Smt G V Subbamma, Narsipatnam V. The Addl. CIT, Range-5, Visakhapatnam

ITA 444/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50323 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Unexplained investment; Unexplained expenditure; Capital Gains

Judgement Text

ITA NO444/VIZ/2010 G.V. SUBBAMMA, NARSIPATNAM. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 444 /VIZAG/ 20 10 ASSESSMENT YEAR : 2006 - 07 SMT. G.V. SUBBAMMA NARSIPATNAM VS. ACIT RANGE - 5 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AERPG 2439L APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE TO THE FACTS OF THE CASE. 2. THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE AD DITION OF RS.77,27,827/- AS AGAINST RS.11,35,727/- ADMITTED B Y THE APPELLANT. 3. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE A DDITION OF RS.7,40,000/- TOWARDS CASH CREDITS. 4. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE A DDITION OF RS.3,43,640/- TOWARDS UNEXPLAINED EXPENDITURE IN RE SPECT OF REPAYMENT OF LOANS. 5. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE A DDITION OF RS.1,78,200/- TOWARDS UNEXPLAINED INVESTMENT IN PRO PERTY. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF A PPEAL HEARING. 2. GROUND NO.1 IS OF GENERAL IN NATURE AND DOES NOT REQUIRE ANY INDEPENDENT ADJUDICATION. 3. WITH REGARD TO GROUND NO.2, THE BRIEF FACTS EMER GED FROM THE ORDER OF THE LOWER AUTHORITY ARE THAT THE ASSESSEE HAS PURCH ASED A RESIDENTIAL PLOT AT BANGALORE FOR A TOTAL CONSIDERATION OF RS.18,75,000 /- AND THE TOTAL COST INCLUDING REGISTRATION CHARGES WAS RS.20,63,848/-. CERTAIN EXPENDITURE ITA NO444/VIZ/2010 G.V. SUBBAMMA, NARSIPATNAM. 2 INCURRED TOWARDS DEVELOPMENT CHARGES TO THE EXTENT OF RS.15,25,425/- HAS ALSO BEEN CLAIMED. THUS, THE TOTAL COST INCLUDING THE DEVELOPMENT OF LAND IS WORKED OUT TO BE RS.35,89,273/-. THE ASSESSEE HAS SOLD THIS LAND ON 10.5.2006 ALONG WITH TWO OTHER PERSONS AND CLAIMED TO HAVE INCURRED TOWARDS SALE COMMISSION OF RS.5,25,000/- AND THE NE T SALE CONSIDERATION WAS CLAIMED TO HAVE BEEN RECEIVED AT RS.47,25,000/-. A CCORDINGLY, NET SHORT TERM CAPITAL GAINS WERE COMPUTED AT RS.11,35,727/- (RS.4 7,25,000 35,87,273). 4. THE ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN WAS NOT ACCEPTED BY THE A.O. IN THE ABSENCE OF PROOF FOR UNEVEN DISTRIB UTION OF SALE PROCEEDS AMONGST THE THREE OWNERS. THE A.O. ALSO NOTICED TH AT THE LAND WAS HELD BY THE ASSESSEE AND TWO OTHER PERSONS AS UNDER: SMT. G.V. SUBBAMMA AC. 1.05 GUNTAS SRI I.V. GOPAL REDDY 0.07 GUNTAS SRI A. RAMA REDDY 0.05 GUNTAS TOTAL EXTENT AC. 1.17 GUNTAS 5. IT WAS EXPLAINED BEFORE THE A.O. THAT AN MOU WAS EXECUTED AMONGST ALL THE THREE PERSONS WITH AN UNDERSTANDING THAT SA LE PROCEEDS OF LAND WOULD BE DISTRIBUTED AMONG THEM IN THE RATIO OF 35% TO SM T. G.V. SUBBAMMA, 23.5% TO I.V. GOPAL REDDY AND 35.5% TO SHRI A. RAMA REDDY. THE A.O. WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND HELD THIS DISPROPORTIONATE DISTRIBUTION OF SALE PROCEEDS WAS AN AFTER THOUGHT TO REDUCE THE TAX LIABILITY IN THE HANDS OF THE ASSESSEE SMT. G.V. SUBBAMMA. BECAUSE THE ASSESSEE HAD PURCHASED THE LAND ON 25.6.2004, S HRI I.V. GOPAL REDDY PURCHASED ON 18.12.2003 AND SHRI A. RAMA REDDY PURC HASED THE LAND ON 24.12.2003 AND 9.2.2004. THE PROPERTY WAS SOLD TOG ETHER FOR ALL THESE THREE PERSONS ON 10.5.2005. THE A.O. HAS ALSO OBSERVED T HAT DATE OF MOU WAS SHOWN AS 7.5.2004. THEREFORE, THE PROPERTY WAS PUR CHASED BY THE ASSESSEES AFTER THE MOU WAS ENTERED. THE A.O. FURTHER OBSERV ED THAT PROPERTY WAS ACQUIRED INDIVIDUALLY AND ALL THE THREE PERSONS WER E NOT THE CO-OWNERS OF THE SAID PROPERTY. THEREFORE, THERE IS NO JUSTIFICATIO N OF CLAIMING THE SALE PROCEEDS IN UNEQUAL PROPORTION. THE A.O. ACCORDING LY REJECTED THE ASSESSEES CLAIM OF SHORT TERM CAPITAL GAIN AND COMPUTED AS UN DER: ITA NO444/VIZ/2010 G.V. SUBBAMMA, NARSIPATNAM. 3 SALE CONSIDERATION OF APPELLANTS SHARE RS.1,18,4 2,100 LESS: COST OF SITE & REGN CHARGES RS. 20,63,8 48 RS. 97,78,252 LESS: SALES COMMISSION CLAIMED RS. 5,25,000 LESS: DEVELOPMENT CHARGES RS.15,25,425 RS. 20,50,425 SHORT TERM CAPITAL GAINS RS. 77,27,827 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSION THAT THE A.O. WAS NOT JUSTIFIED IN IGNOR ING THE MOU BASING ON WHICH THE SALE CONSIDERATION WAS DISTRIBUTED AMONGS T THE THREE PARTIES. THE MOU WAS EXECUTED PRIOR TO THE ACQUISITION OF THE PR OPERTY BY THE ASSESSEE. ONE SHOULD NOT GO WITH THE DATE MENTIONED ON THE DO CUMENT, BUT THE ACTUAL DATE ON WHICH THE MOU WAS EXECUTED SHOULD HAVE BEEN TAKEN INTO ACCOUNT. SHRI I.V. GOPAL REDDY HAS ALSO OFFERED THE RECEIPT OF HIS SHARE IN SALE PROCEEDS. 7. THE CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIO NS OF THE ASSESSEES AND HE HAS APPROVED THE COMPUTATION MADE BY THE ASS ESSING OFFICER AFTER HAVING OBSERVED THAT TOTAL AREA OF LAND WAS 1.17 GU NTAS AND OUT OF IT ASSESSEES HOLDING WAS OF 1.05. THEREFORE, THERE W AS NO VALID REASON FOR DISPROPORTIONATE DISTRIBUTION OF SALE PROCEEDS. 8. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSIONS THAT THE REVENUE AUTHORITIES H AVE NOT TAKEN INTO ACCOUNT THE CORRECT FACTS AND THE CIRCUMSTANCES UNDER WHICH THE MOU WAS EXECUTED. ALL THE IMPUGNED LANDS OF ALL THESE THREE PERSONS A RE ADJOINING LANDS NEAR TO THE HIGHWAY. THE LOCATION OF ASSESSEE LAND WAS IN THE LAST AND THERE WAS NO DIRECT ACCESS TO THE MAIN ROAD. DIRECT APPROACH TO THE MAIN ROAD CAN ONLY BE THROUGH THE LANDS OF OTHER TWO PERSONS. THAT IS WH Y, THE ASSESSEE GOT THE LESSER SHARE OF SALE PROCEEDS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE COST OF LAND DEPENDS UPON ITS LO CATION AND THE COST OF LAND WHICH IS SITUATED ON THE MAIN ROAD, IS ALWAYS HIGHER THAN THE LAND WHICH FALLS AWAY FROM THE MAIN ROAD. IN SUPPORT OF HIS CONTENTIONS, THE LD. ITA NO444/VIZ/2010 G.V. SUBBAMMA, NARSIPATNAM. 4 COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE BOUNDARIES DESCRIBED IN THE SCHEDULE OF PROPERTY IN THE SALE D EED. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID MAJOR PORTION OF PURCHAS E VALUE IN DECEMBER, 2003 ITSELF, THOUGH THE IMPUGNED LAND WAS REGISTERE D ONLY ON 25.6.2004. HENCE, THE ASSESSEE COULD ENTER INTO MOU ON 7.5.200 4. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVIT ED OUR ATTENTION TO THE PROFIT & LOSS ACCOUNT OF PRAKRUTHI BUILDERS IN WHIC H I.V. GOPAL REDDY IS THE MANAGING PARTNER, TO SHOW THE SALE PROCEEDS OF THE PROPERTY ACCORDING TO HIS SHARE DESCRIBED IN THE MOU WAS SHOWN IN THE SAID PR OFIT & LOSS ACCOUNT AS A RING ROAD RECEIPTS. SINCE THE OTHER EXECUTANTS OF THE MOU HAVE SHOWN THE RESPECTIVE AMOUNTS RECEIVED BY THEM IN THEIR BOOKS OF ACCOUNTS, THE ASSESSEES DECLARATION OF RECEIPT ON ACCOUNT OF SAL E OF HER LAND SHOULD NOT BE DOUBTED. 10. THE LD. D.R. ON THE OTHER HAND HAS PLACED A HEA VY RELIANCE UPON THE ORDER OF THE CIT(A). 11. THE LD. D.R. FURTHER CONTENDED THAT ADMITTEDLY ASSESSEE WAS HAVING 1 ACRE 5 GUNTAS BUT SHE HAS DECLARED TO HAVE RECEIVED A SUM OF RS.47,25,000/- AS HER SHARE IN THE RATIO OF 35%. THE DISTRIBUTION OF SALE PROCEEDS WAS NOT IN ACCORDANCE WITH THE LAND HOLDINGS. THE ASSESSEE HA S SHOWN THE LESSER AMOUNT OF RECEIPT TO REDUCE THE TAX LIABILITY. 12. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE RECORD, WE FIND THAT UNDISPUTEDLY LAND HOLDINGS OF THE ASSESSEES WAS MORE THAN THE OTHER EXECUTANTS OF THE MOU. BUT ACCORDIN G TO THE MOU, ASSESSEE WAS ENTITLED TO RECEIVE ONLY 35% OF THE SALE PROCEE DS, WHEREAS HER HOLDING WAS 1.05 GUNTAS OUT OF 1.17 GUNTAS. THE REASONS FO R THE LESSER RECEIPTS, GIVEN BY THE ASSESSEE ARE THAT THE LOCATION OF THE LAND HOLDINGS OF THE ASSESSEE WAS AWAY FROM THE RING ROAD AND THE ACCESS TO THE RING ROAD WAS ONLY THROUGH THE LAND OF OTHER EXECUTORS OF THE MOU . THE CONTENTIONS OF THE ASSESSEE THAT LAND SITUATED ON THE MAIN ROAD ALWAYS HAS ITS MORE VALUE THAN THE LAND SITUATED AT A FAR OFF PLACE FROM THE MAIN ROAD CANNOT BE DISCARDED. THE COST OF LAND ALWAYS DEPENDS UPON ITS LOCATION. THE LOCATION IS THE MAIN FACTOR WHICH PLAYS THE IMPORTANT ROLE IN DETERMININ G THE COST OF LAND. FROM THE SCHEDULE OF PROPERTY, IT IS ALSO EVIDENT THAT T HE LAND HOLDINGS OF ONE OF ITA NO444/VIZ/2010 G.V. SUBBAMMA, NARSIPATNAM. 5 THE EXECUTANTS OF THE MOU, IS SITUATED ON THE MAIN ROAD AND ITS OTHER BOUNDARIES ARE TOWARDS THE LAND HOLDINGS OF OTHERS. ALONG WITH THE SALE DEED, THE SITE PLAN IS NOT FILED BUT SCHEDULE OF PR OPERTY WAS GIVEN. THEREFORE, FROM THE SCHEDULE OF PROPERTIES, THE EXACT LOCATION OF THE LAND HOLDINGS OF THE ASSESSEE AND OTHER EXECUTANTS OF THE MOU ARE NOT CL EARLY VISIBLE. BUT FROM A CAREFUL EXAMINATION OF THE SCHEDULE OF PROPERTIES, IT APPEARS TO US THAT THE LAND OF OTHER EXECUTANTS OF THE MOU ARE EITHER ON T HE MAIN RING ROAD OR CLOSE TO IT AND ASSESSEES PROPERTY IS AWAY FROM THE RING ROAD. FROM THE PERUSAL OF PURCHASE DEED DATED 25.6.2004, WE NOTICE THAT THE A SSESSEE HAS PAID MAJOR PORTION OF PURCHASE VALUE IN DECEMBER, 2003 ITSELF AND HENCE SHE COULD ENTER INTO MOU WITH OTHER LAND OWNERS ON 7.5.2004. WE HA VE ALSO EXAMINED THE PROFIT & LOSS ACCOUNT OF THE PRAKRUTHI BUILDERS IN WHICH ONE OF EXECUTANT OF MOU MR. I. VENUGOPAL REDDY IS A MANAGING PARTNER AN D WE FIND THAT THE SALE PROCEEDS OF HIS LAND AT RING ROAD WAS SHOWN AS PER THE RATIO OF THE DISTRIBUTION OF SALE PROCEEDS DECLARED IN THE MOU. THESE FACTS STRENGTHEN THE CONTENTIONS OF THE ASSESSEE. THEREFORE, THE RE ASONS EXPLAINED BY THE ASSESSEE FOR A LESSER RECEIPT OF SALE PROCEEDS APPE AR TO BE REASONABLE. SINCE THE FACTS WITH REGARD TO THE LOCATION OF LAND IS NO T CLEARLY VISIBLE FROM THE DOCUMENTS, WE ARE OF THE VIEW THAT IN THIS REGARD T HE MATTER SHOULD BE EXAMINED BY THE A.O. BY MAKING A PHYSICAL INSPECTIO N OF THE SITE EITHER BY HIMSELF OR THROUGH THE LAND REVENUE AUTHORITIES. I F THE CONTENTIONS OF THE ASSESSEE PROVE TO BE TRUE AND LAND OF THE ASSESSEE IS AWAY FROM THE MAIN ROAD AND THE PASSAGE TO THE RING ROAD IS ONLY THROU GH THE LAND OF THE OTHER EXECUTANTS OF THE MOU, THE CONTENTIONS OF THE ASSES SEE SHOULD BE ACCEPTED AND THE CAPITAL GAIN OFFERED BY HER SHOULD BE ACCEP TED. OTHERWISE, THE A.O. IS FREE TO ACT IN ACCORDANCE WITH LAW. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . PRONOUNCED IN THE OPEN COURT ON 15.7.2011 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 15 TH JULY, 2011 ITA NO444/VIZ/2010 G.V. SUBBAMMA, NARSIPATNAM. 6 COPY TO 1 SMT. G.V. SUBBAMMA, PEDDABODDEPALLI, NARASIPATNAM 2 ADDL. CIT, RANGE - 5, VISAKHAPATNAM 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM