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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG, & SHRI O.P. KANT,
PER CHANDRA MOHAN GARG, J UDICIAL MEMBER
This appeal filed by the revenue is directed against the order of the CIT(A)-XIX, New Delhi dated 21/12/2000 in first appeal No. 71/2007-08 for A.Y. 2003-04.
The grounds raised by the assessee read as under:
“1. That the Ld. CIT(A) has erred deleting the addition made by the AO in treating commission receipts as business income by holding that the said receipts cannot be treated as business income under the circumstances in which the said commission was received.
2. That the Ld. CIT(A) has erred in deleting the addition of Rs. 1,50,93,870/- and Rs. 15,59,394/- made by the AO on account of suppression of sale price of ships by holding that the said additions have been made purely on suspicion, surmises and conjectures even though the AO had discussed the matter in detail in his order and had clearly proved the suppression of the sale price resorted to by the assessee.”
Briefly stated, the facts giving rise to this appeal are that the case was selected for scrutiny and the AO passed assessment order u/s 143(3) of the Income tax Act, 1961 [for short, 'the Act'] assessing the income of the assessee at Rs. 2,07,97,279/- against the returned income of Rs. 9,90,464/- by making certain additions including impugned additions. The AO treated the commission receipts as business income by holding that the said receipts cannot be treated as business income under the circumstances in which the said commission was received. The AO also made additions on account of suppression of sale price of shops and the amount of difference in sale consideration of property Nos. 208 and 208A in Sahara Mall, Gurgaon treating the same as income from capital gains. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who partly allowed all the three issues/grounds raised before the Tribunal in this appeal.
Ground No. 1
Apropos Ground No. 1, we have heard the arguments of both the sides and carefully perused the relevant material on record. The ld. DR submitted that the ld. CIT(A) has erred in deleting the addition made by the AO in treating the commission receipts as business income by holding that the said receipts cannot be treated as business income under the circumstances in which the said commission was received. The ld. DR vehemently pointed out that the assessee purchased properties in the months of February 2002 and April 2002 but commission was paid in the months of October 2002 and March 2003 which clearly suggests that the commission income received from the said two parties has nothing to do with the transaction of purchase of properties by the assessee in Sahara Mall. The ld. DR also pointed out that in response to the questionnaire issued by the AO, the assessee did not furnish any evidence to substantiate its claim of commission income. Therefore, the AO correctly held that the amount was business income and the same was rightly put to tax accordingly.
Replying to the above submissions of the ld. DR, the assessee drew our attention towards the operative paras 10.1 and 10.2 of the impugned first appellate order and submitted that the assessee had purchased five properties from M/s Sahara India Commercial Corporation Limited [SICC, for short], in Sahara Mall, Gurgaon during 2002 on various dates. The ld. AR further submitted that the Estate Agents deducted the tax at source amounting to Rs. 43,954/- as SICC Ltd deducted tax on the payment of commission made to them. The ld. AR further submitted that M/s Unistar Properties, Shray Properties and M/s Shalloo Agencies paid back an amount of Rs. 8,37,131/- to the assessee out of the total commission received by them from SICC in the sale transactions undertaken with assessee by SICC Ltd. The ld. AR also pointed out that the assessee deducted the said amount from the purchase price of the property and returned the short term capital gains assessable under the head capital gains in respect of the sale of the five properties. The ld. AR strenuously pointed out that the AO treated the said amount of the business income of the assessee solely on the ground that the payments were received in the month of October 2002 to March 2003 much after the date when the properties were purchased which is not a justified and reasonable basis to disallow the claim of the assessee.
On careful consideration of the above from the first appellate order, we note that the ld. CIT(A) granted relief to the assessee with the following conclusion and findings:
“10.1 In the above ground of appeal, the appellant has assailed the action of the Assessing Officer in making an addition of Rs. 8,37,131/- treating the same as commission payment assessable under the head Business Income. The fact of the matter is that the appellant had purchased five properties from M/s. Sahara India Commercial Corporation Limited (hereinafter referred to as SICC Ltd.) in Sahara Mall, Gurgaon. The properties were purchased during the year 2002 on various dates. The Estate Agents of the SICC Ltd., M/s. Unistar Properties, Shray Properties and M/s. Shalloo Agencies, paid back the appellant an amount of Rs. 8,37,131/- out of the total commission received by them from SICC Ltd in the sale transaction made to the appellant by SICC Ltd.. The said Estate Agents deducted the tax at source amounting to Rs. 43.954/- as SICC Ltd. deducted tax on the payment of commission made to them. The Appellant deducted the said amount from the purchase price of the property and returned the short term capital gains assessable under the head Capital Gams in respect of the sale of the five properties. The Assessing Officer has objected to this stand of the appellant solely on the ground that the payments were received in the months of October, 2002 and March, 2003, much after the date when these properties were purchased. On this basis he concluded that the commission could not be connected with the purchase price, as submitted by the appellant. Accordingly, he treated the sum of Rs. 8,37,131/- as appellant’s income from business.
10.2 The assessee has clearly explained the nature of receipt and under what circumstances the amount was received. The receipt has not arisen from any business activities undertaken by the assessee Considering the facts and circumstances of the case, the commission receipts cannot be treated as income.
Relief: Rs. 8,37,131/-”.
In the light of the above observations of the AO and the conclusion of the ld. CIT(A), at the very outset, we may point out that the AO has not allege that the claim of the assessee is bogus or factually incorrect. The main basis for treating the said amount as business income of the assessee is that the AO was not satisfied with the explanation of the assessee that it was the amount of commission which was received by property brokers from the seller SICC out of sale transaction wherein the assessee purchased five properties from SICC. The AO mainly stressed upon this fact that the said amount was received much after the date when these properties were purchased by the assessee from SICC. Therefore, this amount cannot be treated as commission paid back by the property dealers to the assessee. From the impugned order, we are satisfied that the ld. CIT(A) considered all relevant facts and granted relief to the assessee. WE may point out that the assessee purchased five properties from SICC during the year 2002 on various dates through property dealers/estate agents and the estate agents paid back Rs. 8,37,131/- to the assessee out of total commission received by them from SICC Ltd under the sale transactions made by SICC to the assessee. This is a practice of common parlance in big property deals. The purchaser of the property receives part amount of commission from property dealers which further reduced the cost of purchase and this practice is a normal business practice. Furthermore, neither the AO nor the ld. DR has controverted this fact that the said Estate Agents/property dealers deducted the tax at source amounting to Rs. 43,495/- while making payments to the assessee and it is also important to note that the assessee deducted the said paid back amount from purchase price of the property and which reduced the cost of acquisition and on sale of the property the assessee returned the short term capital gains, accordingly, under the head of capital gains accrued to the assessee out of sale of properties.
We are not in agreement with the conclusion of the AO because if payment is delayed and the assessee received paid back amount much after the date when the properties were purchased, then also the claim of the assessee cannot be denied on this presumption. To sum up, we are in agreement with the conclusion of the ld. CIT(A) that the paid back amount received by the assessee from Estate Agent has been reduced from purchase price of the properties and the assessee returned the short term capital gain accordingly. Therefore, the said amount received by the assessee from the Estate Agent was part of commission received by Estate Agent from SICC which cannot be treated as business income of the assessee. Accordingly, the conclusion of the ld. CIT(A) is confirmed and we are unable to see any valid reason to interfere with the impugned order and thus we uphold the same. Accordingly, we uphold the impugned order on this count and dismiss ground No. 1 raised by the revenue being devoid of merits.
Ground No. 2
The ld. DR submitted that there are two limbs of Ground No. 2 viz. Firstly, addition of Rs. 1,50,93,870/- made by the AO on account of suppression of sale price of shops and secondly the addition of Rs. 15,59,394/- being difference in sale consideration as determined by the AO and as declared by the assessee which must have been received by the assessee in cash or in some other form. The ld. DR supporting the action of the AO submitted that the assessee has not produced any documentary evidence which could suggest that the market price prevalent in Sahara Mall in the month of March 2003 was around Rs. 3000/- per sq ft. The ld. DR vehemently pointed out that in the absence of any documentary evidence and satisfactory explanation of the assessee the AO rightly reached to the conclusion that he assessee has under stated the sale price of premises S-101 and S-102 in Sahara Mall, Gurgaon. The ld. DR further elaborated that the AO righty concluded that these premises must have been sold @ Rs. 6300/- per sq ft. which was the rate of second floor and the assessee sold the premises in question which was on first floor. The ld. DR also pointed out that the size of the property sold is also relevant for determination of sale consideration, as small property fetches higher price and big property gets less price. The ld. DR also pointed out that the AO was quite justified and correct in making additions being the difference in sale consideration as determined by the AO and as declared by the assessee. Therefore, the ld. DR finally submitted that the ld. CIT(A) granted relief to the assessee without any justified reason. Therefore, the impugned order may be set aside by restoring that of the AO.
Replying to the above contention of the Revenue, the ld. AR has drawn our attention towards para 13 of the impugned order and submitted that the assessee filed detailed written submissions before the authorities below which read as under:
“It is most respectfully submitted that the addition made by Assessing Officer is totally illegal and against the provisions of the computation of capital gains. There is no provision in the Act, whereby, in the absence of the evidence, the Assessing Officer can take in to consideration the alleged short fall in consideration deemed to have been received by the appellant as appellant’s income accruing or arising on the transfer of the capital asset. The Hon’ble Supreme Court in the case of K.P. Verghese vs. CIT 131 ITR 597, while considering the provisions of section 52(2) of the I.T. Act, 1961 as it then was before it was repealed, held that the Assessing officer cannot go beyond the value of consideration stated in the agreement of sale unless the Assessing Officer has evidence to show that the money over and above the stated consideration was received by the appellant on the transfer of the property. In the instant case, the Assessing Officer has absolutely no evidence to show that the appellant has received the consideration over and above what is stated to be in the agreement to sell. No doubt, the appellant had sold the properties situated at S-101 andS-102 @ Rs.3,000/- per sq.ft., far less than the consideration at which the appellant had purchased the properties from SICC Ltd.. But for this fact of the matter, the Assessing Officer has no evidence to show that the appellant had received extra consideration which had to be included in the consideration shown in the agreement to sale while working out short term capital gains. The property was sold to a well known business house in Calcutta, namely, M/s. Tickwell Commercial Ltd., who were and are running a chain of hotels under the name and style of M/s. Haldiram Sweets. The Assessing Officer had all the time to investigate and verify the transaction by issuing summons u/s. 131 of the I.T. Act, 1961 to the above said purchaser. The Assessing Officer had issued the summons at the fag end of the year and received no response. It is suffice to say that the transactions are genuine and at arms length and the transactions are purely commercial in nature. The appellant rights in the properties was sold at a loss a decision, which cannot be questioned by the Assessing Officer. The appellant has also submitted to the Assessing Officer the reason for sale of the said properties at far less a price which was that because of large measurement of the properties there were no purchasers who were ready to purchase it at a price above Rs.3,000/- per sq.ft.. The appellant had taken a commercial decision to dispose off all the five properties during the year itself each property being sold at different price above or below the purchase price to generate sufficient cash flow in its business for other purposes. If the Assessing officer can accept the rate of sale of Rs.6,300/- per sq.ft. for property bearing no.S-207A, also the property sold by the appellant, there is no reason why other rates of the properties sold should not be accepted.
For the reasons stated above, it is submitted that the addition made by the Assessing Officer based on conjectures and needs to be deleted.”
Besides reiterating the above written submissions, the ld. AR also added that it was the case of distress sale due to sudden fall in the creditability and good will of the Sahara Group. He further elaborated that the assessee received and accounted the same amount which have been mentioned in the respective sale deeds and the actual consideration has to be considered while computing the capital gains accrued to the assessee. The ld. AR vehemently contended that the consideration actually received is relevant for taxation the presumptive or deemed consideration calculated or estimated on pure guess work or surmises and conjectures cannot be taken or adopted for the purposes of taxation. The ld. AR also pointed out that the AO has not brought any material allegation or evidence on record to show that the assessee actually received higher price over and above which was mentioned in the sale deed and in this situation, no addition can be made. The AO made addition without any basis and justified reason which was rightly deleted by the ld. CIT(A). Hence, the impugned order may kindly be upheld and confirmed. The ld. AR has also placed reliance on the decisions of the Hon'ble Jurisdictional High Court of Delhi in the cases of CIT Vs. Nilofer Singh 309 ITR 233 [Del] and CIT VS. Dinesh Jain [HUF] 352 ITR629 [Del].
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) vide paras 14 to 15.8 has come to the conclusion by holding as under: 15.2 The assessee incurred losses in respect of properties bearing No. S-101 8s S- 102 vis a vis marginal gains in respect of other properties. In view of the differential gains, the AO did not believe the loss and worked out the gain in respect of these properties by adopting Rs. 6300 per sq. yard the value for which property bearing no. S-207A was sold. The details of working are as under:
Area Rate Probable Sale Difference Name of Sales the consideration consideratio property n shown S-101 2116 6300 13330800 6349800 6981000 S-102 2439 6300 15365700 7252830 8112870 Total 15093870
The amount of Rs. 1,50,93,870/- as worked out in the above table was added. 15.3 The AR submitted in the course of assessment proceedings as under:
“ that these were the big shops measuring 2116 sq. ft. and 2439 sq. ft. and the buyers were not available who could invest huge money in these bigger shops. On the other hand there was a rumour in the market that the Sahara Group is not doing well and as such they are on the verge of disposing off these properties...”
15.4 The main contention of the AR is that there is no evidence to suggest that the assessee received more than what was stated in the documents. The AR heavily relied on the decision rendered in the case of K.P. Verghese vs. CIT 131 ITR 597 (SC). 15.5 The AO has not examined the buyer of the property even to get an idea whether any extra amount was paid to the assessee. The AO has not controverted the facts brought on record. It is also well settled principle of law that apparent is the real until the contrary is established and the burden lies on the person who alleges that the apparent is not the real. Therefore, the AO must bring positive material on record to prove the falsity of the entries/transaction appearing in the books of account. The books of account cannot be rejected in light hearted manner on mere suspicion and surmises however grave. Reliance for these propositions is placed on the decision of the Honble ITAT in the case of Kasat Paper 8s Pulp Ltd., vs. ACIT 74 ITD 455 (Pune).
15.6 It is settled principle of law that no addition/disallowance can be made on suspicion, surmises and conjectures as held by Hon’ble Supreme Court in the following cases. a) Dhirajlal Girdharilal v CIT 26 ITR 736 b) Omar Salay Mohammed Sait v CIT 37 ITR 151 c) Dhakeshwari Cotton Mills Ltd. v CIT 26 ITR 775 d) Lalchand Bhagat Ambica Ram v CIT 37 ITR 288
15.7 In the case of Acchyalal Shaw v. ITO (2009) 30 SOT 44 (Kol.) (URO), the Hon’ble ITAT observed as under:
“Suspicion cannot replace evidential document. Simple argument or allegation of manipulation is not sufficient without proper evidence.”
15.8 I am in full agreement with the contentions of the AR. In the light of the various decisions cited, there is no case for addition of Rs. 1,50,93,870/-. Accordingly, Ground No. 4 is allowed.”
At the outset, from the vigilant and careful reading of the relevant operative para at page 4 of the assessment order, we observe that the AO made addition by observing and holding that: “the difference in the sale consideration as determined by the undersigned and as declared by the assessee must have been received by the assessee in cash or in some other form and the same is added to the income of the assessee”.
In view of the relevant para of above noted conclusion of the AO, we observe that the AO made addition merely on the basis of other transaction of sale of property No. S-207A by taking rate of this transaction for estimating the higher consideration. From the relevant operative part of the first appellate order of the ld. CIT(A), as reproduced above, we observe that the AO has not examined the buyer of the property even to get an idea whether any extra amount was paid to the assessee. It was also noted by the ld. CIT(A) that the AO has not controverted the facts brought on record. i.e explanation and evidence filed by the assessee to support the situation of distress sale of these properties.
In the light of the above facts and circumstances of the case, the assessee established by way of filing explanation and evidence such as relevant sale deeds executed by him in favour of the buyer, the amount received as consideration as mentioned in the sale deeds and in our considered opinion, the onus of the assessee stood discharged and shifted upon the AO to show that the money over and above stated consideration was received by the assessee on transfer of properties bearing Nos. S-101 and S-102, in Sahara Mall, Gurgaon.
At this juncture, the proposition laid down by the Hon'ble Supreme Court and relied by the assessee in the case of K.P. Verghese Vs. CIT 131 ITR 597 [Hon'ble Supreme Court] is supporting the case of the assessee wherein their Lordships held that the AO cannot go beyond the value of consideration stated in the sale deeds unless the AO has evidence to show that the money over and above stated consideration was received by the assessee [seller] on transfer of property.
In the instant case, the AO had no evidence to show that the assessee received the consideration over and above what is stated in the agreement to sell or sale deed. The AO has not made analogical and fruitful enquiry from the buyer regarding consideration paid by it to the assessee. The AO doubted the consideration because the assessee sold said properties @ Rs. 3,000/- per sq. ft. which was far less the consideration at which the assessee had purchased properties from SICC Ltd. At the same time, we observe that the AO could not put this doubt to a logical end by making further enquiries from the buyer and by making other enquiries to establish and show that the assessee received over and above the amount what is stated in the sale agreements/deeds. In this situation, the explanation given by the assessee deserves to be accepted that the assessee had taken a commercial decision to dispose off all five properties during the year itself being sold at different price above or below the purchase price to generate sufficient cash flow in its business for other properties.
The AO proceeded to make addition by taking a rate of sale price other property sold by the assessee for estimation of addition without bringing any positive evidence or material to show and establish on record to prove falsity in the consideration recorded and shown by the assessee in his books of accounts. We may point out that the AO made addition merely based on suspicion and estimated the difference on the basis of conjectures and surmises which is not sustainable and thus we are inclined to hold that the ld. CIT(A) rightly deleted the baseless addition. Furthermore, it is a well accepted preposition that the suspicion cannot reject or dismiss substantial and relevant evidence and simple allegation of manipulation based on estimation and guess work is not sufficient to prove contrary without proper and positive evidence to legally establish the allegation that the money in cash or in other form, over and above what is stated to be in the agreements to sale or sale deed was received by the assessee.
Finally, in the light of our conclusion and findings, as recorded and stated above, we decline to accept the action of the AO and we are unable to see any ambiguity, perversity or any other valid reason to interfere with the conclusion of the ld. CIT(A) on this issue and this we uphold the same. Consequently, the first limb of Ground No. 2 of the Revenue being devoid of merits is dismissed.
With regard to the second limb of Ground No. 2 regarding addition of Rs. 15,59,394/- being the difference in the sale consideration of property S-208 and S-209 in Sahara Mall, Gurgaon, we find that the issue is similar to that of the properties covered in the first limb of Ground No. 2. We find that the ld. CIT(A) has categorically held that even in respect of these properties, no evidence was brought on record to dispute the claims made by the assessee. Following the discussion made while disposing first limb of Ground No. 2, we dismiss this issue also on same footing.
In the result, the appeal of the Revenue is jettisoned.
The order is pronounced in the open court on 29.04.2016.