SANNIDHI C PATEL, MUMBAI V. ITO 11(1)(4), MUMBAI

ITA 6232/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8282 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: G P MEHTA
• Keywords: Salary income; Question of law; Fair market value
• Section: 56(2); 56

Judgement Text

, , ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , .. , ! BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER . / ITA NO.6232/MUM/2011 ' ' ' ' #' #' #' #' / ASSESSMENT YEAR: 2008-09 MISS SANNIDHI C. PATEL, C/O. G.P. MEHTA & COMPANY CAS, 807,TULSIANI CHAMBERS 212 NARIMAN POINT, MUMBAI-400021 VS. THE INCOME-TAX OFFICER, WARD 11(1)(4), AAYAKAR BHAVAN, 4 TH FLOOR, M.K.ROAD, MUMBAI-400020 ( $% / APPELLANT ) ( &'$% / RESPONDENT) P.A. NUMBER : AAJPP3244J $% ( ) / APPELLANT BY: SHRI G.P. MEHTA &'$% ( ) / RESPONDENT BY : SHRI NEIL PHILIP ( *+ / DATE OF HEARING : 11/12/2014 ,-# ( *+ / DATE OF PRONOUNCEMENT : 17/12/2014 O R D E R PER JOGINDER SINGH, JM: THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 12/07/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE FIRST GROUND RAISED PERTAINS TO UPHOLDING ADDITION OF RS.25 LAKH TAKING RECOURSE TO SECTION 56(2)(VI)OF THE INCOME T AX ACT, 2 MISS SANNIDHI C. PATEL . 1961(HEREINAFTER THE ACT). THE CRUX OF ARGUMENT AD VANCED BY SHRI G.P. MEHTA, LD. COUNSEL FOR THE ASSESSEE, IS T HAT THE LD. FIRST APPELLATE AUTHORITY, WITHOUT APPRECIATING THE FACT AND THE EVIDENCES BROUGHT ON RECORD SUSTAINED THE IMPUGNED ADDITION WHICH IS CLEARLY DISREGARDED TO THE STATUTORY PROVI SIONS AND JUDICIAL PROPOSITIONS. ON THE OTHER HAND, SHRI NEI L PHILIP, LD. DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BR IEF ARE THAT THE ASSESSEE, AN INDIVIDUAL, DERIVES INCOME FROM SALARY , CAPITAL GAINS, BUSINESS AND OTHER SOURCES, DECLARED TOTAL I NCOME OF RS.2,55,870/- IN ITS RETURN FILED ON 30/03/2009. I N RESPONSE TO THE NOTICE, ISSUED TO THE ASSESSEE, U/S 143(2) OF T HE ACT SUBMITTED THE DETAILS CALLED FOR ALONGWITH EXPLANAT ION. HOWEVER, THE ASSESSING OFFICER MADE ADDITION OF RS.25,45,513 /- TO THE RETURNED INCOME. 2.1. THE ASSESSEE WAS GIVEN A SUM OF RS.25 LAKH B Y USTAD ZAKIR HUSSAIN (AN EMINENT TABLA ARTIST) IN PURSUANCE OF A GENERAL POWER OF ATTORNEY DATED 01 ST MARCH, 2002, FOR THE PURPOSE OF MAKING INVESTMENT WITH HSBC BANK, PORTFOLIO MANAGEM ENT SCHEME ON HIS BEHALF. THE SAID AMOUNT WAS DEPOSITED IN BANK ACCOUNT NUMBER 6882 (BANK OF BARODA). THE ASSESSEE ISSUED A CHEQUE FOR DEPOSIT IN HSBC BANK ACCOUNT FOR INVESTM ENT IN PORTFOLIO MANAGEMENT SCHEME. THE COPY OF BANK PASS -BOOK OF USTAD ZAKIR HUSSAIN (SB AC NO.6715 WITH BANK OF BAR ODA) IS 3 MISS SANNIDHI C. PATEL . AVAILABLE ON RECORD (PAPER BOOK PAGES 11 TO 15) FRO M WHICH IS EVIDENT THAT THE AMOUNT WAS DEBITED/WITHDRAWN ON 09 /05/2007 (PAGE-13 OF THE PAPER BOOK). SHRI ZAKIR HUSSAIN OF FERED SHORT TERM CAPITAL GAIN OF RS.3,11,884/- (PAGE -17 OF THE PAPER BOOK SHOWING COMPUTATION OF TOTAL INCOME) AND BY MENTION ING A NOTE CLAIMED IT EXEMPT U/S 10(34) OF THE ACT AS DIVIDEND RECEIVED FROM INDIAN COMPANIES AND MUTUAL FUNDS. WE FURTHER NOTE THAT DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED H ER BALANCE SHEET WITH SCHEDULE OF INVESTMENT, DETAILS OF SHORT TERM CAPITAL GAIN AND CONFIRMATION FROM ZAKIR HUSSAIN CONFIRMING THAT THE IMPUGNED AMOUNT WAS GIVEN TO THE ASSESSEE FOR MAKIN G INVESTMENT ON HIS BEHALF. HOWEVER, THE LD. ASSESSIN G OFFICER TAKING RECOURSE TO SECTION 56(2)(VI) OF THE ACT MAD E THE ADDITION. FOR BETTER APPRECIATION OF FACTS, WE ARE REPRODUCIN G HEREUNDER THE RELEVANT PROVISION OF THE ACT: SECTION 56(2)(VI): IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SU B-SECTION (1), THE FOLLOWING INCOMES, SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, NAM ELY :- (VI) WHERE ANY SUM OF MONEY, THE AGGREGATE VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, IS RECEIVED WI THOUT CONSIDERATION, BY AN INDIVIDUAL OR A HINDU UNDIVIDE D FAMILY, IN ANY PREVIOUS YEAR FROM ANY PERSON OR PER SONS ON OR AFTER THE 1 ST DAY OR APRIL, 2006 BUT BEFORE THE 1 ST DAY OF OCTOBER, 2009, THE WHOLE OF THE AGGREGATE VA LUE OF SUCH SUM; 4 MISS SANNIDHI C. PATEL . WE FIND THAT SECTION 56 OF THE ACT DEALS WITH INCOM E FROM OTHER SOURCES. SUB-CLAUSE (VI) TO SECTION 56 (2) W AS INSERTED BY TAXATION LAWS (AMENDMENT) ACT, 2006, WITH EFFECT FR OM 01/04/2007. THE PLAIN READING OF THE AFOREMENTIONE D STATUTORY PROVISIONS REVEALS THAT IT IS INTENDED TO TAX A REC EIPT OF MONEY WITHOUT CONSIDERATION. THE IMPUGNED AMOUNT WAS REC EIVED BY THE ASSESSEE FOR MAKING THE INVESTMENT ON BEHALF OF USTAD ZAKIR HUSSAIN, ON THE BASIS OF POWER OF ATTORNEY. CLAUSE -3(POWER OF ATTORNEY) IS REPRODUCED HEREUNDER: TO MAKE INVESTMENTS IN MY NAME OR ON MY BEHALF OF ANY KIND WHETHER OF DEPOSITS (INCLUDING FIXED DEPOS IT IN A BANK), SHARES, DEBENTURES, BONDS, STOCKS ETC., IS SUED BY ANY PUBLIC/PRIVATE SECTOR UNDERTAKINGS, CORPORAT IONS, COMPANIES ETC., AND ALSO TO APPLY, BUY, SELL, TRANS FER OR OTHERWISE DEAL WITH ANY KIND OF SECURITIES, SHARES DEBENTURES, FIXED DEPOSITS, STOCKS BONDS ETC, ON MY BEHALF. IN THE CONCLUDING PARA OF THE POWER OF ATTORNEY, IT IS STATED AS UNDER: AND I DO HEREBY AGREE THAT ALL ACTS, DEEDS AND THI NGS LAWFULLY DONE BY AFORESAID ATTORNEY, BY VIRTUE OF P OWER HEREBY GIVEN SHALL BE CONSTITUTED AS ACTS, DEEDS AN D THINGS DONE BY ME AND I UNDERTAKE TO RATIFY AND CON FIRM THE SAME. 5 MISS SANNIDHI C. PATEL . 2.2. IF THE PROVISIONS OF THE ACT AND THE CONTENT O F THE POWER OF ATTORNEY ARE KEPT IN JUXTAPOSITION AND ANALYZED THE N IT CAN BE CONCLUDED THAT THE MUTUAL FUNDS, PURCHASE AND SOLD BY THE ASSESSEE WERE MADE ON BEHALF OF SHRI ZAKIR HUSSAIN AND THERE IS NO EVIDENCE TO ESTABLISH THAT THE INVESTMENT MADE B Y THE ASSESSEE IS FROM THE FUNDS OF SHRI ZAKIR HUSSAIN AS IS EVIDENT FROM RETURN OF INCOME, BALANCE SHEET FILED IN THE C ASE OF USTAD ZAKIR HUSSAIN AND THE EXPLANATION OF THE ASSESSEE W AS MERELY BRUSHED ASIDE BY THE ASSESSING OFFICER. NO ADVERSE REMARK HAS BEEN MADE BY THE ASSESSING OFFICER IN THE CASE OF U STAD ZAKIR HUSSAIN, THUS, THE ADVERSE OBSERVATION MADE IN THE ASSESSMENT ORDER IS FACTUALLY INCORRECT. RATHER, THE ASSESSING OFFICER DID NOT CONSIDER THE DETAILS AND EVIDENCE FILED BY THE ASSE SSEE AND STILL IF HE WAS HAVING ANY APPREHENSION REGARDING THE EXPLAN ATION OF THE ASSESSEE NOTHING PREVENTED HIM TO CALL FOR THE DETA ILS FROM THE ASSESSEE AS WELL AS FROM ZAKIR HUSSAIN BEFORE RESOR TING TO THE PROVISIONS OF SECTION 56(2)(VI) OF THE ACT. IDENTI CALLY, THE HONBLE PUNAJB & HARYANA HIGH COURT IN THE CASE OF CIT VS S ARAN PAL SINGH (HUF) 237 CTR (P & H) 50 HELD AS UNDER: THE ASSESSING OFFICER MADE ADDITION TO THE RETURNED INCOME ON ACCOUNT OF AMOUNT RECEIVED AS LOAN WHICH WAS TREATED TO BE RECEIPT WITHIN THE MEANING OF SECTION 56(2)(V) OF THE ACT. ON APPEAL, THE CIT(A) SET ASIDE SUCH A DDITION WHICH WAS UPHELD BY THE TRIBUNAL. THE TRIBUNAL OBSERVED IN PARA 9 AS UNDER: 6 MISS SANNIDHI C. PATEL . APART FROM THE AFORESAID, INSOFAR AS THE PRESENT C ASE IS CONCERNED, THERE IS NO DISPUTE REGARDING THE NATURE AND SOURCE OF THE IMPUGNED UNSECURED LOANS. THE NATURE OF THE AMOUNTS HAVING BEEN RECEIVED AS UNSECURED LOANS AND THE SOURCES THEREOF, IS NOT IN DOUBT. THE ASSE SSEE HAD ALSO EXPLAINED THAT SUCH UNSECURED LOANS HAVE B EEN REPAID WITHIN A SHORT PERIOD AND THE PURPOSE OF RAI SING THE LOANS WAS ALSO EXPLAINED BEFORE THE ASSESSING O FFICER. THE ASSESSING OFFICER HAS NOT DOUBTED ANY OF THE AFORESAID FEATURES OF THE TRANSACTION BUT HAS MEREL Y OBSERVED THAT SINCE THE UNSECURED LOANS WERE RAISED FREE OF INTEREST, IT CONSTITUTED RECEIPT OF MONEY WITHO UT CONSIDERATION AND THEREFORE HE PROCEEDED TO INVOKE SECTION 56(2)9V) OF THE ACT. IN OUR CONSIDERED OPI NION, THE FACTUM OF THE ASSESSEE BEING LIABLE TO REPAY THE IM PUGNED UNSECURED LOANS, IMBIBES THE SAME WITH CHARACTERIST ICS OF A LIABILITY. MERELY BECAUSE THE AMOUNT OF LOAN HAS BEEN RAISED WITHOUT INVOLVING PAYMENT OF INTEREST, CANNO T BE SEEN TO HAVE VESTED THE IMPUGNED AMOUNT WITH CHARACTERISTICS OF AN INCOME, WITHIN THE MEANING OF SECTION 56(2)(V) OF THE I.T. ACT. THE EXISTENCE OF THE EXPR ESSION WITHOUT CONSIDERATION IN SECTION 56(2)(V) CANNOT DI STRACT FROM THE FACT THAT IN THE IMPUGNED CASE, THE SUM OF MONEY RECEIVED IN QUESTION CARRIED A LIABILITY OF ITS REP AYMENT AND THE SAME WAS NOT RECEIVED BY THE ASSESSEE WITH AN ABSOLUTE UNFETTERED RIGHT OF POSSESSION. THEREFORE , IN THE 7 MISS SANNIDHI C. PATEL . TOTALITY OF CIRCUMSTANCES OF THE PRESENT CASE, WE F IND NO JUSTIFICATION TO UPHOLD THE STAND OF THE ASSESSING OFFICER AND THE CIT(A) WAS JUSTIFIED IN DELETING THE IMPUGN ED ADDITION. ACCORDINGLY, THE CONCLUSION OF THE CIT(A ), IS AFFIRMED WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT SCOP E OF SECTION 56(2) (V) IS VERY WIDE WHICH INCLUDED ANY A MOUNT RECEIVED BY THE ASSESSEE UNLESS THE SAME WAS COVERE D BY THE PROVISIO. WE ARE UNABLE TO ACCEPT THE SUBMISSION. THE AMOUNT CONTEMPLATED UNDER SECTION 56(2)(V) OF T HE ACT CANNOT INCLUDE LOAN WHICH IS SHOWN TO HAVE BEEN REP AID. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, A CONCURRENT FINDING OF FACT HAS BEEN RECORDED THAT T HE AMOUNT RECEIVED WAS A SHORT TERM LOAN WHICH WAS DUL Y REPAID. THE SAID AMOUNT CANNOT BE TREATED AS INCOM E OF THE ASSESSEE UNDER SECTION 56(2)(V) OF THE ACT. TH US, NO SUBSTANTIAL QUESTION OF LAW ARISES. 2.3. IF THE PROVISIONS OF THE ACT, THE DECISION FRO M HONBLE HIGH COURT PUNJAB & HARYANA IN SARAN PAL SINGH (HUF)(SUP RA) ARE ANALYZED, THERE IS NO DOUBT ABOUT THE GENUINENESS O F THE TRANSACTION. THE ASSESSEE NEVER BECAME THE BENEFIC IARY OF THE IMPUGNED AMOUNT I.E. RS.25 LAKH, THUS THERE IS NO Q UESTION OF MAKING THE ADDITION U/S 56(2)(VI) OF THE ACT. EVEN OTHERWISE, THE AMOUNT AFTER LIQUIDATING THE MUTUAL FUND WAS RETURN ED BACK 8 MISS SANNIDHI C. PATEL . (RS.15,58,368/- ON 19/10/210 AND RS.10,37,263/- ON 22/03/2011) MEANING THEREBY, THE AMOUNT WAS RETURNE D BACK ALONG WITH PROFIT, CONSEQUENTLY, THE PROVISION OF S ECTION 56(2)(VI) IS NOT APPLICABLE. THIS GROUND OF THE ASSESSEE IS, THEREFORE, ALLOWED. 3. SO FAR AS, ADDITION OF RS.45,513/-, BEING ESTIMA TED ALV OF THE VACANT PROPERTY, IS CONCERNED, AFTER HEARING TH E RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSEE WAS HAVING T WO PROPERTIES ONE AT BARODA AND OTHER AT PUNE IN HER NAME. THE A SSESSEE CLAIMED BARODA PROPERTY AS SOP AND HAS SHOWN THE PR OPERTY SITUATED AT PUNE AT RS.8,45,226/- IN HER BALANCE SH EET 31/03/2003. THE STAND OF THE REVENUE IS THAT, KEEP ING IN VIEW, THE INFLATION AND STEEP RISE IN THE PROPERTY PRICES , THE FAIR MARKET VALUE OF THE SAID PROPERTY SHOULD BE MUCH HIGHER. THE ASSESSING OFFICER ON CONSERVATIVE BASIS TOOK THE RATEABLE VAL UE AT 8% PER ANNUM OF THE INVESTMENT AND THUS COMPUTED THE PROPE RTY INCOME AT RS.45,513/- AND TAXED THE SAME AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS DISPUTED THIS V ALUATION. ADMITTED POSITION IS THAT THE ASSESSEE DID NOT FILE ANY MUNICIPAL VALUATION OF THE SAID PROPERTY. THE ASSESSEE HAS N OT EXPLAINED HOW THE VALUATION IS TOWARDS HIGHER SIDE. THE FORMU LA DEVISED BY THE REVENUE IS ALSO BASED UPON PERSONAL PERCEPTION, THEREFORE, TO PUT AN END TO THE LITIGATION, AS AGREED FROM BOTH S IDES, THE VALUE IS REDUCED TO RS.30,000/- AGAINST VALUATION OF RS.4 5,513/- DONE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. C OMMISSIONER 9 MISS SANNIDHI C. PATEL . OF INCOME TAX (APPEALS), THUS, THIS GROUND OF THE A SSESSEE IS PARTLY ALLOWED. FINALLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 17/12/2014. SD/- SD/- (B.R. BASKARAN) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED - 17/12/2014 F{X~{T? P.S/. . . . . . . ( (( ( &*/ &*/ &*/ &*/ 0/#* 0/#* 0/#* 0/#* / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. /2 &* , , / DR, ITAT, MUMBAI 6. 23' 4 / GUARD FILE. . . . . / BY ORDER, '/* &* //TRUE COPY// 5 55 5 / 6 6 6 6 7 7 7 7 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI,