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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SHRI G.D. AGRAWAL, & SHRI CHANDRA MOHAN GARG
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
These are cross appeals filed by the Revenue and the assessee directed against the order of the CIT(A), Ghaziabad dated 05/12/2012 for A.Y 2009-10.
This appeal has been fixed for hearing in view of the recent CBDT Instruction No. 21/2015 dated 10.12.2015, revising the monetary limit of Rs.10 lakhs for not filing the appeal before the Tribunal in terms of section 268A(1) of the Income-tax Act.
The CBDT in its recent Circular No. 21/2015 dated 10.12.2015 has provided that no departmental appeal shall be filed before the ITAT wherein the tax effect involved is less than Rs.10 lakhs. Further, in para 10 of the Circular, it is provided that this instruction would apply retrospectively and the pending appeals below the specified tax limit of Rs.10 lakhs may be withdrawn/not pressed.
The learned CIT-DR appearing on behalf of the Revenue before us, at the outset, submitted that appeal can be withdrawn only after getting the approval of competent authority. He referred to para 7 of the Circular to submit that dismissal of appeal, however, in any case, on account of low tax effect should not be considered as a precedence in the matters of subsequent years where the tax effect is above the monetary limit prescribed by this Circular and the issue should be decided on merits.
After considering the rival submissions, we find that prima facie, the tax effect involved in this appeal by the Revenue is below Rs. 10.00 lakhs and, therefore, we deem it proper to dismiss the appeal particularly because the pending appeal is covered by Circular in view of para 10 of the circular. However, we may clarify that if on receipt of this order, the AO finds that the tax effect is above Rs.10 lakhs or in any other manner, the Circular is not applicable in view of exceptions culled out in the Circular, he will be at liberty to file miscellaneous application for recalling of this order which the Tribunal will consider in accordance with law. We further find considerable force in the contention of the CIT/DR that this order cannot be considered as an acceptance by the Revenue on the issue involved in this appeal and will not be an estoppel for the Revenue to take up the issue, involved in this appeal, before ITAT on merits if the tax effect in those years is more than Rs.10 lakhs.
4 & 1180/Del/2014 7. Keeping in view the above Circular and the provisions of section 268A of the Income-tax Act, 1961 and without going into merits of the case, we dismiss the instant appeal filed by the Revenue as tax effect in the appeal is less than Rs.10 lakhs.
In the result, the appeal of the Revenue stands dismissed. [A.Y 2009-10] [Assessee’s appeal]
The assessee has raised the following grounds of appeal:
“1. That CIT(A) has erred in law in confirming addition of Rs. 10,00,000/- out of unexplained investment of Rs. 25,26,000/- as held by Assessing Officer.
The Assessee had sufficient cash available with him and there is no justification for making addition of Rs. 10,00,000/- on account of unexplained investment in payment of stamp duty. The addition has been made on the basis of surmise and on arbitrary grounds.
It is therefore prayed that addition may please be deleted.”
5 & 1180/Del/2014 2. That CIT(A) was not justified in estimating payout at the rate of 3% of stamp value for payment made to seller by assessee in spite of the seller explicitly denying in the statement recorded by Assessing Officer that no money was received by him. On the basis of facts and circumstances of the case, there is no justification in holding that the seller has received money from purchaser at the time of settlement of case.
No evidence was brought on record by assessing authorities that there was any transaction of money that had taken place between parties.
In view of above facts and circumstances of case, that CIT(A) has erred in confirming addition of Rs. 16,93,200/- in respect of amount paid to buyer at the time of settlement.
3. That CIT(A) was not justified in enhancing /estimating rental income of Rs. 15,00,000 in respect of shops. That the CIT(A) should not have ignored the direct evidence collected/ verified by the Inspector of Income Tax Officer. On the basis of the facts and circumstances of the case, there is no justification for enhancing/ estimating Rs. 15,00,000/- as rental income from the shops.
It is therefore prayed that the addition may please be deleted and appeal may please be allowed.”
Briefly stated, the facts pertaining to this ground are that the during the year under consideration, the assessee made investment in the purchase of stamp of Rs. 25,26,000/-. When asked to prove the source of investment, the assessee stated that the said amount was out of cash withdrawal from his bank account with Urban Cooperative Bank. However, when examined, the AO found that there was no such withdrawal during the year under consideration. When confronted, the assessee explained that the withdrawal was made during the A.Y 2000-01 and the cash was lying with him. The assessee furnished details, however, no other documents were produced by the assessee. Finding various inconsistencies with the statements of the assessee, the AO was not satisfied and observing that the statements given by the assessee were nothing but colorful story to prove the purchase of stamp. Accordingly, the AO treated the amount of Rs. 25,26,000/- utilized for purchase of stamp for property during the year as unexplained investment and added the same to the income of the assessee. Aggrieved, the assessee went in appeal before the ld. CIT(A) who gave part relief to the assessee by restricting the addition to Rs. 10,00,00. Aggrieved, the assessee is in appeal before this Tribunal.
7 & 1180/Del/2014 11. We have heard the rival submissions and have perused the relevant material on record. We find that the AO made the addition of Rs. 25,26,000/- on the basis of investment made by the assessee in stamps. However, the ld. CIT(A) restricted the same to Rs. 10,00,000/- on the following reasoning and conclusion:
“5.1.4 It is agreed by appellant’s himself in submissions that entire amount of compensation received of Rs. 81,60,000/-, was withdrawn in cash, and was used for purchases of various properties, payment of stamp duties on them, study expenses of his son, and other expenses incurred during period 2000 to 2009 as shown in the cash flow chart.
The cash balance, even as per appellant’s chart, as on 1/4/2009 was Rs. 8,37,000/-
I find that purchase of car has not been incorporated in this chart. Payment of Rs. 5,50,000/- approx for purchase of car would further depletes this balance to less than Rs. 3 lakhs. But, without prejudice to this; I hold that the cash flow chart itself is a self-serving statement prepared by the appellant, and is not fully acceptable; it requires modification, as discussed below The yearly household & personal expenses at Rs. 1,50,000/- to Rs. 1,80,000/- are certainly inadequate considering the financial status, location of the house in a posh locality, level of study of children etc. The onus was on 8 & 1180/Del/2014 appellant to furnish a detailed statement of various types of household and personal expenses—fooding, taxes, servants, study of children, vehicle, electricity, telephone, outings/travelling etc. but appellant has shied away from furnishing such details and evidences. It can also be observed that no payment of any kind has been made by cheque. All such outgoings are, thus, to be estimated. In my estimate; even on a conservative scale, the total of such expenditure would be Rs. 25,000/- p.m. i.e Rs. 3,00,000/- annually. This implies that a greater portion of cash compensation would have been used.
Another aspect is that although daughter’s marriage took place in F.Y. 2009-10; the appellant has not given any evidence of any such major source. Thus, it can be reasonably estimated that Rs. 5 lakh would have been kept apart for this impending family function.
5.1.5 Thus, from above analysis, it can be inferred that cash flow chart submitted by appellant needs modification, to the extent that after meeting the cost of reconstruction /renovation of the shops; only a part of such explained cash(withdrawal out of compensation) remained saved to meet the cost of stamps; balance was met from unexplained sources.
The A.O has treated the entire cost of stamps, at Rs. 25,26,000/- as unexplained investment. On estimate basis, I reduce the extent of such unexplained investment to Rs.
9 & 1180/Del/2014 10,00,000/- as spent on stamps, from unexplained sources. In other words, the appellant could only have Rs. 1526,000/- left out of cash compensation (since Rs. 10,00,000/- had got spent on reconstruction/renovation of the shops) and, hence, the investment to the extent of Rs. 10 lakhs for purchase of stamps, was from unexplained/unaccounted thus, the addition of on account of unexplained investment in stamps is upheld in principle, but the amount is restricted to Rs. 10,00,000/- (in place of Rs. 25,26,000).”
On a careful perusal of the operative part of the order of the first appellate authority, we find no lacunae in the findings and conclusion arrived at by the ld. CIT(A). The ld. CIT(A) was just and quite justified by holding that the appellant could only have Rs. 15,26,000/- left out of cash compensation (since Rs. 10,00,000/- had got spent on reconstruction/renovation of the shops) and, hence, the investment to the extent of Rs. 10 lakhs for purchase of stamps, was from unexplained/unaccounted. He was perfectly right in holding that the addition of on account of unexplained investment in stamps was upheld in principle and restricting the amount to Rs. 10,00,000/. Accordingly, finding no infirmity in the order of the ld. CIT(A), we uphold the same and dismiss the ground of appeal raised by the assessee. Ground No. 1 is dismissed.
Briefly stated, the facts of the case as emanating from the order of the AO are that the assessee has fought the case for 8 years with Shri Brahma Pal and the matter was settled without any other payment. The seller must have incurred huge amount on the advocates fees. Further, he had good knowledge about the vicinity of the property. Atta Mazra is the most expensive area adjoining to Great India Palace Mall (GIP) and the matter was settled without any consideration. The AO observed that the story of assessee was beyond human behavior. No doubt there is nothing on record that the assessee paid any amount, but the payment made to the purchaser cannot be denied. A report was published by the National Institute of Public Finance and Policy in March 1985, titled "Aspects of black money in India'. The report has discussed the prevalence of notorious practice of payment of black money in real estate transaction in the metropolitan city of Mumbai. Though technically the report of National Institute of Public Finance and Policy cannot be substituted for evidence, but one has to take note of this practice coupled with the attendant circumstances of this case. The AO further observed that he cannot overlook this notorious practice which is published in the report of National Institute of Public Finance and Policy. There
11 & 1180/Del/2014 cannot be any direct evidence for receipt of on-money. Obviously no sane person would admit that he is receiving on-money. But this fact can be established by facts and attendant circumstances of a particular case. In the present case, the assessee had denied the receipt of on-money. But when a man of high status in the society had, under these circumstances, when the assessee was going to sell the property to the next, he settled the matter from Sh. Brahma Pal. In these circumstances the payment of giving the money to settle case cannot be denied, especially when there was only Rs. 10,000/- as balance and the case was contested for 8 years and the case was finalized, when assessee was intending to sell the property and looking for a customer and the deal was finalized within 1 year from the date of registration of the property. The AO further observed that moreover insertion through amendment Act 2009 in Section 56 of the IT Act 1961 also supports the facts that the lesser value of consideration paid in comparison to the stamp value will be treated as income of the assessee. However the section was omitted later on, but this also intended to deal with such type of transactions. Finally, the AO observed that now the question arises what is the quantum, which is paid beyond the shown transaction. In the absence of any quantum he estimate the same @ 5% of the stamp value of the 12 & 1180/Del/2014 properties purchased by the assessee and his wife on the reasoning that the assessee had shown payment of stamp and the consideration of property in cash out of his own fund for the properties and stamp purchased by him. The AO held that 5% of the total amount comes to Rs.28,22,000/- on both the properties of Rs. 2,82,20,000/- (each) and the same was added to the income of the assessee. Aggrieved, the assessee went in appeal before the ld. CIT(A) who estimated the same @ 3% instead of 5% as estimated by the AO by reducing the addition to Rs. 16,93,200/-.
We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. We find that the AO has made the addition on estimated basis and the ld. CIT(A) has also upheld the same without any concrete basis and just on surmises and conjectures. The ld. CIT(A) simply held that as against value for stamp duty purchase being at a huge amount of Rs. 2,82,20,000/-, transfer of property getting settled, that too, in spite of dispute running into 8-9 years, when Noida turned into one of the costliest commercial places in the world without any further consideration against all yardsticks of preponderance of evidence. The ld. CIT(A) also observed that the court’s order dismissing the petition on account of continuous
13 & 1180/Del/2014 non-prosecution also indicates towards such out of court settlement in unaccounted/unrecorded cash. We do not find any material on record to indicate the basis on which the AO estimated the stamp value and the ld. CIT(A) estimated it at a lesser rate. Addition made on the basis of estimation has not legs to stand. Accordingly, we are not inclined to agree with the finding and conclusion of the authorities below and delete the addition made purely on the basis of estimation.
Ground No. 3
Apropos Ground No. 3, the facts pertaining to this ground as emanating from the assessment order are that the assessee denied earning any rental income from shops and contended that the shops were lying vacant. However, on enquiry the Inspectors found that there were shops and the assessee was receiving rent. When confronted, the assessee offered a sum of Rs. 1,50,000/- as rent. The Inspector deputed to enquire reported that the rent received from these shops came to Rs. 19,000/- per month. Accordingly, the AO made an addition of Rs. 1,59,600/- [12 x 19,000/- = 2,28,000/- minus 30% of 2,28,000/-]. Aggrieved, the assessee went in appeal before the ld. CIT(A) who enhanced the
We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. We find that the ld. CIT(A), in the first appellate order, has given a finding which reads as under:
“During appellate hearing, the counsel has furnished a copy of suit/petition filed by the assessee in the Court of Civil Judge [Senior Division, Gautam Budh Nagar (Petition No. 403 of 2002)]. From the details mentioned by the petitioner (the assessee) himself on page 3 & 4 of this petition, it is observed that six shops were given on rent on accumulative rent of Rs. 86,000/- per month, which works out to a rental income of Rs. 10,32.000/- for the entire year. Thus, rental receipt assessed at Rs. 1, 59,600/- by the AO appears to be an under assessment.
Further, in view of no copy of the rental agreement produced, the rental income may in fact be estimated at higher figure.
You are requested to show cause as to why not the rental income be ‘enhanced’ as discussed above. This is to be treated as specific opportunity to show cause as to why not the rental income be enhanced? 14
3. The appellant has replied as under:
“ In response to your letter issued on 17/10/2012 it is mentioned in the letter that the accumulated rent of six shops / Property @ of 86000/- p. m which work outs to a total rental income of Rs 1032000/- for the entire year and the rental receipts assessed at Rs 159000/- by the assessing officer.
In this regard it is submitted that the appellant entered into the agreement with the seller on 18/08/2000 and the actual position handed over on 05/02/2008 on the final date of registration of the said shops / property.
During the time spam of agreement to say and the registration of the entire property was in possession of the seller and any income is in the hand of seller himself. When the possession of this property was given to the appellant all the shops is were vacant and in inhabitable condition hence no income could we generated out of this property.
16 & 1180/Del/2014 The appellant himself declared the rental income of Rs 159600/- in front of the assessing officer which is very much in the line of prevailing market rent. Hence, enhancing this rental income is not correct and bad in law. You are therefore requested to accept the income the assessed by the assessing officer.”
The reply is cursory and unsatisfactory. The rental income as declared by appellant itself in its petition, from 6 shops itself, is Rs. 10,32,000/- have not been mentioned at all.
I estimate a reasonable sum of Rs. 15,00,000/- as rental receipts from the 12 shops. Giving 30% deduction for expenses (as allowed by the A.O.), I direct the AO to assess a rental income of Rs. 10, 50,000/- (15,00,000/ 30% of 15,00,000/-). This tantamounts to “enhancement of income” on this issue, although, overall, there is reduction of assessed income.”
On careful perusal of the above findings of the ld. CIT(A), we find that the ld. CIT(A) has enhanced the rental income on estimated basis which is not sustainable in the eyes of law. We, therefore, decline to agree with the view taken by the ld. CIT(A)
17 & 1180/Del/2014 and thus enhancement order of first appellate authority is set aside and dismissed. Further, when we logically evaluate the conclusion of the AO then we find that the AO made addition with the following observation:
“The assessee had denied vide its submission dated 17/10/2011 that he is not earning any income on account of rent received and the shops are lying vacant. However, it is perused from the Photo of property taken at the time of registration there are shops and the scanned copy of the annexure of this property registered deed is being given as under. Moreover, when the enquiries made by the Inspectors revealed that the shops are there and the rent is being received assessee offered a rent of Rs.1,50,000/- that the same could not include in his rental income vide its submission dated 19/12/2011 The ITI deputed for this purpose reported that the rent received from these shops comes to Rs.19,000/- per month. Therefore an addition of Rs.1,59,600/- (12*19,000= 2,28,000 Minus 30% of 2,28,000) and the same is hereby added to the Income of the assessee.”
In view of the above, it is amply clear that the AO made addition after calling spot inspection report dated 19.12.2011 wherein he reported that the rent received from shops comes to Rs. 19,000/- per month. This fact has not been controverted by the assessee. At the same time, from the framing of Ground No. 3, it is 18 & 1180/Del/2014 revealed that the assessee is only aggrieved by the order of the ld. CIT(A) which enhanced the addition made by the AO on the basis of Inspector’s report [supra]. The assessee is also relying upon the said report to challenge the enhancement order by stating that ht ld. CIT(A) should not have ignored the direct evidence collected/verified by the Inspector of Income tax. In view of the above, since by the earlier part of this order we have dismissed the order of enhancement passed by the ld. CIT(A), hence, grievance of the assessee has been redressed by the addition made by the AO on this count on the basis of direct evidence and spot inspection report is sustainable and thus we uphold the same. Accordingly, Ground No. 3 of the assessee is partly allowed on the issue of enchantment of addition only.
In the result, the appeal of the assessee is partly allowed whereas the appeal of the Revenue stands dismissed.