DCIT, New Delhi V. Mrs. Meera Goyal, New Delhi

ITA 604/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4337 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H L DIHANA
• Keywords: Source of fund; Capital receipt
• Section: 133A; 144

Judgement Text

ITA NO. 604/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 604/DEL/2011 A.Y. : 2007-08 DY. . COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I5, ROOM NO. 354, E-2, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI VS. MRS. MEERA GOYAL, B-45, MAHARANI BAGH, NEW DELHI (PAN/GIR NO. : AGQPG 7373J) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. R.S. SINGHVI, CA DEPARTMENT BY : SH. H.L. DIHANA, C.I.T.(D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 29.11. 2010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 1 8 CRORE MADE BY THE ASSESSING OFFICER HOLDING THE TRANSACTION OF SALE WITH M/S SHINESTAR BUILDCON (P) LTD AS BOGUS. 3. IN THIS CASE ASSESSEE HOLDS A HOUSE PROPERTY AT 37, FRIENDS COLONY. ON 28.1.2007 THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL WITH M/S SHINESTAR BUILDCON (P) LTD., A MDLR GROUP CO MPANY FOR SALE OF THE ABOVE SAID PROPERTY. THE SALE CONSIDERATION OF PROPERTY WAS FIXED ITA NO. 604/DEL/2011 2 AT ` 150 CRORES. EARNEST MONEY OF ` 36 CRORES WAS RECEIVED BY THE ASSESSEE VIDE 4 CHEQUES ON THE DATE OF SIGNING THE AGREEMENT. THE BALANCE AMOUNT WAS PAYABLE BY 30.3.2007. AS PER CLA USE 3 OF THE AGREEMENT TO SELL, IF SHINESTAR BUILDCON (P) LTD. FAI LED TO PAY THE BALANCE CONSIDERATION, THE ASSESSEE HAD THE RIGHT T O FORFEIT THE EARNEST MONEY AND NO CLAIM OF SHINESTAR BUILDCON P LTD. WAS T O BE LEFT ON THE PROPERTY AND THE AGREEMENT TO SELL SHALL BE TERMINAT ED. M/S SHINTESTAR BUILDCON P LTD. FAILED TO PAY THE BALANCE CONSIDERATION AND ACCORDINGLY, AFTER SENDING A NOTICE OF FORFEITURE D ATED 31.3.2007 THE ASSESSEE FORFEITED ` 18 CRORES OF EARNEST MONEY. TWO CHEQUES OF ` 18 CRORES WERE RETURNED BACK. THE FORFEITED AMOUNT HA S BEEN SHOWN AS ADVANCE RECEIVED FROM PROPERTY IN THE BALANCE SHE ET OF THE ASSESSEE. THE SUM OF ` 18 CRORES HAS NOT BEEN OF FERED FOR TAXATION. ASSESSING OFFICER OBSERVED THAT THE ENTIRE TRANSAC TION WAS A SHAM TRANSACTION FOR ALLOWING M/S SHINESTAR BUILDCON P LT D. TO BOOK BOGUS LOSSES. THE ASSESSING OFFICER CONCLUDED AS UNDER :- ON THE BASIS OF THE FACTS ENUMERATED ABOVE TRANSA CTION OF AGREEMENT TO SELL FOR THE PROPERTY AT 37, FRIENDS COL ONY IS TREATED AS BOGUS IN NATURE. FROM THE BEGINNING, THERE WAS N O INTENTION OF BOTH THE PARTIES TO THE TRANSACTION TO COMPLETE THE SALE. THIS IS A WAY DEVISED TO HELP SHINESTAR BUILDCON P LTD TO BOO K BOGUS LOSS IN THE YEAR. IN VIEW OF THE BOGUS NATURE OF THE NEGOTIATIONS FOR SALE OF THIS ASSET SECTION 51 OF THE IT ACT IS SPEC IFICALLY MADE INAPPLICABLE IN THIS CASE. THE EARNED MONEY ` 18 C RORES RECEIVED AND RETAINED BY THE ASSESSEE IN PURSUANCE TO AGREEM ENT TO SELL DATED 28.1.2007 IS TREATED AS MONEY RECEIVED BY AN INDIVIDUAL WITHOUT ANY CONSIDERATION AS PER THE PROVISIONS OF SECTION 56(VI) OF THE IT ACT AND ACCORDINGLY BROUGHT TO TAXATION A S INCOME FROM ITA NO. 604/DEL/2011 3 OTHER SOURCES, PENALTY PROCEEDINGS U/S 271(1)(C) IS INITIATED SEPARATELY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE ISSUE AND HELD AS UNDER:- 6. I HAVE CONSIDERED THE FACTS AS REFERRED TO IN THE ASSESSMENT ORDER, SUBMISSION OF THE APPELLANT AND DIRECTIONS OF ADDITIONA L COMMISSIONER OF INCOME TAX, U/S. 144A. AS PER THE FACTS ON RECORD, THERE WAS AGREEMENT TO SALE BETWEEN APPELLANT AND MIS. SHINESTAR BUILDCON PVT. LTD. AND IN PURSUANCE OF IT, APPELLANT RECEIVED RS. 1 8 CRORES AS EARNEST MONEY. SUBSEQUENTLY, THE SAID EARNEST MONEY WAS FORFEIT ED BY THE APPELLANT AND SAME WAS CLAIMED AS CAPITAL RECEIPT. IN THE CONTEXT OF SUCH FORFEITURE, THE ASSESSING OFFICER RAISED SPECIFIC QUE RY AS PER QUESTIONNAIRE DTD. 30.09.2009. THE NATURE OF QUERY H AS BEEN EXTRACTED IN THE WRITTEN SUBMISSION OF THE APPELLANT. 7. THE QUERY OF THE ASSESSING OFFICER WAS SPECIFIC AND IN RELATION TO ISSUE OF FORFEITURE OF EARNEST MONEY. IN RESPONSE TO THE ABOVE SAID QUERY, THE APPELLANT MADE SUBMISSION VIDE COMMUNICATI ON DTD. 27.11.2009. AS . THE ASSESSING OFFICER WAS NOT SATISFIED AB OUT THE CONTENTION OF THE APPELLANT, THEREFORE REFERENCE WA S MADE TO THE ADDITIONAL COMMISSIONER OF INCOME TAX, U/S. 144A OF TH E I T ACT, AND IN THE SAID CONTEXT, THE ADDITIONAL COMMISSIONER OF INCOM E TAX ISSUED DIRECTION U/S. 144A VIDE COMMUNICATION DTD. 7.12.200 9. SUBSEQUENT TO THE ISSUE OF DIRECTION BY THE ADDITIONAL COMMISSIONER O F INCOME TAX, THE ASSESSING OFFICER COMPLETED ASSESSMENT VIDE ORDER DTD. 14.12.2009. IT IS CLAIMED BY THE APPELLANT THAT THE ORDER WAS PASSED WITHOUT ANY FURTHER NOTICE TO THE APPELLANT. 8. I HAVE GONE THROUGH THE DIRECTIONS OF THE ADDITI ONAL COMMISSIONER OF INCOME TAX AND THERE IS NO DISPUTE THAT IN RESPECT OF ISSUE OF FORFEITED EARNEST MONEY, THE ADDITIONAL COMMI SSIONER OF INCOME TAX AFTER TAKING INTO CONSIDERATION PROVISIONS OF SEC. 51 OF THE INCOME TAX ACT, 1961 AND DECISION OF SUPREME COURT I N THE CASE OF TRAVANCORE RUBBER AND TEA CO. LTD., ISSUED SPECIFIC DI RECTION THAT FORFEITED EARNEST MONEY IS NOT LIABLE TO TAX AND SAME IS TO BE CONSIDERED AS CHARGE AGAINST THE PROPERTY AND VALUE OF THE PROPERTY IS ITA NO. 604/DEL/2011 4 TO BE SUITABLY ADJUSTED FOR THE PURPOSE OF COMPUTATIO N OF CAPITAL GAIN, AS AND WHEN THE PROPERTY IS SOLD. 9. I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND IT IS NOTICED THAT ASSESSING OFFICER HAS NOT MADE ANY REFERENCE TO DIRECTION OF ADDITIONAL COMMISSIONER OF INCOME TAX IN THE ASSESSMENT ORDER. AS PER PROVISIONS OF SECTION 144A, THE DI RECTIONS U/S. 144A BY ADDITIONAL COMMISSIONER OF INCOME TAX ARE BIN DING ON THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NO AUTHORITY OR JURISDICTION TO DISREGARD THESE DIRECTIONS. IT WOULD BE WORTHWHILE TO CONSIDER THE WORDINGS OF SECTION 144A HERE- 'POWER OF (JOINT COMMISSIONER) TO ISSUE DIRECTIONS IN CERTAIN CASES. 144A. (***) A (JOINT COMMISSIONER) MAY, ON HIS OWN MOT ION OR ON A REFERENCE BEING MADE TO HIM BY THE (ASSESSING) OFFICE R OR ON THE APPLICATION OF AN ASSESSEE, CALL FOR AND EXAMINE TH E RECORD OF ANY PROCEEDINGS IN WHICH AN ASSESSMENT IS PENDING AND, IF HE CONSIDERS THAT, HAVING REGARD TO THE NATURE OF THE CA SE OR THE AMOUNT INVOLVED OR FOR ANY OTHER REASON, IT IS NECESSAR Y OR EXPEDIENT SO TO DO, HE MAY ISSUE SUCH DIRECTIONS AS HE THINKS FIT FOR THE GUIDANCE OF THE (ASSESSING) OFFICER TO ENABLE H IM TO COMPLETE THE ASSESSMENT AND SUCH DIRECTIONS SHALL BE BIND ING ON THE (ASSESSING) OFFICER: PROVIDED THAT ON DIRECTIONS WHICH ARE PREJUDICIAL TO THE ASSESSEE SHALL BE ISSUED BEFORE AN OPPORTUNITY IS GIVEN TO THE A SSESSEE TO BE HEARD. EXPLANATION.- FOR THE PURPOSE OF THIS (SECTION) NO DI RECTION AS THE LINES ON WHICH AN INVESTIGATION CONNECTED WITH THE ASSE SSMENT SHOULD BE MADE, SHALL BE DEEMED TO BE A DIRECTION PRE JUDICIAL TO THE ASSESSEE. (***) 10. THE WORDS IN THE STATUTE REGARDING THE NATURE O F DIRECTIONS ARE VERY CLEAR IE. 'AND SUCH DIRECTIONS SHALL BE BIND ING ON THE (ASSESSING) OFFICER:' . THE LAW DOES NOT GIVE ANY OPTION TO THE A.O OTHER TH AN FOLLOWING THE DIRECTIONS OF THE JCIT U/S 144A. ITA NO. 604/DEL/2011 5 11. IT IS FURTHER NOTICED THAT IMMEDIATELY AFTER REC EIPT OF DIRECTION, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT WITHOUT ANY FURTHER QUERY OR CLARIFICATION AND AS SUCH IT WAS OBLIGATORY FOR THE ASSESSING OFFICER TO CONSIDER AND APP LY SUCH DIRECTIONS. IT WAS NOTICED FORM THE ASSESSMENT ORDER THA T THE ASSESSING OFFICER CONSIDERED THE ENTIRE TRANSACTION AS BOG US AND COLLUSIVE BUT THERE HAS BEEN NO MATERIAL OR EVIDENCE TO THIS EFFECT NOR ANY OPPORTUNITY TO THE ASSESSEE. 12. AS OBSERVED BY THE ASSESSING OFFICER HERSELF, THERE WA S SURVEY U/S. 133A AT THE PREMISES OF THE APPELLANT BUT T HERE HAS BEEN NO REFERENCE TO ANY INCRIMINATING MATERIAL WHI CH HAS ANY ADVERSE IMPLICATION IN RELATION TO GENUINENESS OF THE AGREEMENT. THE OBSERVATION OF THE ASSESSING OFFICER THAT THE TRANS ACTION WAS A DEVICE TO HELP SHINESTAR BUILDCON PVT. LTD. TO CLAIM BOGUS LOSS IS ALSO NOT CORROBORATED WITH ANY EVIDENCE, FINDIN G OR CONCLUSION. FURTHER, IN THE ABSENCE OF ANY OPPORTUNIT Y TO THE ASSESSEE, THESE OBSERVATIONS ARE OF LITTLE RELEVANCE. THE WHOLE CASE OF THE ASSESSING OFFICER IN RESPECT OF WHICH. THE CL ARIFICATION WAS CALLED FOR IS WITH REFERENCE TO ISSUE OF FORFEITED EARNEST MONEY AND ONCE THE DIRECTIONS HAVE BEEN ISSUED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX U/S. 144A, THE SAID ISSUE IS TO BE DECIDED AS PER THE DIRECTION OF ADDITIONAL C OMMISSIONER OF INCOME TAX. 13. FURTHER, EVEN THOUGH IT IS A CASE OF SURVEY, THE A SSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL THAT THERE IS ANY UNEXPLAINED SOURCES OF INCOME RELATING TO RS. 18 CRORE S AND AS SUCH THE WHOLE ADDITION IS ON THE BASIS OF PRESUMPTION. THE EARNEST MONEY WAS RECEIVED THROUGH BANKING CHANNELS AN D GENUINENESS OF SUCH RECEIPT FROM MIS. SHINESTAR BUILDCON PVT. LTD. IS NOT IN DISPUTE. I AM IN AGREEMENT WITH THE A R THAT THERE CANNOT BE ANY ADDITION ON THE BASIS OF SURMISES AND CONJ ECTURES AND VARIOUS JUDGMENTS REFERRED TO IN THE WRITTEN SUBMI SSION OF THE APPELLANT ARE RELEVANT IN SUPPORT OF THE SAID PRI NCIPLE. THE DIRECTIONS OF THE ADDITIONAL COMMISSIONER OF INCOME TA X ARE ON THE BASIS OF SPECIFIC PROVISIONS OF SEC. 51 OF I T ACT A ND DECISION OF SUPREME COURT AND ASSESSING OFFICER HAS NOT MADE ANY ADVERSE COMMENTS IN RESPECT OF THE SAME AND AS SUCH THE SE DIRECTIONS ARE TO BE APPLIED AND ACCEPTED AS BINDING AND OPERATIVE. HOWEVER, AS DIRECTED BY ADDITIONAL COMMISSI ONER OF ITA NO. 604/DEL/2011 6 INCOME TAX, EARNEST MONEY SO RECEIVED AND FORFEITED I S TO BE ADJUSTED AGAINST THE COST OF THE PROPERTY AND CAPITAL GAIN IS TO BE WORKED OUT ON THE BASIS OF RESULTANT COST AS AND WHEN TH E PROPERTY IS SOLD . 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT RECORDS. WE FIND THAT IT IS NOT DISPUTED THAT THER E WAS AN AGREEMENT TO SELL BETWEEN THE ASSESSEE AND M/S SHINESTAR BUILDCON P LTD. AND IN TERMS OF THE AGREEMENT THE ASSESSEE RECEIVED ` 18 CRORES AS EARNEST MONEY. SUBSEQUENTLY, THE SAID EARNEST MONEY WAS FO RFEITED BY THE ASSESSEE AND THE SAME WAS CLAIMED AS CAPITAL RECEIP T. ASSESSING OFFICER WAS NOT SATISFIED, THEREFORE, A REFERENCE WAS MADE TO ADDL. COMMISSIONER OF INCOME TAX, U/S 144 OF THE IT ACT. T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A CAT EGORICAL FINDING THAT IN RESPECT OF THE ISSUE OF FORFEITURE OF EAR NEST MONEY, THE ADDL. COMMISSIONER OF INCOME TAX, AFTER TAKING INTO CO NSIDERATION THE PROVISIONS OF SECTION 51 OF THE IT ACT AND DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA COMPANY LTD., ISSUED DIRECTIONS THAT FORFEITED EARNEST MONEY IS NOT LIABLE TO TAX AND THE SAME IS TO BE CONSIDERED AS CHARGE AGAINST THE PROPERTY AND VALUE OF THE PROPERTY IS TO BE SUITABLY ADJUSTED FO R THE PURPOSE OF COMPUTATION OF CAPITAL GAIN, AS AND WHEN THE PROPERT Y IS SOLD. 6.1 WE FIND OURSELVES IN AGREEMENT WITH THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSING OFFICER HA D TO ABIDE BY THE DIRECTIONS OF THE ADDL. COMMISSIONER OF INCOME TAX, WH ICH HE HAS NOT DONE IN THIS CASE. FURTHER, LD. COMMISSIONER OF I NCOME TAX (APPEALS) HAS GIVEN A FINDING THAT THERE WAS SURVEY U/S 133A AT THE PREMISES OF THE ASSESSEE AND NO INCRIMINATING MATERIAL WHICH HAS ANY ADVERSE ITA NO. 604/DEL/2011 7 IMPLICATION IN RELATION TO THE GENUINENESS OF THE TR ANSACTION WAS FOUND. THUS, IT IS CLEAR THAT THE ADDITION WAS MADE ON THE BASIS OF PRESUMPTION. THE EARNEST MONEY WAS RECEIVED THROUGH BANKING CHANNELS AND GENUINENESS OF THE RECEIPT IS NOT IN D ISPUTE. WE FIND OURSELVES IN AGREEMENT WITH THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT NO ADDITION CAN BE DONE ON THE BASIS OF SURMISES AND CONJECTURES. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE LD. COMMISSIONER OF INCOME TAX (APPEALS)S DIRECTION THA T AS DIRECTED BY THE ADDL. COMMISSIONER OF INCOME TAX, EARNEST MONEY S O RECEIVED AND FORFEITED IS TO BE ADJUSTED AGAINST THE COST OF PROP ERTY AND CAPITAL GAIN IS TO BE WORKED OUT ON THE BASIS OF THE RESULTANT C OST AS AND WHEN THE PROPERTY IS SOLD. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/04/2011 UP ON CONCLUSION OF HEARING. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 05/04/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES