ITO 12(1)(1), MUMBAI vs. MAURICE NAZARETH, MUMBAI

अपीलाथ� क� ओर से/By Appellant : Shri Randhir Gupta, D.R. ��यथ� क� ओर से/By Respondent : Mrs. Roshan P. Nanavati, A.R. सुनवाई क� तार�ख/Date of Hearing : 04.08.2016 घोषणा क� तार�ख/Date of Pronouncement : 26.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M:

This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-23, Mumbai, dated 30.11.2011 for A.Y. 2008-09 on following grounds:

A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 2

“1. On the facts and circumstances of the case and in law. the Learned CIT(A) erred in deleting the addition of Rs.3,91,124/- being the difference between the purchase price mentioned in the agreement and purchase price as shown in the P & L account of the assessee on account of unexplained investment made by the AO ignoring the fact that the assessee had failed to explain the difference in spite of giving sufficient opportunity to the assessee. la. While doing so the Ld. CIT(A) was not justified in admitting the assessee's additional evidence without giving the opportunity to the AO.

2a. While doing so, the Ld CIT(A) was not justified in admitting the assessee's additional evidence without giving the opportunity to the AO.

4. On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of gift amount of Rs. 53,83,348/- ignoring the fact that the assessee has not proved the genuineness of the said gift with substantial evidence nor furnish any proper explanation in spite of giving several opportunity to the AO.

A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 3

4a. While doing so, the LD CIT(A) was not justified in admitting the assessee's additional evidence without giving the opportunity to the AO.

5. On the facts and circumstances of the case and in the law, the Ld CIT(A) erred in deleting unexplained cash credit of Rs. 6,33,170/- ignoring the fact that the assessee has not proved the credit worthiness of these investments made ,nor furnished any explanation in spite of giving several opportunity.

5a. While doing so, the LD CIT(A) was not justified in admitting the assessee's additional evidence without giving the opportunity to the AO.

6. On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in the deleting the addition of unexplained cash credit of Rs. 4,16,000/- ignoring the fact that the assessee has not proved the sources of funds for these FD's in banks nor furnished any proper explanation in spite of giving several opportunity.

6a. While doing so, the LD CIT(A) was not justified in admitting the assessee's additional evidence without giving the opportunity to the AO.

7. On the facts and circumstances of the case and in law, the ld. CIT(A) failed to give opportunity of being heard to the AO and violated the provisions of Rule 46A.” 2. First issue is with regard to addition of Rs.3,91,124/-. Assessee has received AIR information that assessee had sold a property at Malad at Rs.62,19,500/-. Assessee furnished a few details in support of investment in flat which was confirmed by Bank of India (Bandra) as per details mentioned in assessment order giving dates and amounts which totaled to Rs.58,28,376/- as against AIR information showing the same as Rs.62,19,500/-. Since, assessee could not furnish details of A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 4 amount of Rs.3,91,124/- for purchase of subject property, addition of said amount was made on account of unexplained investment.

2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee.

2.2 Same has been opposed on behalf of Revenue inter alia submitting that CIT(A) erred in deleting addition of Rs.3,91,124/- being difference between purchase price mentioned in the agreement and purchase price as shown in P&L account of assessee on account of unexplained investment. Learned Departmental Representative also opposed the admission of additional evidence. On other hand, learned Authorized Representative supported the order of CIT(A).

2.3 After going through rival submissions and perused the material on record, we find that stand of assessee has been that there was no sale of property by assessee. Agreement to sale by the developer/builder has been misunderstood by Assessing Officer as sale agreement of assessee. In fact, assessee entered into agreement for the purchase of immovable property at this price at Malad (E). Copy of agreement of sale was filed before CIT(A) inter alia stated that balance amount of Rs.3,91,124/- to Raheja Tipco Heights was made in subsequent A.Y. 2009-10 and hence not includible in A.Y. A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 5 2008-09. Copy of the balance sheet for A.Y. 2009-10 was furnished. Copy of bank statement was filed in support of the payment. Copy of ledger account of SO property at Raheja Property, Tipco Heights, Malad (E) which shows opening balance of Rs.58,28,376/- with closing balance of Rs. 66,76,205/- which includes payment made during the year. It reveals that Rs.8,47,829/- was paid during F.Y. 2008-09. Though the actual amount paid was Rs.66,76,205/-. The value of property was taken at Rs.62,29,500/-. The balance payments to Rahejas were for other expenses including stamp duty, stamps, car park space, society maintenance and various other charges payable which are not included in the agreement for the said property. All payments were made from Bank of India Overdraft Account. Bank statements for the period from 01.04.2008 to 31.03.2009 highlighting the entries of payment were filed. Statement from Raheja Universal Ltd. were also filed. In view of said explanation filed along with supporting documents, evidence of payment through banks, addition was rightly deleted by CIT(A). Same is upheld.

3. Next issue is with regard to unexplained expenditure u/s.69 of the Act on account of developing expenditure for Karjat farm house of Rs.17,34,492/-. Assessing Officer made addition of Rs.18,30,118/- on account of Karjat Farm House. Assessee had shown developing expenses at Rs.18,30,318/- for Karjat farm house for which no details were furnished. Assessing Officer made addition of said amount as unexplained expenditure u/s.69C of the Act. A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 6 3.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee.

3.2 Same has been opposed on behalf of Revenue inter alia submitting that CIT(A) erred in deleting the unexplained expenditure u/s.69 of the Act on account of developing expenditure for Karjat farm house of Rs.17,34,492/- ignoring the fact that assessee has not proved the expenditure nor furnished any proper explanation in spite of giving several opportunities to assessee. On other hand, learned Authorized Representative supported the order of CIT(A).

3.3 After going through rival submissions and perused the material on record, we find that the stand of assessee has been that an amount of Rs.18,30,318/- is a total amount spent year after year by assessee from the year 1989 till 2008. The plot No. was 100/2 and was the first investment made in agricultural land. Much later assessee started constructing farm house on small part of agricultural land. Assessee paid Rs.6000/- approximately as initial down payment for purchase of a part of big plot of land. However, the seller did not register the document for almost 10 year and assessee during these 10 years invested in developing the land in time to time. In February 1999, the seller demanded Rs.20,000/- for registration of the plot from each of the buyer including assessee and the same was paid. Thereafter, documents for A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 7 survey No. 100/2 was registered on 24.02.1999 and Rs 53,000/- was paid as assessee share of registration fee between 1989 to F.Y. ending on 31.03.2007 assessee invested Rs.12,29,214.55 from time to time. The investment was reflected in the books of account in each year. During F.Y.2007-08, assessee invested Rs.6,01,104/- and the total value of asset was reflected as Rs.18,30,318.55. The actual investment during the year was only Rs 6,01,104/- which was supported by vouchers. The Assessing Officer, however, added the full balance of Rs.18,30,318.55 together. Copy of 7/12 Utara from revenue records dated 24.02.1999, 23.04.2001 was enclosed. It was stated that produce on the farm in the form of cow and buffalo milk, chicken, eggs and vegetables Most part of these items were sold in the local market and balance used for personal use of assessee and his family. Income from farm house was declared in each assessment year. Details of the development expenses totaling Rs.6,01,104/- was filed. Assessee also filed detailed narration for each payment made by assessee along with xerox copies of the vouchers. Assessing Officers order, submissions made on behalf of assessee and materials on record have been considered Only the expenses incurred during the year (Rs.6,01,104/-), which were considered for addition/otherwise during the year. Assessee has furnished details of each payment made during the year with the receipt, which were paid to purchase of inverter batteries, building material, transport, labour and to architect. Copies of the vouchers have also been filed. Some of the payments have been made by cheques which were found ITA No.997/Mum/12 A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 8 acceptable. The remaining payments have been made in cash though supported by some cash memos, payment was not verifiable, since, same has been shown as made in cash. The cash payments which were as follows were held liable to be added as unverifiable. So, same were added. In appeal, after taking into consideration facts and circumstances, the addition made by Assessing Officer was restricted to following cash payments: Date Particulars Voucher No. Amount 19/05/2007 Paid to Shree Gajanan 51 Rs.24,170/- Transport 16/11/2007 Paid to Danaji Mistry 170 Rs.19,000/- 28/11/2007 Paid to Hatimi Steel Traders 181 Rs33,456/- 23/12/2007 Paid to Ganesh Singh 226 Rs.19,000/- Total Rs.95,626/- This reasoned factual finding of CIT(A) needs no interference from our side because payment by cheque has been accepted and cash has been disallowed. We uphold the same.

4.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 9 and having considered the same, CIT(A) granted relief to assessee.

4.2 Same has been opposed on behalf of Revenue inter alia submitting that CIT(A) was not justified in holding that shares were received as inheritance and also in view of explanation (1)(i)(b) to Section 2(42A) of the Act in determining the period for which a capital asset was held of Rs.11,94,972/- and CIT(A) wrongly directed the Assessing Officer to treat the long term capital gain as exempt. On other hand, learned Authorized Representative supported the order of CIT(A).

4.3 After going through rival submissions and perused the material on record, we find that the stand of assessee has been that he had received shares in movable property by family arrangement which included distribution of shares held by his late father Mr. Edgar S. Nazareth. Shares were divided between four family members, (a) Mrs. Enid A. Nazareth, mother of assessee and wife of deceased father, (b) Mr. Daniel Nazareth, eldest son, (c) Mr. Maurice B. Nazareth., assessee and (d) Mr. Lancy Nazareth, the youngest son On distribution of shares, following shares were received by the assessee as inheritance/gift. Qty Name of the company a) 188 Avaya Global b) 100 HDFC Bank c) 134 HDFC Bank d) 46 Honeywell e) 1280 ITC f) 552 Larsen & Toubro (sold after31/03/2008) g) 34 Tata Sponge h) 50 TRF Ultra Tech i) 221 A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 10 Assessee also had his own investments in shares. He had his separate Demat account and shares were transferred to his Demat Account from his mother's account. During the year, except 552 L&T shares, assessee sold all the shares through Nalanda Securities. He also sold off some of his own share investment and totally he received Rs.11,94,972/-. This amount was accepted by the Assessing Officer. The fact, these shares were held by assessee and his father much over one year and hence under the Income Tax Act, long term capital gain on such sale off shares was fully exempt and it was not appreciated by Assessing Officer. The Accountant has shown this amount under the head long term capital gain rightly, this amount was reflected in bank account and was out of sale proceeds of shares. Assessee suffered stroke and was admitted to hospital. To meet the hospitalization expenses, assessee sold some of his own investment in shares and except 552 shares of L&T, he sold all shares received as inheritance/gift from his mother. Shares were held more than one year hence long term capital gains were exempt. Sales were done through Nalanda Securities Pvt. Ltd. from whom he received Rs.11,94,972/- and the Assessing Officer got confirmation from the share broker. In support of contention that shares were held for more than one year it was submitted that the said shares were held by Mr. Edgar S Nazareth for more than one year. Mr. Edgar S. Nazareth was assessed to Income-tax and Wealth-tax in Ward 19(3)(1) and PAN No.- was AAAPN 7692C. Statement of demat account of Mr. Edgar S. Nazareth from 01.04.2005 to 01.12.2006 was filed. Mr. Edgar S. Nazareth passed away on ITA No.997/Mum/12 A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 11 06.11.2006 which reveals that shares were held for more than one year. Xerox copy of wealth tax return for A.Y. 2004-05 with details of share investment account were filed along with xerox copy of return of income with details of dividend income received for A.Y. 2004-05. Though bank demat statement was from 01.04.2005, the affidavit of Mrs. Enid A. Nazareth inter alia stated that Mr. Edgar S Nazareth held shares many years prior to this date. In this regard, it was submitted that shares held for more than one year hence long term capital gain was rightly claimed as exempt by assessee. In view of above discussion, CIT(A) observed that shares were received as inheritance and in view of Explanation (1)(i)(b) to section 2(42A) of the Act, in determining the period for which a capital asset is held, there shall be included the period for which the asset was held by the previous owner. In the Light of details filed, the shares are found held for more than one year and accordingly sale proceeds from the same (being long term capital gains) were rightly allowed as exempt, after verification by the Assessing Officer that all conditions u/s. 10(38) were fulfilled. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same.

5.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee.

5.2 Same has been opposed on behalf of Revenue inter alia submitting that CIT(A) erred in deleting addition of gift amount of Rs.53,83,348/- ignoring the fact that assessee has not proved the genuineness of said gift with substantial evidence nor furnish any proper explanation in spite of giving several opportunity to Assessing Officer. On other hand, learned Authorized Representative supported the order of CIT(A).

5.3 After going through rival submissions and perused the material on record, we find that the stand of assessee has been that Assessing Officer had insisted to obtain the income tax A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 13 records and gift deed between Mrs. Enid A. Nazareth, mother of assessee and assessee. Since, the Authorized Representative of assessee was not the tax consultant of the mother the same could not be given. Further, that gift between of mother and son need not be by way of stamped gift document. The amount was received by cheques and reflected in assessee’s return of income. The copy of PAN of mother was provided Late Mr. Edgar S. Nazareth died intestate on 06.11.2006. He left behind the four members of his family. Late Mr. Edgar S. Nazareth died without making a written Will. But, Enid A. Nazareth then almost 79 years was well aware of husband's intentions. She, therefore, decided to distribute her inheritance amongst herself and her three sons as given above, during her life time, keeping her share also, so that she lived independently. The estate of late Mr. Edgar S. Nazareth were in the forms of immovable properties and movable properties. But, since there was no immediate liquidity of asset, family settlement was agreed upon and entered into between the four Nazareth family members. Same was on records of Assessing Officer. Late Mr. Edgar S. Nazareth had the following immovable properties: a. Flat in Adarsh CHS Ltd. at Dadar b. Flat in Rose Minar CHS Ltd. at Bandra c. Flat in Coronet CHS Ltd. at Bandra Since, mother of assessee, Mrs. Enid A. Nazareth, was the sole legatee of Estate of Mr. Edgar S. Nazareth, as per family arrangement, she first got transferred all the properties; both immovable and movable properties in her name from time to time. His movable properties were in the form of shares, ITA No.997/Mum/12 A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 14 debentures, PPF balance, balance in bank account etc. As per family arrangement, all expenses of transfer of all properties in the name of Mrs. Enid A Nazareth were to be borne by said Mrs. Enid A Nazareth out of Estate of Mr. Edgar S. Nazareth. However, since immovable properties were three and the legatees were four members of family, mother + three sons – it was decided as under: “Coronet flat Bandra Flat - where, both the parents were residing, from the day they left Colaba residence, shall be continued to be held in the name of Mrs. Enid A Nazareth. It was Self Occupied property of Mr. Edgar S. Nazareth nominated to Mrs. Enid A Nazareth. Mrs. Enid A Nazareth continues to reside in the same flat till her life time. Therefore, it was decided that only two properties viz. flat in Adarsh CHS at Dadar and Rose Minar CHS at Bandra be sold out and the net proceeds after payment of taxes, duties etc., will be divided into three equal parts between the three sons viz. Mr. Daniel Nazareth, Mr. Maurice B. Nazareth (appellant) and Mr. Lancy Nazareth. The proceeds were therefore given as gift from mother –Mrs. Enid A Nazareth to the three sons. All properties were sold accordingly and taxes etc. were paid by Mrs. Enid A Nazreth. All these documents were submitted by M/s. Atul Purani & Associates, the C.A. of the said Mr. & Mrs. Nazareth with his covering letter. Copy of the family arrangement was filed. Shares as per nomination were first transferred to Demat account of Mrs. Enid A Nazareth. Then being four legatees, one fourth share each of the same value were transferred to the three sons, from her Demat account to each of the three son's Demat account. The 1/4 share of the mother remained in her Demat account. Similarly all other moveable properties were liquidated, 1/4th part being retained by mother and ¾ of the total distributed among her three sons equally. The Assessing Officer has admitted that confirmation of cheques credited in appellant's bank account was received, the receipt is gift/share of inheritance out of her Love and affection towards her sons and fulfilling the last wish of her deceased husband. Part of the gift invested in the purchase of Tipco A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 15

Heights, at Malad (E) and balance invested bank FDs. The appellant has also enclosed affidavit of the mother giving details of the amount distributed by her to the appellant from time to time out of the proceeds of immovable properties and movable properties which he had received from time to time and distributed between the family members as per family arrangement by them. The affidavit also mentioned details of shares distributed to the appellant.”

Assessing Officer’s order, submissions made for assessee and materials on record have been considered by CIT(A). In facts and circumstances including explanations filed along with supporting documents, evidence of receipts through banks, CIT(A) found himself satisfied with regard to enhancement of property in the hands of assessee and so that addition in question was rightly deleted. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same.

6.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee. A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 16 6.2 Same has been opposed on behalf of Revenue inter alia submitting that CIT(A) erred in deleting unexplained cash credit of Rs.6,33,170/- ignoring the fact that assessee has not proved the creditworthiness of these investments made nor furnished any explanation in spite of giving several opportunity. So, order of CIT(A) be set aside and that of Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of CIT(A).

6.3 After going through rival submissions and perused the material on record, we find that the stand of assessee has been that full amount of gift received from time to time was deposited in the bank Details of cheque received in addition to investment in Malad flat received as 1/4 share inheritance/gift from the estate of late Mr. Edgar S. Nazareth was filed as follows: S. No. Particulars Cheque No. & Date Amount Rs.

Investment in Bank is Rs.6,33,170 FDs in Bank Rs.4,16,000 Total Rs.10,49,170 Thus, assessee had available funds of Rs.14,30,133/- with him. He therefore, invested from time to time only Rs.10,49,170/- leaving still the balance of Rs.3,80,963/-. The only mistake is that of the Accountant. He separately showed two deposits in two accounts. He should have merged two separate heads of accounts. Investment in bank and FDR in bank means one and the same thing and either it can be shown as investment in bank or FDS in Bank and the total amount should have been shown in balance sheet. Then, this confusion would not have arisen in the mind of Assessing Officer. Thus, the investments and FDs in banks were not unexplained cash credit. Copies of bank statements were filed highlighting all investment in bank deposits over Rs.20,000/-, highlighting entries with date and amount and when first A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 18 FDR/s were made, interest received on these deposits and dates and amounts on maturity dates. This explanation of assessee was filed along with supporting documents, evidence of transaction routed through bank entries. CIT(A) was convinced and rightly deleted the addition in question. This reasoned factual finding of CIT(A) needs not interference from our side. We uphold the same.

6.4 Next issue is with regard to addition of unexplained cash credit of Rs.4,16,000/-. Assessee made FDs with various banks to the tune of Rs.29.08 lakhs. The source of FDs of Rs.24.92 lakhs was out of balance available in the account of assessee and balance amount of Rs.4.16 lakhs was out of other funds available to assessee. In response to show cause notice asking assessee to substantiate the source of investment of Rs.4.16 lakhs, assessee did not appear nor filed any documentary evidence for providing the source of funds. Assessing Officer accordingly held the same to be unexplained cash credit and made addition u/s.68 of the Act.

6.5 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee. CIT(A) relied on the contention raised with regard to addition of Rs.6,33,170/- dealt in para 6.3 of this order. So, CIT(A) after considering the assessment order, statement of assessee as discussed above along with supporting documents, evidence of transaction routed through bank entries, finally A.Y. 08-09 [ITO vs. Mr. Maurice B. Nazareth) Page 19 held that there was no cause to make addition as unaccounted investment in said account, which was found explained on the basis of evidence as discussed above and accordingly, addition in question was deleted. This reasoned factual finding of CIT(A), wherein he deleted the addition of Rs.4,16,000/- on the basis of evidence on record as discussed above, needs no interference from our side. We uphold the same.

Pronounced in the open Court on this the 26th day of August, 2016.