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Income Tax Appellate Tribunal, “B”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the revenue against the order of CIT(A)- Mumbai, for the assessment year 2008-2009, wherein the revenue is aggrieved for deleting the addition made on account of short term capital gain.
Rival contentions have been heard and record perused. The AO made addition treating the sale consideration of the subject property amounting to Rs.50,00,000/- as unexplained money u/s.69A. By the impugned order the CIT(A) after calling for remand report, deleted the addition after having following observations :- 7. I have gone through the Assessment Order, written submissions of the AR, the Remand Report of the AO and the AR’s rejoinder thereto. On a perusal of these documents, I am of the 2 view that there is considerable force in the AR’s submissions for the reasons recorded hereunder. 7.1. The contention of the appellant that no income is chargeable in her hands as she was merely a name lender in the entire transaction merits consideration. Even though the purchase agreement dated 11.09.2006 and sale agreement dated 18.12.2008 have been executed by the appellant and her husband, the inescapable conclusion that emerges on looking at the other evidences and materials on record clearly indicate that purchase and sale transaction in respect of Flat no. 132 H in Raj Arcade are nothing but paper transactions. In arriving at his findings in the assessment order, the AO has heavily relied on the fact that the appellant and her husbands are signatories to the purchase and sale agreements. This position was strongly opposed by the appellants during the course of the assessment proceedings itself stating that even though they were the signatories, they were merely name lenders to the arrangement and that the agreements were executed only under the direction of the builder. The appellant had also requested the AO to cross verify these facts from the builders. The AO however did not carry out any such cross verification during assessment proceeding and arrived at the conclusion that the appellant was the legal owner of the said flat and therefore the income arising on sale of the said flat was assessable in her hands only.
7.2. In his affidavit Dt. 21.07.2012,Shri Ajay Patel, one of the partners of Rajesh Construction Co. and signatory to the Purchase Agreement dated 11.09.2006, has confessed that they had approached the appellant and her husband, who happen to be of the same community as him, with a request to lend their names as purchaser of the said flat and that the appellant did not pay any consideration for the same. This confession of the builder also corroborates with the AO's finding in remand proceedings. During the remand proceedings, the AO issued summons to M/s. Rajesh Construction Co. and in reply they have submitted t at they have not sold the said flat no. 132 H to the appellant during AY 2006-07 which confirms with the stand taken by the appellant. 7.3 During the remand proceedings, the builder has further submitted that the appellant had initially paid a sum of Rs. 11,00,000/- towards the booking of the said flat which was subsequently cancelled at the oral request of the appellant and that the said amount was adjusted against the amount due in respect of sale of flat In Raj Madhur to the appellant. The builder has also issued receipts to the appellant and her husband in respect of the amounts paid by them to the builder against their booking of Flats in Raj Madhur. It is pertinent to note that the above referred amount of Rs.11,00,000/- forms part of the said receipts issued by them in respect of Raj Madhur Flats. Thus it is clear that in fact no consideration has passed from the appellant's side in respect of the Raj Arcade Flat.
7.4 Even at the time of sale of the said flat the appellant has not received any amount from M/s, Karma Ispat Ltd. The entire consideration of Rs. 50 Lakhs is received by the builder, This fact is evident from the appellant's and her husband's bank statements filed before me, This fact is also corroborated with the submissions of the builder in his affidavit and again before the AO during remand proceedings as well as submission of M/s, Karma Ispat ltd in the affidavit of their Director, Moreover the builder has also confirmed in his submissions during the Remand Proceedings that they have shown the sale of the said flat no 132 H in Raj Arcade to MI5, Karma Ispat Ltd. during FY 2008-09, From these submissions of the builder and other evidences on record it is clear that the builder has indeed shown the sale of flat in his books for which he has also received the sale consideration, it is also not proved by the Department that the appellant & her husband have received any other benefit under this arrangement. Therefore, the clear position that emerges is that the beneficial ownership of the flat was always with the builder and the appellant was merely a front for executing the arrangement, Once this position is accepted, I am of the view that as the income arising from the sale of the said flat has already been explained to have been included in the total income of the builder, which fact is also not rebutted by the AO, the same cannot be once again assessed in the hands of the appellant, 7,5, It is a settled legal position under the Income Tax Law that the income must be taxed only in the hands of the legal owner, In CIT vs, Poddar Cement (P) Ltd. (1997) 226ITR 625 (SC) their Lordships have observed that "We are conscious of the settled position that under the common law, 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But in the context of s. 22 of the IT Act, having regard to the ground realities and further having regard to the object of the IT Act, namely, "to tax the income", we are of the view, "owner" is a person who is entitled to receive income from the property in his own right," Thus their Lordships have taken the view that having regard to the ground realities and further having regard to the object of the IT Act namely, to tax the income in the hands of real owner, their Lordships have taken the view that the owner is the person who is entitled to receive income, This decision of the Apex Court was relied upon by the Calcutta High Court in the case of CIT v Ajit Kumar Roy (2001) 252 ITR 468 (Cal.). In the said case, the assessee had bought a house property in the name of her wife, However the entire investment for buying the property was made by the assessee himself, The Hon'ble Calcutta High Court relying on the above decision of the Apex Court held that the "when the entire investment was made by the assessee, simply the flat is in the name of wife of the assessee, In such case, the income from that property should be taxed in the hands of the assessee and not in the hands of his wife", On the same analogy even in the present case only the flat is in the name of the appellant, She has neither
4 contributed the purchase consideration for acquiring the flat nor has she received any sale consideration at the time of its sale. Therefore in such a case the income has to be assessed in the hands of the builder only as he is the person entitled to receive the income in his own right and which he has rightfully done so by crediting the same in his books of accounts. 7.6. The AO while structuring the additions u/s 69A has relied on the following decisions: LakhmichandBaijnath v CIT [1959] 35 ITR 416 (SC) Roshan Di Hatti v CIT [1977] 107 ITR 938 (SC) / Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SC) CIT v R S Rathore [1995] 212 ITR 390 (Raj.) 7.7. In the case of the above mentioned decisions of the Supreme Court and Rajasthan High Court, the appellant had received / credited a certain sum of money in his books of accounts for which certain explanation was given by the assessee which was rejected by all the Income Tax Authorities and therefore the addition was made. The Appellant's case is on a different footing as in appellant's case the AO has not proved that the appellant / her husband have received any consideration or any other benefit under this arrangement. In view of the same, the addition made u/s 69A cannot even otherwise stand. 7.8. In view of the above discussion and analysis of the facts and circumstance of the case as well as keeping in view of the fact that the appellant's contention could not get rebutted during the remand proceeding and verification process by the A.O., I have no reason to reject the appellant's submissions and grounds.”
We have considered rival contentions and carefully gone through the orders of authorities below as well as remand report sent by the AO.
From the record we found that the said flat No.132/H in Raj Arcade was sold to M/s Karma Ispat Ltd, was belonging to the builder and not to the assessee. As per the evidence discussed by CIT(A) in his order, the builder has shown the sale of flat in its books of accounts and also offered profit arising thereon in respect of sale consideration so received by it. A finding has also been recorded to the effect that assessee or her husband has not received any other benefit under this arrangement. Therefore, the