Shri R. Thirunavukkarasu, CHENNAI V. ITO, CHENNAI

ITA 3069/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4160 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Principle of natural justice
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 3069/MDS/2016 / ASSESSMENT YEAR : 2011-2012. R. THIRUNAVUKKARASU, NO.2, APPIER LANE, ROYAPURAM, CHENNAI 600 013. [PAN AJYPT 0603K] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 6(4) CHENNAI 600 006. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI.B. SAGADEVAN, JCIT. /DATE OF HEARING : 29-06-2017 !' /DATE OF PRONOUNCEMENT : 30-06-2017 % / O R D E R GROUNDS TAKEN BY THE ASSESSEE IN THIS APPEAL WHICH IS DIRECTED AGAINST AN ORDER DATED 17.10.2016 OF LD. C OMMISSIONER OF INCOME TAX (APPEALS)-05, CHENNAI ARE REPRODUCED HER EUNDER: 1.THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPE ALS) 5, CHENNAI DATED 17.10.2016 IN I.T.A.NO.73/CIT(A)-5/20 15-16 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE TAXATI ON OF SHORT ITA NO.3069/MDS/2016. :- 2 -: TERM CAPITAL GAINS IN THE REAL ESTATE TRANSACTION R OUTED THROUGH THE APPELLANT IN THE COMPUTATION OF TAXABLE TOTAL I NCOME WITHOUT ASSIGNING 'PROPER REASONS AND JUSTIFICATION . 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ASSESSMENT OF SHORT TERM CAPITAL GAINS IN THE HANDS OF THE APP ELLANT BASED ON THE POA DATED 22.01.2010 WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE PROCEEDINGS IN THE HANDS OF THE LAND OWNER AS SUGGESTED IN THE REMAND REPORT WERE TOTALLY MISCONSTRUED AND OUGHT TO HAVE APPRECIATED THAT THE PROPERTY RAISED WERE NOT OBTAINED IN THE P OA THEREBY VITIATING THE PRESUMPTION OF TRANSFER BASED ON THE SAID POA WITH A VIEW TO COMPUTE SHORT TERM CAPITAL GAINS IN THE HANDS OF THE APPELLANT. 5.THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE C OMPUTATION OF SHORT TERM CAPITAL, GAINS IN THE. HANDS OF THE APPELLANT ON ALL FACETS, WAS WRONG AND INCORRECT AND OUGHT TO HAVE APPRECIATED THAT IN ANY EVENT THE FAILURE TO TAKE A PPROPRIATE ACTION IN THE HANDS OF THE LAND OWNER WOULD NOT JUS TIFY THE SUSTENANCE OF SUCH COMPUTATION OF SHORT TERM CAPITA L GAINS IN THE HANDS OF THE APPELLANT. 6.THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE O RDER OF RE- ASSESSMENT UNDER CONSIDERATION WAS PASSED OUT OF TI ME, INVALID, PASSED WITHOUT JURISDICTION AND NOT SUSTAI NABLE BOTH ON FACTS AND IN LAW. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPU GNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 2. ASSESSEE A TRADING COMMISSION AGENT HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS .1,50,430/-. AS PER THE ASSESSING OFFICER, ASSESSEE HAD SOLD AN IMM OVABLE PROPERTY FOR RS.2.04 CRORE DURING THE RELEVANT PREVIOUS YEAR , BUT CAPITAL GAINS ITA NO.3069/MDS/2016. :- 3 -: ARISING THEREFROM WAS NOT ADMITTED IN SUCH RETUR N. A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED, UPON WHICH THE ASSESSEE REQUESTED THE ASSESSING OFFICER TO TREAT THE RETURNS ORIGINAL LY FILED AS ONE FILED PURSUANT TO SUCH NOTICE. ASSESSEE ALONG WITH THREE OTHER PERSONS NAMED A. GNANSEKAR, R.S. RATHINA AND ONE SHRI. R. S IVA MUTHUKUMARAN WERE HOLDING A POWER OF ATTORNEY DATE D 22.01.2010 FOR SELLING 78 CENTS OF LAND AT ZAMIN PALLAVARAM VI LLAGE OWNED BY ONE SMT. D.MALLIGA. THE SALE DEED WAS REGISTERED ON 02 .08.2010 IN FAVOUR OF M/S. NEW LIFE ASSEMBLY OF GOD (NLAG) A BRANCH O F SOUTH INDIA ASSEMBLIES OF GOD REPRESENTED BY THEIR ADMINISTRAT ION IN-CHARGE SHRI. M. BENJAMIN CLIFFORD. ASSESSEE RECEIVED IN HIS BANK ACCOUNT WITH M/S. TAMILNADU MERCHANTILE BANK A SUM OF RS.44,65,000/- BEING PART OF THE TOTAL CONSIDERATION. THOUGH THE SALE PRICE ME NTIONED IN THE SALE DEED WAS RS.2.04 CRORES, SHRI. BENJAMIN CLIFFORD WHO APPEARED BEFORE THE LD. ASSESSING OFFICER ON A SUMMONS ISSUE D TO HIM, STATED THAT ACTUAL CONSIDERATION WAS RS.1.83CRORES ONLY, WHICH WAS PAID BY M/S. NLAG AS UNDER:- SL. NO NAME PAY ORDER NO. DATE OF ISSUE AMOUNT (G) 1 R. THIRUNAVKKARASU 936815 & 936816 20.01.2010 4465000 2 A GNANASEKAR 936817 & 936818 20.01.2010 465000 3 R.S. RATHINAM 936819 & 936820 20.01.2010 4222400 4 R. SIVA MUTHUKUMARAN 936821 & 9368122 20.01.2010 4222400 5 ADVANCE PAID IN THE YEAR 2010 TO A BROKER 1000000 TOTAL 18374800 ITA NO.3069/MDS/2016. :- 4 -: LD. ASSESSING OFFICER ALSO RECORDED A STATEMENT FRO M SMT. MALLIGA ORIGINAL OWNER OF THE PROPERTY AND ACCORDING TO HIM , SHE DENIED EXECUTION OF A POA OR SALE OF LAND. SHE STATED B EFORE THE LD. ASSESSING OFFICER THAT SHE WAS CHEATED AND SHE HAD FILED A POLICE COMPLIANT IN THIS REGARD. 3. THOUGH THE ASSESSEE STATED THAT HE WAS ONLY A COMMI SSION AGENT AND LATE SHRI. DHANDAPANI, HUSBAND OF SMT. M ALLIGA HAD OBTAINED FROM HIM FOUR BLANK CHEQUES THROUGH WHICH THE MONEY WAS WITHDRAWN, LD. ASSESSING OFFICER REFUSED TO ACCEP T THIS. ACCORDING TO THE LD. ASSESSING OFFICER IT COULD NOT BE BELIEVED THAT ASSESSEE WAS ONLY A COMMISSION AGENT, SINCE THE SALE CONSIDERAT ION WAS PAID BY THE BUYER PROPORTIONATELY TO EACH ONE OF THE FOUR PAO H OLDERS. AS PER LD. ASSESSING OFFICER THE SALE CONSIDERATION WAS PAID B Y THE BUYER TO THE PAO HOLDERS ONLY BECAUSE THE PAO HOLDERS HAD THE P OWER TO SELL AND WERE IN POSSESSION. ACCORDING TO LD. ASSESSING OFF ICER ASSESSEE COULD NOT ESTABLISH THE RETURN OF MONEY TO SMT. MALLIGA AND LATTER HAD DENIED RECEIPT OF ANY MONEY FROM THEM. AGAIN AS P ER THE LD. ASSESSING OFFICER, IN THE SALE DEED EXECUTED ON 2 ND AUGUST, 2010, THE PAO HOLDERS WERE MENTIONED AS THE VENDORS. HE THUS CAME TO A CONCLUSION THAT ASSESSEE HAD TRANSFERRED HIS RIGHTS IN PROPERTY AND ITA NO.3069/MDS/2016. :- 5 -: COMPUTED A SHORT TERM CAPITAL GAINS OF RS.44,48,820 /-, AFTER DEDUCTING INDEXED COST OF RS.16,180/-. 4. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENTS TA KEN BY THE ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX (APP EALS) WERE AS UNDER:- (I) HE WAS ONLY A POA HOLDER AND MONEY WAS ONLY ROUTED THROUGH HIM TO THE SELLER. (II) THE MONEY WAS DISBURSED TO THE NOMINEES OF LAND OWNER, FOR WHICH THE LAND OWNER USED THE BLANK CHEQUES GIVEN BY HIM. (III) EACH OF THE RECIPIENTS MENTIONED IN (II) ABOVE WERE SUMMONED AND STATEMENTS RECORDED FROM THEM, BUT THESE NEVER GIVEN TO HIM. (IV) THE LAND OWNER HAD BLINDLY ACTED BASED ON THE INSTRUCTIONS OF HER HUSBAND AND THEREFORE HER VERSION OF BEING CHEATED COULD NOT BE BELIEVED. (V) LAND OWNER SMT. MALLIGA WAS ASSESSED TO TAX AND HER PAN WAS BZSPM 1976R. ASSESSEE ALSO RELIED ON THE JUDGMENT OF HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS C. SUGUMARAN (2014) 11 3 DTR 35. 5. LD. COMMISSIONER OF INCOME TAX (APPEALS) SOUGHT A R EMAND REPORT FROM THE LD. ASSESSING OFFICER, WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT SMT.MALLIGA HAD FILED HER RETURN OFFE RING THE CAPITAL GAINS ITA NO.3069/MDS/2016. :- 6 -: TO TAX. THE LD. ASSESSING OFFICER IN HIS REMAND REP ORT STATED THAT HER RETURNS FOR AY 2010-2011 & 2011-12 DID NOT SHOW ANY CAPITAL GAINS INCOME. 6. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER GOI NG THROUGH THE ENTIRE GAMUT OF THE CASE HELD THAT TH E CAPITAL GAINS WAS RIGHTLY CONSIDERED IN ASSESSEES HAND. ACCORDING T O HIM, IN THE CASE OF C. SUGUMARAN (SUPRA) RELIED ON BY THE ASSESSEE, T HE PROPERTY RIGHTS WERE NOT TRANSFERRED TO THE PAO HOLDER, WHEREAS IN THE INSTANT CASE , SHRI. M. BENJAMIN CLIFFORD THE PURCHASER HAD AFFIR MED THAT SUCH RIGHTS WERE VESTED IN PAO HOLDERS. 7. NOW BEFORE ME, THE LD. AUTHORISED REPRESENTATIVE ST RONGLY ASSAILING THE ORDERS OF THE AUTHORITIES BELOW, PLAC ING RELIANCE ON CLAUSE 5 OF THE PAO SUBMITTED THAT THE POWER VESTED IN THE PAO HOLDERS WAS ONLY TO ENTER INTO A DEED OF CONVEYANCE WITH M/S. S OUTH INDIA ASSEMBLES OF GOD. THUS ACCORDING TO HIM THERE WA S ONLY A LIMITED POWER WITH THE ASSESSEE. FURTHER, ACCORDING TO HIM , CLAUSE 11 OF THE PAO CLEARLY INDICATED THAT THE PROPERTY WAS IN POS SESSION OF SMT. MALLIGA. FURTHER, ACCORDING TO HIM, CLAUSE (13) OF THE PAO CLEARLY STATED THAT NO CONSIDERATION WAS PAID BY THE PAO HO LDERS TO SMT. MALLIGA ON EXECUTING THE PAO. THUS, ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE, THE INGREDIENTS NECESSARY FOR CONST ITUTING A TRANSFER ITA NO.3069/MDS/2016. :- 7 -: MENTIONED UNDER SECTION 2 (47) ( V) OF THE ACT WERE NOT SATISFIED AND ASSESSEE WAS AT NO POINT THE OWNER OF THE PROPERTY. FURTHER, ACCORDING TO HIM, CHEQUES ISSUED BY THE ASSESSEE WE RE ENCASHED BY SMT.MALLIGAS HUSBAND THROUGH SHRI. BASLINE, DEVA THUNAI SUSEELA AND ONE JAWAHAR ALL WITHIN FOUR DAYS OF THE CREDIT OF T HE SUM IN ASSESSEES ACCOUNT. ACCORDING TO HIM, THE STATEMENTS RECORDED FROM THESE PERSONS COULD HAVE REVEALED THE TRUTH BUT THESE WE RE NEVER SHOWN TO ASSESSEE. AS PER THE AUTHORISED REPRESENTATIVE, AS SESSEE BEING NOT AN OWNER OF THE PROPERTY COULD NOT BE SADDLED WITH CAPITAL GAINS. 8. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT SMT. MALLIGA HAD DENIED RECEIPT OF ANY MONEY. ACCO RDING TO HIM, THE BUYER HAD ACQUIRED THE PROPERTY FROM THE PAO HOLDER S AND PAID THE MONEY TO THE PAO HOLDERS. FURTHER, DISTRIBUTION OF THE MONEY BY THE PAO HOLDERS, DID NOT AFFECT THE TAXABILITY OF THE INCOME IN THEIR HANDS. THUS, AS PER LD. DEPARTMENTAL REPRESENTATIVE THE SUM WAS RIGHTLY CONSIDERED AS CAPITAL GAINS IN ASSESSEES H AND. 9. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS. ONE OF THE MAIN CONTENTION OF THE LD. AUTHORISED RE PRESENTATIVE IS THAT ASSESSEE WAS ONLY A CONDUIT AND SALE WAS EFFECTED ONLY BY SMT. MALLIGA, THROUGH HER HUSBAND. AS PER THE ASSESSEE BLANK CHEQUES EARLIER ISSUED BY HIM TO SMT. MALLIGA S HUSBAND WA S USED BY THE LATTER ITA NO.3069/MDS/2016. :- 8 -: FOR WITHDRAWING THE PAY ORDER ISSUED BY THE BUYER, CREDITED TO HIS ACCOUNT. ASSESSEES BANK ACCOUNT WITH MERCHANTILE B ANK FOR THE PERIOD 25.01.2010 TO 27.01.2010 REFLECTS THE FOLLOWING TRA NSACTIONS:- DATE PARTICULARS CHQ. NO WITHDRA WALS DEPOSITS BALANCE 23.01.2010 BY CLOSING /ZM 055 MICR/SET 18 4465000 4466044 CR. 25.01.2010 TO CASH 504555 44000 4422044 CR 25.01.2010 BASLINE 504558 900000 3522044 C R 25.01.2010 DEVATHUNAI SUSEELA 504556 900000 2622044 CR 25.01.2010 BASELINE 504557 900000 1722044 CR 27.01.2010 JAWAHEER 504560 820350 901694 CR. 27.01.2010 JAWAHEER 504559 900000 1694 CR. IT IS CLEAR THAT THE PAY ORDER OF G.44,65,000/- CR EDITED TO ASSESSEES ACCOUNT WERE ALMOST FULLY WITHDRAWN BY WAY OF CHEQU ES TO SHRI. BASELINE, SMT. DEVATHUNAI SUSEELA AND SHRI. JAWAHA R. AS PER THE ASSESSEE STATEMENTS OF THESE PERSONS WERE INDEED R ECORDED BUT NEVER PUT TO HIM. IN MY OPINION, THE KEY WHICH WIL L UNRAVEL THE MYSTERY SURROUNDING THE TRANSACTION WILL BE REVEALE D IN SUCH STATEMENTS, IF RECORDED BY THE LD. ASSESSING OFFIC ER. IF IT IS NOT RECORDED IT IS IMPERATIVE FOR THE LD. ASSESSING OFF ICER TO SUMMON THEM AND RECORD THEIR STATEMENTS, WITH ASSESSEE GIVEN OP PORTUNITY FOR CROSS EXAMINATION. EVEN IF IT IS ALREADY RECORDED, ASSES SEE IF HE INSISTS HAS TO BE ACCORDED AN OPPORTUNITY TO CROSS EXAMINE THEM . ONLY THIS MEASURE CAN GIVE US A CLEAR IDEA AS TO WHO WAS THE REAL OWNER OF THE ITA NO.3069/MDS/2016. :- 9 -: PROPERTY AND IN WHOSE HANDS THE CAPITAL GAINS IS TO BE TAXED. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHO RITIES AND REMIT THE QUESTION BACK TO THE LD. ASSESSING OFFICER FOR CONS IDERATION AFRESH AFTER TAKING INTO ACCOUNT THE STATEMENTS RECORDED O R TO BE RECORDED FROM SHRI. BASELINE, SMT. DEVATHUNAI SUSEELA AND J AWAHAR. NEEDLESS TO SAY THE QUESTIONS OF LAW RAISED BY THE ASSESSEE SHALL REMAIN OPEN. ORDERED ACCORDINGLY 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 30TH DAY OF JUNE, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 30TH JUNE, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF