Shri V.S. Balasubramanyam, Bangalore V. ITO, Bangalore

ITA 189/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63694 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI CITII
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital asset; Cost of acquisition
• Section: 133A; 234B

Judgement Text

PAGE 1 OF 19 ITA NO. 189/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. 189/BANG/2010 (ASST. YEAR 2005-06) SHRI V S BALASUBRAMANYAM, #7/3, BULL TEMPLE ROAD, SHANKARPURAM, CHAMRAJPET, BANGALORE-4. PA NO.AATPB8232E VS THE INCOME TAX OFFICER, WARD-3(2), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 27.08.2012 DATE OF PRONOUNCEMENT : 21.09.2012 APPELLANT BY : SHRI V SRINIVASAN, C.A. REVENUE BY : SHRI FARHAT HUSSAIN QURESHI, CIT-II OR DER PER GEORGE GEORGE K : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT (A)-II, BANGALORE DATED 22.12.2008. THE RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THE ASSESSEE HAD ORIGINALLY RAISED SEVENTEEN GR OUNDS IN AN ILLUSTRATIVE AND NARRATIVE MANNER. SUBSEQUENTLY, HE CAME UP WITH CONCISE GROUNDS CONSISTING OF ELEVEN GROUNDS. HOWEVER, THE SUBSTANCES OF THE GRIEVANCES OF THE ASSESSEE ARE REFORMULATED AS UNDE R: PAGE 2 OF 19 ITA NO. 189/BANG/2010 2 (1) THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOL DING THAT THE ASSESSEE WAS LIABLE TO PAY CAPITAL GAINS TAX; (2) THAT THE CIT (A) ERRED IN NOT DELETING THE SUM OF R S.1 CRORE RECEIVED BY THE ASSESSEES BROTHER V.S. NATARAJ WHIC H WAS DEBITED TO THE ASSESSEES ACCOUNT BY HIGHLAND ENTERPRISES WH ILE SETTLING THE RETIREMENT ACCOUNT; & (3) CHARGING OF INTEREST U/S 234B AND 234D OF THE ACT. IN HIS SUBSEQUENT REPRESENTATION, THE ASSESSEE HAD AGAIN PRAYED FOR ADMISSION OF ADDITIONAL GROUND - WHICH HAS ALREADY BEEN FOUND A PLACE IN HIS CONCISE GROUNDS OF APPEAL - NAMELY: (1) THAT THE ASSESSEE DENIES HIMSELF LIABLE TO BE CHARG ED TO INTEREST U/S 234B AND 234D OF THE ACT 3. DURING THE COURSE OF HEARING, IT HAS BEEN NOTI CED THAT THERE WAS A CONSIDERABLE DELAY OF 350 DAYS IN FILING HIS AP PEAL. THE ASSESSEE IN HIS AFFIDAVIT DATED 18.2.2010 SUBMITTED THAT HE HAD UND ERGONE BY-PASS SURGERY AND WAS UNDER MEDICAL OBSERVATION FROM THE YEAR 2006 WHICH HAD RESULTED IN CURTAILING HIS ACTIVITIES AND CONSIDERING HIS ADVAN CED AGE, HIS AUDITOR DID NOT BRING TO HIS NOTICE THE OUT COME OF THE APPEAL FILE D BEFORE THE CIT (A). THIS, ACCORDING TO THE ASSESSEE, HAD RESULTED IN NOT FILI NG ANY FURTHER APPEAL AGAINST THE ORDER OF THE CIT (A). HOWEVER, ON FURT HER CONSULTATION WITH HIS AUDITOR, THE ASSESSEE HAD FILED AN APPEAL BELATEDLY WHICH RESULTED IN DELAY OF 350 DAYS. IT WAS SUBMITTED THAT THE DELAY WAS NOT I NTENTIONAL, WILLFUL OR DELIBERATE. IT WAS, THEREFORE, PRAYED THAT THE DEL AY MAY PLEASE BE CONDONED. PAGE 3 OF 19 ITA NO. 189/BANG/2010 3 3.1 CONSIDERING THE SUBMISSION OF THE ASSESSEE, T HE DELAY OF 350 DAYS IN PREFERRING THIS APPEAL IS CONDONED AND THE A PPEAL IS ADMITTED FOR CONSIDERATION. 4. REVERTING BACK, BRIEFLY STATED, THE FACTS OF TH E ISSUES ARE AS UNDER: THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE AY UNDER CONSIDERATION, ADMITTING A TOTAL INCOME OF RS.1,68,980/- WHICH WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. SUBSEQUE NTLY, THE ASSESSEES CASE WAS TAKEN UP FOR SCRUTINY BY THE AO. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THERE WAS A SURVEY OPERATION U/S 133A OF THE ACT IN THE CASE OF M/S. BHUMIKA BUILDERS AND DE VELOPERS ON 24.8.2005 WHICH, AMONG OTHERS, TRANSPIRED THAT THE PRESENT AS SESSEE HAD PAID A SUM OF RS.55 LAKHS TOWARDS PURCHASE OF A PROPERTY. BEING Q UERIED, THE ASSESSEE HAD STATED THAT HE HAD PURCHASED LANDS ADMEASURING 4 ACRES AND 20 GUNTAS AT HOSKERAHALLI IN 1980 FOR RS.38,000/-; AND HE G AVE A POWER OF ATTORNEY [POA] IN FAVOUR OF SHRI SRIHARI KHODAY TO SELL THE P ROPERTY. IT WAS STATED THAT ON 22/5/2004, THE PROPERTY WAS TRANSFERRED TO S HRI SRIHARI KHODAY FOR RS.1,80,00,000 BY MEANS OF A SETTLEMENT DEED AND THAT HE HAD RECEIVED THE AMOUNT THROUGH CHEQUES. HOWEVER, THE ASSESSEE IN HIS LETTER DATED 30.9.2005 RETRACTED THE REPLIES MADE IN HIS LETTER DT.2.9.05 TO THE EFFECT THAT THE EARLIER STATEMENT WAS IN THE CONTEXT OF QU ERIES RAISED BY THE AO; THAT HE AND HIS WIFE FORMED A PARTNERSHIP WITH L.K. TRUST ON 23.12.1988 FOR THE DEVELOPMENT OF THE SUBJECT PROPERTY BY TAKING THE EXPERTISE AVAILABLE WITH THE TRUST, THAT IT HAD CONTRIBUTED THE PROPERT IES BELONGING TO THEM AS THEIR CAPITAL IN THE SAID PARTNERSHIP. HOWEVER, TH E ASSESSEE WAS UNABLE TO PAGE 4 OF 19 ITA NO. 189/BANG/2010 4 PRODUCE THE ORIGINAL PARTNERSHIP DEED; AND THAT THE REFERENCE TO GIVING POA IN FAVOUR OF SHRI SRIHARI KHODAY IN THE SWORN STATEM ENT WAS IN THE SAID CONTEXT ETC. IT WAS, FURTHER, CLAIMED THAT THE AS SESSEE AND HIS WIFE SMT KALAVATHI HAVE CONTRIBUTED THE SUBJECT LANDS AS CAP ITAL IN 1988 IN THE PARTNERSHIP FIRM - M/S. HIGHLAND ENTERPRISES. 4.1 HOWEVER, THE AO HAD, FOR ELABORATE AND COMPRE HENSIVE REASONS RECORDED IN HIS ORDER, COME TO THE CONCLUSION THAT THE ALLEGED PARTNERSHIP FIRM NEVER EXISTED. IT WAS CONCLUDED THAT THE ASSE SSEES CLAIM OF HAVING RECEIVED THE CONSIDERATION BY WAY OF REPAYMENT OF CAP ITAL CONSEQUENT ON HIS RETIREMENT FROM THE FIRM HAD NO BASIS; AND THAT, AC CORDING TO THE LETTER OF THE ASSESSEES REPRESENTATIVE ON 18.12.2006 BEFORE THE AO, THE ENTIRE AMOUNT OF RS.3.85 CRORES WAS RECEIVED BY THE ASSESSE E ON 22.5.2004 I.E, YEAR ENDED 31.3.2005. THEREFORE, THE AO HAD TAKEN T HE NET VALUE OF LONG TERM CAPITAL GAINS EARNED BY THE ASSESSEE AT RS.3.82 ,60,000/- AS ON 22.5.2004 AFTER ALLOWING DEDUCTION TOWARDS COST OF ACQUISITION. AS THE ASSESSEE WAS REPORTED TO HAVE RECEIVED THE SAID CON SIDERATION ON 22.5.2004 I.E., FOR THE YEAR-ENDED 31.3.2005, THE CAPITAL GAIN S ARISING FROM THE SALE OF THE SUBJECT PROPERTY WAS BROUGHT TO TAX IN THE RELE VANT ASSESSMENT YEAR UNDER CONSIDERATION. 5. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES WIT H THE CIT (A) FOR RELIEF. 6. AFTER GIVING DUE WEIGHT-AGE TO THE ASSESSEES SUBMISSIONS AS RECORDED IN HIS APPELLATE ORDER AND ALSO IN CONFORM ITY WITH THE RULING OF THE PAGE 5 OF 19 ITA NO. 189/BANG/2010 5 HONBLE SUPREME COURT IN THE CASE OF KARTHIEKEYA V. SARABHAI SIDDANTHA BAHI V. CIT REPORTED IN 156 ITR 509 (SC), THE CIT ( A) HAD REJECTED THE ASSESSEES CONTENTIONS FOR THE FOLLOWING REASONING: 4.2. IN VIEW OF THE FACTS OF THE PRESENT CASE, THE FORMATION OF THE PARTNERSHIP ITSELF IS NOT GENUINE IN AS MUCH AS THE APPELLANT AND HIS WIFE SMT KALAVATHI, A S PARTNERS WHO CONTRIBUTED THEIR LANDED PROPERTIES AS THEIR CAPITAL WERE ENTITLED TO ONLY 3 PER CENT SHARE IN THE PROFIT/LOSS OF THE FIRM WHEREAS THE OTHER PARTNER V IZ., M/S. L.K. TRUST WHICH DID NOT CONTRIBUTE ANY CAPITAL EITHER IMMOVABLE OR MOVABLE WAS ENTITLED TO 97 PER CENT OF THE PROFITS. THE APPELLANT DID NOT FILE THE ORI GINAL PARTNERSHIP DEED EVEN AT THE APPELLATE STAGE IN SPI TE OF BEING ASKED TO DO SO. IT IS ALSO SEEN FROM THE REC ORDS THAT THE SAID FIRM HAS NOT FILED RETURNS OF INCOME EVER SINCE ITS INCEPTION AND THAT IT HAD NOT OPENED ANY B ANK ACCOUNT. BESIDES, EVEN THOUGH THE FIRM WAS FORMED ON 23/12/1998 IT WAS REGISTERED WITH THE REGISTRAR OF FIRMS ON 23/7/2003 I.E., NEARLY 15 YEARS AFTER ITS FORMATIO N. THE APPELLANT HIMSELF HAS QUESTIONED THE GENUINENES S OF THE PARTNERSHIP FIRM IN THE COMPLAINT LODGED BY HIM WITH THE CHIEF METROPOLITAN MAGISTRATE, BANGALORE. ALL THESE GO TO CLEARLY SHOW THAT THE PARTNERSHIP WAS NOT GENU INE. I AM, THEREFORE, INCLINED TO AGREE WITH THE VIEWS O F THE AO THAT THE MANNER IN WHICH THE PROPERTY WAS TRANSFERRED TO THE FIRM AND THE APPELLANT TAKING RETIREMENT FROM THE PARTNERSHIP FIRM INDICATED THAT THE APPELLANT WANTED TO AVOID THE PAYMENT OF TAX ON THE CAPITAL GAINS ARISING FROM SUCH TRANSFER OF THE SAI D PROPERTY AS THE AO HAS PIERCED THE VEIL AND COME TO THE CORRECT CONCLUSION IN THIS REGARD. IN OTHER WORDS, THE ENTIRE SCHEME WAS SHAM IN NATURE AS HELD BY THE HON BLE SUPREME COURT IN THE CASE CITED ABOVE. PAGE 6 OF 19 ITA NO. 189/BANG/2010 6 7. AGITATED, THE ASSESSEE HAS COME UP WITH THE PR ESENT APPEAL. DURING THE COURSE OF HEARING, THE LEARNED AR CAME U P WITH THE SUBMISSION IN AN ELABORATE MANNER, THE SUBSTANCE OF WHICH IS SUMM ARIZED AS UNDER: - THAT THE ASSESSEE WAS OWNING ABOUT 4 ACRES & 20 G UNTAS OF LAND AT HOSKERAHALLI AND HIS WIFE SMT KALAVATHI WAS OWNING ABOUT 5 ACRES & 9 GUNTAS AT ITTAMADAGU; AND THAT TH OSE LANDS WERE ACQUIRED BY THEM WAY BACK IN 1980 AND THEREAFTER , THEY WERE CONTRIBUTED TO A PARTNERSHIP FIRM, CALLED M/S . HIGHLAND ENTERPRISES IN 1988; - THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON BEING QUERIED BY THE AO WITH REGARD TO ACQUISITION OF CERT AIN PROPERTIES FROM M/S. BHOOMIKA BUILDERS & DEVELOPERS WHICH WAS SUBJECTED TO A SURVEY OPERATION ON 24.8.2005, TH E ASSESSEE HAD AVERRED THAT HE WAS OWNING 4 ACRES & 20 GUNTAS OF AGRICULTURAL LAND AT HOSKERAHALLI WHICH WAS PURCHAS ED IN 1980 FOR A CONSIDERATION OF RS.38000/-. HE HAD GIVEN P OA TO SRI SRIHARI KHODAY IN 1988 TO SELL THE PROPERTY; AND THAT ON 22.5.2004 A SETTLEMENT DEED WAS MADE BETWEEN HIM AN D SRI SRIHARI KHODAY, ACCORDING TO WHICH, THE SUBJECT PROP ERTY WAS TRANSFERRED TO SRIHARI KHODAY FOR A SALE CONSIDERATI ON OF RS.1.8 CRORES, ACCORDING TO THIS SETTLEMENT, HE HAD RECEIV ED RS.1.8 CRORES THROUGH CHEQUES; - THAT AFTERMATH, THE ASSESSEE, ACCORDING TO THE LE ARNED AR, HAD REALIZED THAT HE HAD NOT MADE THE SWORN STATEME NT IN CORRECT PERSPECTIVE, HE ACCORDINGLY, RETRACTED THE E ARLIER STATEMENT AS UNDER: (A) THAT THE EARLIER STATEMENT MADE ON 2.9.2005 WAS MADE IN THE LIMITED CONTEXT OF QUERIES RAISED AND HE DID NO T HAVE A CHANCE TO EXPLAIN THE ENTIRE BACKGROUND FACTS IN DE TAILS; PAGE 7 OF 19 ITA NO. 189/BANG/2010 7 (B) THAT THE ASSESSEE AND HIS SPOUSE HAD FORMED A PARTNERSHIP FIRM CALLED M/S. HIGHLAND ENTERPRISES O N 23.12.1988 WITH M/S. L.K.TRUST; (C) THAT THE ASSESSEE AND HIS WIFE HAD CONTRIBUTED THE PROPERTIES OWNED BY THEM TO THE CAPITAL OF THE PARTN ERSHIP FIRM; (D) THAT THE ASSESSEE & HIS WIFE WERE CREDITED WI TH RS.2 CRORES & RS.2.2 CRORES TOWARDS THE VALUE OF LANDS CONTRIBUTED BY THEM RESPECTIVELY TO THE FIRM; (E) THAT THE ORIGINAL PARTNERSHIP DEED WAS NOT TRAC EABLE, PHOTOSTAT COPY OF THE SAME WAS FURNISHED BEFORE THE AO; (F) THAT THE COPIES OF ACCOUNT STATEMENTS OF THE AS SESSEE AND HIS WIFE IN THE BOOKS OF THE FIRM FOR THE YEARS- ENDED 1988-89 TO 2004-05 WERE ALSO FILED; (G) THAT THE ASSESSEE HAD EXECUTED A POA IN FAVOUR OF SHRI K.L. SRIHARI, ONE OF THE TRUSTEES OF L.K.TRUST; & (H) THAT DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE AND HIS WIFE HAVE MERELY RETIRED FROM THE PARTNERSHI P FIRM AND RECEIVED THE AMOUNT STANDING TO THEIR CREDITS I N THE CAPITAL OF THE PARTNERSHIP FIRM AND, THEREFORE, THE RE WAS NO QUESTION OF ANY LIABILITY TOWARDS CAPITAL GAINS AS T HERE WAS NO SALE OF ANY PROPERTY DURING THE YEAR UNDER CONSIDERATI ON TO RAISE TO ANY LIABILITY TO CAPITAL GAINS. - THAT THE ASSESSEE AND HIS WIFE HAVE ENTERED INTO A RETIREMENT-CUM-RECONSTITUTION DEED DATED 22.5.2004 WHICH WAS INDIRECTLY REFERRED TO AS SETTLEMENT DEED BY THE AS SESSEE IN THE INITIAL STATEMENT GIVEN ON 2.9.2005 BEFORE THE AO WHICH WAS IN THE LIMITED CONTEXT AND IT DID NOT BRING OUT THE ENTIRE TRANSACTION IN THE CORRECT PERSPECTIVE; AND THAT IN AS MUCH AS WHAT THE ASSESSEE RECEIVED WAS NOTHING BUT THE AMOU NT STANDING TO THE CREDIT OF HIS CAPITAL ACCOUNT IN TH E BOOKS OF THE PARTNERSHIP FIRM AND, THUS, THERE WAS NO TRANSFER O F ANY CAPITAL ASSET TO ATTRACT THE LIABILITY TO CAPITAL GAINS; PAGE 8 OF 19 ITA NO. 189/BANG/2010 8 - THAT IT WAS EVIDENT THAT THE ORIGINAL DOCUMENTS O F THE PROPERTIES BELONG TO THE ASSESSEE SEIZED BY THE DEPA RTMENT IN THE COURSE OF SEARCH CONDUCTED ON KHODAY BREWERIES L IMITED ON 20.2.1997 AND MARKED AS A/KBL/37; AND THAT IT WAS C LEAR THAT AS EARLY AS 1997, THE ORIGINAL DOCUMENTS OF THE SUBJ ECT PROPERTIES WERE IN THE CUSTODY OF KHODAYS AND, THEREF ORE, IT CANNOT BE SAID THAT THE CONSTITUTION OF THE PARTNER SHIP FIRM WAS AN AFTER-THOUGHT; - THAT THE JOINT DEVELOPMENT AGREEMENT [JDA] BETWE EN THE PARTNERSHIP FIRM HIGHLAND ENTERPRISES AND M/S. PRESTIGE ESTATES PROJECTS PVT. LTD DT 23.9.2005 WHICH WAS RE GISTERED WITH THE SUB-REGISTRAR, KENGERI SHOWS THAT THE ASSE SSEE AND HIS WIFE HAD CONSTITUTED THE PARTNERSHIP FIRM ON 23 .12.1998; AND THAT IT BECOMES CLEAR THAT THE TITLE TO THE PRO PERTIES OF THE ASSESSEE STOOD VESTED IN HIGHLAND ENTERPRISES R IGHT FROM 1988 AND THIS WAS DESCRIBED IN THE REGISTERED DOCUM ENTS VESTING IN SUCCESSIVE OWNERS AND, THUS, IT CANNOT B E SAID THAT THE CONSTITUTION OF THE PARTNERSHIP FIRM WAS A MERE SHAM OR A DEVICE TO AVOID THE RIGORS OF TAXATION; - THAT THE RECITALS IN THE JDA FURTHER BRING OUT TH AT THE ASSESSEE AND HIS WIFE HAD RETIRED FROM THE FIRM ON 22.5.2004 AND THAT THE PARTNERSHIP FIRM CONTINUED TO BE THE O WNER OF THE PROPERTIES; AND THAT THE PARTNERSHIP FIRM HAD SECUR ED APPROVAL OF A DEVELOPMENT PLAN IN TERMS OF BDA RESOLUTION DA TED 22.1.1999 WHICH EXHIBITS THAT THE FIRM WAS ENGAGED IN CARRYING ON BUSINESS; - THAT FROM THE JDA, IT CAN BE SEEN THAT THE PARTNE RSHIP FIRM HAD RELINQUISHED A PORTION OF THE PROPERTY IN FAVOU R OF BDA IN TERMS OF THE RELINQUISHMENT DEED DATED 28.7.2000 RE GISTERED WITH THE SUB-REGISTRAR, BANGALORE SOUTH TALUK WHICH SHOWS THAT THE FIRM WAS ENGAGED IN CARRYING ON BUSINESS; - THAT THE BANGALORE MAHANAGARA PALIKE BY ITS ENDORS EMENT DATED 28.7.2003 HAD AGREED TO ASSESS AND REGISTER T HE PARTNERSHIP FIRM AS KHATEDARS ON PAYMENT OF BETTERME NT AND PAGE 9 OF 19 ITA NO. 189/BANG/2010 9 OTHER CHARGES AND, THUS, IT BECOMES CLEAR THAT THE SAID FIRM WAS ENGAGED IN CARRYING ON BUSINESS; - THAT THE HONBLE HIGH COURT WHILE DISPOSING OFF O F THE CIVIL MISC. PETITION OF THE ASSESSEE HAD OBSERVED THAT TH E EXECUTION OF THE PARTNERSHIP DEED DATED 23.12.1988 WAS NOT IN DISPUTE AND ALSO LOOKED INTO THE RETIREMENT DEED DATED 22.5 .2004 HAD COME TO A CONCLUSION THAT THE PETITIONERS, NAMELY, T HE ASSESSEES CANNOT INVOKE THE ARBITRATION CLAUSE CONTAINED IN T HE PARTNERSHIP DEED IN LIEU OF THE RETIREMENT DEED DAT ED 22.5.2004 AND, THUS, THE DOUBTING OF EXISTENCE OF T HE PARTNERSHIP FIRM BY THE AUTHORITIES BELOW WAS NOT JU STIFIED; - WITH REGARD TO THE AOS ALLEGATION THAT THE SAID FIRM DID NOT CARRY ON ANY BUSINESS FOR A PERIOD OF 15 YEARS AFTER I TS INCEPTION, IT WAS CLAIMED THAT THE FIRM MAY NOT HAVE A BANK ACCOUNT OR MAY HAVE REGISTERED WITH THE REGISTRAR O F FIRMS ONLY IN 2003, THE EVIDENCES ADDUCED THAT THE FIRM HA D OBTAINED DEVELOPMENT PLAN AND HAD RELINQUISHED AREAS TO THE BDA MUCH BEFORE THE YEAR UNDER CONSIDERATION; - IN RESPECT OF ABSENCE OF MUTUAL AGENCY AMONGST TH E PARTNERS, IT WAS CLAIMED THAT THE AO TOOK THIS VIEW CHIEFLY BE CAUSE OF A CRIMINAL COMPLAIN FILED BY THE ASSESSEE BEFORE THE C HIEF METROPOLITAN MAGISTRATE. IT WAS AVERRED THAT THE A SSESSEE WAS AGGRIEVED BY INORDINATE DELAY IN DEVELOPMENT OF THE P ROPERTIES AND WITH A VIEW TO PRESSURIZE THE KHODAYS, HE HAD FI LED THE SAID COMPLAINT; AND THAT THE SAID COMPLAINT WAS STILL PE NDING, HE HAD APPROACHED THE HONBLE HIGH COURT WITH A CIVIL MISC . PETITION SEEKING APPOINTMENT OF AN ARBITRATOR. IT WAS CLAIM ED THAT THE HONBLE HIGH COURT HAD ACCEPTED THE EXISTENCE OF TH E PARTNERSHIP FIRM IN ITS OBSERVATION. THIS, IT WAS CLAIMED, TANTAMOUNT TO THE ACCEPTANCE OF THE PARTNERSHIP DEE D BY THE ASSESSEE AND IT CANNOT BE SAID THAT THE CRIMINAL CO MPLAINT FILED BY THE ASSESSEE SHOWS THAT THERE WAS NEITHER A PARTN ERSHIP FIRM NOR THERE WAS ANY MUTUAL AGENCY. - WITH REGARD TO THE AOS APPREHENSION IN RESPECT O F THE MARKET VALUE OF THE PROPERTIES, IT WAS CLAIMED THAT THERE WAS PAGE 10 OF 19 ITA NO .189/BANG/2010 10 NO REQUIREMENT ON THE ASSESSEES TO PROVE THAT THE ASSESSEES WERE CREDITED WITH THE MARKET VALUE OF THE PROPERTI ES IN THE BOOKS OF PARTNERSHIP FIRM; AND THAT THE PROVISIONS OF S. 45(3) OF THE ACT DO NOT REQUIRE THAT THE PROPERTIES MUST BE INTRODUCED INTO THE FIRM AT MARKET VALUE AND, THUS, THE VIEW E XPRESSED BY THE AO WAS ERRONEOUS; & - THAT THE EXISTENCE OF THE PARTNERSHIP FIRM STANDS PROVED AND ESTABLISHED AND THE FACT THAT THERE WAS A DELAY IN T HE REGISTRATION OF THE FIRM OR OBTAINING PAN FROM THE DEPARTMENT DOES NOT RESULT IN TO TERM IT THAT THE TRANSACTION WAS SHAM. TO STRENGTHEN AND TO SUBSTANTIATE HIS CLAIM, THE LE ARNED A R CAME WITH VOLUMINOUS PAPER BOOKS CONTAINING VARIOUS DOCUMENTA RY EVIDENCES AND ALSO A NUMBER OF CASE LAWS. 8. ON THE OTHER HAND, THE LEARNED DR SUPPORTED TH E REASONING OF THE AO AS WELL AS THE CIT (A) IN REJECTING THE ASSE SSEES CONTENTIONS. DURING THE COURSE OF HEARING, THE LEARNED DR HAD RE ITERATED THE FOLLOWING FACTS FOR THE ABOVE CONCLUSIONS: - THAT IT WAS ONLY CONSEQUENT TO SURVEY, THE ARRANGE MENT OF TRANSFER OF LAND TO THE ALLEGED PARTNERSHIP FIRM AN D SUBSEQUENT RETIREMENT FROM THE FIRM AND PAYMENT CAME TO LIGHT; - THAT THERE WAS NO EXISTENCE OF ANY ORIGINAL PARTNE RSHIP DEED TO PROVE THE VERY EXISTENCE OF THE SAID FIRM AND TO PROVE ITS EXISTENCE, THE RETIREMENT DEED WAS DEVISED WHICH WA S AS IF TO PUT THE CART BEFORE THE HORSE; - THAT SINCE THE FORMATION OF THE ALLEGED PARTNERSH IP FIRM IN 1988, THE FIRM HAD NEITHER DONE ANY BUSINESS, NOR (I ) ACQUIRED PAN; (II) OPENED A BANK ACCOUNT IN ITS NAME; (III) FILED RETURNS OF INCOME. THESE ARE CLEAR POINTERS TO THE FACT THAT THE PARTNERSHIP FIRM WAS A SHAM ARRANGEMENT TO TRANSFER THE LAND WITHOUT INCIDENCE OF TAX; PAGE 11 OF 19 ITA NO .189/BANG/2010 11 - THAT THE CRIMINAL COMPLAINT LODGED BY THE ASSESSEE AGAINST THE PARTNERSHIP FIRM AND SRI SRIHARI KHODAY WAS MUCH LAT ER OF THE SURVEY; AND THAT THE APPRECIATION OF THE LAND WAS A ROUND RS.30 CRORES (AS IS SEEN FROM THE CONSIDERATION RECEIVED FROM PRESTIGE GROUP), THE LODGING OF A COMPLAINT WITH C MM OR A HIGH COURT DECREE LONG AFTER THE RECEIPT OF PAYMENT ON RE TIREMENT HOLDS NO EVIDENTIARY VALUE WHICH WAS MERELY A DEVISE TO AVOID TAX INCIDENCE RELIES ON THE CASE LAWS: (I) MALABAR FISHERS CO. V. CIT (1979) 120 ITR 10049 (SC); & (II)SUNIL DIDDHARTHBHAI V. CIT (1985) 156 ITR 0509 (SC) IN CONCLUSION, IT WAS ARGUED THAT THE ARRANGEMENT W AS A COLOURABLE DEVISE AS ELABORATELY PROVED BY THE AO WHICH WAS DULY UPHELD BY THE CIT (A) TOO. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F EITHER PARTY, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD AND ALSO DOCUMENTARY EVIDENCES ADDUCED BY THE LEARNED A R IN THE SHAPE OF PAPER BOOKS AS WELL AS VARIOUS CASE LAWS. THE ISSUES RAISED BY THE ASSESSE E ARE ADJUDICATED SERIALLY AS BELOW: (1) THE AUTHORITIES BELOW ERRED IN ASSUMING THAT T HE ASSESSEE WAS LIABLE TO PAY CAPITAL GAINS TAX : AFTER CAREFULLY CONSIDERING THE SUBMISSION OF THE LEARNED AR, PERUSAL OF THE CONNECTED RELEVANT MATERIALS AVAILAB LE ON RECORD AND ALSO THE SEQUENCE OF EVENTS WHICH TOOK PLACE IN THE INTERVEN ING PERIOD, IT IS MORE APPROPRIATE TO ARRANGE THE FACTS OF THE ISSUE COHES IVELY FOR PROPER PERCEPTION AS UNDER: PAGE 12 OF 19 ITA NO .189/BANG/2010 12 (I) THAT THE ASSESSEE HAD PURCHASED AGRICULTURAL LA NDS OF 4 ACRES 20 GUNTAS IN SY. NO.125 SITUATED AT HOSAKERA HALLI VILLAGE FOR A TOTAL CONSIDERATION OF RS.38000/- UND ER A REGISTERED SALE DEED DATED 20.6.1980. SIMULTANEOUS LY, SMT. KALAVATHI, THE ASSESSEES WIFE HAD ALSO PURCHASED A GRICULTURAL LANDS OF 4 ACRES 1 GUNTAS IN SY.NO.43 SITUATED AT IT TAMADU VILLAGE FOR A TOTAL CONSIDERATION OF RS.38000/- UND ER A REGISTERED SALE DEED DATED 20.6.1980; (II) THAT THROUGH A POA DATED 23.12.1988, THE ASSES SEE HAD AUTHORIZED SHRI K.L. SRIHARI KHODAY TO SELL HIS PROP ERTY; (III) THAT ON THE SAME DAY, A DEED OF PARTNERSHIP AP PEARS TO HAVE EXECUTED, CONSTITUTING A PARTNERSHIP FIRM, STYL ED M/S. HIGHLAND ENTERPRISES AND THE NATURE OF ITS BUSINESS BEING CONSTRUCTION OF BUILDING AND TO DEVELOP THE LAND THE SUBJECT PROPERTIES AND TO OPERATE A BANK ACCOUNT IN ITS N AME ETC. THE FIRM CONSISTED OF THREE PARTNERS, NAMELY, THE AS SESSEE, HIS WIFE SMT. KALAVATHI AND M/S. L K TRUST WITH A PROFI T AND LOSS SHARING RATIO OF 3% FOR FIRST AND SECOND PARTIES AN D THE THIRD PARTNER L.K. TRUST WITH 97%. THE ASSESSEE AND HIS WIFE HAVE CONTRIBUTED THE SUBJECT PROPERTIES AS THEIR CAPITAL S WHEREAS L.K. TRUST HAD CONTRIBUTED NONE ; (IV) THAT THERE WAS AN AGREEMENT DATED 18.7.1996, F URTHER FOLLOWING CO-SHARERS WERE INCLUDED, NAMELY: B.S.RANGANATHA IYER, S/O SESHA IYER V.S.VIRUPAKKA IYER - DO V.S. GOPALASWAMY - DO V.S. NATARAJ - DO ALL THESE PERSONS WERE THE CO-SHARERS OF THE ASSESS EE AND HIS WIFE. ACCORDING TO THIS ARRANGEMENT, THEY WERE ENTI TLED TO 50000 SFT OF BUILT-UP AREA ON THE AFORESAID LAND A FTER COMPLETION BY THE PROJECT; THE NEXT DAY I.E., ON 19.7.1996, ANOTHER AGREEMENT W AS EXECUTED BETWEEN SHRI V.S.NATARAJ AND SHRI SRIHARI KHODAY, PAGE 13 OF 19 ITA NO .189/BANG/2010 13 TRUSTEE OF L K TRUST, ACCORDING TO WHICH, SRI NATAR AJ RETIRED AND PARTY OF THE FIRST PART WILL GET ADDITIONAL 3500 0 SFT OF BUILT-UP AREA ON COMPLETION OF THE PROJECT; (V) ON 22.5.2004, A DEED OF RETIREMENT-CUM-RECONSTI TUTION OF THE FIRM WAS EXECUTED, ACCORDING TO WHICH, THE ASSE SSEE AND HIS WIFE RETIRED FROM THE PARTNERSHIP AND RECEIVED RS.2 .85 CRORES AND RS.2.9 CRORES RESPECTIVELY. IT WAS STEADILY CONTENDED BY THE ASSESSEE THAT SINCE THE SUM OF RS.2.85 CRORES RECEIVED BY HIM ON THE RETIREMENT FROM THE PA RTNERSHIP FIRM, IT WAS NOT LIABLE TO CAPITAL GAINS TAX. 9.1 THE FIRST AND FOREMOST ISSUE TO BE CONSIDERED IS THE VERY FORMATION OF THE PARTNERSHIP FIRM ITSELF IN THE SEN SE THAT THE ASSESSEE AND HIS WIFE WHO HAVE CONTRIBUTED THEIR SUBSTANTIAL VAL UE OF IMMOVABLE ASSETS WERE ENTITLED TO GET A MEAGER 3% SHARE IN PROFIT/LO SS OF THE ALLEGED PARTNERSHIP FIRM, BUT, ON THE OTHER HAND, THE THIRD PARTNER, L.K. TRUST WHO CONTRIBUTED NEITHER ANY IMMOVABLE ASSET NOR CASH WAS, HOWEVER, ENTITLED TO 97% SHARE. FURTHER, WHEN THE ASSESSEE WAS REQUI RED TO FURNISH THE ORIGINAL PARTNERSHIP DEED FOR SCRUTINY BY THE AO, THE ASSESSEE HAD FAILED TO DO SO NOT ONLY BEFORE THE AO BUT ALSO BEFORE THE CIT (A) AS WELL. THE ALLEGED PARTNERSHIP FIRM DEALING WITH THE PROPERTIE S RUNNING INTO CRORES OF RUPEES HAD FAILED TO OPEN EVEN A BANK ACCOUNT WHICH WAS A MINIMUM REQUIREMENT. THOUGH THE PARTNERSHIP FIRM ALLEGED T O HAVE BEEN FORMED IN THE YEAR 1988 ITSELF, STRANGELY IT GOT REGISTERED WIT H THE REGISTRAR OF FIRMS ONLY IN 2003 AFTER THE LAPSE OF FIFTEEN YEARS. ANOTH ER STARTLING INCIDENT WHICH CAME INTO FORE WAS THE QUESTIONING OF THE VER Y EXISTENCE AND GENUINENESS OF THE PARTNERSHIP FIRM WHICH WAS ALLEG ED TO HAVE BEEN PAGE 14 OF 19 ITA NO .189/BANG/2010 14 CONSTITUTED BY NONE OTHER THAN THE ASSESSEE HIMSELF BY LODGING A COMPLAINT WITH THE CHIEF METROPOLITAN MAGISTRATE [CMM], BANGA LORE. THE ABOVE SCENARIO CLEARLY EXHIBITS THAT THE GENUINENESS OF TH E PARTNERSHIP FIRM IS NOT ABOVE THE BOARD. 9.2 IT WAS CONTENDED THAT ALL THE THREE PARTIES H AVE JOINTLY ENTERED INTO A PARTNERSHIP AND EXECUTED THE DEED OF PARTNER SHIP ON 23.12.1988. STRANGELY, THE DEED OF PARTNERSHIP HAS BEEN AUTHENTI CATED ONLY BY THE ASSESSEE AND HIS WIFE, SMT. KALAVATHI BUT NOT BY L.K . TRUST, EVEN THOUGH IT HAS BEEN VOUCHED AS UNDER: IN WITNESS WHEREOF THE FIRST AND SECOND PARTNER AND ONE OF THE TRUSTEES OF THE THIRD PARTNER NAMELY SRI K.L.SWAMY HAVE SET THEIR HANDS TO THIS DEED ON THE D AY, MONTH AND THE YEAR FIRST ABOVE WRITTEN IN THE PRESE NT OF THE FOLLOWING WITNESSES AND SRI V.S.NATARAJ HAS SET HIS HAND AS A CONSENTING WITNESS TO THIS DEED ON THE SA ME DAY. [SOURCE: P 3 9 OF PB AR]. 9.3 MOREOVER, AS PER THE STATEMENT OF THE ASSESSE E ON OATH BEFORE THE AO, IT WAS AVERRED THAT HE HAD GIVEN POA TO SHR I SRIHARI KHODAY AND, ACCORDINGLY, A SETTLEMENT DEED WAS MADE BETWEEN THE ASSESSEE AND SRIHARI KHODAY, ACCORDING TO WHICH, THE SUBJECT PROPERTY WAS TRANSFERRED TO SRI SRIHARI KHODAY FOR A SALE CONSIDERATION OF RS.1.8 CR ORES. THE SALE CONSIDERATION OF RS.1.8 CRORES WAS PAID/ RECEIVED T HROUGH CHEQUE/DD/PAY ORDERS WHICH WERE RECORDED IN THE ANDHRA BANK PASS BOOK. THE DETAILS OF RECEIPT OF PAYMENTS ARE AS FOLLOWS: (I) RS.25 LAKHS ON 4.5.2004 FROM M/S. SOVERIGN HO TELS (SRI SRIHARI KHODAY IS THE MANAGING PARTNER & AUTHORIZED SIGNATORY); PAGE 15 OF 19 ITA NO .189/BANG/2010 15 (II)RS.60 LAKHS FROM L.K. TRUST (SRI SRIHARI KHOD AY IS ONE OF THE TRUSTEES AND AUTHORIZED SIGNATORY); (III)RS.1 CRORE - FROM L.K. TRUST SECURITIES DIVIS ION (SRI SRIHARI KHODAY IS ONE OF THE TRUSTEES AND A UTHORIZED SIGNATORY) THE ABOVE FACTS CLEARLY ESTABLISH THAT THE TRANSFER TOOK PLACE IN THE GUISE OF THE ALLEGED PARTNERSHIP FIRM AND THAT THE GENUIN ENESS OF THE PARTNERSHIP FIRM HAS NOT BEEN ESTABLISHED BEYOND DOUBT. 9.4 WITH REGARD TO THE APPLICABILITY OF THE PROVIS IONS OF S.45 (3) OF THE ACT, IT IS MORE APPROPRIATE TO DRAW STRENGTH FR OM THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF KARTIKEYA V. SA RABHAI V. CIT REPORTED IN 156 ITR 509 (SC). FOR APPRECIATION OF FACTS, TH E RELEVANT PORTION OF THE HONBLE COURT OBSERVATIONS IS EXTRACTED AS UNDER: 20. WE HAVE DECIDED THESE APPEALS ON THE ASSUMPTI ON THAT THE PARTNERSHIP FIRM IN QUESTION IS A GENUINE FIRM AND NOT THE RESULT OF A SHAM OR UNREAL TRANSACTION, AND THAT THE TRANSFER BY THE PARTNER OF HIS PERSONAL ASS ET TO THE PARTNERSHIP FIRM REPRESENTS A GENUINE INTENTION TO CONTRIBUTE TO THE SHARE CAPITAL OF THE FIRM FOR THE PURPOSE OF CARRYING ON THE PARTNERSHIP IN WHICH HE I S OR BECOMES A PARTNER IS MERELY A DEVICE OR RUSE FOR CONVERTING THE ASSET INTO MONEY WHICH WOULD SUBSTANT IALLY REMAIN AVAILABLE FOR HIS BENEFIT WITHOUT LIABILITY T O INCOME-TAX ON A CAPITAL GAIN, IT WILL BE OPEN TO TH E IT AUTHORITIES TO GO BEHIND THE TRANSACTION AND EXAMIN E WHETHER THE TRANSACTION OF CREATING THE PARTNERSHIP IS A GENUINE OR A SHAM TRANSACTION AND, EVEN WHERE THE PARTNERSHIP IS GENUINE, THE TRANSACTION OF TRANSFER RING THE PERSONAL ASSET TO THE PARTNERSHIP FIRM REPRESEN TS A REAL ATTEMPT TO CONTRIBUTE TO THE SHARE CAPITAL OF THE PARTNERSHIP FIRM FOR THE PURPOSE OF CARRYING ON THE PAGE 16 OF 19 ITA NO .189/BANG/2010 16 PARTNERSHIP BUSINESS OR IS NOTHING BUT A DEVICE OR RUSE TO CONVERT THE PERSONAL ASSET INTO MONEY SUBSTANTIALLY FOR THE BENEFIT OF THE ASSESSEE WHILE EVADING TAX ON A CAPITAL GAIN. THE ITO WILL BE ENTITLED TO CONSIDER ALL THE RELEVANT INDICIA IN THIS REGARD, WHETHER THE PARTNE RSHIP IS FORMED BETWEEN THE ASSESSEE AND HIS WIFE AND CHILDR EN OR SUBSTANTIALLY LIMITED TO THEM, WHETHER THE PERSON AL ASSET IS SOLD BY THE PARTNERSHIP FIRM SOON AFTER IT IS TRANSFERRED BY THE ASSESSEE TO IT, WHETHER THE PARTNERSHIP FIRM HAS NO SUBSTANTIAL OR REAL BUSINES S OR THE RECORD SHOWS THAT THERE WAS NO REAL NEED FOR TH E PARTNERSHIP FIRM FOR SUCH CAPITAL CONTRIBUTION FROM THE ASSESSEE. ALL THESE AND OTHER PERTINENT CONSIDERAT IONS MADE BE TAKEN INTO REGARD WHEN THE ITO ENTERS UPON A SCRUTINY OF THE TRANSACTION, FOR, IN THE TASK OF DETERMINING WHETHER A TRANSACTION IS A SHAM OR ILLU SORY TRANSACTION OR A DEVICE OR RUSE HE IS ENTITLED TO PENETRATE THE VEIL COVRING IT AND ASCERTAIN THE TRU TH, 9.5 WITH THE SUPPORT OF RULING OF THE HONBLE SUP REME COURT (SUPRA), THE AO HAD ANALYZED THE ISSUE THREAD BARE A ND CAME TO THE DEFINITE CONCLUSION THAT THE ASSESSEES CASE FALLS WITHIN TH E AMBIT OF THE PROVISIONS OF S.45 (3) OF THE ACT. FOR APPRECIATION OF FACTS, THE RELEVANT SECTION IS EXTRACTED AS UNDER: 45.(3) THE PROFITS OR GAINS ARISING FROM THE TRANS FER OF A CAPITAL ASSET BY A PERSON TO A FIRM OR OTHER ASSOC IATION OF PERSONS OR BODY OF INDIVIDUALS (NOT BEING A COMPA NY OR A CO-OPERATIVE SOCIETY) IN WHICH HE IS OR BECOMES A PARTNER OR MEMBER, BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE, SHALL BE CHARGEABLE TO TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TAKES PLACE AND , FOR THE PURPOSES OF SECTION 48, THE AMOUNT RECORDED IN THE BOOKS OF THE FIRM, ASSOCIATION OR BODY AS THE VALUE OF THE CAPITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF THE PAGE 17 OF 19 ITA NO .189/BANG/2010 17 CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET. FURTHER, AS HIGHLIGHTED BY THE CIT (A) IN THE CASE O F THE ASSESSEES SPOUSE [SMT. KALAVATHI ITA NO.814/B/11], SUBSEQUENT TO T HE SO-CALLED RETIREMENT- CUM-RECONSTITUTION OF THE PARTNERSHIP DEED, THE AFO RESAID LAND WAS TRANSFERRED TO M/S. PRESTIGE ESTATE PROJECT PVT. LT D VIDE AGREEMENT DATED 23.12.2005 BY M/S. HIGHLAND ENTERPRISES REPRESENTED BY ITS PARTNER, NAMELY, M/S, L.K. TRUST [REPRESENTED BY SRI. K.L. RA MACHANDRA, SRI K.L. SRIHARI, SRI K.L.A.PADMANABHASA & SRI K.L.SWAMY] [SO URCE: P 111 OF PB AR]. HOWEVER, IN THE AGREEMENT THE ASSESSEE AND HIS WIFE SMT. KALAVATHI HAVE BEEN MADE PARTIES TO THE TRANSFER OF THE PROPERTY. IN VIEW OF THE ABOVE FACTS, IT IS IMPLICIT THAT THE TRANSFER HAS BEEN EF FECTED BY AN AGREEMENT DATED 22.5.2004, THE ASSESSEE AND HIS WIFE HAVE REC EIVED THEIR RESPECTIVE SHARES DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 9.6 TAKING INTO ACCOUNT THE ABOVE FACTS AND CIRCU MSTANCES OF THE ISSUE, WE ARE OF THE FIRM VIEW THAT THE CIT (A) WAS JUSTIFIED IN TAKING A STAND THAT THE AO WAS WITHIN HIS REALM TO ARRIVE AT A CONCLUSION THAT THE SUBJECT PROPERTY WAS TRANSFERRED AND THE ASSESSEE TA KING RETIREMENT FROM THE ALLEGED PARTNERSHIP FIRM WAS A CLEAR INDICATION THAT THE ASSESSEE WANTED TO AVOID THE PAYMENT OF TAX ETC., 9.7 BEFORE PARTING WITH, WE WOULD LIKE TO HIGHLIG HT, WITH DUE RESPECTS, THE SUBSTANCE OF THE RULING OF THE HONBL E HIGH COURT. THE ISSUE RAISED BEFORE THE HONBLE COURT WAS NOT THE GENUINE NESS OR OTHERWISE OF THE PAGE 18 OF 19 ITA NO .189/BANG/2010 18 EXISTENCE OF THE PARTNERSHIP FIRM, BUT, SEEKING DIR ECTION FOR APPOINTMENT OF AN ARBITRATOR TO INVOKE THE DISPUTE BETWEEN THE PAR TIES. TO BE PRECISE, THE ISSUE BEFORE THE HONBLE COURT WAS CONFINED TO THE APPOINTMENT OF AN ARBITRATOR, BUT, NOT TO ESTABLISH THE EXISTENCE OF THE ALLEGED PARTNERSHIP FIRM. THEREFORE, THE RULING OF THE HONBLE HIGH CO URT, IN OUR CONSIDERED VIEW, CANNOT BE OF ANY HELP TO THE ASSESSEE. WE H AVE ALSO CAREFULLY PERUSED THE VARIOUS CASE LAWS ON WHICH THE ASSESSEE HAD PLACED STRONG RELIANCE AND REITERATE THAT THEY ARE NOT DIRECTLY APP LICABLE TO THE FACTS OF THE ISSUE UNDER CONSIDERATION. 9.8 WITH REGARD TO THE ASSESSEES GRIEVA NCE THAT THE CIT (A) ERRED IN NOT DELETING THE SUM OF RS.1 CRORE RECEIVED BY TH E ASSESSEES BROTHER V.S. NATARAJ WHICH WAS DEBITED TO THE ASSESSEES ACCOUNT BY HIGHLAND ENTERPRISES WHILE SETTLING THE RETIREMENT ACCOUNT, WE WOULD LIKE TO EMPHASIZE THAT THE APPREHENSION OF THE ASSESSEE IS UNFOUNDED. AS A MATTER OF FACT, THE CIT (A) HAD IMPLICITLY RECORDED HIS FIN DINGS AT PARA 6 THAT 6.(ON PAGE 17).AFTER GOING THROUGH THE APPELLANTS SUBMISSIONS AND THE PROOF FURNISHED BY THE APPELLANT, I FIND THAT THE P AYMENT MADE TO THE APPELLANTS BROTHERS AMOUNTS TO RS.1,00,00,000/- AN D NOT RS.1,50,00,000/- AS CONTENDED BY THE APPELLANT AS T HE AMOUNT OF RS.1,00,00,000/- HAS NOT BEEN CREDITED TO THE APPEL LANTS BANK ACCOUNT. IN VIEW OF THESE FACTS, THE AO IS DIRECTE D TO COMPUTE THE CAPITAL GAINS BY EXCLUDING THE SUM OF RS.1,00,00,00 0/- AS MENTIONED ABOVE. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE HAS BEEN RAISED ON MISCONCEPTION AND, THUS, IT REQUIRES NO F URTHER DIRECTION OF THIS PAGE 19 OF 19 ITA NO .189/BANG/2010 19 BENCH. THIS GROUND IS, ACCORDINGLY, DISMISSED AS SU PERFLUOUS. IT IS ORDERED ACCORDINGLY. 9.9 IN RESPECT OF CHARGING OF INTEREST U/S 234B AND U/S 234D OF THE ACT, WE WOULD LIKE TO CLARIFY THAT CHARGING OF I NTEREST U/S 234B OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. THERE FORE, THIS PART OF THE GROUND IS NOT MAINTAINABLE AND, HENCE, THE SAME IS DISMISSED. HOWEVER, WITH REGARD TO CHARGING OF INTEREST U/S 234D OF THE ACT, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS JUSTIFIED IN CHARGI NG OF INTEREST U/S 234D OF THE ACT WHICH IS IN CONFORMITY WITH THE FINDINGS OF THE HONBLE ITAT, DELHI SPECIAL BENCH IN THE CASE OF ITO, W 11(1), NE W DELHI V. M/S. EKTA PROMOTERS PVT. LTD REPORTED IN (2008)-305 ITR (AT) 1 (DEL) (SB). THUS, THE ACTION OF THE AO IN CHARGING OF INTEREST U/S 234D O F THE ACT WAS IN ORDER AND THE SAME IS UPHELD. 10. IN THE RESULT, THE ASSESSEES APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF SEPTEMBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.