Mohd. Majid Khan, Hyderabad V. ITO, Ward - 6(1), Hyderabad

ITA 311/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66324 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALLIKARJUNA
• Assessee Lawyers: P VINOD
• Keywords: Diversion of income; Wrong claim; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 311/HYD/2012 ASSESSMENT YEAR: 2002-03 MOHD. MAJID KHAN, APPELLANT HYDERABAD (PAN AJLPK1867D) VS. INCOME-TAX OFFICER, RESPONDENT WARD 6(1), HYDERABAD. APPELLANT BY : SHRI P. VINOD RESPONDENT BY : SHRI MALLIKARJUNA DATE OF HEARING : 25/09/2012 DATE OF PRONOUNCEMENT : 28/ 09 /2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE ASSESSEES IS DIRECTED AGA INST THE ORDER OF CIT(A)-IV, HYDERABAD DT. 27/12/2011 FOR TH E ASSESSMENT YEAR 2002-03. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE ALONG WITH HIS BROTHERS/SISTERS WERE OWNERS OF A PROPERTY KNOW N AS BASHIR MANZIL BEARING MCH NO. 6-3-581 ADMEASURING 4899 SQ .YDS., SITUATED AT KHAIRATABAD, HYDERABAD. THERE WAS BUILT UP AREA OF ABOUT 16,000 SFT ON THE ABOVE LAND. THE ASSESSEE AN D OTHERS ENTERED INTO AN AGREEMENT DT. 14/03/1988 WITH M/S B NR DEVELOPERS (P.) LTD. REP. BY ITS MANAGING DIRECTOR SRI B.C. REDDY, FOR THE PURPOSE OF DEVELOPMENT OF THE PROPERTY. AS PER THE TERMS OF THE AGREEMENT, BNR DEVELOPMENT PVT. LTD., WAS TO PAY TOTAL CONSIDERATION OF RS. 34,50,000/-. OUT OF THIS RS. 1 8 LACS WAS TO ITA NO. 311/HYD/2012 MOHD. MAJID KHAN 2 BE PAID IN CASH AND THE REMAINING AMOUNT OF RS. 16, 50,000 WAS TO BE PAID IN THE FORM OF COST OF CONSTRUCTION OF S IX FLATS. AN AMOUNT OF RS. 5 LACS WAS PAID AT THE TIME OF AGREEM ENT DT. 14/03/1988 AND FURTHER AMOUNT OF RS. 6 LACS WAS TO BE PAID AFTER OBTAINING URBAN LAND CEILING EXEMPTION. HOWEVER, ON ACCOUNT OF VARIOUS FACTORS INCLUDING THE PENDENCY OF LITIGATIO N BEFORE THE CIVIL COURT AND FOR WANT OF NOC FROM APPROPRIATE AU THORITY FOR AGREEMENT DT. 14/03/1988, BNR DEVELOPERS P. LTD. CO ULD NOT DEVELOP THE PROPERTY AND IT DID NOT MAKE ANY OTHER PAYMENT EXCEPT THE INITIAL AMOUNT OF RS. 5 LAKHS. 3. ON A LATER DATE, THE ASSESSEE AND HIS BROTHERS & OTHERS DECIDED TO SELL THE PROPERTY. SINCE BNR DEVELOPERS PVT. LTD. HELD THE DEVELOPMENT RIGHTS IN RESPECT OF THE PROPERTY A ND HAD ALSO SPENT CONSIDERABLE WITH RESPECT TO THE WRIT PETITIO N FILED BEFORE THE HONBLE HIGH COURT, AGAINST 269UD ORDER BY THE DEPARTMENT, THE BNR DEVELOPERS MADE A PARTY TO THE AGREEMENT OF SALE ENTERED INTO ON 05/02/1997 WITH SHRI G. SUDARSHAN R EDDY AND 10 OTHERS. AS PER THE TERMS OF THE AGREEMENT OF SALE T HE TOTAL CONSIDERATION WAS AGREED AT RS. 2.01 CRORES. OUT OF THIS CONSIDERATION, THE ASSESSEE AND HIS BROTHERS WAS TO RECEIVE AN AMOUNT OF RS. 189 LACS AND BNR DEVELOPERS PVT. LTD. , WAS DIRECTLY PAID RS. 12 LACS FOR THE RIGHTS IT HELD IN THE PROPERTY. THUS, THE ASSESSEE AND OTHERS RECEIVED ONLY RS. 1.8 9 LACS AND THE ASSESSEE IN RETURN OF INCOME HAD CLAIMED THE AMOUNT OF RS. 12 LACS AS DEDUCTION FROM TOTAL CONSIDERATION RECEIVED . THE ASSESSEE AND OTHERS HAD NOT REFUNDED THE AMOUNT OF RS. 5 LAC S RECEIVED ON 14/03/1988 AS BNR DEVELOPERS FAILED TO HONOUR ITS A GREEMENT AND FURTHER ON ACCOUNT OF FACT THAT ASSESSEE AND OT HERS HAD TO INCUR HUGE LITIGATION EXPENSES FROM 1988 TILL 1997 WHEN THE PROPERTY WAS ULTIMATELY SOLD. ITA NO. 311/HYD/2012 MOHD. MAJID KHAN 3 4. THE ASSESSING OFFICER DID NOT ALLOW THE ABOVE DE DUCTION AND HELD THAT THE AMOUNT OF RS. 12 LAKHS PAID TO BNR DE VELOPERS IS IN THE FORM OF EARNEST MONEY REFUND BY THE ASSESSEE AN D OTHERS TO BNR DEVELOPERS. THE ASSESSEE BOTH IN THE ASSESSMENT PROCEEDINGS AS WELL AS IN THE PENALTY PROCEEDINGS S UBMITTED THAT THEY HAD RECEIVED ONLY RS. 5 LAKHS INITIAL PAYMENT ON 14/03/1988 AND THAT THE AMOUNT OF RS. 12 LAKHS IS NOT RETURN O F EARNEST MONEY BUT IS AN AMOUNT PAID BY THE VENDORS (G. SUDE RSHAN & 10 OTHERS) DIRECTLY TO BNR DEVELOPERS TO ENSURE THE CO OPERATION OF BNR DEVELOPERS AND TO PERFECT THE TITLE. THIS AMOUN T PAID BY VENDORS DIRECTLY TO BNR DEVELOPERS IS DIVERSION OF INCOME BY OVERRIDING TITLE AND THE ASSESSEE AND OTHERS NEVER RECEIVED SUCH AMOUNT INTO THEIR COFFERS. IN FACT THE ASSESSEE AND OTHERS SHOULD HAVE TAKEN INTO ACCOUNT ONLY RS. 189 LACS AS THE CO NSIDERATION INSTEAD OF TAKING RS. 201 LACS AS CONSIDERATION AND THEN CLAIMING DEDUCTION OF RS. 12 LACS PAID BY VENDORS TO BNR DEV ELOPERS DIRECTLY. 5. THEREAFTER, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) BY HOLDING THAT THE ASSESSEE COULD NOT SU BSTANTIATE HIS CONTENTION THAT HE HAS NOT CONCEALED THE INCOME. AC CORDINGLY, HE LEVIED A PENALTY OF RS. 12,87,594/-, WHICH IS 200% OF TAX SOUGHT TO BE EVADED FOR CONCEALMENT OF PARTICULARS OF INCO ME AND FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. 6. ON APPEAL, BEFORE THE CIT(A), THE ASSESSEE WITH REGARD TO THE AMOUNT OF RS. 12,00,000/- CONTENTEDLY PAID TO M /S BNR DEVELOPERS P. LTD., SUBMITTED THAT THE SIX BROTHERS HAD ENTERED INTO AN AGREEMENT FOR SALE OF THE ABOVE PROPERTY TO M/S BNR DEVELOPERS P. LTD VIDE AN AGREEMENT DT. 14/03/1988, GIVING A POWER OF ATTORNEY. ITA NO. 311/HYD/2012 MOHD. MAJID KHAN 4 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) HELD THAT THE ASSESSEE HAD CLEAR KNOWLEDGE R EGARDING THE NATURE OF THE PAYMENT OF RS. 12 LAKHS AND, THEREFOR E, A WRONG CLAIM WAS CONSCIOUSLY MADE IN THE RETURN OF INCOME. HE FURTHER HELD THAT THE ASSESSEE CANNOT GET THE BENEFIT OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE PETROPRODUCTS P. LTD., 322 ITR 158 AND UPHELD THE A CTION OF THE AO IN LEVYING PENALTY U/S 271(1)(C). 8. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US. 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI P. VINOD SUBMITTED THAT THE ASSESSEE AND OTHERS HAVE MADE A BONAFIDE CLAIM OF RS. 12,00,000/- AS DEDUCTION FROM THE TOTA L AMOUNT PAID BY THE VENDORS AND THIS AMOUNT SHOULD HAVE BEEN TRE ATED AS DIVERSION OF INCOME BY OVERRIDING TITLE IN AS MUCH AS THE ASSESSEE AND OTHERS DID NOT RECEIVE THIS AMOUNT AT ALL SO AS TO TREAT IT AS PART OF SALE CONSIDERATION. WITHOUT PREJUDICE, THIS AMOUNT CANNOT BE TREATED AS RETURN OF EARNEST AMOUNT IN AS MUCH A S THERE IS NO EVIDENCE ON RECORD THAT THE ASSESSEE HAS RECEIVED M ORE THAN RS. 5 LAKHS, AND IT HAS BEEN THE STAND OF THE ASSESSEE THAT HE AND OTHERS DID NOT RECEIVE ANY AMOUNT EXCEPT RS. 5 LACS MENTIONED ABOVE. THIS AMOUNT ALSO IS NOT RETURNABLE AS BNR DE VELOPERS FAILED TO EXECUTE THE AGREEMENT ON ACCOUNT WHICH AN D FOR OTHER REASONS THE ASSESSEE AND OTHERS HAVE TO SPEND HUGE AMOUNTS IN LITIGATION. IT IS, THEREFORE, SUBMITTED THAT THE CL AIM FOR DEDUCTION OF RS. 12 LAKHS AND THE CLAIM OF EXPENDITURE OF RS. 5 LAKHS FOR MEETING LITIGATION EXPENSES IS GENUINE. 10. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 311/HYD/2012 MOHD. MAJID KHAN 5 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE CASE OF THE CO-OWNER, I.E. BROTHER OF THE ASSESSEE, NAMELY, MOHD. WAHEED KHAN, THE COORDINATE BENCH OF THE TRIBUNAL I N ITA NO. 316/HYD/2012, ORDER DATED 24/08/2012 HAS HELD AS FO LLOWS: 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIE S AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. WE FIND THAT THE DETAILS PERTAIN ING TO THE CLAIM OF THE ASSESSEE WERE FILED AND WERE AVAILABLE WITH THE AO. WE ARE OF THE VIEW THAT WHILE THE ASSESSEE HAD MADE BONAFIDE CLAIMS IT WAS FOR THE AO TO DETERMINE WHET HER THE SAME ARE ALLOWABLE AS PER THE PROVISIONS OF THE ACT . THEREFORE, THE QUESTION OF CONCEALING INCOME OR FUR NISHING INACCURATE PARTICULARS DOES NOT ARISE. SINCE IT IS A DIFFERENCE OF OPINION, ON WHICH, PENALTY CANNOT BE LEVIED AS H ELD BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC), WE ARE OF THE OPINION THAT CONCEALMENT PENALTY IS NOT LEVIABLE ON THE ASS ESSEE AND ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 12. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIAL LY IDENTICAL TO THAT OF THE CASE OF THE BROTHER OF THE ASSESSEE(SUP RA) RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN T HE CASE OF THE CO-OWNER, I.E., THE BROTHER OF THE ASSESSEE, WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE APPEAL OF THE ASS ESSEE. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 28/09/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL M EMBER HYDERABAD, DATED: 28 TH SEPTEMBER, 2012. KV ITA NO. 311/HYD/2012 MOHD. MAJID KHAN 6 COPY TO:- 1) MOHD. MAJID KHAN, C/O. SHRI P. VINOD, ADVOCATE, FLA T NO. 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2) ITO, WARD 6(1), HYDERBAD 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D.