Riverview Properties Pvt. Ltd., were taken by Ganpat Murkute and

deposited in the United Western Bank and Ganpat Murkute issued

the cheques to different persons without the knowledge of the

Mahendra Vitkar. Before us, nothing was brought on record to

demonstrate that the contents of the affidavit are false. The

appeals of Ganpat Murkute and Mahendra Vitkar were heard

together. We find that Ld.CIT(A) while deciding the issue in the

case of Mr. Ganpat Murkute has noted that M.R. Vitkar was only

a name lendor for the transaction and the entire transaction was

carried out by the Ganpat Murkute and that Ganpat Murkute was

solely responsible for the entire transaction and the assessee was

only instrumental in carrying out the transaction in consultation

with Shri Sanjay Jain. He has further given a finding that based

on the statement recorded u/s 131 of M.R. Vitkar and considering

the totality of the material on record, it was Ganapat Murkute who

carried out the transaction and was the sole beneficiary. In the

entirety of the facts and circumstances where the transaction has

been conducted by Shri Ganpat Mukundrao Murkute and also as

financial position of Shri Mahendra R. Vitkar was not sound to

make investment of even Rs.10 lakhs, as is evident from his bank

position and in view of the declaration of entire cost of acquisition

by Shri Ganpat Mukundrao Murkute in his hands, we hold that

transaction relates to Ganpat Murkute and the sale consideration

in entirety is to be considered in his hands in order to compute

income from short term capital gains. In such a situation, we are

of the view that Ld.CIT(A) has rightly held the entire amount of

capital gains to be taxable in the hands of Ganpat Murkute. Since

the entire gains are held to be taxable in the hands of Ganpat

Murkute, we hold that no portion of capital gains are taxable in the

hands of Mahendra Vitkar. Thus, the ground in case of Ganpat

Murkute is dismissed and in the case of Mahendra Vitkar is

allowed.

of Ld.D.R. Ld.D.R. has pointed out that in the capital gains

working, assessee has shown different issues of capital gains and

has not shown the full value of consideration received on sale of

land. Further, since the original intimation was u/s 143(1) of the

Act and not u/s 143(3) of the Act, we are of the view that AO was

fully justified in resorting to re-opening of assessment. Further

the case laws relied upon by Ld.A.R. being distinguishable on facts,

are not applicable to the present case.

improvement of land and payment of commission claimed by

Ganpat Murkute, we find that before AO and Ld.CIT(A), assessee

has not been able to substantiate the expenditure incurred on

account of development of land as well as payment of commission.

Considering the aforesaid facts, we find no reason to interfere with

the order of Ld.CIT(A). Thus, the grounds of assessee in the case

of Ganpat Murkute are dismissed.

No.2141/PUN/2013 and the appeal of the Revenue in ITA

No.1213/PUN/2010 are dismissed and the appeal of the

assessee in ITA No.1208/PUN/2010 is allowed.

Order pronounced on 2nd day of February, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 2nd February, 2018. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-V, Pune. CIT-V, Pune. 4. CIT(A)-II, Pune. 5. CIT-II, Pune. 6. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, 7. ITAT, “A” Pune; 8 गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER,स �या // True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune