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Income Tax Appellate Tribunal, “PATNA” BENCH: PATNA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
ORDER/ आदेश Per Rajesh Kumar, AM: These cross appeals by the assessee and by the revenue and the cross objections by the assessee are directed against the orders of the Ld. Commissioner of Income Tax, (Appeal)-Hazaribagh[hereinafter referred to as ‘Ld.CIT(A)’] for the assessment years2012-13, 2013-14 & 2016-17.
The only issue raised by the assessee in the various grounds of appeal is against the confirmation of notional addition of Rs. 4,68,566/- by Ld. CIT(A) as made by the AO towards rent receivable by the assessee w.e.f. 28.07.2012 as per the order passed by the Court of Home Controller, Patna.
Facts in brief are that the AO during the course of assessment proceedings, observed that the assessee has rented out the property to Krishna Niketan at monthly rate of Rs. 2,22,115/- and accordingly the AO called upon the assessee to show cause as to why the annual value of the property u/s 23 of the Act should not be calculated by applying same rate in the whole financial year. The assessee replied vide letter dated 21.03.2016 submitting that the above property was let out at monthly rent of Rs. 1,20,000/- per annum of which the assessee’s share is ½ at prevalent rate for a period from December, 2008 to November, 2038. It was submitted that over a period, the rental value of property has increased. Besides the tenant was using the property for residential purposes of its staff. Hence the assessee started pressuring the tenant for increase of rent and even the matter went into dispute and suit was filed in the appropriate Court to get the eviction of property the court of home Controller decided the suit on 28.07.2012 holding that the rent payable by the tenant would be Rs. 4,44230/- per annum (with assessee’s share ½). Finally it was mutually agreed to the revise rent vide agreement dated 28.12.2015 w.e.f 1.12.2012 to Rs. 4,44,231/- per annum with assessee share Rs. 2,22,115/- per annum. However the AO added an 4 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya amount of Rs. 4,68,566/- to the income of the assessee in assessment framed u/s 143(3) of the Act dated 31.03.2016 on the basis that according to rent controller order , the revised rent is effective from 27.07.2012.
In the appellate proceedings, the Ld. CIT(A) simply dismissed the appeal of the assessee by upholding the order of AO.
After hearing the rival submissions and perusing the material on record, we observe that the assessee is co-owner of ½ of the property which was rented to Krishna Niketan at the market rate for a period from December 2008 to November. 2038 however rental value of the property has increased considerably over a period and the assessee started pressing for the higher rent. We also note that the another reason for pressing for the rent was that the tenant was using the premises as staff residences. Finally the assessee filed a suit for eviction of property simultaneously filing a suit before Rent Controller for increase in rent. The Rent Controller vide order dated 28.07.2012 held that monthly rent would be Rs. 4,44,230/- thus deciding the issue of increase in rent in favour of the assessee. Accordingly ,a revised rent agreement was executed between the assessee and the tenant on 28.12.2015 w.e.f 1.12.2012 fixing the rent at Rs. 4,44,230/- per month and return of income was filed accordingly. However, according to the AO rent should have been charged as per the order of Rent Controller order from the date of the order. We note that in the case of other co-owner the addition made by the AO on account of notional rent was deleted by the Ld. CIT(A). We observe that the assessee has received rental of Rs. 60,000/- per month from 30.11.2012 which has been accepted by the Ld. CIT(A) in the case of other co-owner and which has not been challenged before the tribunal. Accordingly following the same, we hold that the addition confirmed by the Ld. CIT(A) on account of notional income is not sustainable and accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. The appeal of the assessee is allowed. (Revenue) & C.O. No. 02/Pat/2021(Assessee)_ for AY 2012- 13
The issue raised in ground no. 1 by the revenue is against the order of Ld. CIT(A) quashing the order passed u/s 154 of the Act dated 24.02.2020 by the AO.
Facts in brief are that the assessment u/s 143(3) read with Section 147 of the Act was framed by the AO vide order dated 10.12.2019 assessing total income of Rs. 8,18,08,606/-. Thereafter the AO passed a rectification order u/s 154 of the Act dated 24.02.2020 wherein the AO stated that in the assessment order dated 10.12.2019,the section and sub-section under which the assessment was framed, was wrongly mentioned as “section 143(3) r.w.s 147” instead of “section 144 r.w.s 147 of the Act” which was a mistake apparent from the record and accordingly the same was rectified.
8. The Ld. CIT(A) allowed the appeal of the assessee by quashing the order passed by the AO u/s 154 of the Act by observing and holding as under:
“I have considered the fact and merit of the case, I have also gone through the Assessment Order as well as grounds of appeal filed and written submission made by the appellant. After considering the facts of the case it is found that no notice was served u/s 139(9) of the I.T. Act, 1961 to the appellant declaring the return filed in response to notice u/s 148 of the Act as invalid. Further it is found that the assessee has complied to notice u/s 142(1) and it is an admitted fact that no notice u/s 143(2) of the Act has been issued by the AO. Hence, the assessment made cannot be said to have been made u/s 144 of the Act not being as per the provision of section 154 of the Act. Hence, the order made by the AO u/s 154 of the Act dated 24.02.2020 is hereby quashed on these grounds. In the result, the appeal of the appellant is allowed.”
9. The ld. A.R. vehemently submitted before the Bench that the order passed by the AO is absolutely bad in law as no notice was issued by the AO giving an opportunity to the assessee to respond to the proposed rectification and therefore on this count alone ,the order passed by the AO u/s 154 of the Act is bad in law and was rightly quashed by the Ld. CIT(A) in the appellate proceedings. The Ld. A.R submitted that the AO has completely erred in passing the order u/s 154 of the Act dated 24.02.2020 proposing and purporting to rectify the mistake which according to 6 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya the AO is apparent from the record. By virtue of the said rectification order, the AO tried to overcome the claim of the assessee that the assessment order passed on 13.12.2019 passed u/s 143(3) of the Act is bad in law since no notice u/s 143(2) of the Act was issued. The Ld. A.R submitted that jurisdiction u/s 154 of the Act is available to the AO for correcting and rectifying the apparent mistake and not for his change of opinion with respect to provisions under the Act under which the assessment is sought to be made and nor for those issues which can be established by long drawn process of reasoning on those points/issues on which there may be two opinions nor for a decision on a debatable point of law or failure to apply the law to the set of facts which remains to be investigated cannot be correct by resorting to rectification. The Ld. A.R submitted that the AO has issued notice u/s 142(1) of the Act dated 13.11.2019 thereby the assessee was requested to show cause as to why corresponding addition should not be made in your income for A.Y. 2012-13 in view of non declaration of income from capital gain in the return for A.Y. 2012-13 filed on 27.04.2019. The ld AR argued that the assessee replied the said show cause notice on 27.11.2019 by submitting that income from capital gain was not included in the return of income on the ground that the said sale deed was cancelled as per terms and conditions agreed between the assessee and the buyer of property. The Ld. A.R also submitted that no notice has been issued and served upon the assessee to invoke the provisions of section 144 of the Act and therefore there is no question of passing the assessment order which is sought to be rectified. The ld Counsel argued that the order passed u/s 154 of the Act has to be annulled as the assessment order passed dated 10.12.2019 cannot be said to have been passed u/s 144 of the Act since there was no failure by the assessee as contemplated u/s 144 of the Act. The Ld. A.R stated that the debatable issue is whether on the facts and circumstances of the case the return of income filed on 20.04.2019 relating to AY 2012-13 is valid or invalid in the view of the provisions of Section 148,139(9) and 292(8) of the Act and therefore inference can only be drawn on the facts and provisions of law of the Act after long drawn discussion. Therefore under such circumstances, the provisions of Section 154 of the 7 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya Act cannot be invoked. In defense of arguments the Ld. A.R relied on the series of decision namely a) T.S. Balaram, ITO vs. Volkart Bros ( 1971) 82 ITR 50 (SC), and ITO, North Satara vs . Arvind N. Mafatlal & Ors. (1962) 045 ITR 0271 (SC). The Ld. A.R submitted that in view of the ratio laid down in the above decisions the appeal of the revenue may kindly be dismissed by upholding the order of ld CIT(A).
The Ld. D.R on the other hand relied on the order of AO and submitted that the AO has power u/s 154 of the Act to rectify any mistake which is apparent from the records and in the present case, the mention of wrong section is apparently mistake and therefore the jurisdiction u/s 154 of the Act was rightly exercised by the AO. The ld. AR therefore prayed before the bench that the order of CIT(A) may be reversed and that of AO may be restored.
After hearing the rival contentions and perusing the material on record including the impugned order passed by the Ld. CIT(A), we note that in the present case the assessment has been framed u/s 143(3) read with Section 147 of the Act after calling for various details from the assessee by issuing notice u/s 142(1) of the Act during the assessment proceedings. We note that notice u/s 142(1) of the Act was duly given to the assessee on 13.11.2019 which was also replied on 27.11.2019. In the said reply, the assessee submitted that capital gain has not been shown in the return of income filed by the assessee as the sale deed has been cancelled as per agreed terms and condition between the assessee and the buyer of the property. In our opinion, the assessment order has rightly been framed u/s 143(3) r.w.s 147 of the Act. In the present case we observe that the AO has resorted to the provisions of section 154 of the Act only to correct the anomaly of non issuance of mandatory notice u/s 143(2) of the Act. On the other hand , the provisions of Sections 144 of the Act are applicable only when the assessee does cooperate and does not furnish any details/information and then it does not require to issue any notice u/s 143(2) of the Act but the facts in the instant case are different. We therefore do not find any infirmity in the order of Ld. CIT(A) and accordingly same is upheld by dismissing the appeal of the revenue.
Cross-objection raised by the assessee in support of the order of Ld. CIT(A) and since we have dismissed the appeal of the revenue, then the CO becomes infructuous and is dismissed.
The only issue raised by the revenue is against the order of Ld. CIT(A) quashing the assessment on the ground that no notice u/s 143(2) was served to the assessee before completing assessment proceedings.
Facts in brief are that the assessee filed the return of income on 18.12.2012 declaring income of Rs. 87,64,009/-. Thereafter the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 28.03.2019. The assessee has filed return of income in response thereto on 27.04.2019 which was found to be invalid due to some reasons however no defective notice u/s 139(9) was issued before treating the return as invalid by the AO. Besides the AO did not issue notice u/s 143(2) of the Act during the assessment proceedings. It is pertinent to mention that the AO has not only assessed to income of the assessee on the basis of said return filed by the assessee but also issued notice u/s 142(1) of the Act with the detailed questionnaire mentioning therein and giving show cause notice for non-disclosure of the capital gain in the return filed and thereafter the AO presumed the return to be invalid. The AO thereafter framed the assessment u/s 143(3) r.w.s 147 of the Act assessing the income at Rs. 8,18,08,606/- by making addition on account of long term capital gain of Rs. 7,31,02,196/- vide order dated 10.12.2019.
In the appellate proceedings the Ld. CIT(A) allowed the appeal of the assessee on legal issue as well as on merit. The Ld. CIT(A) called for a remand report from the AO during the appellate proceedings and in the remand report the AO submitted that the return filed by the assessee was invalid and he was not able to generate notice u/s 143(2) of the Act and accordingly the same was not issued to the assessee before holding return as invalid however no such notice was issued to the assessee.Finally the Ld. CIT(A) allowed the appeal of the assessee by observing and holding that as under:
After pursuing the case record and the contentions of the Assessing Officer and ofthe A R of the appellant I find as a matter of fact that no notice u/s 143(2) of the ITAct, 1961 has been issued hence the assessment said to have been made u/s 143(3)r.w.s. 147 f the IT Act, 1961 suffers from jurisdictional error which is not curable u/s292B of the IT Act, 1961 since issuance of Notice u/s 143(2) of the IT Act, 1961 is astatutory notice. In this regard the appellant submitted several judgments of Hon'bleSupreme Court, Hon'ble High Courts in India and Hon'ble ITATS in India is as under:
1. 1. The judgment of Hon'ble Supreme Court in the case of PCIT Vs. Hotel BlueMoon (2010) { 188 Taxman113 (SC) ], has held that no assessment can bemade without issuing of notice under section 143(2) of the act.
2. In the case of PCIT Vs. Oberoi Hotels (P) Ltd. (2018) 96 taxmann.com104(Calcutta), the Hon'ble Calcutta High Court has held that where theAssessing Officer had completed assessment of assessee under section 143(3)read with section 143(2) of the Act, reassessment order passed was legallyunsustainable and same could not be justified by invoking provisions of section292BB of the Act.
3. In the case of PCIT Vs. Shri Jai Shiv Shankar Traders (P.) Ltd. (2015) 64taxmann.com 220(Delhi), the Hon'ble Delhi High Court has held that failureof the Assessing Officer issue notice under section 143(2) of the Act is fatal toorder of reassessment; such failure cannot be condoned by referring to section292BB of the Act.
4. In the case of CIT Vs. Fomento Finance and Investment(P.) Ltd. [2020] 113taxmann.com 237 (Bombay), the Hon'ble Bombay High Court has held thatfor block assessment of undisclosed income also, provision of section 142,143(2) and 143(3) of the Act are applicable and no assessment can be madewithout issuing notice under section 143(2) of the Act.
5. In the case of Sanjeev Aggarwal Vs. DCIT [2016] 70 taxmann.com 265(Chandigarh-Trib.) the Hon'ble Chandigarh Tribunal has held that where theAssessing Officer passed an order under section 147 read with section 143(3)of the act for making assessment without issuing notice under section 143(2) ofthe Act, it would be invalid..
6. CIT Vs. Bihari Lal Agrawal[2013] 33 taxmann.com 553 (Allahabad); 1. ITO Vs. DD Ahuja & Brothers [2014] 45 taxmann.com336(Lucknow-trib.); 2. G.N.Mohan Raju Vs. ITO[2015] 57 taxmann.com 415 (Bangalore-Trib.); 3. Mohinder Kumar Chhabra Vs. ITO [2014] 48 taxman.com 120(Delhi-Trib.) In view of the above judgments, I hereby quash the assessment made on10.12.2019
The A.R has further argued, that without prejudice to the illegal initiation of proceedings under section 147 and the issuance of Notice u/s 148 besides the alleged addition of Capital Gains and the purported assessment made u/s 143(3)r.w.s. 147 of the IT Act, 1961, that the Sale Deed dated 21.03.2012 incorporates the sale of agricultural land to M/s Chandramauli Developers (P) Ltd for a consideration of Rs.7,83,27,813 and the Sale Deed incorporates the mode of payment by Cheques and one of the post dated cheque dated for Rs.7,04,95,032 and the same Sale Deedalso incorporate the fact if for any reason the cheques are not cleared by the bankthe this Sale shall stands cancelled and the Sale Deed shall become illegal. The said Sale Deed dated 21.03.2012 should be read as whole and not only a part thereof. The cheque issued by the purchaser of the property was presented to thebank of the assessee but the same was returned being unable to encash the same. This is evident from the bank account wherein it was credited thereafter it wasdebited. Thus in fact the transfer of the title over property stood cancelled/withdrawnand hence no Capital accrued to the assessee. On perusal of the Sale Deed dated 21.03.2012, I find that it also incorporates thecircumstances under which the sale of the land is to be held as void therefore considering the Sale document as a whole it is observed that Sale said to have been effected on 21.03.2012 has become cancelled hence no Capital Gain has accrued to the assessee. Hence, Both on the jurisdictional ground that no notice u/s 143(2) was served to the assessee and also on merit that the transaction amount of Rs. 78327813/- was not cleared by the bank and therefore the sale of the property has not taken place as per the sale deed. The appeal of the appellant is allowed.”
The ld DR vehemently relied on the assessment order passed whereas on the hand the Ld. A.R submitted before the Bench that as per the provisions of Section 292B of the Act, no return of income ,which has been furnished , shall be deemed to be invalid merely by reason of mistake, defect or omission in return of income and if such return of income is filed by the assessee as per the Act. The AR stated that in the present case the return of income filed in response to notice issued u/s 148 of the Act by the AO has not only assessed the income on that basis of such return of income but also issued notice u/s 142(1) of the Act along with questionnaires as annexure whereby it was show caused as to why the income from capital gain should not be added to the income of the assessee due to non declaration of the same in the return of income. The ld. A.R argued that by misconstruing the provisions of section 139(9) of the Act and 292B of the Act, the AO has treated the return of income as invalid which is wrong
11 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya and in defense, he relied on certain decisions namely PCIT Vs Silver Line 363 ITR 465 (Delhi) and Sapthagiri Finance and Investments Vs ITO (2013)90 DTR (Mad)289. The ld AR contended that in absence of issue of notice u/s 143(2) of the Avct , the assessment framed u/s 143(3) r.w.s. 147 of the Act is illegal and invalid. The ld AR argued that the said defect of non issuance of notice u/s 143(2) is not curable even u/s 292BB of the Act. In defense of his arguments the ld AR relied on the PCIT Vs Hotel Blue Moon(2010)188 Taxman 113(SC) and Sanjeev Aggrawal vs DCIT (2016) 70 Taxman 265 (Chd Tribunal).
After hearing the rival contentions and perusing the material on record, we find that the AO himself admitted that no notice u/s 143(2) of the Act was either generated or served on the assessee giving reasons that the return filed by the assessee was an invalid return and therefore no notice u/s 143(2 was either generated or issued . We note that the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 on 28.03.2019 which was complied with by the assessee by filing return of income on 27.01.2019. We note that the AO has even assessed the income on the basis of return of income filed by the assessee u/s 148 (1) of the Act and even the notice was issued u/s 142(1) giving show cause to the assessee as to why the capital gain on sale of property should not be added to the income of the assessee. Considering these facts and circumstances it is apparent from the records before us that no notice has been issued and served on the assessee . In our opinion where no notice u/s 143(2) is issued, the assessment so framed by the AO is null and void in law. The case of the assessee finds support from the decision of Hon’ble Apex Court in the case of PCIT vs. Hotel Blue Moon (supra) wherein the Hon’ble Apex Court has held that no assessment can be made without issuing notice u/s 143(2) and this decision has been relied on the First Appellate Authority while allowing the appeal of the assessee. Similarly the other decisions in the case of PCIT vs. Oberoi Hotels Pvt. Ltd. (2018) 96 taxmann.com 104 (Cal), CIT vs. Fomento Finance and Investment Pvt. Ltd. (2020) 113 taxmann.com 237 (Bom) , Sanjeev Kumar Aggarwal vs .DCIT (2016) 70
12 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya taxmann.com 265 (Chandigarh-Trib) and CIT vs. Bihari Lal Agarwal (2013) 33 taxmann.com 553 (Allahabad) have decided the issue that assessment framed is invalid sans notice u/s 143(2) of the Act which were also referred by the Ld. CIT(A). Considering the ratio laid down in the above decisions, we hold that the Ld. CIT(A) has rightly allowed the appeal of the assessee on legal issue. Accordingly we uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue.
Insofar as the issue on merit is concerned we observe that the Ld. CIT(A) has given a clear finding a fact that the sale proceeds of Rs. 7,43,27,813/- for sale of land of M/s Chandramauli Developers Pvt. Ltd. has not materialized as the cheque issued by the said party were not honoured and therefore sale deed became invalid and was cancelled and consequently no capital gain was shown in the return of income. Therefore even on merit the revenue has no case and Ld. CIT(A) has rightly allowed the appeal of the assessee. Consequently we dismiss ground no.2 of the revenue by upholding the order of Ld. CIT(A). Cross-objection is in support of the appellate order of Ld. CIT(A) and therefore is being dismissed as we have dismissed the appeal of the revenue.
The only issue raised in the grounds of appeal is against the confirmation of addition of Rs. 34,00,000/- by the Ld. CIT(A) as made by the AO u/s 68 of the Act.
Facts in brief are that the return was filed on 31.03.2017 declaring total income of Rs. 4,24,41,600/- which was revised by the assessee declaring total income of Rs. 2,49,73,811/-. The said revision was done in order to reduce the claim u/s 54EC and 54F against the declared long term capital gain on certain long term gain during the course of assessment proceedings. The AO observed that the assessee has taken unsecured loan of Rs. 34,00,000/- and accordingly called upon the assessee to furnish the details of names and addresses of the persons along with confirmation letters, bank statements and other evidences. The assessee replied the queries by the AO by 13 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya submitting that the unsecured loanswere taken in earlier years and are being carried /brought forward to the current financial year. The assessee submitted that Rs. 14,00,000/- was taken from Nirmala Singh and Rs. 10,00,000/- from Ram Prit Singh and Rs. 10,00,000/-from Rohit Engicon Pvt. Ltd.. However no confirmations were filed. Thereafter the AO again requested and called upon the assessee to submit the same but remained non complied. Finally the AO added the same to the income of the assessee on the ground that the assessee has not submitted any details.
In the appellate proceedings, the Ld. CIT(A) simply dismissed the appeal of the assessee by observing that the assessee has not responded to the querries raised by the AO and the issue was decided by the AO on the basis of available material and added the total income. Similarly the assessee failed to substantiate these loans before the First Appellate Authority resulting into confirmation of the said addition.
After hearing the rival contentions and perusing the material on record, we note that the assessee has submitted that these loans were being brought forward from earlier years and in fact represented the opening balances from three parties as stated above. Before us, the assessee submitted that bank statements, ledger accounts of these parties, balance sheet and confirmations from these parties. We observe from the balance sheet that these loans were opening balances brought forward from earlier years which have been taken in the earlier years. In our opinion the provisions of Section 68 of the Act are not applicable to the loans/cash credits received in earlier years and only the cash credits which have been credited in the books of account of the assessee during the year are liable to be added u/s 68 of the Act, in case, the assessee failed to satisfy with three ingredients of the said section. The case of the assessee finds support from the several decisions as discussed hereinafter. In the case of ACIT vs. ATS Promoters & Builders (P) Ltd [2015] 57 taxmann.com 21 (All), the Hon’ble Court has held that the provisions of section 68 are not applicable where the sum is not even credited in the books of account during the year. Similarly the decision of Mumbai Tribunal in the case of ACIT vs. Golden Line Studio Pvt. Ltd. (2018) 98 taxmann.com 299 (Mumbai-Trib) has held as under:
“15. However, in the instant case, we are of the view that the "nature" of the transaction has been explained by the assessee as Share Premium, which could not be contradicted by the revenue with any other material. There is no dispute with regard to the "Source". Hence, in effect, the conditions prescribed in sec. 68 of the Act has been fulfilled by the assessee. With regard to the basis for excess premium, we have noticed that the AO has considered the share premium amount as excess in nature, only for the reason that it is in excess of Book value of shares. We have noticed that the "book value" of shares would value only "Equity shares" and not "Preference shares". Hence, the very basis on which the AO determined the excess premium" should, in our view, is not sustainable. In any case, the assessee has shown that the transaction is a commercial transaction involving receipt of money @ Rs.500/- per share and repayment of the same @ Rs.750/- per share after a period of five years. Yet another point, which supports the case of the assessee is that the assessee had received funds in the earlier years and not during the year under consideration. During the year under consideration, the assessee has transferred the funds to "preference shares account" and "shares premium" account by passing journal entries. There should not be any doubt that the provisions of sec.68 shall apply only in the year in which the cash credit was found.
16. In view of the foregoing discussions, we are of the view that there is no justification in assessing the alleged excess premium as income of the assessee. Accordingly we are of the view that the Ld CIT(A) was justified in deleting the impugned addition and accordingly we uphold his decision.”
In the present case these loans were received in FY 2013-14 and therefore the provisions of Section 68 cannot be invoked. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly the appeal of the assessee is allowed.
The issue raised in ground no. 1 and 2 by the revenue is against the order of Ld. CIT(A) allowing the deduction of Rs. 4,45,12,849/- u/s 54F of the Act and Rs. 50,00,000/- u/s 54EC of the Act.
Facts in brief are that the assessee purchased a land in Gurgaon on 4.2.2005 at Rs. 31,40,250/- from Smt. Kanta Kanodia and Smt. Kaushalya Devi. Thereafter the assessee sold the said land to Chandramauli Builders Pvt. Ltd. by executing a sale deed dated 21.03.2012 for an agreed consideration of Rs. 7,83,27,813/-. However out
15 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya of the cheques issued towards sale consideration, the assessee realized only Rs. 78,32,781/-. The land was mutated in the name of purchaser on 11.04.2012 after a lot of litigations and the assessee was able to recover the remaining amount during the relevant assessment year when the purchaser company roped in third party namely Vinay Mangla & Tushar Chand Dushad. A sale deed was entered on 08.02.2016 between Chandramauli Developers, said purchaser M/s Vinay Mangla and assessee Shri Tushar Chand Dushad. The assessee signed in the capacity of a witness and not as a owner. As the sale proceeds were realized by the assessee during the relevant assessment year, the assessee computed capital gain on sale of property during relevant assessment year and capital gain accrued amounting to Rs. 7,01,29,667/- was shown during the year and deduction u/s 54F of Rs. 4,45,12,849/- was claimed in respect of acquisition of new house as a residential flat on 04.02.2016 beside deduction of Rs. 50,00,000/-u/s54EC of the Act for making investment in the NHAI Bond during the relevant assessment year. According to AO, the long term capital has accrued to the assessee in AY 2012-13 and not during the year when the part of money was received by the assessee and therefore, the AO rejected the claim u/s 54EC & 54F and added the same of Rs. 4,95,12,849/- to the income of the assessee.
The Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under:
As regards the denial of exemption as per sale deed submitted before Assessing Officer as well during appellate proceedings it is mentioned that in case the cheque amount will not be realized by the appellant then the sale deed will stand nonexistent and amount paid by the purchaser will be forfeited. In this case amount of consideration could not be realized by the appellant because the said cheque was bounced and payment could not be effected. After this the appellant took back the possession of land and filed case in High court & civil court. The compromise between appellant and purchaser took place in A.Y. 2016-17 and the said land was sold to third party in A.Y. 2016-17. Appellant received Rs.7,04,95,032/- as sale consideration in A.Y. 2016-17 and accordingly, appellant calculated capital gain tax and tax due was duly paid. On the other hand, Assessing Officer states in assessment order that 16 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya 7. d. The exemption claimed by the assessee includes claim of repayment of housing loan of Rs. 1,97,16,393/- on 22.03.2016 which is presumably related to any other property as the cost of properly acquired from M/s Bestech (erroneously referred to as Ms Unitech in the show cause notice) itself is merely Rs. 1,11,53, 500/- e. Notwithstanding above, the assessee has claimed total exemption u/s 54F for an amount of Rs. 4,45, 12,849/- through no complete details and evidences w.r.t. the same have been provided by the assessee. However, the same vere not pressed by the Revenue as the legality of the assessee's claim itself remained unproved.
On the similar analogy, the claim of assessee u/s 54EC w.r.t. exemption of Rs. 50, 00, 000/- is also disallowed for want of compliance with the relevant provisions of the said section; as enumerated in the show cause notice reproduced above to which the assessee failed to provide any satisfactory reply/explanation.
Therefore, the exemption claimed by the assessee u/s 54EC and 54F are hereby disallowed. It is not out of place to bring it on record that the assessee was liable to declare Long Term Capital Gains in the A.Y. 2012-13 itself, despite the fact that the sale-deed had already been registered in F.Y. 201-12 itself and assessee realized part of the sales consideration during the year only; but the assessee failed to do so. Now, when the assessee has offered the capital gain in the year under consideration in consequence of recovery of major sales proceeds, the same are being assessed as offered to protect the interest of Revenue. Assessing Officer failed to appreciate the fact that the said land transaction could not be effected in A.Y. 2012-13 due to the non-payment of consideration All such documents including evidences in this regard were filed before Assessing Officer also. But, Assessing Officer failed to take any cognizance in this regard. Same set of details along with submission were filed during the appellate proceedings also. The said sale of land only could be effected in A.Y. 2016-17 and appellant considered and declared capital gain tax and paid the said tax and invested an amount of Rs. 50,00,000/- in REC Bond u/s 54EC of the Act. After considering the facts mentioned above, I find force in appellant's arguments and submission. Assessing Officer could not consider the fact that actual transaction of said land could only take place in A.Y. 2016-17 and appellant correctly calculated the capital gain tax. In view of the above, addition made by the Assessing Officer on account of disallowance of exemption claimed under section 54F & 54EC of the Act is hereby deleted. As regards the addition on account of disallowance of claim of loan liability to the tune of Rs. 34,00,000/- On perusal of assessment order, it is observed that after availing several opportunities the appellant has not provided the reason why the name of M/s Rohit
17 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya Engicon Put. Ltd. was not disclosed in earlier replied. On the basis of material available on record the A.O added the loan liabilities of the assessee in his total income. During the assessment proceedings as well as appellate proceedings the appellate failed to substantiate the loan liabilities of Rs. 3400000/-. Hence the addition made by the A.O, is hereby confirmed. As regards the addition on account of enhancement in declared business income to the tune of Rs. 19,19,300/- Ongoing through the submission made by the appellant, it is observed that the assessee during the financial year 2015-2016 had carried on business under the Kumar enterprises as a proprietor. The appellant during the financial year 2015- 2016 relevant to assessment year 2016-2017 had not carried on any other business either under the name Kumar Travels or under Taran Communication. The businesses under the Kumar Travels and Taran Communication were dormant. The Balance Sheet and Profit & Loss Account of M/s Kumar Enterprises were submitted during the course of hearing before the Assessing Officer as well as appellate proceedings. Hence the disallowance made by the A.O is not sustainable and hereby deleted.
After hearing the rival contentions and perusing the material on record, we observe that the Ld. CIT(A) has rightly appreciated the facts of the case that cheques were issued in respect of sale consideration however payments could not be realized. The Ld. CIT(A) recorded the findings that out of total sales consideration of 7,83,27,813/-, the assessee realized only Rs. 78,32,781/-. The land was mutated in the name of purchaser on 11.04.2012 after a lot of litigation and the assessee was able to recover the remaining amount during the instant assessment year when the purchaser company roped in third party namely Vinay Mangla & Tushar Chand Dushad. A sale deed was entered on 08.02.2016 between Chandramauli Developers, said purchasers and the assessee. Consequently the assessee calculated the capital gain taxed and paid sum during the year. The Ld. CIT(A) has held that the AO has failed to appreciate that transaction could not happen in Ay 2012-13 due to non-payment of sale consideration. Finally the Ld. CIT(A) allowed the deduction u/s 54F and 54EC by holding that there was no income from long term capital gain as the assessee realized the sale consideration during the year. After perusing the facts on record we find that 18 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya the Ld. CIT(A) has taken a correct view in the matter and therefore we are inclined to uphold the same by dismissing the ground nos. 1 and 2 of the revenue’s appeal.
Issue raised in ground no. 3 is against the deletion of addition of Rs. 19,19,300/- by Ld. CIT(A) as made by the AO by estimating profit.
Facts in brief are that the assessee carried on business under the name Kumar Enterprises as a proprietor. During the instant financial year the assessee has not carried on any business in the name of M/s Kumar Travels or M/s Taran Communications in which the assessee was doing business in the earlier years. During the year, the balance sheet and profit and loss account of M/s Kumar Enterprise was furnished before the AO. The assessee has been shown the business income of Rs. 4,87,700/- from M/s Kumar Enterprise in his total income. The AO rejected the books of account u/s 145(3) on the ground that income from M/s Kumar Travels and M/s Taran Communications were not shown in the books of account and therefore the same were liable to be rejected. The AO estimated the income of Rs. 2,00,000/- per month and after revising the income shown by the assessee , made an addition of Rs. 19,19,300/- on estimated basis.
The Ld. CIT(A) in the appellate proceedings allowed the appeal of the assessee by observing and holding as under:
On going through the submission made by the appellant, it is observed that the assessee during the financial year 2015-16 had carried on business under the Kumar Enterprises as a proprietor. The appellant during the financial year 2015-16relevant to assessment year 2016- 17 had not carried on any other business either under the name Kumar Travels or under Taran Communication. The businesses under the Kumar Travels and Taran Communication were dormant. The Balance Sheet and profit and loss account of M/s Kumar Enterprises were submitted during the course of hearing before the Assessing Officer as well as appellate proceedings. Hence the disallowance made by the AO is not sustainable and hereby deleted.
After hearing the rival contentions and perusing the material on record, we observe that during the year the assessee has not done any business in proprietary concerns namely M/s Kumar Travels as well as in M/s Taran Communications whereas the assessee has done business in Kumar Enterprises. During the year the 19 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya assessee has shown business income of Rs. 4,87,700/- from M/s Kumar Enterprises which was duly shown in the return of income. The AO rejected the books of account on the ground that the assessee has not shown the income in the two concern namely M/S Kumar Travels and M/S Taran Communication and made addition after estimating the income of Rs. 2,00,000/- per month and therefore after making allowance for income declared by the assessee , Rs. 19,19,300/- was added to the income of the assessee. The assessee has furnished balance sheet, profit and loss account during the course of assessment proceedings. We note that the AO has not brought on record any material or evidence to substantiate that the assessee has earned income these two concerns apart from declared income from M/S kumar Enterprises and therefore, the addition was made on suspicion, surmises and conjecture which is not permissible under the law. The Ld. CIT(A) after rightly appreciating the facts of the case deleted the addition. The case of the assessee finds support from the following decisions:
i) DCIT vs. Ashok Weaving Works in [2015] 63 taxmann.com 370 (Ahmedabad Trib)wherein it was held that unless defect is pointed out in books of assessee, no addition could be made by the AO on ad-hoc basis. ii) ACIT vs. Ganpati Enterprises Ltd. [2013] 32 taxmann.com 262 (Delhi-Trib) wherein it was held that the AO informed to give details/ explanation which were found unverifiable and made an ad-hoc disallowance and the said disallowance was to be deleted. iii) ACIT vs Mohinder Kumar Jain in [2017] 84 taxmann.com 141 (Delhi Trib) wherein it was held that expenses on account of business promotion and vehicle running and maintenance could not have been disallowed on estimate basis without bringing any cogent material on record for disallowing expenses.
20 94/PAT/2020 ITA Nos. 96 & 98/PAT/2021 C.O Nos. 2 & 3/ PAT/2021 AY: 2012-13,2013-14 ,2016-17 Kumar Arunodaya In view of the aforesaid facts and circumstances and decisions of the Co-ordinate Benches, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground no. 3 raised by the revenue.
Issue raised in ground no. 4 needs no adjudication.
In the result, the appeals of the assessee are allowed, the appeals of the revenue is dismissed and the Cross-objections of the assessee are also dismissed.
Order is pronounced in the open court on 7th November, 2023