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Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI N.R.S.GANESAN & SHRI CHANDRA POOJARI
आदेश /O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) dated 1.9.2010.
- - 2 ITA 1924/Mds/10
The assessee has raised the following grounds in this appeal: “1. The Hon’ble CIT(Appeals) has erred in confirming the additions made by the Assessing Officer for ₹ 15 lakhs towards the amount received as confirmatory party in spite of providing that there is no income to the Appellant in that transaction and the amount received represents the amount of reimbursement of advance made to the farmers of agricultural land.
2. The Hon’ble CIT(Appeals) has erred in upholding the additions made by the Assessing Officer for ₹ 1,75,175/- towards the balance c omission in the transaction of purchase of land on behalf of commission in the transaction of purchase of land on behalf of Mrs. Gnaneswari whereas the Appellant has clearly proved by producing the stamped receipt for the amount of ₹1,75,000/- towards the compensation paid to the land owner for the loss of agricultural activity.
3. The Hon’ble CIT(Appeals) has erred in confirming the additions of ₹ 24,47,663/- made by the Assessing Officer towards unexplained credits in the bank account of the Appellant towards the amount received from Nuziveedu Seeds Pvt. Ltd. Being the employer of the Appellant despite the fact that it was clearly established that the amount sent by the employer was for the repair and renovation work at the company premises at Chennai to be spent on behalf of the company and no income had arisen for the Appellant. Further CIT(Appeals) VIII has affirmed the addition of ₹ 16,000/- towards salary which is incorrect whereas the Appellant had received only ₹ 50,000/- towards salary.
4. The Hon’ble CIT(Appeals) has erred in confirming the additions of ₹ 7,50,200/- towards advance paid to land owners in spite of proving that there was no deficit in the - - 3 ITA 1924/Mds/10 cash flow statement and such amounts were paid only to the land owners who were farmers as compensation amount for loss of agricultural activity but for such payment the transaction would not have taken place.”
The brief facts of the case are that the assessee filed his return of income for the AY 2007-08 on 23.7.2007 by admitting the taxable income of ₹ 3,11,980/-. The case was selected for scrutiny. During the course of assessment proceedings, the AO had made four additions under various heads and finally assessed the total income as ₹ 52,01,010/-.
Particulars Amount in Rs.(`) Considered received as confirming party 15,00,000 Commission Income from Mrs.Gnanaeswari 1,75,175 Salary and other Recepts from Nuziveedu Seeds 26,63,663 Pvt Ltd. Advance paid to land owners 7,50,200 Aggrieved, the assessee went in appeal before the CIT(Appeals), who confirmed the additions by dismissing the appeal of the assessee. Against this, the assessee is in appeal before us.
The ld. AR submitted that the assessee was appointed as liasoning agent to purchase agricultural land near Chennai, for and on behalf of Gowri Realtors P. Ltd., Bangalore. The - - 4 ITA 1924/Mds/10 assessee was paid ₹ 15 lacs by Gowri Realtors P. Ltd. towards payment as a confirming party, which represents the amount of reimbursement of advance made to the farmers of the agricultural land. The company also paid consideration of ₹ 2.5 crores by way of various D.Ds drawn favouring the vendors which were duly paid to the owners of land. There is no involvement of any income for the assessee for this year.
The AO has stated that various D.Ds for ₹ 2.5 crores 4.1 were paid to the assessee as per the agreement. This amount represents the amount of purchase consideration paid for the agricultural land purchased from the farmers and paid directly to the farmers who are the owners of the land. Further the D.Ds were drawn in favour of the vendor and not in favour of the assessee and were given to the farmers and hence such D.Ds could not have been deposited in the assessee’s bank account. Even the amount of ₹ 15 lacs paid as confirming party relates to the reimbursement of advance paid on behalf of Gowri Realtors to the farmers and it does not constitute income in the hands of the assessee. The assessee is not having any other bank account than the one declared by him. His only Bank Account
- - 5 ITA 1924/Mds/10 was Axis Bank, Adyar. The sale deed dated 21.03.2007 between Gowri Realtors P. Ltd. and Dr. Sundararajan with the assessee as confirming party is the document to prove the liasioning work done by the assessee. For the liasioning work done by the assessee, the assessee has raised Bill for Service Charges together with service tax in the subsequent year and offered the same as income.
The various D.Ds on various dates amounting to ₹ 2.5 4.2 crores were drawn in favour of the vendors and hence there is no question of depositing the D.Ds in the assessee’s bank account. The amount of ₹ 15 lacs paid to the assessee as consideration represents the part of sale consideration of the property purchased by Gowri Realtors P. Ltd. The sale consideration advanced to the vendor by the assessee was reimbursed to the assessee. There was no involvement of any income of whatsoever for the assessee. The liasoning work consists of identifying the land, negotiating with the land owners namely farmers, negotiating with the agreement holders if any, paying compensation to the farmers for loss of agricultural activity etc. For the services rendered the assessee has - - 6 ITA 1924/Mds/10 been paid service charges along with the service tax in the subsequent years. Sale consideration is paid directly to the owners by way of D.Ds. The advance amount and compensation amount is routed through the assessee.
4.3 The reimbursement amount given in the name of the assessee was deposited in assessee’s bank account. The D.Ds of sale consideration was paid to the vendors directly. Hence, there is no income involved and the additions made in this regard for an amount of ₹ 15 lacs is incorrect and fit to be deleted. 4.4. On the other hand, the ld. DR relied on the order of lower authorities.
We have heard both the parties and perused the material on record. The main contention of the ld.A.R is that an amount of ` 2.5 crores through various Demand Drafts (D.D.s) was not given to the assessee and it was directly given to the vendors, one Dr.R.Sundararajan. However, the Learned Assessing Officer given a categorical finding in his order that an advance of ` 2.5 crores vide various D.D.s paid in favour of the assessee by - - 7 ITA 1924/Mds/10 M/s.Gowri Realtors Pvt. Ltd.,Bangalore vide Memorandum of agreement dated 13.03.2007 between assessee and M/s.Gowri Realtors Pvt. Ltd.,Bangalore. Furhter, the assessee has not provided the bank account through which these D.Ds were encashed. The assessee received the amount of ` 2.5 croresthe sale deed dated 21.03.2007 executed by Dr.R.Sundararajan as a vendor and the assessee has confirming the party in favour of M/s.Gowri Realtors Pvt. Ltd.,Bangalore, which shows that the assessee received ` 15 lakhs as consideration on account of confirming party. The explanation offered by the assessee is that this amount of ` 15 lakhs represent the part of sale consideration paid to Dr.R.Sundararajan is not supported by any documents. In such situation, it is not possible to hold that assessee has not in receipt of ` 15 lakhs, when the documents shows otherwise. Accordingly, in our opinion, we have no hesitation in confirming the addition of ` 15 lakhs towards receipt of consideration as confirming party from M/s.Gowri Realtors Pvt. Ltd.,Bangalore. Accordingly, the addition is sustained.
- - 8 ITA 1924/Mds/10 Hence, this ground stands dismissed.
Regarding second ground relating to receipt of commission from Smt. Gnaneswari, the ld. AR, submitted that during the period from 1.9.2006 to 12.3.2007, the assessee acted as a liasioning agent for purchasing agricultural land for one Mrs. Gnaneswari, a N.R.I. for whom he purchased land and for this service he has received commission of ₹ 2,57,000/-. This amount was admitted as income in his return of income. The AO contended that the difference amount of ₹ 4,32,175/- is the amount received from Mrs. Gnaneswari and the cost including the stamp duty and registration expenses i.e. 60,00,000 – 55,67,825, is commission income. But whereas apart from stamp duty, registration expenses, sale consideration, an amount of ₹ 1,75,000/- was paid to the farmers who were owners of agricultural land as compensation for loss of agricultural activity and ₹ 175/- towards incidental expenses in this connection.
6.1.According to AR,there is extra cost involved beyond the sale consideration, stamp duty,registration charges and the - - 9 ITA 1924/Mds/10 registration expenses, towards compensation for loss of agricultural activity paid to the farmers, it has to be part of the total cost involved in the transaction. The commission amount for the same was only ₹ 2,57,000/- which was duly declared in the assessee’s return of income. The voucher namely, the stamped receipt for the payment of compensation to the extent of ₹ 1,75,000/- was furnished before the lower authorities. Hence, the amount of ₹ 1,75,175/- added in the commission amount has to be deleted. The commission amount of ₹ 2,57,000/- was correctly disclosed by the assessee and no other amount was derived as income from the transaction by the assessee. Without paying the compensation to the farmers, the agricultural land cannot be purchased in the first place. After the payment of compensation only, the negotiation for the purchase of land would go through. The payment of compensation to the farmers is essential payment and but for such payment the purchase could not happen. Hence the amount of ₹ 1,75,175/- was to be added with the purchase cost. The assessee was not 10 - - ITA 1924/Mds/10 benefitted by any other amount than ₹ 2,57,000/- towards his commission. What he got as commission was duly declared in his return of income. Hence, the ld. AR submitted that the addition of ₹ 1,75,175/- has to be deleted. 6.2 The Ld DR relied on the order of lower authorities.
We have heard both the parties and perused the material on record. In this case, the claim of assessee is that an amount of ₹ 1,75,175/- was paid as a compensation to the farmers and without which the agricultural land could not be purchased. To that extent, the assessee has also filed the details like stamp duty, registration charge etc., for payment of commission to the farmers. However, this was not considered by the ld. Learned Commissioner of Income Tax(A). In our opinion, it is appropriate to remit the issue to the file of Learned Assessing Officer to examine the genuineness of the claim of assessee and decide accordingly. Hence, this issue is remitted back to the file of Learned Assessing Officer for fresh consideration.
In respect of third ground relating to payments of 11 - - ITA 1924/Mds/10 salary and other receipts from Nuziveedu Seeds Pvt. Ltd., the ld. AR submitted that the assessee was employed till April 2006 for a period of one and half years as branch in charge for Chennai branch of a company by name, Nuziveedu Seeds P. Ltd. His responsibility was to administer as Manager and to purchase agricultural land for and on behalf of the company. The assessee was the authorized signatory to execute the Document on behalf of the company. The company’s registered office was situated at Hyderabad. He was paid a salary of ₹ 10000/- per month by the company. For meeting the expenses of branchy office and also towards meeting the repair and remodelling expenses of the company’s building at Anna Salai, Chennai towards reimbursement against bills, the company used to send D.Ds to his savings account with Axis Bank, Chennai.
8.1 According to AR, the amount sent by the company represents only for the expenses of Chennai office and the repair and remodelling expenses for the company’s building at Chennai. For the previous year ended
12 - - ITA 1924/Mds/10 31.3.2007, the assessee was paid ₹ 50,000/- towards salary for five months.
8.2 According to AR, this amounts sent by the company, Nuziveedu Seeds P. Ltd. were of three categories of payment. One towards the office expenses for the Chennai office of the company, the second one towards repairing and remodelling expenses for the company’s building at Chennai and the third one towards the salary of the assessee. The AO had obtained confirmation ledger from the company directly which comprises only of office expenses and salary. The other payment relating to repair and remodelling expenses was not contained in that ledger. The amount sent for meeting the repair and remodelling expenses for the company’s building at Chennai will naturally be reflected in a separate ledger under different head of account in the company’s books, whereas the assessee has received the amount in all the three categories and deposited the same in his bank account.
8.3 The AO has also stated that some of the D.Ds sent
13 - - ITA 1924/Mds/10 by the company were not traceable in the assessee’s bank account. That is because some of the D.Ds were drawn in favour of the works contractors and such D.Ds were senbt to the assessee by debiting his account. Hence, such D.Ds could not be found in assessee’s bank account. The assessee had received towards office expenses and for repairs and remodelling of the company’s building at Chennai ₹ 29,75,012/-, which was duly deposited in his bank account and spent fully for company. An amount of ₹5,27,349/- plus extra amount or ₹ 16000/- shown under the head salary in the confirmation ledger from the company represent the office expenses. Apart from this, the assessee received ₹ 24,47,663/- towards repairs and remodelling expenses of the company’s building at Chennai. All the amounts were spent in full on behalf of the company.
8.4 He submitted that the assessee’s income during his work as Manager of Chennai branch of M/s.Nuziveedu Seeds P. Ltd. was only by way of salary of ₹ 16,000/- p.m. For the year ended 31.3.2007, he worked only for five
14 - - ITA 1924/Mds/10 months for which he was paid a salary of ₹ 50,000/- only. An amount of ₹ 16,000/- shown extra under the head salary represents the salary of the staff at Chennai office.
According to AR, the addition made for ₹ 24,47,663/- 8.5 and ₹ 16,000/- were wrong and they are fit to be deleted. The AO should have called for the ledger relating to repairs and remodelling expenses of the company’s building at Chennai. If called then the amount of ₹ 24,47,663/- can be correlated. The AO has not given enough opportunity of being heard to the assessee. Nor she has called for the clarification in this regard.
The ld. DR relied on the order of the Ld. Learned Commissioner of Income Tax(A).
We have heard both the parties and perused the material on record. The contention of the ld. AR is that the above impugned amount has been received towards reimbursement of expenditure incurred towards and renovation work at the company premises, Chennai and the assessee has received only ₹ 10,000/- salary per month and this amount of ₹ 24,47,663/- cannot be 15 - - ITA 1924/Mds/10 considered as an income of assessee. Further, according to him, another amount of ₹ 16000/- towards salary is not correct, it is the salary of staff at Chennai office. However, the DR submitted that as for the confirmation received from M/s.Nuziveedu Seeds P. Ltd., regarding miscellaneous receipts of `5,27,349/- as against the claim of ` 29,75,012/- as claimed by the assessee. Hence, there was an addition of ₹ 24,47,663/- as unexplained expenditure in the hands of assessee. In our opinion, it is appropriate to remit the issue to the file of Learned Assessing Officer to call for the detail statement of account from the employer, M/s.Nuziveedu Seeds P. Ltd., and the amount reimbursed to the assessee towards this count. Accordingly, this issue is remitted back to the file of Learned Assessing Officer for fresh consideration. At the same time, the Learned Assessing Officer has to ascertain the exact amount of salary paid to the assessee whether it is ₹ 66,000/- or ₹ 50,000/- per month and decide accordingly. This issue is also remitted back to the file of Learned Assessing Officer for fresh consideration.
16 - - ITA 1924/Mds/10
Regarding advance paid to land owners, the AO has made an addition of ₹ 7,50,200/- on presumptive basis towards the difference between the cash withdrawals and the amount paid as compensation for loss of agricultural activity to the farmers to purchase agricultural land. The assessee has furnished the fund flow statement by way of Bank analysis along with the return of income. The Bank analysis reproduced by the AO in her order indicate the amount used to purchase land for ₹ 1,25,98,000/- on behalf of the principal parties. The Bank analysis also indicates the amount received from Mrs. Gnansehwari and others towards the purchase of land for an amount of ₹1,28,55,000/-. According to the assessee, it is clearly proved that the receipts and payments shown in the bank analysis tally with the actual inflow and outflow of funds as explained and there is no room for any short fall in the receipts warranting an addition. However, the AO made an addition of ₹ 7,50,200/- to the returned income towards the difference between the cash withdrawals from the bank and 17 - - ITA 1924/Mds/10 the amount paid as compensation to the farmers. That is ₹53,55,000/- (compensation) minus ₹ 46,04,800/-(cash withdrawals). Apart from the cash withdrawals from the bank, the assessee was having cash on hand for the purpose of utilizing to pay advance to the farmers who are owners of agricultural land. The total cash received by the assessee is ₹ 47,50,000/- from Mrs. Gnaneshwari, ₹51,00,000/- from Mr. Narayanamurthy father of the assessee, ₹ 2,55,000/- from Gowri Realtors Pvt. Ltd. for meeting the registration expenses in all totalling to ₹1,01,50,000/- out of which the cash expenses were met. According to the assessee, from the bank statement, it is evident that the total withdrawal from the bank is ₹47,56,800/- and it is not ₹ 46,04,800/- as stated by the AO. Similarly, the total bank deposit into the bank is ₹51,01,500/- and it is not ₹ 42,03,500/- as stated by the AO in her order. Further, the assessee submitted that from the cash flow statement given it is evident that the cash receipts and payments are correctly indicated and there is no deficit cash balance as stated by the AO to meet the 18 - - ITA 1924/Mds/10 payment of compensation.
11.1 The ld. AR, further submitted that the date wise break up of withdrawals and deposits into the bank account is also enclosed and the additions made by way of ₹7,50,200/- was purely on presumptive basis and factually incorrect and it is to be deleted. Further, the AO has stated in the last paragraph of her order that the assessee is owning presently ₹ 6.02 crores worth of property. This statement is absolutely wrong in the sense that the business of the assessee is that of liasoning agent. The assessee had obtained the Power of Attorney for some of the properties, which are meant for transferring to the principal company, there were purchased by using the advance received from the principal companies. Hence, they form part of the business asset considering the nature of business. The properties will be transferred as per the Liaoning agency arrangement. Therefore, he prayed that the additions made by the AO and confirmed by the CIT(A) to be deleted.
19 - - ITA 1924/Mds/10 11.2 On the other hand, Ld. D.R relied on the order of Ld. CIT(A).
We have heard both the parties and perused the material on record. The total deposit of ` 53,55,000/- to the bank account of assessee by way of cash, which was said to have received from M/s.Balaji Realtors Pvt. Ltd., towards advance payment ot the land owners. Out of this, ase made a withdrawal of ` 46,04,800/- for purchase of agricultural land. Thus, there was a difference of ` 7,50,200/- which was considered as income of assessee. The contention of the ld. AR is that assessee received ` 53,55,000/- from M/s.Balaji Realtors Pvt. Ltd., and the same amount has been paid to the land owners, though the entire amount was not paid, out of the deposits, the assessee is already having cash in hand to make such payment. In our opinion, this contention of assessee is required to be verified with reference to bank accounts of assessee and by reconciling the cash balance in the hands
20 - - ITA 1924/Mds/10 of assessee. Therefore, this issue is also remitted back to the file of Learned Assessing Officer for fresh consideration.
In the result, the appeal of assessee is partly allowed 13. for statistical purposes. Order pronounced on 22nd February , 2017 at Chennai.