Smt.Thankamma Simon, Trichur V. The DCIT, Thrissur

CO 13/COCH/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9402 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: VISHNU PRASAD B MENON
• Keywords: Capital asset; Gift; Business income; Income from undisclosed sources; Search and seizure; Valuation report
• Section: 2(14); 133A

Judgement Text

1 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 775/COCH/2013 (ASSESSMENT YEAR 2009-10) DY.CIT, CENT.CIRCLE VS SMT. THANKAMMA SIMON S.T. NAGAR, THRISSUR-1 W/O SHRI SIMON VARGHESE P PARAKADATH HOUSE MANGALASSERY PO, TRICHUIR-1 PAN : DEXPS1813B (APPELLANT) (RESPONDENT) C.O. NO.13/COCH/2014 (ARISING OUT OF I.T.A NO. 775/COCH/2013) (ASSESSMENT YEAR 2009-10) SMT. THANKAMMA SIMON VS DY.CIT, CENT.CIR. THRISS UR MANGALASSERY PO, TRICHUR (CROSS OBJECTOR) (RESPONDENT) I.T.A NOS. 776 TO 778/COCH/2013 (ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11) DY.CIT, CENT.CIR VS SHRI SIMON VARGHESE TRICHUR PARAKADATH HOUSE MANGALASSERY PO, TRICHUIR-1 PAN : AFGPV9060G (APPELLANT) (RESPONDENT) C.O NOS.10 TO 12/COCH/2014 (ARISING OUT OF I.T.A NOS. 776 TO 778/COCH/2013) (ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11) 2 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 SIMON VARGHESE VS DY.CIT, CENT.CIR TRICHUR TRICHUR (CROSS OBJECTOR) (RESPONDENT) I.T.A NOS. 779 TO 781/COCH/2013 (ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11) DY.CIT, CENT.CIR VS SHRI T.V. JOHNSON S.T. NAGAR, TRICHUR THOZHUTHUPARAMBIL HOUSE R.S. ROAD, IRINJALAKKUDA TRICHUR PAN : AEPPJ3129N (APPELLANT) (RESPONDENT) C.O. NOS 07 TO 09/COCH/2014 (ARISING OUT OF I.T.A NOS. 779 TO 781/COCH/2013) (ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11) SHRI T.V. JOHNSON VS DY.CIT, CENT.CIR IRINJALAKKUDA, TRICHUR S.T. ROAD, TRICHUR (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI M ANIL KUMAR, CIT DR ASSESSEE BY : SHRI VISHNU PRASAD B MENON DATE OF HEARING : 05-02-2014 DATE OF PRONOUNCEMENT : 28-03-2014 O R D E R PER N.R.S. GANESAN (JM) ALL THE APPEALS OF THE REVENUE RELATE TO THREE IND EPENDENT ASSESSEES. THE RESPECTIVE ASSESSEES HAVE FILED CRO SS OBJECTIONS. SINCE 3 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 COMMON ISSUES ARISE FOR CONSIDERATION, ALL THE APPE ALS AND THE CROSS OBJECTIONS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. LET US FIRST TAKE APPEAL IN ITA NO.775/COCH/2013 IN THE CASE OF SMT.THANKAMMA SIMON. 3. SHRI M ANIL KUMAR, THE LD DR SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERATION IS PROFIT ON SALE OF VILLAS AT IRINJA LAKUDA. ACCORDING TO THE LD.DR, THERE WAS A SEARCH AND SEIZURE OPERATION AT THE RESIDENCE OF SHRI SIMON VARGHESE, HUSBAND OF THE ASSESSEE. SIMULTANE OUSLY, SURVEY OPERATION U/S 133A WAS CONDUCTED AT THE BUSINESS PR EMISES OF M/S SION LAND DEVELOPERS AND BUILDERS, CHALAKKUDY AND IRINJA LAKUDA IN WHICH THE ASSESSEE IS A PARTNER. ACCORDING TO THE LD.DR, DUR ING THE COURSE OF SEARCH AND SURVEY OPERATIONS SEVERAL INCRIMINATING MATERIA LS WERE FOUND. THE LD.DR FURTHER SUBMITTED THAT THE ASSESSEE HAS PURCH ASED 6.855 CENTS OF LAND FROM SHRI T.V. JOHNSON, WHO IS THE ASSESSEE IN ITA NOS.779 TO 781/COCH/2013 FOR A SALE CONSIDERATION OF RS.2,50,3 89. THE ASSESSEE CONSTRUCTED RESIDENTIAL HOUSE ON THE LAND SO PURCHA SED. SUBSEQUENTLY THE ASSESSEE SOLD THE SAME TO ONE E.B. ANILKUMAR, WHO I S A NON RESIDENT INDIAN FOR A SALE CONSIDERATION OF RS.55,04,000. T HE ASSESSEE HAS OFFERED 4 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 SHORT TERM CAPITAL GAIN FOR TAXATION. ACCORDING TO THE LD.DR, THE ASSESSEE AND HER HUSBAND SHRI SIMON VARGHESE ARE NON RESIDEN T INDIANS LIVING IN KUWAIT. THEREFORE, THEY HAD NO INTENTION TO RESIDE IN THE HOUSE CONSTRUCTED BY THE ASSESSEE. THE INTENTION OF THE ASSESSEE IN PURCHASING THE LAND AND CONSTRUCTING HOUSE ON IT WAS FOR ENGAG ING THEMSELVES IN REAL ESTATE BUSINESS. ACCORDING TO THE LD.DR, THE ASSES SEE HAS ALSO SIMULTANEOUSLY CONSTRUCTED A RESIDENTIAL HOUSE AT M ANGALASSERY, THE NATIVE PLACE OF THE HUSBAND OF THE ASSESSEE. BOTH THE ASSESSEE AND HER HUSBAND IN THEIR INDIVIDUAL CAPACITIES ARE PARTNERS IN THE FIRM, M/S SION LAND DEVELOPERS AND BUILDERS. ACCORDING TO THE LD. DR, THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL TO SUGGEST THAT THE HOUSE WHICH IS SUBJECT MATTER OF DISPUTE WAS CONSTRUCTED FOR THEIR OCCUPAT ION. THEREFORE, THE ASSESSING OFFICER, BY PLACING RELIANCE ON THE JUDGM ENT OF THE APEX COURT IN THE CASE OF G VENKATASWAMY NAIDU & CO VS CIT 35 ITR 594 (SC) FOUND THAT THE PURCHASE OF LAND AND CONSTRUCTION OF RESID ENTIAL HOUSE AND SUBSEQUENT SALE OF THE SAME TO SHRI EB ANIL KUMAR W OULD AMOUNT TO AN ADVENTURE IN THE NATURE OF TRADE AND THEREFORE, THE PROFIT ARISING OUT OF THE SALE OF PROPERTY WAS TREATED AS INCOME FROM BUSINES S. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) FOUND THAT THE A CTIVITY OF THE ASSESSEE DOES NOT AMOUNT TO ADVENTURE IN THE NATURE OF TRADE AND THEREFORE, THE 5 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 PROFIT ARISING OUT OF SALE OF PROFIT HAS TO BE TREA TED AS CAPITAL GAIN. ACCORDING TO THE LD.DR, THE ASSESSEE IS ACTIVELY EN GAGED IN THE BUSINESS OF REAL ESTATE IN HER CAPACITY AS PARTNERS IN SION LAND DEVELOPERS & BUILDERS. THEREFORE, THE CIT(A) IS NOT JUSTIFIED I N TREATING THE SAME AS CAPITAL GAIN. 4. ON THE CONTRARY, SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY, THE ASS ESSEE, HAS INDEPENDENT SOURCE OF INCOME. THE ASSESSEE PURCHASED THE LAND ON 22-08-1999 FROM SHRI T.V. JOHNSON. THE ASSESSEE CONSTRUCTED 2210 S Q.FT AREA OF BUILDING ON IT IN THE YEAR 2007. THE ASSESSEE WAS FORCED TO SELL THE PROPERTY ON 05- 09-2008 FOR A SALE CONSIDERATION OF RS.54,04,000. ACCORDING TO THE LD.REPRESENTATIVE, THE COST OF CONSTRUCTION WAS RS. 48 LAKHS. HOWEVER, THE APPROVED VALUER ESTIMATED THE COST OF CONSTRUCTION ONLY AT RS. 43,52,000. ACCORDING TO THE LD.REPRESENTATIVE, MERELY BECAUSE THE ASSESSEE WAS A PARTNER IN SION LAND DEVELOPERS & BUILDERS IT DOES NOT MEAN THAT THE PROPERTY PURCHASED IN HER INDIVIDUAL NAME ALSO WAS FOR BUSINESS PURPOSE. THE VERY FACT THAT THE LAND WAS PURCHASED IN THE YE AR 1999 AND THE SAME WAS SOLD ONLY IN THE YEAR 2008 AFTER PUTTING UP CON STRUCTION IN THE YEAR 2007 SHOWS, ACCORDING TO THE LD.REPRESENTATIVE, THA T THERE WAS NO INTENTION 6 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 TO DEAL IN REAL ESTATE BUSINESS AT THE TIME OF PURC HASE OF THE PROPERTY. THE SUBSEQUENT SALE OF PROPERTY, ACCORDING TO THE LD.RE PRESENTTIVE, BY NO STRETCH OF IMAGINATION, CAN BE SEEN AS AN ADVENTURE IN THE NATURE OF TRADE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE ASSESSEE PURCHASED THE LAND FROM SHRI TV JOHNSON ON 22-08-1999. AFTER HOLDING THE LAND FOR ALMOST EIGHT YEARS THE ASSESSE E PUT UP THE CONSTRUCTION IN THE YEAR 2007 BY INVESTING A SUM OF RS.48 LAKHS. THEREAFTER, THE BUILDING ALONG WITH THE LAND WAS SO LD TO ONE SHRI EB ANILKUMAR ON 05-09-2008 FOR A SALE CONSIDERATION OF RS.54,04,000. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE PR OFIT ARISING OUT OF THE SALE OF PROPERTY IS TO BE TREATED AS BUSINESS INCOME OR CAPITAL GAIN? 6. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF T HE APEX COURT IN THE CASE OF G VENKTASWAMY NAIDU & CO (SUPRA). IN T HE CASE BEFORE THE APEX COURT, THE ASSESSEE FIRM WAS ACTING AS MANAGIN G AGENT OF JANARDANA MILLS LTD, COIMBATORE. THE ASSESSEE BOUG HT FOUR CONTIGUOUS PLOTS OF LAND ADMEASURING 5 ACRES 26 CENTS UNDER FO UR SALE DEEDS. AFTER FIVE YEARS THOSE PROPERTIES WERE SOLD BY THE ASSESS EE IN TWO LOTS TO 7 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 JANADANA MILLS LTD. THE INCOME-TAX OFFICER TREATED THE PROFIT ON SALE OF SUCH PROPERTY AS INCOME FROM BUSINESS; HOWEVER, THE ASSESSEE CONTENDED THAT IT IS CAPITAL GAIN. ON THOSE FACTS, THE APEX COURT FOUND THAT IT WOULD NOT BE EASY TO ASSUME IN THE CASE OF A FIRM THAT TH E ACQUISITION OF THE OPEN PLOTS COULD INVOLVE ANY PRIDE OF POSSESSION TO THE PURCHASER. IT IS A SERIES OF FOUR TRANSACTIONS UNDERTAKEN BY THE ASSESSEE IN PURSUANCE OF A SCHEME AND IT WAS AFTER THE ASSESSEE HAD CONSOLIDATED ITS HOLDING THAT AT A CONVENIENT TIME IT SOLD THE LANDS TO THE JANARDANA MILLS IN TWO LOTS. IF THE PROPERTY HAS BEEN PURCHASED BY THE ASSESSEE AS A MA TTER OF INVESTMENT IT WOULD HAVE TRIED EITHER TO CULTIVATE THE LAND, OR T O BUILD ON IT; BUT THE ASSESSEE DID NEITHER AND JUST ALLOWED THE PROPERTY TO REMAIN UNUTILIZED EXCEPT FOR THE NET RENT OF RS.80 PER ANNUM WHICH IT RECEIVED FROM THE HOUSE ON ONE OF THE PLOTS. THE REASON GIVEN BY THE ASSESSEE FOR THE PURCHASE OF THE PROPERTIES BY THE MILLS HAS BEEN RE JECTED BY THE TRIBUNAL. IN THOSE FACTS AND CIRCUMSTANCES, THE APEX COURT CA ME TO THE CONCLUSION THAT THE TRANSACTION WAS ADVENTURE IN THE NATURE OF TRADE. 7. IN THE CASE ON HAND, THE PROPERTY WAS NOT PURCHA SED IN THE NAME OF FIRM. THE PROPERTY WAS PURCHASED IN THE INDIVIDUAL NAME EVEN THOUGH THE ASSESSEE WAS A PARTNER IN A FIRM BY NAME, SION LAND DEVELOPERS & 8 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 BUILDERS. IF THE INTENTION OF THE ASSESSEE WAS TO TRADE IN THE LAND, THEN, THE PROPERTY WOULD HAVE BEEN PURCHASED IN THE NAME OF T HE PARTNERSHIP FIRM. THE VERY FACT THAT THE LAND WAS PURCHASED IN THE IN DIVIDUAL NAME CLEARLY SHOWS THAT THE INTENTION WAS TO KEEP THE LAND AS A PRIDE OWNER OF THE PROPERTY. AFTER RETAINING THE PROPERTY FOR ABOUT E IGHT YEARS THERE WAS A CAPITAL ACCRETION TO THE ASSESSEE AND THEREAFTER SH E CONSTRUCTED A RESIDENCE ON IT BY INVESTING RS.48 LAKHS. IN THE Y EAR 2008, THE BUILDING ALONGWITH THE LAND WAS SOLD TO ONE SHRI EB ANILKUMA R. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THIS IS A SALE TRANSACTION ENTERED INTO BY THE ASSE SSEE IN HER INDIVIDUAL CAPACITY. THEREFORE, THERE IS NO PRESUMPTION THAT THE ASSESSEE PURCHASED THE PROPERTY WITH AN INTENTION TO SELL THE SAME. T HE VERY FACT THAT THE ASSESSEE RETAINED THE PROPERTY FOR EIGHT YEARS BEFO RE CONSTRUCTION SHOWS THAT THE ASSESSEE INTENDED TO POSSESS THE PROPERTY AS A PRIDE OWNER. THEREFORE THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT THE JUDGMENT OF THE APEX COURT IN THE CASE OF G VENKATASWAMY NAIDU & CO (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. HENCE, THE CIT(A) HAS RIGHTLY FOUND THAT WHAT IS TO BE ASSESSED IS ONLY CAPITAL G AIN AND NOT ANY BUSINESS PROFIT. HENCE, THE ORDER OF THE CIT(A) ON THIS ISS UE IS CONFIRMED. 9 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PROF IT ON SALE OF AGRICULTURAL LAND. 9. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION SOLD 164.57 CENTS OF LAND AT MANGALASSERY TO ONE M/S MANHATTAN ENTERPRISES (PRIVATE) LIMITED. THE A SSESSEE CLAIMED THAT THE PROPERTY WAS AGRICULTURAL LAND, THEREFORE, NOT LIABLE FOR CAPITAL GAIN. HOWEVER, THE ASSESSING OFFICER FOUND THAT THE LAND WAS SOLD FOR DEVELOPMENT AS HOUSING SITE AND IN FACT THE PURCHAS ER HAS DEMARCATED THE LAND INTO PLOTS. THEREFORE, THE ASSESSING OFFICER TREATED THE LAND AS NON AGRICULTURAL LAND AND ASSESSED THE PROFIT ON SALE O F LAND AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE. HOWEVER, THE CIT(A) FOUND THAT WHEN THE INSPECTOR OF INCOME-TAX INSPECTED THE PREM ISES HE FOUND THAT THE LAND WAS CULTIVATED WITH COCONUT TREES AND TEAK WOO DS AND THAT THE LAND WAS CLASSIFIED AS WET LAND IN THE LAND RECORDS OF T HE STATE GOVERNMENT. ACCORDINGLY, THE CIT(A) FOUND THAT NO CAPITAL GAIN AROSE ON SALE OF SUCH LAND. 10. ON THE CONTRARY, SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE LAND WAS PURCHA SED DURING THE YEAR 10 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 1996 1998 AND THE SAME WAS SOLD TO M/S MANHATTAN ENTERPRISES (PRIVATE) LIMITED ON 29-05-2008. ACCORDING TO THE LD.REPRESENTATIVE, THE LAND WAS CLASSIFIED AS WETLAND IN THE STATE GOVERNM ENT RECORDS. DUE TO SCARCITY OF LABOURERS THE ASSESSEE WAS FORCED TO SE LL THE LAND. TILL THE SALE OF THE LAND, THE PROPERTY WAS MAINTAINED AS AGRICUL TURAL LAND. IN FACT, COCONUT TREES WERE GROWN WHICH WAS EVIDENT FROM THE REPORT OF THE INSPECTOR OF INCOME-TAX. THEREFORE, ACCORDING TO T HE LD.REPRESENTATIVE, THE ASSESSING OFFICER IS NOT RIGHT IN SAYING THAT THE P ROPERTY IS NON AGRICULTURAL LAND AND THE PROFIT ARISING FROM SALE OF THE LAND I S LIABLE FOR CAPITAL GAIN TAX. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE REPORT OF THE INSPECTOR OF INCOME-TAX IT APPEARS THAT COCONUT TREES AND TEA K WOOD TREES WERE GROWN AND THERE WAS ALSO EVIDENCE OF CULTIVATION OF OTHER CROPS ON THE LAND. MOREOVER, THE LAND WAS CLASSIFIED AS WETLAND IN THE STATE GOVERNMENT RECORDS. THE CONTENTION OF THE REVENUE IS THAT THE ASSESSEE SOLD THE LAND FOR DEVELOPING THE SAME AS RESIDENTIA L PLOT AND IN FACT THE PURCHASER HAD DEMARCATED THE LAND AS RESIDENTIAL PL OTS. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE LAND WAS MAINT AINED AS AGRICULTURAL LAND AND COCONUT TREES WERE CULTIVATED ON IT, THE L AND HAS TO BE TREATED AS 11 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 AGRICULTURAL LAND. THE MERE FACT THAT THE PURCHASE R HAS DEVELOPED THE PLOT INTO RESIDENTIAL FLATS CANNOT BE A GROUND FOR TREAT ING THE LAND AS NON AGRICULTURAL LAND IN THE HANDS OF THE ASSESSEE. IN OTHER WORDS, FOR ALL PRACTICAL PURPOSE, THE LAND SHOULD BE TREATED AS AG RICULTURAL LAND IN THE HANDS OF THE ASSESSEE. THEREFORE, NO CAPITAL GAIN AROSE TO THE ASSESSEE ON SALE OF SUCH LAND AS HAS BEEN FOUND BY THE CIT(A ). 12. THE ISSUE DOES NOT RESTS HERE IN THIS CASE. TH E ASSESSING OFFICER FOUND THAT THE PROFIT ON SALE OF LAND IS BUSINESS I NCOME. THE CIT(A) HAS NOT ADDRESSED THIS ISSUE IN THE IMPUGNED ORDER. IF THE ASSESSEE IS ENGAGED HERSELF IN THE BUSINESS ACTIVITY IN PURCHAS E AND SALE OF LAND, THEN THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROFIT HAS TO BE CLASSIFIED AS BUSINESS INCOME. THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE PROPERTY NEEDS TO BE ASCERTAINED. THOUGH TH E ASSESSEE CLAIMS THAT THE LAND WAS PURCHASED DURING THE ASSESSMENT YEAR 1 996 1998 THE INTENTION OF THE ASSESSEE TO PURCHASE LAND TO SUCH AN EXTENT IS ALSO NOT KNOWN. IT IS ALSO NECESSARY TO FIND OUT WHETHER TH E ASSESSEE HAS PURCHASED BY WAY OF ONE SINGLE SALE DEED OR BY MEAN S OF SEVERAL SALE DEEDS. IT ALSO NEEDS TO BE ASCERTAINED WHETHER THE ASSESSEE HAS ALSO PURCHASED PROPERTY IN THE SAME AREA AND SOLD THE SA ME TO PERSONS OTHER 12 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 THAN M/S MANHATTAN ENTERPRISES (PRIVATE) LIMITED. SINCE THE CIT(A) HAS NOT ADDRESSED THIS ISSUE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE CIT(A). ACC ORDINGLY, THE MATTER IS REMANDED BACK TO THE FILE OF THE CIT(A) FOR RECONSI DERATION. THE CIT(A) SHALL RECONSIDER AS TO WHETHER THE PROFIT ON SALE O F SUBJECT LAND HAS TO BE ASSESSED UNDER THE HEAD PROFITS AND GAINS FROM BUS INESS OR PROFESSION OR CAPITAL GAIN AND THEREAFTER DECIDE THE ISSUE I N ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESSEE. 13. THE ASSESSEE FILED THE CROSS OBJECTION ONLY TO SUPPORT THE ORDER OF CIT(A). THEREFORE, THE CROSS OBJECTION OF THE ASSE SSEE IS INFRUCTUOUS. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSE AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 15. NOW COMING TO THE APPEALS FILED BY SHRI SIMON V ARGHESE IN ITA NOS. 776 TO 778/COCH/2013, THE FIRST GROUND OF APPEAL IS WITH REGARD TO PROFIT ON SALE OF VILLAS AT IRINJALAKUDA. 13 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 16. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE CONSTRUCTION OF VILLAS AND APARTMENT S. THE ASSESSEE CONSTRUCTED VILLAS IN HIS OWN NAME AND SOLD THE SAM E DURING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD.DR, THE A SSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT FOR CONSTRUCTION. THE COST OF CONSTRUCTION WAS REFERRED TO THE DVO. THE DVO ESTI MATED THE COST OF CONSTRUCTION AT RS.1,10,84,000. HOWEVER, AS PER TH E SEIZED MATERIAL IT WAS FOUND THAT THE ASSESSEE HAS SPENT ABOUT RS.1,94,00, 000. THE ASSESSEE HAS ALSO CONFIRMED THE PAYMENT OF RS.1,94,00,000. THEREFORE, THE ASSESSING OFFICER HAS NOT PLACED ANY RELIANCE ON TH E VALUATION REPORT FILED BY THE DVO. THE ASSESSEE HAS CONSTRUCTED ALMOST TE N VILLAS IN IRINJALAKUDA. CONSTRUCTION OF 10 VILLAS CANNOT BE FOR PERSONAL OCCUPATION OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER, BY PLACING RELIANCE ON G VENKATASWAMY NAIDU & CO (SUPRA) FOUND THAT THE ASSE SSEE ENGAGED HIMSELF IN THE BUSINESS OF CONSTRUCTION OF VILLAS A ND SALE OF THE SAME AND ACCORDINGLY ASSESSED THE PROFIT ON VILLAS WAS TREAT ED AS BUSINESS PROFIT. HOWEVER, THE CIT(A), WITHOUT ANY REASON, DELETED TH E ADDITION. WHEN THE ASSESSEE ACCEPTED THAT HE PAID RS.1,94,00,000 ACCOR DING TO THE LD.DR, THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITIO N MADE BY THE ASSESSING OFFICER. 14 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 17. ON THE CONTRARY, SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFIC ER MAINLY PLACED RELIANCE ON THE SO-CALLED APPRAISAL REPORT PREPARED BY THE SEARCH TEAM FOR ESTIMATION OF PROFIT. ACCORDING TO THE LD.REPRESEN TATIVE, THE CONSTRUCTION OF VILLAS WAS NOT COMPLETED. ACCORDING TO THE LD.REPR ESENTTIVE, ALL THE VILLAS ARE ON THE OPEN LAND WITH FOUNDATION, AS IS EVIDENT FROM THE SALE DEED. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUC TION AND SALE OF VILLAS. THE ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE IS PURCHASING AND SELLING PROPERTIES AT REGULAR INTERVALS. IN THE AB SENCE OF ANY BOOKS OF ACCOUNT, PROFIT & LOSS ACCOUNT, ETC. THE ASSESSING OFFICER ESTIMATED THE PROFIT ON THE BASIS OF THE MATERIAL FOUND DURING TH E COURSE OF SEARCH OPERATION. THE CONTENTION OF THE ASSESSEE BEFORE T HE LOWER AUTHORITIES THAT THE SEIZED MATERIAL DOES NOT DISCLOSE THE ACTUAL PR OFIT ARISING OUT OF THE TRANSACTION, THE ASSESSING OFFICER REJECTED THE CON TENTION OF THE ASSESSEE 15 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 AND FOUND THAT THE COST OF CONSTRUCTION AS WELL AS THE SALE PRICE OF THE PROPERTY AS FOUND FROM THE SEIZED MATERIAL IS REASO NABLE ONE. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE AS SESSEE THAT THE SALE PRICE FOUND IN THE SEIZED MATERIAL IS ONLY AN ANTIC IPATED SALE PRICE. THE ASSESSING OFFICER ALSO REJECTED THE CLAIM OF THE AS SESSEE THAT ONLY CAPITAL GAIN HAS TO BE COMPUTED. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSING OFFICER HAS NOT MADE ANY FURTHER ENQUIRY EITHER FRO M THE MARKET OR FROM THE PURCHASERS WITH REGARD TO THE ACTUAL SALE REALIZATI ON. THEREFORE, HE PLACED RELIANCE ON THE VALUATION REPORT FILED BY THE ASSES SEE WHICH GIVES THE COST OF CONSTRUCTION AT RS.1,377 PER SQ.FT. INSTEAD OF R S.702 PER SQ.FT. AS PER THE SEIZED MATERIAL. ULTIMATELY, THE CIT(A) DELETED TH E ADDITION MADE BY THE ASSESSING OFFICER. THE CIT(A) HAS NOT GIVEN ANY FI NDING AS TO WHETHER THE TRANSACTION HAS TO BE TREATED AS BUSINESS TRANSACTI ON OR THE GAIN IS A CAPITAL GAIN. 19. THE CLAIM OF THE ASSESSEE BEFORE THE ASSESSING OFFICER IS THAT THE PROFIT ARISING OUT OF SALE OF VILLAS AT IRINJALAKKU DA IS A CAPITAL GAIN. THE ASSESSING OFFICER TAKING INTO CONSIDERATION THE NUM BER OF VILLAS CONSTRUCTED BY THE ASSESSEE AND THE NUMBER OF TRANSACTIONS FOUN D THAT THE ASSESSEE ENGAGED HIMSELF IN PURCHASE AND SALE OF PROPERTIES. THEREFORE, THE PROFIT 16 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 HAS TO BE TREATED AS INCOME FROM BUSINESS. THE CIT (A) FAILED TO CONSIDER WHETHER THE TRANSACTION IS A BUSINESS TRANSACTION O R NOT? HAD THE CIT(A) FOUND THAT FURTHER ENQUIRY WAS REQUIRED, HE SHOULD HAVE CALLED FOR A REMAND REPORT ASKING THE ASSESSING OFFICER TO EXAMI NE FURTHER. THE CIT(A) BEING AN OFFICER HAVING JURISDICTION CO-TERMINUS WI TH THAT OF THE ASSESSING OFFICER HAS TO RECTIFY THE PROCEDURAL ERROR COMMITT ED BY THE ASSESSING OFFICER BY CALLING FOR THE REMAND REPORT. MERELY B ECAUSE THE ASSESSING OFFICER HAS NOT MADE FURTHER ENQUIRY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT DELETING THE ENTIRE ADDITION BY ACCEPT ING THE CLAIM OF THE ASSESSEE MAY NOT BE JUSTIFIED. THE ASSESSING OFFIC ER, AS RIGHTLY CLAIMED BY THE ASSESSEE, HAS MAINLY PLACED RELIANCE ON THE APP RAISAL REPORT OF THE DEPARTMENT AND THE SEIZED MATERIAL. THE SEIZED MAT ERIAL DISCLOSES THE PROFIT ON SALE OF THE PROPERTY. THE ASSESSEE, HOWE VER, CLAIMS THAT IT IS AN ANTICIPATED SALE PROFIT AND NOT THE ACTUAL PROFIT. WHEN THE ASSESSEE CLAIMS THAT IT IS ONLY AN ANTICIPATED SALE PROFIT, THE ASS ESSING OFFICER OUGHT TO HAVE FOUND OUT WHAT WAS THE ACTUAL SALE CONSIDERATION RE CEIVED ON SALE OF VILLAS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THE ASSESSING OFFICER HAS TO EXAMINE THE MATTER AFRESH. SINCE THE ASSESS ING OFFICER PLACED RELIANCE ON THE APPRAISAL REPORT OF THE DEPARTMENT, THE COPY OF THE SAME SHALL BE FURNISHED TO THE ASSESSEE SO AS TO ENABLE THE ASSESSEE TO OFFER 17 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 HIS COMMENTS ON THE APPRAISAL REPORT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF COMPUTAT ION OF PROFIT ON SALE OF VILLAS AT IRINJALAKKUDA IS REMITTED BACK TO THE FIL E OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE MATTER AFRE SH AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 20. THE NEXT ISSUE ARISES FOR CONSIDERATION IS PROF IT ON SALE OF AGRICULTURAL LAND. 21. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE SOLD PROPERTY TO M/S MANHATTAN ENTERPRISES (PVT) LTD. M /S MANHATTAN ENTERPRISES (PVT) LTD, AFTER PURCHASE OF THE PROPER TY HAS DEMARCATED THE LAND INTO PLOTS. ACCORDING TO THE LD.DR, THE PROPE RTY IS SITUATED NEARER TO NH-17. THE ASSESSEE OFFERED A PALTRY SUM AS AGRICU LTURAL INCOME IN THE EARLIER ASSESSMENT YEARS. ACCORDING TO THE LD.DR, THE LAND FETCHED A VERY HANDSOME PRICE OF RS.24 LAKHS. THEREFORE, ACCORDIN G TO THE LD.DR, THE LAND CANNOT BE TREATED AS AGRICULTURAL LAND. HOWEVE R, THE CIT(A) BY PLACING RELIANCE ON THE REPORT OF THE INSPECTOR OF INCOME-T AX DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 18 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 22. ON THE CONTRARY, SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT AFTER PURCHASE OF T HE PROPERTY, THE ASSESSEE CULTIVATED THE SAME. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE CULTIVATED PLANTAIN, PINEAPPLE, TAPIOCA, E TC. IN FACT, THE INSPECTOR OF INCOME-TAX INSPECTED THE LAND ON THE INSTRUCTION OF THE ASSESSING OFFICER AND FOUND THAT THE PROPERTY WAS USED FOR CULTIVATIO N OF PINEAPPLE. MOREOVER, THE LAND WAS CLASSIFIED AS WETLAND IN THE REVENUE RECORDS. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE CIT(A) FOUND THAT IT IS AN AGRICULTURAL LAND; HENCE, THE PROFIT ON SALE OF SUC H LAND IS EXEMPT FROM TAXATION. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE INSPECTOR OF INCOME-TAX INSPECTED THE LAND ON THE INSTRUCTIONS OF THE ASSESSING OFFIC ER AND FOUND THAT PINEAPPLE WAS CULTIVATED ON THE LAND WHICH IS NOT D ISPUTED AT ANY QUARTER. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS DIS CLOSED AGRICULTURAL INCOME FROM THE ABOVE PROPERTY. THOUGH THE AMOUNT SHOWN A S AGRICULTURAL INCOME IS VERY PALTRY, THE FACT REMAINS IS THAT AGR ICULTURAL INCOME HAS BEEN 19 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 DISCLOSED. WHEN THE REPORT OF THE INSPECTOR OF INC OME-TAX DISCLOSES THAT THE LAND WAS CULTIVATED WITH PINEAPPLE AND THE ASSE SSEE ALSO CLAIMS THAT EARLIER THE LAND WAS CULTIVATED WITH PLANTAIN, TAPI OCA AND PINEAPPLE, WE FIND NO REASON TO REJECT THE CLAIM OF THE ASSESSEE. IT IS ALSO A FACT THAT THE SUBJECT LAND WAS CLASSIFIED AS WETLAND IN THE RECOR DS OF THE STATE GOVERNMENT. WHEN THE ASSESSEE IS USING THE LAND FO R CULTIVATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT CANNO T BE A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. THE MAIN OBJECTION OF THE DEPARTMENT IS THAT THE PURCHASER, VIZ. MANHATTAN EN TERPRISES (PVT) LTD DIVIDED THE LAND INTO HOUSING PLOTS BY DEMARCATION, IT SHOULD BE TREATED AS CAPITAL ASSET. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE USAGE BY THE PURCHASER WILL NOT DETERMINE THE CHARACTER OF T HE LAND IN THE HANDS OF THE PRESENT ASSESSEE. WHAT IS REQUIRED IS - TO SEE WHETHER THE ASSESSEE CULTIVATED THE LAND OR NOT? ON THE BASIS OF THE MA TERIALS AVAILABLE ON RECORD, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE USED THE LAND FOR CULTIVATION. THEREFORE, THE CIT(A) HA S RIGHTLY FOUND THAT IT CANNOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANI NG OF SECTION 2(14) OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS CO NFIRMED. 20 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 24. THE REVENUE HAS TAKEN ONE MORE GROUND FOR THE A SSESSMENT YEAR 2010-11 WITH REGARD TO CASH SEIZED FROM THE LOCKER. 25. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT DUR ING THE COURSE OF SEARCH OPERATIONS, AN AMOUNT OF RS.20,50,000 WAS SE IZED FROM THE LOCKER MAINTAINED BY ONE SHRI T.V. JOHNSON, BROTHER IN LAW OF THE ASSESSEE. SUBSEQUENTLY COPY OF THE AGREEMENT DATED 08-01-2010 SAID TO BE EXECUTED BETWEEN THE ASSESSEE AND ONE SHRI E.P. JOS E WAS PRODUCED. ON EXAMINATION OF SHRI T.V. JOHNSON, HE CLAIMED THA T THE AMOUNT WAS HANDED OVER TO HIM BY ONE SHRI E.P. JOSE TO BE GIVE N TO THE ASSESSEE. THE ASSESSEE, SHRI T.V. JOHNSON CLAIMED THAT HE KEP T THE MONEY IN LOCKER FOR HANDING OVER THE SAME TO THE ASSESSEE SUBSEQUEN TLY. THEREFORE, IT IS OBVIOUS THAT THE MONEY FOUND IN THE LOCKER OF SHRI T.V. JOHNSON BELONGS TO THE ASSESSEE AND IT IS UNACCOUNTED INCOME. THEREFO RE, THE ASSESSING OFFICER ASSESSED THE SAME IN THE BLOCK PERIOD. HOW EVER, THE CIT(A) FOUND THAT THE MONEY SHOULD BE ASSESSED ONLY IN THE HANDS OF SHRI T.V. JOHNSON AND NOT IN THE HANDS OF THE ASSESSEE. ACCORDING TO THE LD.DR, WHEN THE MATERIALS AVAILABLE ON RECORD CLEARLY SHOW THAT THE MONEY WAS RECEIVED BY SHRI T.V. JOHNSON ON BEHALF OF THE PRESENT ASSESSEE AND IT WAS KEPT IN THE 21 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 LOCKER FOR THE PURPOSE OF HANDING OVER THE SAME TO THE ASSESSEE, THE CIT(A) IS NOT CORRECT IN DELETING THE ADDITION. 26. ON THE CONTRARY, SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT OUT OF THREE UNSOLD VILLAS AT KIDANGOOR PROPERTY, ONE VILLAS WAS BOOKED BY E.P. JOSE, ERUMA KKATTUPARAMBIL HOUSE, KALPPARAMBU. AN AGREEMENT WAS EXECUTED ON 0 8-01-2010 BETWEEN THE ASSESSEE AND THE SAID SHRI E.P. JOSE. THE ASSESSEE RECEIVED RS.4 LAKHS ON THE DATE OF THE AGREEMENT FR OM SHRI E.P. JOSE AND THE SAID AMOUNT WAS HANDED OVER TO SHRI T.V. JOHNSO N FOR MEETING THE UNEXPECTED EXPENDITURE IN CONNECTION WITH THE VILLA PROJECT. ACCORDING TO THE LD.REPRESENTATIVE, ON 06-02-2010, SHRI E.P. JOS E PAID ANOTHER SUM OF RS.14 LAKHS TO SHRI T.V. JOHNSON ON BEHALF OF THE A SSESSEE. THE ASSESSEE INSTRUCTED SHRI T.V. JOHNSON TO KEEP THIS AMOUNT FOR MEETING THE UNFORESEEN EXPENDITURE. ACCORDING TO THE LD.REPRES ENTATIVE, SHRI E.P. JOSE IS A NON RESIDENT INDIAN AND FOR THE PURPOSE OF CON VENIENCE, SHRI T.V. JOHNSON KEPT THE MONEY IN THE LOCKER OF THE BANK WH ICH IS NEARER TO HIS RESIDENCE. ACCORDING TO THE LD.REPRESENTATIVE, THE AMOUNT WAS DISCLOSED IN THE CASH FLOW STATEMENT FILED BEFORE THE DEPARTMENT . REFERRING TO THE STATEMENT MADE BY THE ASSESSING OFFICER ON PAGE 22, THE LD.REPRESENTATIVE 22 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 SUBMITTED THAT THE ASSESSEE, IN FACT, PURCHASED THE MATERIAL TO PROVE THE SOURCE OF THE AMOUNT SEIZED FROM THE BANK LOCKER. THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE AMOUNT OF RS.20,50,000 WAS SEIZED FROM THE LOCKER M AINTAINED BY SHRI T.V. JOHNSON, BROTHER IN LAW OF THE ASSESSEE. SHRI T.V. JOHNSON ADMITTED THAT THIS MONEY WAS RECEIVED FROM SHRI E.P. JOSE ON BEHALF OF THE ASSESSEE AND IT WAS KEPT IN THE LOCKER FOR THE PURP OSE OF HANDING OVER THE SAME TO THE ASSESSEE. THE ASSESEE NOW CLAIMS THAT THE RECEIPT OF MONEY WAS DISCLOSED IN THE CASH FLOW STATEMENT. REFERRI NG TO THE STATEMENT MADE BY THE ASSESSEE, MORE PARTICULARLY, PAGE 22, T HE LD.DR SUBMITTED THAT THE ASSESSEE HAS NO EVIDENCE TO PROVE THE SOUR CE OF THE AMOUNT SEIZED FROM LOCKER. THE SOURCE OF THE AMOUNT IS TH E PAYMENT MADE BY SHRI E.P. JOSE IN PURSUANCE OF THE AGREEMENT DATED 08-01-2010. IT APPEARS THAT THE COPIES OF THE BANK STATEMENTS SHOW ING THE WITHDRAWALS MADE BY SHRI E.P. JOSE WERE FILED ON RECORD. THIS PAYMENT WAS NOT REFLECTED IN THE CASH FLOW STATEMENT. WHAT WAS REF LECTED WAS RS.7 LAKHS AND RS.14 LAKHS. WHAT WAS PRODUCED BEFORE THE ASSE SSING OFFICER IN THE 23 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 FORM OF BANK STATEMENTS WAS COPY OF THE BANK STATEM ENT SHOWING WITHDRAWALS MADE BY SHRI E.P. JOSE ON 04-01-2010 TO THE EXTENT OF RS.19 LAKHS AND ANOTHER AMOUNT OF RS.8 LAKHS ON 01-02-201 0. THEREFORE, WHAT WAS DISCLOSED BY THE ASSESSEE IN THE CASH FLOW STAT EMENT DOES NOT TALLY WITH THE WITHDRAWALS MADE BY SHRI E.P. JOSE. IT IS FOR THE ASSESSEE TO EXPLAIN HOW THE AMOUNT CAME INTO POSSESSION OF SHRI T.V. JOHNSON ON BEHALF OF THE ASSESSEE. WITHOUT APPRECIATING THIS FACTUAL MATERIAL AND CLAIM OF THE ASSESSEE, THE CIT(A) SIMPLY DELETED TH E ADDITION ON THE GROUND THAT IT HAS TO BE ASSESSED ONLY IN THE HANDS OF SHRI T.V. JOHNSON. WHEN THE ASSESSEE SPECIFICALLY CLAIMS THAT THERE WA S AN AGREEMENT AND THE AMOUNTS WERE RECEIVED BY SHRI T.V. JOHNSON ON B EHALF OF THE ASSESSEE IN PURSUANCE TO THE AGREEMENT, IT IS NOT K NOWN WHY THIS AMOUNT SHOULD BE ASSESSED IN THE HANDS OF SHRI T.V. JOHNSO N. IT IS AN AMOUNT RECEIVED BY SHRI T.V. JOHNSON ON BEHALF OF THE ASSE SSEE AND IT WAS KEPT IN THE BANK LOCKER OF SHRI T.V. JOHNSON ONLY FOR THE P URPOSE OF HANDING OVER THE SAME TO THE PRESENT ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE ABSENCE OF ANY SATIS FACTORY EXPLANATION FOR THE EARNING OF THE AMOUNT OR RECEIPT OF ADVANCE IN PURSUANCE TO THE AGREEMENT IT HAS TO BE TREATED AS INCOME FROM UNACC OUNTED SOURCE. THE VERY FACT THAT THE CASH WAS RECEIVED AND KEPT IN TH E LOCKER WOULD GO TO 24 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 SHOW THAT IT IS AN UNACCOUNTED TRANSACTION BETWEEN E.P. JOSE AND THE ASSESSEE. NO PERSON WOULD KEEP RS.20 LAKHS IN THE BANK LOCKER NOWADAYS IF IT IS A REAL TRANSACTION. THEREFORE, I T IS FOR THE ASSESSEE TO EXPLAIN HOW HE CAME TO THE POSSESSION OF RS. 20,50, 000 IN CASH AND THE CIRCUMSTANCES UNDER WHICH IT WAS KEPT IN THE BANK L OCKER. THE NORMAL HUMAN CONDUCT AND BEHAVIOR CANNOT BE IGNORED WHILE DECIDING THE OWNERSHIP OF THE MONEY IN QUESTION. THEREFORE, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION. ACCORDINGLY, THE ORDER OF CIT(A) IS SET ASIDE AND T HE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE IS RESTORED. 28. NOW COMING TO THE CROSS OBJECTIONS FILED BY THE ASSESSEE, THE CROSS OBJECTIONS ARE FILED ONLY TO SUPPORT THE ORDERS OF CIT(A). IN VIEW OF THE DECISION OF THIS TRIBUNAL ON THE APPEALS FILED BY T HE REVENUE THE CROSS OBJECTIONS BECOME INFRUCTUOUS. THEREFORE, THE SAME ARE DISMISSED. 29. IN THE RESULT, THE APPEALS FILED BY THE DEPARTM ENT ARE PARTLY ALLOWED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 25 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 30. NOW COMING TO THE APPEALS FILED BY THE REVENUE IN THE CASE OF T.V. JOHNSON, THE FIRST GROUND OF APPEALS IS WITH REGARD TO LOAN GIVEN TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN. 31. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE IS THE BROTHER IN LAW OF SHRI SIMON VARGHESE. ACCORDING T O THE LD.DR, THE ASSESSEE IS LOOKING AFTER THE REAL ESTATE BUSINESS OF SHRI SIMON VARGHESE. ACCORDING TO THE LD.DR, THE MATERIAL AVAILABLE ON R ECORD SHOWED THAT THE ASSESSEE HAS PROVIDED AN ACCOMMODATION TO THE EXTEN T OF RS.80 LAKHS TO HIS COUSIN BROTHER, SHRI T.J. RAJAN AND HIS WIFE, S MT. PUSHPA RAJAN. ACCORDING TO THE LD.DR, THE ASSESSEE CLAIMS HIMSELF A POLITICIAN AND HE HAS NO OTHER SOURCE OF INCOME OTHER THAN FROM POLIT ICS AND LOOKED AFTER THE BUSINESS OF HIS BROTHER IN LAW SHRI SIMON VARGHESE. THE ASSESSEES WIFE SMT. BEENA JOHNSON WAS WORKING AS A TEACHER IN ST. JOSEPHS HIGH SCHOOL, IRINJALAKKUDA. HOWEVER, PRESENTLY SHE IS U NEMPLOYED. THE ASSESSEES TWO DAUGHTERS STUDY IN THIS SCHOOL. DUR ING THE COURSE OF EXAMINATION, THE ASSESSEE ADMITTED THAT HIS HOUSEHO LD EXPENSES IS RS.20,000 PER MONTH AND HE IS GETTING AN AVERAGE IN COME OF RS.50,000 FROM HIS BROTHER IN LAW, SHRI SIMON VERGHESE FOR MA NAGING HIS BUSINESS IN INDIA. OTHER THAN THIS, ACCORDING TO THE LD.DR, TH E ASSESSEE HAS NO 26 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 INDEPENDENT SOURCE OF INCOME. HOWEVER, HE GAVE ACC OMMODATION ENTRIES BY GIVING CHEQUES TO MAKE THE TRANSACTIONS GENUINE TO SHRI T.J. RAJAN AND HIS WIFE SMT. PUSHPA RAJAN. REFERRING TO THE ASSES SMENT ORDER, MORE PARTICULARLY PAGES 4 & 5, THE LD.DR SUBMITTED THAT THE ASSESSING OFFICER EXTRACTED THE MONEY RECEIVED FROM SHRI SIMON VARGHE SE. ACCORDING TO THE LD.DR, THE ENTIRE MONEY RECEIVED BY THE ASSESSEE IS FOR CONSTRUCTION OF VILLAS AT IRINJALAKKUDA. 32. THE LD.DR FURTHER SUBMITTED THAT FROM THE FUNDS PROVIDED BY SHRI SIMON VARGHESE, THE ASSESSEE PROVIDED AN ACCOMMODAT ION TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN. THE LD.DR FURTHER SUB MITTED THAT ON VERIFICATION OF THE ACCOUNTS IT WAS FOUND THAT THE FUNDS RECEIVED BY THE ASSESSEE IS NOT EVEN SUFFICIENT TO MEET THE COST OF CONSTRUCTION. THEREFORE, THE ASSESEE COULD NOT HAVE GIVEN ANY LOAN TO SHRI T .J. RAJAN AND SMT. PUSHPA RAJAN. HOWEVER, THE PAYMENTS WERE MADE BY C HEQUE TO GIVE A COLOUR TO THE TRANSACTION AS GENUINE ONE. WHEN THE ASSESSEE HAS NO SUFFICIENT FUNDS, HE COULD NOT HAVE ADVANCED FUNDS TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN. THE LD.DR FURTHER SUBMITTED THA T WHEN THE ASSESSEE WAS EXAMINED ON 15-12-2011; HE ADMITTED THAT HE WAS FULLY DEPENDENT UPON HIS BROTHER IN LAW SHRI SIMON VARGHESE. THE M ATERIAL FOUND DURING 27 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 THE COURSE OF SEARCH AND SURVEY OPERATION SHOWS THA T THE ASSESSEE IS ACTIVELY ENGAGED IN THE DAY TO DAY BUSINESS TRANSAC TION OF SHRI SIMON VARGHESE. SHRI SIMON VARGHESE ALSO ADMITTED IN HIS STATEMENT THAT HE AGREED TO GIVE A SHARE OF PROFIT FROM THE SALE OF V ILLAS CONSTRUCTED AT IRINJALAKKUDA. ACCORDING TO THE LD.DR, WHEN THE AS SESSEE HAS NO SOURCE OF INCOME, HE COULD NOT HAVE ADVANCED SUCH A HUGE A MOUNT TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN. THE ASSESSEE CONFIRME D THAT THE LOANS SAID TO BE GIVEN TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN WERE FREE OF INTEREST. SHRI T.J. RAJAN ALSO CONFIRMED THAT HE H AS NOT PAID ANY INTEREST TO THE ASSESSEE. THE AMOUNTS GIVEN WERE NEITHER LOANS NOR A GIFTS. THEREFORE, ACCORDING TO THE LD.DR, THE ASSESSING OF FICER TREATED THE ENTIRE TRANSACTIONS AS BOGUS AND TREATED A SUM OF RS.15 LA KHS AS INCOME OF THE ASSESSEE. 32. ON THE CONTRARY, SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY, THE ASS ESSEE AND HIS WIFE BEENA JOHNSON ADVANCED HUGE SUMS TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN. THOUGH THE ASSESSING OFFICER CLAIMS THAT TH E ASSESSEE HAS NO INDEPENDENT SOURCE OF INCOME, HE ADMITS THAT THE AS SESSEE IS LOOKING AFTER THE BUSINESS OF HIS BROTHER IN LAW, SHRI SIMION VAR GHESE. IT IS ALSO A FACT 28 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 THAT SHRI SIMON VARGHESE HAS BEEN PAYING AMOUNTS TO THE ASSESSEE THROUGH HIS NRE ACCOUNT. THE FUNDS PROVIDED BY SHRI SIMON VARGHESE WERE CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. BY CONSENT OF SHRI SIMON VARGHESE, THE ASSESSEE ADVANCED RS. 80 LAKHS TO HIS COUSIN BROTHER, SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN FREE OF INTEREST. ACCORDING TO THE LD.REPRESENTATIVE, THE SOURCE FOR ADVANCING FUNDS TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN IS THE MONEY RECEIVED FROM SH RI SIMON VARGHESE FROM HIS NRE ACCOUNT. THE ENTIRE TRANSACTION WAS M ADE THROUGH BANKING CHANNEL. THE CAPACITY OF SHRI SIMON VARGHESE TO AD VANCE SUCH HUGE FUNDS IS NOT IN DISPUTE. ONCE THE FUNDS WERE ADVAN CED BY SHRI SIMON VARGHESE, THROUGH BANKING CHANNEL AND THE SAME WERE USED FOR ADVANCING TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING OFFICER HAS NO REA SON TO DOUBT THE GENUINENESS OF THE TRANSACTION. THE LD.REPRESENTAT IVE SUBMITTED THAT WHEN THE PAYMENTS WERE RECEIVED THROUGH BANKING CHANNELS , THE ASSESSEE COULD NOT HAVE MADE THE PAYMENTS WITHOUT HAVING ANY BANK ACCOUNT. THEREFORE, ACCORDING TO THE LD.DR, THE CIT(A) HAS R IGHTLY FOUND THAT THERE IS NO OCCASION FOR THE ASSESSING OFFICER TO TREAT THE LOAN GIVEN TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN AS BOGUS; HENCE HE HAS RIGHTLY DELETED THE ADDITION. 29 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER TREATED A SUM OF RS. 15 LAKHS AS BOGUS TRANSACTION OUT OF THE LOANS GIVEN TO THE ASSESSEES COUSIN BROTHER SHRI T.J. RAJAN AND HIS W IFE SMT. PUSHPA RAJAN. IT IS AN ADMITTED FACT THAT THE FUNDS WERE TRANSFER RED THROUGH BANKING CHANNEL. FROM THE ASSESSMENT ORDER IT APPEARS THAT SHRI SIMON VARGHESE, THE BROTHER IN LAW OF THE ASSESSEE WAS TRANSFERRING FUNDS IN REGULAR INTERVALS FROM HIS NRE ACCOUNT TO THE ASSESSEES BA NK ACCOUNT. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE IS LOOKING AFTER THE REAL ESTATE BUSINESS OF SHRI SIMON VARGHESE IN INDIA. THE ASSESSEE ALSO CLAIMS THAT HIS HOUSEHOLD EXPENSES ARE RS.20,000 PER MONTH AND HE A LMOST GOT RS.50,000 PER MONTH FROM SHRI SIMON VARGHESE. THE FUNDS TRANSFERRED FROM NRE ACCOUNT OF SHRI SIMON VARGHESE WAS REGULAR LY CREDITED TO THE ASSESSEES BANK ACCOUNT. APART FROM THIS, THE ASSE SSEE WAS ALSO AUTHORIZED TO RECEIVE THE SALE CONSIDERATION ON SAL E OF PROPERTIES ON BEHALF OF SHRI SIMON VARGHESE. THEREFORE, THE ASSESSEE HA D SUFFICIENT FUNDS AT HIS DISPOSAL TO PROVIDE INTEREST FREE LOANS TO SHRI T.J. RAJAN AND SMT. PUSHPA RAJAN. IN THE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO OCCASION FOR THE ASSESSING OFFICER TO TREAT THE LOAN 30 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 AS BOGUS. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONF IRMED. 34. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PRO FIT ON SALE OF VILLAS AT IRINJALAKKUDA. 35. WE HEARD SHRI M ANIL KUMAR, THE LD.DR AND SHRI VISHNUPRASAD B MENON, THE LD.REPRESENTATIVE FOR THE ASSESSEEE. 36. WHILE CONSIDERING THE SAME ISSUE IN THE CASE OF SHRI SIMON VARGHESE, THIS TRIBUNAL FOUND THAT THE ASSESSING OF FICER HAS MAINLY PLACED RELIANCE ON THE APPRAISAL REPORT OF THE DEPARTMENT AND THE SEIZED MATERIAL. THE ASSESSEE CLAIMS THAT THE SEIZED MATERIAL DISCLO SES ONLY AN ANTICIPATED SALE PROFIT. THEREFORE, THE ASSESSING OFFICER OUGH T TO HAVE FOUND OUT WHAT WAS THE ACTUAL SALE CONSIDERATION RECEIVED ON SALE OF VILLAS. ACCORDINGLY, THE MATTER WAS REMANDED BACK TO THE FILE OF THE ASS ESSING OFFICER. SINCE THE ISSUE RAISED IN THESE APPEALS IS WITH REGARD TO SALE OF VERY SAME VILLAS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH. ACCORDINGLY, THE ORDE RS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF SALE OF VILLAS AT IRINJALAKKUDA IS 31 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE MATTER AFRESH AFTER GIVING REASON ABLE OPPORTUNITY TO THE ASSESSEE AND THEREAFTER DECIDE THE SAME IN ACCORDAN CE WITH LAW. 37. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ONLY TO SUPPORT THE ORDER OF THE CIT(A); THEREFORE, THEY ARE INFRUCTUOU S. 38. THE APPEALS FILED BY THE REVENUE ARE PARTLY ALL OWED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 39. IN OVERALL RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED AND ALL THE CROSS OBJECTIONS FILED BY THE A SSESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MARCH, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 28 TH MARCH, 2014 PK/- 32 ITA NO.775/COCH/2013 ITA 776-778/COCH/2013 ITA 779-781/COCH/2013 COS 7 TO 13/COCH/2014 COPY TO: 1. SMT. THANKAMMA SIMON / SIMON VARGHESE P, PARAKAD ATH HOUSE, MANGALASSERY PO, TRICHUR-1 / SHRI T.V. JOHNSON, THO ZHUTHUPARAMBIL HOUSE, R.S. ROAD, IRINJALAKUDA, TRICHUR 2. DY.CIT, CENT.CIR, S.T. NAGAR, TRICHUR 3. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH