DR H KRISHNA vs. THE DEPUTY COMMISSIONER INCOME TAX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.541 OF 2014 BETWEEN: DR. H. KRISHNA S/O HONNEGOWDA AGED ABOUT 52 YEARS KAVERI NURSING HOME NO.1132, 3RD MAIN ROAD 1ST CROSS, ASHOKNAGAR MANDYA-571401. ... APPELLANT (BY SRI. CHYTHANYA K.K. ADV.,) AND: THE DEPUTY COMMISSIONER INCOME TAX CENTRAL CIRCLE, NO.55/1 SHILPASHREE BUILDING 1ST FLORR, OPP.STERLING TALKIES VISHWESWARANGAR, MYSORE-570008.

... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 08.08.2014 PASSED IN ITA NO.1012/BANG/2011 FOR THE ASSESSMENT YEAR 2009-10, PRAYING TO: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE.

2 (II) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU 'C' BENCH IN ITA NO.1012/BANG/2011, DATED 08-08-2014 FOR THE ASSESSMENT YEAR 2009-10. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment year 2009-10. The appeal was admitted by a bench of this Court vide order dated 20.04.2015 on the following substantial questions of law: (i) Whether on the facts and in the circumstances of the case, the Honourable Tribunal was right in not considering Rs.50,00,000/- as part of cost of acquisition ignoring (a) the actual sale consideration as per the sale agreement, (b) actual payments and (c) assessment in the hands of seller. (ii) Whether on the facts and in the circumstances of the case, the

3 Honourable Tribunal was right in denying the capitalization of the interest on borrowed funds, ignoring that the amount borrowed actually funded the payment of purchase consideration as established in the bank statement. (iii) Whether on the facts and in the circumstances of the case, the Honourable Tribunal's finding as regards purchase consideration and utilization of borrowed funds is perverse being based on irrelevant consideration and being de- hors the relevant consideration. 2. Facts leading to filing of this appeal briefly stated are that the assessee is a Doctor by profession, and runs a nursing home at Mandya in the name and style of M/s Kaveri Nursing Home, which is a proprietary concern. The assessee entered into an agreement for purchase of a property situate at J.C.Road, Bangalore on 01.06.2005 with one M/s Blue Cross Builders and Investors Ltd. For a consideration of Rs.9,92,75,000/-.

4 Thereafter, on 02.01.2007 a supplemental agreement was executed, in which sale consideration was mentioned as Rs.11,82,50,000/-. Thereafter, M/s Blue Cross Builders and Investors Ltd. executed a Power Of Attorney on 01.09.2007 in favour of the assessee. The assessee soled the aforesaid property on 10.04.2008 to one Rajendra Kumar Jain and the amount of sale consideration mentioned in the sale deed was Rs.18,50,00,000/-. The assessee however, declared the sale consideration in the return of income as Rs.21,75,00,000/-. The assessee filed the return of income on 29.04.2009 for the Assessment Year 2009- 10, in which income of Rs.10,227,22,270/- was declared. Thereafter, a notice under Section 143(2) of the Act was issued on 14.09.2009 for scrutiny assessment. A notice under Section 142(1) was also issued, by which the assessee was asked to furnish the details. The Assessing Officer passed an order of assessment on 30.12.2010.

5 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 22.08.2011 partly allowed the appeal preferred by the assessee. The revenue thereupon approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by an order dated 08.08.2014 inter alia held that there is no corroborative material on record to demonstrate that the assessee has to pay a sum of Rs.50,00,000/- to M/s Blue Cross Builders and Investors Ltd. except bald assertion of the assessee that he has to pay Rs.50,00,000/- to M/s Blue Cross Builders and Investors Ltd. and denied the claim of deduction of Rs.11,82,50,000/- as part of cost of acquisition of the property. The capitalization of interest of Rs.7 Lakhs paid on borrowed fund for purchase of the property was also denied. In the result, the appeal preferred by the revenue was partly allowed. In the aforesaid factual background, the assessee has approached this court.

6 4. Learned counsel for the assessee submitted that the tribunal erred in holding that there is no material on record that the assessee has to pay a sum of Rs.50,00,000/- to M/s Blue Cross Builders and Investors Ltd. except the bald assertion of the assessee. In this connection, our attention has been invited to list of documents, which was filed before the tribunal. It is further submitted that the tribunal ought to have appreciated that M/s Blue Cross Builders and Investors Ltd. in response to the notice under Section 133(6) of the Act had filed copy of its return of income and copy of ledger accounts of the assessee, wherein the balance of Rs.50,00,000/- was shown as outstanding. It is also argued that the tribunal ought to have appreciated that sale consideration of Rs.21,75,00,000/- was adopted as against the amount of Rs.18,50,00,000/- as mentioned in the sale deed for stamp duty valuation and therefore, the Assessing Officer ought to have considered the value of cost of acquisition as Rs.11,82,50,000/-. It is further

7 submitted that the revenue cannot be permitted to blow hot and cold. It is also urged that the tribunal ought to have appreciated that there was an oral agreement between the assessee and Dr.Manjunath under which the amount was borrowed and assessee was required to pay interest on the aforesaid amount and even oral agreement is binding between the parties. It is further submitted that the findings recorded by the tribunal are perverse. In support of aforesaid submissions, reliance has been placed on 'ASHISH PLASTIC INDUSTRIES VS. ACIT', 2015-TIOL-51-SC-IT, 'M.BASHEER AHAMED VS. CIT, (2013) 352 ITR 157 (MAD), 'CIT VS. GEORGE HENDERSON & CO. LTD', (1967) 66 ITR 622 (SC), 'PR. CIT VS. QUARK MEDIA HOUSE INDIA (P.) LTD.', (2017 391 ITR 145 (P & H), and 'HIRA LAL RAM DAYAL VS. CIT', (1980) 122 ITR 461 (P & H). 5. On the other hand, learned counsel for the revenue submitted that the assessee had mentioned the

8 cost of acquisition as Rs.11.32 Crores in the Special Power Of Attorney, which is a registered document. It is further submitted that the assessee in fact is attempting to adjust a sum of Rs.50,00,000/- from unaccounted cash of Rs.3.75 Crores, which was seized from him. It is further pointed out that schedule of payments given by the assessee as mentioned in para 6 of the order of assessment does not refer to a sum of Rs.50,00,000/-, which is payable. It is further submitted that from perusal of details of payment as tabulated in para 4 of the order of assessment, the liability to the vendor viz., M/s Blue Cross Builders and Investors Ltd. is only Rs.11.32 Crores and not Rs.11.82 Crores as claimed by the assessee. It is also pointed out that documents referred to the by the assessee are contrary to the registered document and have been prepared subsequently and have no bearing on the issue. It is also urged that the assessee has failed to establish accrual of borrowing for acquisition of the property in

9 question and the receipt of loan was made after advance payment was made and admittedly, after receipt of loan, no advance was paid. It is also urged that the finding of fact has been recorded by the tribunal and is based on the documents produced by the assessee himself and therefore, the same cannot be termed as perverse. 6. We have considered the submissions made by learned counsel for the parties and have perused the record. From perusal of the details of payments furnished by the assessee on 09.08.2010, which is mentioned in para 6 of the order of assessment, it is evident that there is no mention of amount of Rs.50,00,000/-, which is said to be payable to M/s Blue Cross Builders and Investors Ltd. It is also pertinent to mention here that M/s Blue Cross Builders and Investors Ltd. had furnished an explanation before completion of the assessment, in which it was stated that the deal was complete on 31.08.2007 and M/s Blue Cross Builders and Investors Ltd. is not concerned

10 about any subsequent events. It has further been stated that further consideration, if any, in respect of the aforesaid property has been received by the assessee and the tax liability is also on the assessee. The Assessing Officer has taken note of the reply filed by the assessee and has held that the stand of the assessee cannot be accepted as no details regarding exact dates and notes of payments between the parties concerned were furnished at any time during the statements recorded under Section 131 of the Act at the time of investigation. It is also noted that there is no mention of any amount payable to M/s Blue Cross Builders and Investors Ltd. in the return of income for the Assessment Year 2009-10 and at no point of time, before issuance of notice dated 01.10.2010 the assessee has accepted that any amount was payable to M/s Blue Cross Builders and Investors Ltd. Accordingly, the Assessing Officer has added Rs.50,00,000/- under the head of short term capital gains to the income of the

11 assessee. It has also been held that there was no agreement with Dr.Manjunath with regard to any amount borrowed from him or with regard to any payment of interest and assessee has invested entire money towards purchase of five sites in the same year. It has also been held that the money was repaid to Dr.Manjunath on 25.07.2007 and property has been sold on 10.04.2008 and offered to tax in Assessment Year 2009-10 and the events have taken place in different financial years. Therefore, the amount of Rs.7,00,000/- cannot be allowed as expenses under the head of short term capital gains. The tribunal has held that in the Power Of Attorney executed in favour of the assessee, there is no mention that it has to pay a sum of Rs.50,00,000/-. The tribunal has agreed with the findings recorded by the Assessing Officer and has held that the Assessing Officer has rightly not granted the benefit of Rs.50,00,000/- to the assessee towards cost of acquisition. It has further been held that there is no

12 direct nexus between the loans advanced to the assessee by Dr.Manjunath and investment made by the assessee in the property in the same year and the money has been repaid to Dr.Y.S.Manjunath prior to sale of the property. The tribunal has therefore held that the amount of Rs.7,00,000/- cannot be included in the cost of acquisition. The findings recorded by the tribunal are based on meticulous appreciation of evidence on record which by no stretch of imagination can be said to be perverse. Even otherwise, the matter stands concluded against the assessee by findings of fact, which are based on meticulous appreciation of evidence on record. The findings of fact do not suffer from any perversity warranting interference of this court in exercise of powers under Section 260A of the Act. [SEE: SYEDA RAHIMUNNISA VS. MALAN BI BY L.RS. AND ORS. (2016)10 SCC 315 and PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE & ORS. VS. SOFTBRANDS INDIA P. LTD., (2018) 406

13 ITR 513]. In view of preceding analysis, the substantial questions of law are answered against the assessee and in favour of the assessee. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss