SHRI SHIVAJIRAO R.CHAVAN,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-13(2), AHMEDABAD

This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-XX, Ahmedabad (in short referred to as “ld.CIT(A)”) dated 22.03.2006 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Years 2001-02.

The assessee raised additional grounds challenging validity of the assessment framed under section 147 of the Act.

At the outset, the ld.counsel for the assessee stated that he would not want to press the additional ground, therefore, at this stage of admissibility itself of the additional grounds the same is not considered. The additional ground raised by the assessee is accordingly not admitted for adjudication.

The ground no.1 raised by the assessee reads as under:

In the above grounds, the assessee has challenged the addition made on account of rental income earned on immovable properties owned by his family members treating them to be benami properties of the assessee. The property is Ratna Jyoti Complex which was purchased in 1998-99 and treated as unexplained investment of the assessee in the assessment framed for the said year. The property was registered in the name of three co-owners, R.M Chavan, Shakuntalabai R . Chavan and Usha N .Pol, the father, mother and sister of the assessee respectively. Rent of Rs.7385/- per month received in the hands of all the three owners, amounting in all to Rs.2,65,860/- for the year, was treated as rental income of the assessee. Further rental income of Rs.40,000/- earned from Riddhi Siddhi Cellar, claimed to belong to his father Sh.RM Chavan, was also treated as income of the assessee. Thus total addition of 3 Rs.3,05,000/- was made to the income of the assessee on account of rental income earned from aforestated properties owned by his family but held to be benami of the assessee.

The ld.counsel for the assessee contended before us that this rental income had been disclosed by the owners of the property in their returns, and the same had not been disturbed or disputed till the date. Our attention was drawn to evidence in this regard placed before us being copies of Income Tax Returns of all the owners of the said properties, i.e Sh. R. M Chavan, Smt Shakuntala Chavan & Mrs. Usha Pol , for the impugned year disclosing rental income earned from Ratan Jyoti Complex and Riddhi Siddhi Cellars wherever applicable. The said evidences were placed at P.B Page No.3, 6,& 10. Copy of municipal Tax Bill of Ratan Jyoti complex revealing owners name as above was also placed before us at P.B page 11. Attention was also drawn to the submissions made to the Ld.CIT(A) in this regard placed at P.B 51 to 61. The ld.counsel for the assessee contended that in his statement recorded during search by the CBI, the assessee had stated all the facts relating to these properties, as having been purchased by the respective owners and even all sources of purchases was revealed to the CBI. It was also stated in the statement that all the documents for the acquisition of the property and even bank documents for procuring loans for the purpose of the property were executed by the owners of the property, and they being the assessee’s relatives, and the assessee had no role to play in them at all. Our attention was drawn to PB Page No.57 to 61 being copy of the statement recorded of the assessee by the CBI search team, stating the aforesaid mentioned facts.

The ld.counsel for the assessee stated that the Hon’ble Kerala High Court in the case of CIT Vs. K.Mahim Udma, reported on (2000)

It was pointed out that this proposition was reiterated by the Hon’ble Apex Court in the case of Smt. P. Leelavathi (D) by LRs., vs. V. Shankarnarayana Rao (D) by LRs. In Civil Appeal No.1099 of 2008 dated 9.4.2019. Copy of the order was placed before us.

We have heard the rival contentions and gone through the orders of the authorities below.

Thus, it is evident that the case of the Revenue of the impugned properties being benami of the assessee rests merely on the preliminary report of the CBI which did not see the light of day by framing concrete charges against the assessee.

Further, we have perused the statement recorded by CBI of the assessee placed before us at P.B 57-61 and as rightly pointed out by the Ld.Counsel the assessee denied having anything to do with 6 the said properties, he stated the names of the owners of the properties and also revealed sources from where investment was made by them. None of the above facts stated by the assessee was contradicted by the Revenue at any point in time. The entire case of the Revenue rests on the CBI Charge sheet framed by the CBI which was subsequently dropped.

It is evident therefore that the Revenue has failed miserably to prove that the assessee was a benami owner of the impugned properties. The assessee therefore cannot be treated as owner of the properties. The decision referred to by Ld.Counsel for the assessee of the Hon’ble Kerala High Court in K. Mahim Udma (supra) casting an onerous burden on the party alleging benami transaction aptly covers the issue in hand, in favour of the assessee.

Further the fact that rental income from these properties was returned in the hands of respective owners has been accepted by the Revenue all along, also strengthens the case of the assessee.

Ground of appeal No.1 is allowed.

The issue raised in the above grounds relates to alleged badla income earned by the assessee from DD Enterprises amounting to Rs.11,471/-.

The ld.counsel for the assessee first drew our attention to the document in which the said transaction was reflected placed at PB page no.12B. Referring to the same, he pointed out that the document was of DD Enterprise, and it reflected the account of one Shri J.R. Pawar. The ld.counsel for the assessee thereafter pointed out that the income from DD Enterprise had been returned to tax by Shri J.R. Pawar in his return of income filed for the assessment year 2001-02, and computation of return of income was placed at pager no.50. It was pointed out that Shri J.R. Pawar was in badla business, and income from the same had been reflected in its return of income. This badla business being carried out in M/s DD Enterprises.

Our attention was also drawn to the affidavit furnished by Shri J.R. Pawar stating that the assessee was not involved with him in his badla business. The ld.counsel for he assessee, therefore, stated that in view of the above evidences, there was no reasons to treat the amount of Rs.11,477/- as income from badla business of the assessee.

We have heard the rival contentions. As noted above in earlier part of our order the entire case of the Revenue rests on the CBI charge sheet which ultimately did not culminate in any charges being framed on the assessee. Therefore, not much credence can be given

Ground of appeal No.2 is allowed.

The Ld. CIT (A) erred in law and on facts in sustaining the addition of Rs. 26,5207- in the hands of appellant being Post Office MIS interest earned by Shri R M Chavan and offered in his I.T. Return even though the CIT(A) allowed the principal amount of Rs.2,04,000/- investment by late Shri R. M. Chavan in A.Y. 2000-01 vide para 11.3 page 9 of her appellate order.”

The ld.counsel for the assessee contended that his arguments vis-à-vis the impugned addition not being treated as income, was identical to that made in ground no.1, which related to income earned from investment in house property treated as benami of the assessee. He elaborated by stating that his pleadings taken in ground no.1 with the onus of proving that the assessee was benami owner of the investment, laid heavily on the Department, which had made this allegation on the assessee, and the same was not discharged in the present case, as the entire case of the Revenue merely rested primarily on the report of the CBI which did not see light of the day, by way of any charges being framed on the assessee in disproportionate asset case made out by the CBI on the assessee, since the said case was dismissed on the death of the assessee during the pendency of the proceedings before the CBI Court. He relied on the decision of the Hon’ble Kerala High Court in the case of K. Mahima Udma (supra), as referred to in ground no.1 above.

His contention was also to the effect that, the all such income, which were alleged to be relating to the assessee, were disclosed by the respective owners of the investments, which it was earned, in their returns filed for the said year, which was demonstrated to both the authorities below, and the said fact was accepted by the Department with no change in the stand till date.

We have heard contentions of both the parties. Since pleadings of the assessee admittedly with respect to the addition made to the income of the assessee on account of interest earned on FDRs. and Post-Office MIS owned by the family members of the assessee but treated to be benami investment of the assessee, is identical to that made in ground no.1 with respect to rental income earned from the alleged benami properties of the assessee our decision rendered in ground no.1 will squarely apply to the impugned issues also.

In view of the same, the addition made of interest income earned from FDR amounting to Rs.84,445/- and interest earned on Post Office MIS amounting to Rs.26,250/- are directed to be deleted.

In the result, the appeal of the assessee is allowed.