ITO 5(3)(1), MUMBAI V. R.F. PROPERTIES & TRADING P. LTD, MUMBAI

ITA 1053/MUM/2009

• Counselvise Citation: 105319914 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K NAIR
• Assessee Lawyers: S L PODDAR
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Gift
• Section: 143(3); 50C; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D : MUMBAI BEFORE SHRI R.V. EASWAR, (PRESIDENT) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.1053/MUM/2009 ASSESSMENT YEAR :2005-06 INCOME TAX OFFICER 5(3)(1) 526, AAYAKAR BHAVAN, 5 TH FLOOR MUMBAI-400 020. ..( APPELLANT ) VS. M/S. R.F. PROPERTIES & TRADING PVT. LTD. 215, LAXMI INDUSTRIAL ESTATE ANDHERI LINK ROAD ANDHERI(W) MUMBAI-400 053. ..( RESPONDENT ) P.A. NO. (AACCR 8969 E) APPELLANT BY : SHRI G.K. NAIR RESPONDENT BY : SHRI S .L. PODDAR O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.12.2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-0 6. REVENUE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GROUNDS . 2. THE FIRST DISPUTE IS REGARDING ADDITION OF RS.1, 31,75,500/- UNDER SECTION 68 OF THE INCOME TAX ACT. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS NOTED THAT THE ASSESSEE HAD PURCHASED A PROPERTY AT BANDRA VIDE AG REEMENT DATED 9.9.2004 FOR A TOTAL CONSIDERATION OF RS.1,22,00,00 0/-. THE ASSESSEE EXPLAINED THAT THE PROPERTY HAD BEEN PURCHASED OUT OF LOAN OF ITA NO.1053/M/09 A.Y:05-06 2 RS.1,22,00,000/- TAKEN BY THE ASSESSEE FROM SHRI SA JID KHAN, MD OF THE COMPANY. IT WAS FURTHER EXPLAINED THAT ON 20.3.200 4 SHRI SAJID KHAN GAVE GIFTS OF RS.5.50 CRORES TO THE FAMILY MEMBERS AS PE R DETAILS GIVEN BELOW:- 1. MRS. FIRDOUS KHAN, WIFE - RS .2.00 CRORES, 2. MS. SHEHLA KHAN , DAUGHTER RS.2.00 CRORES AND 3. MR. SAIF S. KHAN, SON - RS .1.50 CRORES 2.1 IT WAS FURTHER SUBMITTED THAT MRS. FORDOUS KHAN FLOATED A PROPRIETARY CONCERN M/S. SFS HOLDING ON 1.3.2004 IN WHICH CAPITA L OF RS.2.00 CRORES WAS INTRODUCED OUT OF GIFT RECEIVED FROM SAJID KHAN. S HE ALSO TOOK LOAN OF RS.2.00 CRORES FROM MS. SHEHLA KHAN AND LOAN OF RS. 1.5 CRORES FROM MR. SAIF KHAN. THUS M/S. SFS HOLDING HAD TOTAL FUNDS OF RS .5.50 CRORES WHICH WAS GIVEN AS LOAN TO SHRI SAJID KHAN ON 16.4.2004 WHO P UT THE MONEY IN FIXED DEPOSIT AND WHICH WAS LATER ENCASHED BY HIM AS UNDE R :- 17.6.2004 - RS.1.50 CRORES 02.7.2004 - RS.2.00 CRORES 10.9.2004 - RS .2.00 CRORES 2.2 IT WAS FURTHER SUBMITTED THAT OUT OF ENCASHED D EPOSIT OF RS.2.00 CRORES ON 2.7.2004 SHRI SAJID KHAN GAVE LOAN OF RS.1.28 CR ORES TO THE ASSESSEE ON 11.9.2004 WITH THE HELP OF WHICH THE ASSESSEE PURCH ASED THE PROPERTY. SHRI SAJID KHAN HAD GIVEN FURTHER AMOUNT OF RS.9,75,500/ - TO THE ASSESSEE COMPANY FROM HIS PROPRIETARY CONCERN M/S. SAKS INDI A ON DIFFERENT DATES. THUS TOTAL LOAN DURING THE YEAR TAKEN BY THE ASSESS EE FROM SHRI SAJID KHAN WAS RS.1,37,75,500/-. THE ASSESSING OFFICER OBSERV ED THAT SHRI SAJID KHAN IS CLAIMED TO HAVE RECEIVED FUNDS OF RS.5.50 CRORES FROM MRS. KHAN WHO WAS ITA NO.1053/M/09 A.Y:05-06 3 ADMITTEDLY NOT EVEN AN INCOME TAX PAYEE. THE ASSES SEE THEREFORE, CANNOT BE SAID TO HAVE DISCHARGED THE ONUS OF PROVING THE CREDIT WORTHINESS OF THE PARTY. THE PROPRIETARY CONCERN OF MRS. KHAN HAD NO T DONE ANY BUSINESS TO EARN INCOME AND HER BANK ACCOUNT WAS USED ONLY TO D EPOSIT OR WITHDRAW UNACCOUNTED FUNDS. THE ASSESSING OFFICER THEREFORE , CONCLUDED THAT THE AMOUNT SHOWN BY THE ASSESSEE AS LOAN FROM SHRI SAJI D KHAN WAS FALSE AND IT WAS ASSESSEE'S OWN MONEY ENTERED IN THE BOOKS OF AC COUNT IN THE GUISE OF LOAN. HE THEREFORE, TREATED THE AMOUNT OF RS.1,31,7 5,500/- AS INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE INCOME TAX ACT. I N APPEAL CIT(A), OBSERVED THAT ULTIMATE SOURCE OF LOAN PAID BY THE A SSESSEE COMPANY WAS ITS MD-SHRI SAJID KHAN AND THE TRANSACTION HAD BEEN DIS CLOSED BY SHRI SAJID KHAN IN INCOME TAX RETURN AND CAPACITY WAS THUS PRO VED. SHRI SAJID KHAN HAD GIVEN LOANS TO THREE OTHER COMPANIES ALSO. THE ASSESSING OFFICER HAD ACCEPTED HIS EXPLANATION AND NO ADDITION HAD BEEN M ADE IN HIS CASE IN ASSESSMENT UNDER SECTION 143(3). THE SOURCE WAS TH EREFORE EXPLAINED SATISFACTORILY. CIT(A) THEREFORE, DELETED THE ADDI TION MADE AGGRIEVED, BY WHICH THE REVENUE IS IN APPEAL. 2.3 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. THE LD. AR FOR THE ASSESSEE AT THE VERY OUTSET POINTED OUT THAT SIMILA R LOANS HAD BEEN GIVEN BY SHRI SAJID KHAN TO OTHER CONCERNS OF THE GROUP COMP ANIES I.E., RS.1,37,94,490/- TO SAIF PROPERTIES & MULTI TRADING PVT. LTD. AND RS.1,45,67,715/- TO SAJID PROPERTY & TRADING P. LTD . OUT OF ENCASHED FIXED DEPOSITS AND FROM HIS PROPRIETARY CONCERN M/S. SAKS INDIA IN THE SAME MANNER. SIMILAR ADDITION HAD BEEN MADE BY ASSESSIN G OFFICER IN THOSE CASES ITA NO.1053/M/09 A.Y:05-06 4 WHICH HAD BEEN DELETED BY TRIBUNAL IN ITA NO.1108/M UM/2009 FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF SAIF PROPERT IES & MULTI TRADING PVT. LTD. AND ITA NO.1109/MUM/2009 FOR ASSESSMENT YEAR 2 005-06 IN CASE OF SAJJID PROPERTIES & TRADING PVT. LTD. THE LD. DR F AIRLY CONCEDED THAT FACTS ARE IDENTICAL. WE HAVE GONE THROUGH THE ORDERS OF THE T RIBUNAL CITED ABOVE. WE FIND THAT SHRI SAJID KHAN HAD ADVANCED LOANS TO THE ABOVE TWO CONCERNS ALSO OUT OF ENCASHED FIXED DEPOSITS ON 17.6.2004 AND 10. 9.2004 AND FROM HIS PROPRIETARY CONCERN M/S. SAKS INDIA IN IDENTICAL MA NNER AS IN THE CASE OF THE ASSESSEE. THE TRIBUNAL HAS ALREADY EXAMINED THE IS SUE IN THE CASE CITED. THE TRIBUNAL NOTED THAT FOR THE YEAR ENDING 31.3.2 004, SHRI SAJID KHAN HAD SHOWN WITHDRAWALS OF RS.5,50,10,000/- FOR GIFTS. H IS OPENING BALANCE AS ON 1.4.2003 WAS RS .11,09,48,610/- AND CLOSING CAPITAL ON 31.3.2004 W AS RS.5,04,06,229/-. THE GIFTS DURING THE YEAR 2003-0 4 HAD BEEN GIVEN BY SHRI SAJID KHAN TO HIS WIFE, DAUGHTER AND SON WHICH WERE SUPPORTED BY GIFT DEEDS. THE ASSESSING OFFICER HAD COMPLETED ASSESSMENT IN C ASE OF SHRI SAJID KHAN UNDER SECTION 143(3) AND THE BALANCE SHEET AND CAPI TAL ACCOUNT SUBMITTED HAD BEEN ACCEPTED. THUS, THE SOURCE OF ORIGINAL FUN DS IN CASE OF SHRI SAJID KHAN FROM WHICH GIFTS WERE GIVEN TO WIFE AND OTHER MEMBERS OF FAMILY REMAINED EXPLAINED. THESE FUNDS WERE THE SOURCE OF LOAN BY SHRI SAJID KHAN WHICH WERE PUT INTO FIXED DEPOSITS AND FROM WHICH L OANS WERE GIVE TO THESE COMPANIES. THUS, NO ADDITION WAS REQUIRED TO BE MAD E IN THESE CASES. THE PRESENT CASE IS IDENTICAL. THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SAIF PROPERTIES & MULTI TRADING PVT. LT D. (SUPRA), AND IN THE CASE ITA NO.1053/M/09 A.Y:05-06 5 OF SAJJID PROPERTIES & TRADING PVT. LTD. (SUPRA) WE SEE NO INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS THEREFORE, UPHE LD. 3. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.3 4,12,380/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF THE INCOM E TAX ACT. FACTS OF THE CASE ARE THAT THE ASSESSEE HAD PURCHASED OFFICE PRE MISES AT BANDRA FOR A SUM OF RS.1.22 CRORES. THE MARKET VALUE OF THE PRO PERTY FOR THE PURPOSE OF STAMP DUTY VALUATION WAS RS.1,56,12,380/-. THE ASS ESSING OFFICER OBSERVED THAT UNDER THE PROVISIONS OF SECTION 50C, SALE PRIC E IN CASE OF TRANSFER OF CAPITAL ASSET FOR THE PURPOSE OF CAPITAL GAIN, HAD TO BE SUBSTITUTED BY MARKET VALUE ADOPTED FOR STAMP DUTY PURPOSES. THE ASSESSI NG OFFICER FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 50C COULD B E APPLIED IN CASE OF PURCHASE OF PROPERTY AND THE ASSESSEE HAD THUS MADE UNACCOUNTED INVESTMENT RS.34,12,380/- WHICH WAS UNEXPLAINED. AC CORDINGLY HE ADDED THE SAME TO THE TOTAL INCOME UNDER SECTION69 OF THE INC OME TAX ACT. IN APPEAL THE ASSESSEE SUBMITTED THAT ASSESSEE HAD PURCHASED THE PROPERTY AND NOT SOLD IT AND THEREFORE, PROVISIONS OF SECTION 50C CO ULD NOT BE APPLIED. ASSESSEE HAD NOT MADE ANY UNACCOUNTED INVESTMENT AN D THEREFORE PROVISION OF SECTION 69 COULD ALSO NOT BE APPLIED. THE CIT(A ) WAS SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT THE PROVISIONS OF SECTION 50C COULD BE APPLIED ONLY IN CASE OF COMPUTATION OF CAP ITAL GAIN WHICH WAS CLEAR FROM THE PLAIN READING OF THE PROVISIONS. HE REFERR ED TO THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF SALES TAX COMMISSIO NER VS. MODS SUGAR MILLS AIR 1961 SC 1047 WHEREIN IT WAS HELD THAT STA TUTORY PROVISIONS MUST BE ITA NO.1053/M/09 A.Y:05-06 6 INTERPRETED IN THE LIGHT OF WHAT IS CLEARLY EXPRESS ED. THE CIT(A) ALSO OBSERVED THAT ASSESSING OFFICER HAD BROUGHT NO MATE RIAL ON RECORD TO SHOW THAT THE ASSESSEE HAD MADE ANY UNACCOUNTED PAYMENT TO THE SELLER. THE ADDITION WAS ACCORDINGLY DELETED AGGRIEVED, BY WHIC H THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 3.1 BEFORE US THE LD. AR REITERATED THE SUBMISSION S MADE BEFORE THE LOWER AUTHORITIES WHEREAS THE LD. DR PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION UNDER SECTION 69 OF THE ACT AS UNACCOUNTED INVESTMENT. THE ASSESSEE HAD PURCHASED OFFICE PREMISES FOR A CONSIDERATION OF RS.1.22 CRORES AND THE MARKET VALU E OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY HAD BEEN DETERMINED AT RS .1,56,12,380/-. THE ASSESSING OFFICER HAD THEREFORE, ADOPTED THE MARKET VALUE OF THE PROPERTY AT RS .1,56,12,380/- AS THE PURCHASE PRICE FOLLOWING THE PROVISIONS OF SECTION 50C AND ADDED THE DIFFERENCE OF RS.34,12,380/- AS U NACCOUNTED INVESTMENT BY THE ASSESSEE. THE CIT(A) DELETED THE ADDITION M ADE. IN OUR VIEW THE ORDER OF CIT(A) HAS TO BE UPHELD. THE PROVISIONS O F SECTION 50C ARE APPLICABLE. ONLY IN CASE OF COMPUTATION OF CAPITAL GAIN IN WHICH SALE PRICE HAS TO BE TAKEN AS MARKET VALUE OF THE PROPERTY DET ERMINED FOR THE PURPOSE OF LEVY OF STAMP DUTY. IN THE PRESENT CASE NO COMP UTATION OF CAPITAL GAIN IS INVOLVED. IT IS A CASE OF INVESTMENT. THERE IS NO MATERIAL AVAILABLE ON RECORD ITA NO.1053/M/09 A.Y:05-06 7 THAT THE ASSESSEE HAD MADE ANY UNACCOUNTED PAYMENT WHICH HAD NOT BEEN DISCLOSED. THE ADDITION HAS BEEN MADE PURELY ON TH E BASIS OF PROVISIONS OF SECTION 50C WHICH ARE NOT APPLICABLE IN CASE OF THE ASSESSEE. THE ADDITION MADE BY THE ASSESSING OFFICER, THEREFORE, CANNOT BE JUSTIFIED. ORDER OF CIT(A) DELETING THE ADDITION IS ACCORDINGLY UPHELD. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011. SD/- SD/- (R.V. EASWAR) (RAJENDRA SINGH ) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 29.7.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.