SHEHLA AKHTAR RANGOONWALA, MUMBAI V. ITO 19 (3)(3), MUMBAI

ITA 6538/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3324 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Additional evidence; Cost of acquisition; Reasonable cause; Set aside; Capital Gains
• Section: 147; 148; 54; 144; 69C; 13

Judgement Text

1 ITAs 6537 & 6538/Mum/2019 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A”, MUMBAI BEFORE SHRI ABY T. VARKEY (JUDICIAL MEMBER) AND SHRI S.RIFAUR RAHMAN (ACCOUNTANT MEMBER) I.T.A No.6537/Mum/2019 (Assessment year : 2010-11) Akhtar Zain Rangoonwala Flat No.22, Ocean View, 77, Dumayne Road Colaba, Mumbai PAN : ABHPR8566Q vs ITO 19(1)(1), Mumbai 2 nd Floor, Matru Mandir Building Nana Chowk, Grant Road West Mumbai-400 007 APPELLANT RESPONDENT I.T.A No.6538/Mum/2019 (Assessment year : 2010-11) Shehla Akhtar Rangoonwala Flat No.22, Ocean View, 77, Dumayne Road Colaba, Mumbai PAN : ABHPR8566Q vs ITO 19(3)(3), Mumbai 2 nd Floor, Matru Mandir Building Nana Chowk, Grant Road West Mumbai-400 007 APPELLANT RESPONDENT Assessees represented by Shri Bhupendra Shah Department represented by Shri K.P.R.R. Murty Date of hearing 19/04/2022 Date of pronouncement 29/04/2022 2 ITAs 6537 & 6538/Mum/2019 O R D E R Per: Aby T. Varkey (JM): These are appeals preferred by the assessees against the order of the Learned Commissioner of Income-tax (Appeals)-30, Mumbai dated 25/07/2019 for assessment year 2010-11. 2. ITA No.6537/Mum/2019 pertains to Shri Akhtar,the husband of Smt. Shehla Akhtar Rangoonwala, who has preferred the other appeal numbered as ITA No.6538/Mum/2019. 3. Since both the sides have agreed, first we will take up the appeal of Shri Akhtar in ITA No.6537/Mum/2019 4. The grounds raised by the assessee are against the action of the Ld.CIT(A) in confirming an addition of Rs.37,43,100/- as unexplained investment on account of difference in source of investment while buying new residential property vis-à-vis old residential property. 5. Brief facts of the case as noted by the Assessing Officer is that the assessee had not filed any return of income for the assessment year 2010-11. However, AO on perusal of information on NMS module (non filer management system), he noted that the assessee had sold his residential property at Samundra Setu for Rs.2.35 crores on 31/07/2009 in A.Y. 2010-11. Therefore, he reopened the assessment under section 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’). According to him, eventhough he had issued statutory notices, it were not responded to by the assessee and, therefore, he had no other alternative, but to add the entire sale consideration of Rs.2.35 crores as the income of the assessee. 3 ITAs 6537 & 6538/Mum/2019 Aggrieved, the assessee preferred an appeal before the Ld.CIT(A), who gave partial relief to the assessee by confirming only Rs.37,43,100/- out of Rs.2.35 crores, by holding as under:- “5.3 The second ground of appeal is that the appellant was eligible for deduction towards cost of acquisition of property in computation of long term capital gains and that -the appellant had purchased a new residential house property after selling of house property and was eligible for exemption u/s 54 of the Income Tax Act and that the entire Long Term Capital Gains was exempt u/s 54 of the Act. 5.3.1 The facts of the case are that the assessee appellant had not filed his return of income for A.Y. 2010-11; based on NMS information available in the ITBA Module the case of the assessee appellant was reopened for the reason "sold immovable property valued at Rs. 30,00,000/-or more", which on verification on the ITD system revealed that the assessee had indeed sold a property of Rs;2,35,00,000/- on 31.07.2009 in F.Y. 2009-10 relevant to A.Y. 2010-11. Since there was no compliance to the notice u/s 148 or the statutory notices, the Ld. AO proceeded to complete the assessment u/s 144 r.w.s 148 of the l.T. Act. 1961 on 15.12.2017 wherein the entire sale proceeds of the flat at Samudra Setu, Breach Candy, Mumbai, of Rs.2,35,00,000/-was added to the total income of the assessee. 5.3.2 The assessee appellant in the statement of facts has submitted that he being a senior citizen and not having taxable income had not filed his return of income for the relevant assessment year i.e. A.Y. 2010-11. It was further submitted that the appellant, in July 2009, had sold a residential house property at Samudra Setu, Breach Candy, Mumbai, for Rs.2,35,00,000/- (purchased for Rs.1,68,14,230/- including Stamp Duty and Other Costs) in the financial year 2005-06; in November 2009, the sale proceeds of the property sold was invested in a new residential house property at Ocean View, Colaba, Mumbai for Rs.2,60,00,000/-. 5.3.3 The appellant has furnished the following as additional evidence u/R 46 A: a. Sale deed dt 31.07.2019 wherein Mr Akhtar Zain Rangoonwala and Mrs Shehla Akhtar Rangoonwala are the vendors and Mr Cyrus Shahrukh Contractor and Mrs Roshni Cyrus Contractor are the purchasers; the property sold is Flat no 501, admeasuring 1020 sq mt in Samudra Setu Co-operative Housing Society Ltd, Bhulabhai Desai Road, Mumbai 400026 for a consideration of Rs 2,35,00,000/- of which Rs 12,43,100/- is paid towards discharge of loan/ overdraft account no 4 ITAs 6537 & 6538/Mum/2019 00058020000018 with the HDFC Bank Ltd, Rs 12 f 56,900/- is in favour of the vendors and a sum of Rs 2,10,00,000/- is in favour of the vendors. b. Sale deed dt 01.11.2005 wherein Mr. Ashok Alimchand Balani and Mrs. Kausalya Alimchand Balani are the vendors and Mr. Akhtar Zain Rangoonwala and Mrs. Shehla Akhtar Rangoonwala, are the purchasers of Flat No. 501, 5 th Floor, Samudra Setu, Bhulabhai Desai Road, Mumbai -26 admeasuring about 1020 sq. ft. (carpet) for a lumpsum consideration of Rs. 1,60,00,000/-. c. Sale deed dt. 25.11.2009 wherein Mr. Nikhilesh Chib, is the vendor and Mr. Akhtar Zain Rangoonwala and Mrs. Shehla Akhtar Rangoonwala, are the purchasers of Flat No. 22, 2 nd Floor, Ocean View in Ocean View Co-operative Housing Society admeasuring 888 sq. feet carpet area along with one stilt car parking space admeasuring 115.5 sq. feet for a consideration of Rs. 2,60,00,000/- 5.3.4 The appellant has through the above additional evidence filed u/R 46 A attempted to demonstrate that the property in Samudra Setu was sold for Rs 2,35,00,000/- in FY 2009-10, the cost of acquisition of which was Rs. 1,60,00,000/- in FY 2005-06 and the sale proceeds of Samudra Setu were invested in purchase of residential flat in Ocean View for Rs.2,60,00,000/- in FY 2009-10. The appellant has calculated the long term capital gains as sale consideration of Rs.2,35,00,000 less indexed cost of acquisition of Rs 1,60,00,000/- being Rs 2,03,46,076 and indexed cost of stamp duty of Rs 8,14,230/- being Rs 10,35,399/. However, no proof of stamp duty paid has been adduced; the sale deed reveals that Rs 30,400/- has been paid as stamp duty; the indexed cost of this stamp duty is Rs 38,657/-. Accordingly the capital gains is computed at Rs 2,35,00,000 less ( Rs 2,03,46,076 + Rs 38,657/-J which is Rs 31,15,267/-. 5.3.5 The appellant has claimed exemption on purchase of residential flat in Ocean View for Rs 2,60,00,000/-. The source of such investment is from sale of property in Samudra Setu. As described above, vide sale deed dt 31.07.2019 , appellant Mr Akhtar Zain 7'Langoonwiia and his wife Mrs Shehla Akhtar Rangoonwala sold the property in Flat no 501, admeasuring 1020 sq mt in Samudra Setu Co-operative Housing Society Ltd, Bhulabhai Desai Road, Mumbai 400026 to Mr Cyrus Shahrukh Contractor and Mrs Roshni Cyrus Contractor for a consideration of Rs 2,35,00,000/- of which Rs 12,43,100/- is paid towards discharge of loan/ overdraft account no 00058020000018 with the HDFC Bank Ltd, Rs 12,56,900/- is in favour of the vendors and a sum of Rs 2,10,00,0007- is in favour of the vendors. Thus, only Rs 2,10,00,000/- and Rs 12,56,900/-, being Rs 2,22,56,900/- was available with the appellant for purchase of new flat. The 5 ITAs 6537 & 6538/Mum/2019 source of investment in Ocean View of Rs 2,60,00,000/- thus can be explained only to the extent of Rs 2,22,56,900/-; the balance of Rs 37,43,100/- stands unexplained. This is added as unexplained investment u/s 69C.” 6. Still not satisfied by the aforesaid part relief granted by the Ld.CIT(A), the assessee is before us. 7. Assailing the action of the Ld.CIT(A), the Ld.AR of the assessee, Shri Atul Mehta contended that in this relevant assessment year the assessee had sold the residential house at Samundra Setu Co-operative Housing Society for a consideration of Rs.2.35 crores and thereafter he has purchased a new house for Rs.2.60 crores at Ocean View, Colaba, Mumbai and thus, according to him, the assessee was eligible for exemption under section 54 of the Act. Further according to Ld.AR, the assessee was a senior citizen and the taxable income of the assessee was was below taxable limit as prescribed by the Finance Act, and therefore was not required to file the return of income. According to the Ld.AR the Assessing Officer had sent the notice under section 148 of the Act at the addresss at Samundra Setu, which was the sold out property and therefore, the notices could not be served upon the assessee and, therefore, the Assessing Officer passed the exparte order by framing the best judgement assessment under section 144 of the Act by adding the entire sale consideration to the tune of Rs. 2.35 crores as income of the assessee. Further, according to the Ld.AR, the assessee, before the Ld.CIT(A) filed all the relevant evidences under Rule 46A of the Income-tax Rules, 1962 (herein after the Rules) to substantiate the fact of purchase of the property [Samundra Setu Co-operative Housing Society] in A.Y. 2006-07, which was sold in the relevant assessment year; and the fact of purchase of new residential property at Ocean View, Colaba, Mumbai and the claim of 6 ITAs 6537 & 6538/Mum/2019 exemption under section 54 of the Act. According to Ld.AR, the Ld.CIT(A) appreciated the fact of purchases & sale of the residential property at Samudra Setu and also was satisfied with the purchase of new residential property in Ocean View and thereafter was pleased to give partial relief to the assessee and confirmed only Rs.37,43,100/-. According to the Ld.AR, this partial confirmation was also not warranted because the Ld.CIT(A) did not call for the explanation of the assessee regarding the source of Rs.37,43,100/- which he found in respect of the investment while purchasing the new property at Rs.2.60 crores when the sale consideration that assessee received was only to the tune of Rs.2,22,56,900/-. Therefore, according to Ld CIT(A) after repayment of loan of Rs.12,43,100/- there was a difference of Rs.37,43,100/- which according to him was unexplained investment under section 69C of the Act. According to the Ld.AR, when the appellate proceedings were going on before Ld CIT(A), the assessee’s wife Mrs. Shehla Akhtar Rngoonwala (appellant in ITA No.6538/Mum/2019) was suffering from cancer and since the assessee was looking after her treatment did not get proper opportunity to explain the source of the investment (difference). Therefore, given an opportunity, the assessee would be able to explain the source of investment to the tune of Rs.55 lakhs which includes the stamp duty and registration charges plus Rs.37,43,100/- confirmed by Ld.CIT(A). 8. Per contra, the Ld.DR Shri Mehul Jain relied upon the order of the Ld.CIT(A) and submitted that since the assessee failed to explain the source of investment to the tune of Rs.37,43,100/-, the Ld.CIT(A) rightly made the confirmation of the said sum which does not require any interference from our part. 7 ITAs 6537 & 6538/Mum/2019 9. Having heard both the parties, we note that the assessee a senior citizen had sold his residential house purchased in A.Y. 2006-07 for Rs.1.60 cr. at Samundra Setu Co-operative Housing Society, in this relevant assessment year for Rs.2.35 crores and computed the long term capital gain at Rs.21.19 lakhs and simultaneously purchased a residential property at Ocean View Co-operative Housing Society for a consideration of Rs.2.60 crores. According to the assessee, since he has purchased the new residential property after the sale of the old house, he is eligible for the deduction under section 54 of the Act; and since his taxable income has not crossed the threshold limit prescribed by the Income-tax Act, did not file the return of income. The Assessing Officer, based on information about sale of residential property, reopened the assessment and had sent notices at the old address at Samudra Setu residence which was already sold by the assessee. Since the notices could not be served upon the assessee, the Assessing Officer passed the best judgement assessment by making the entire addition of Rs.2.35 crores. During the appellate proceedings, the assessee filed all the relevant evidences in respect of the transactions under Rule 46A of the Income- tax Rules, 1962. Ld.CIT(A), after considering the evidences in respect of purchase & sale of the house at Samundra Setu Co-operative Housing Society and thereafter taking note that the assessee had purchased a new house at Ocean View Co-operative Housing Society, found the claim of the assessee in respect of exemption under section 54 of the Act as valid. However, the Ld. CIT(A) found that the assessee failed to explain the source of investment to the tune of Rs.37,43,100/- in the purchase of the new property and therefore, she confirmed Rs.37,43,100/- by noting the difference as under:- 8 ITAs 6537 & 6538/Mum/2019 Sale proceeds of Flat at Smudra Setu Rs.2,35,00,00/- Less : Amount used to repay loan against Securities (LAS) Rs. 12,43,100/- Balance consideration available for investment in new flat Rs.2,22,56,900/- Consideration paid for new flat Rs.2,60,00,000/- Hence unexplained investment u/s 69C of the Act 37,43,100/- 10. Before us, the Ld.AR has submitted that the Ld.CIT(A) has not given any opportunity to the assessee to explain the source of Rs.37,43,100/-. According to him, if the Ld CIT(A) had any doubts regarding this issue, the assessee ought to have been given an opportunity to explain the source of investment to the tune of Rs.37,43,100/- and without giving such an oppurtunity, the Ld CIT(A) erred in confirming this addition. Before us, in order to prove the source of Rs.37,43,100/- the assessee has filed the “cash flow” statement which is seen placed at pages 3 & 4. From a perusal of the same, it is seen that Rs.55 lakhs the assessee received as unsecured loan from Shri Pradip Tarachand Kothari (PAN – AABPK1490R) and that same has been repaid on 21/12/2009 alongwith interest of Rs.68,750/- (refer page 69 of paper book). On the strength of cash flow statement the assessee contends that he would be able to discharge the burden of proving the source of investment of Rs.37,43,100/- as well as that of stamp duty and registration also which approximately comes to Rs.55 lakhs. However, we find that these documents were not filed before the Ld CIT(A) because at that time, the assessee’s wife was suffering from cancer and the assessee was looking after her treatment and unfortunately, she expired on 30/10/2020. So we find that there was sufficient cause for not presenting the detail / cash flow statement before the Ld.CIT(A), which occasioned the Ld.CIT(A) confirming Rs.37,43,100/-. The Ld 9 ITAs 6537 & 6538/Mum/2019 AR undertakes before us that given an oppurtunity, the assessee is ready to go before the AO and explain the source of investment not only to the tune of Rs.37,43,100/- but also in respect of the value of stamp duty and registration which approximately comes to Rs.55 lakhs. Since it is a factual aspect, which requires verification, we remand the issue to the AO for the limited purpose of verifying the source of investment not only to the tune of Rs.37,43,100/- but also in respect of the value of stamp duty and registration [which approximately comes to Rs.55 lakhs]. And if the AO finds after verifaication, the the explanation given by the assessee to be satisfactory, then no addition is warranted on this issue. 11. Coming to the appeal in ITA No.6538/Mum/2019, we note that the Assessing Officer had made the same (double) addition of Rs.2.35 crores also in the hands of Smt. Shehla Akhtar in respect of the same transaction which has been discussed (supra) which also has been deleted by the Ld.CIT(A). However, she confirmed the addition regarding the claim of the assessee to have received gift of Rs.26 lakhs from her uncle and brother in law. Aggrieved, the assessee is appeal before us. 12. In respect of the impugned action of Ld.CIT(A) confirming addition of Rs.26 lakhs disbelieving the gift received by the assessee/Smt. Shehla Akhtar, it was brought to our notice that the assessee/Smt. Shehla Akhtar received as gift from her paternal uncle Rs.20 lakhs which is evidenced from the bank statement filed by the assessee which is placed at page 16 of the paper book wherein an amount of Rs.20 lakhs has been paid by Shri Sayed Yawar Abbas (paternal uncle /brother of the father of the Smt. Shehla), Rs. 6 lakhs (GBP 6,050) from Mr. Sayed Mujahid 10 ITAs 6537 & 6538/Mum/2019 Ali Zaidi (brother in law of Smt. Shehla). In order to confirm the fact of the gift of Rs.20 lakhs, the Ld.AR drew our attention to page 6 of the paper book which is a letter written by the donor stating that out of love and affection, an amount of Rs.20 lakhs was given as gift to Smt Shelhla vide cheque No.00179 dated 14/07/2009. The Ld.AR drew our attention to page 7 which is the copy of the HDFC cheque dated 14/12/2009 of Rs.20 lakhs [ HDFC Saving Bank NR(E) account] of the donor who is in UK; and the gift of Rs.4,48,358/-( 6,050 pounds) has been transferred from the bank account A/c 111 – 3519 of Mr. Syed Mujahid (CHASGBZL) and it is noted that the assessee had filed the copy of the gift letters of both the donors (refer pages 6 to 7 & 10 to 12of paper book) and also the respective bank statements which are found placed at pages 13 to 17 of the paper book. However, we note that these facts could not be placed before the Ld. CIT(A) because, she was undergoing treatment for cancer which eventually took her life on 30.10.2020. So the Ld.CIT(A) confirmed Rs.26 lakhs. We note that the assessee had reasonable cause for not submitting the aforesaid evidence before the Ld.CIT(A), therefore, the impugned confirmation was made by the Ld.CIT(A) to the tune of Rs.26 lakhs. However, since these facts need to be verified, for the ends of justice, the issue is also remanded to the file of the Assessing Officer for verification in accordance with law. Therefore, we set aside the impugned order and remand the issue to the Assessing Officer for the limited purpose of verifying the facts stated supra inrespect of Rs. 26 lakhs and after verification AO finds the same to be correct no addition is warranted on this score. Needless to say, sufficient opportunity to be given to the Ld AR of assessee during the time of verification. 11 ITAs 6537 & 6538/Mum/2019 13. In the result, both the appeals filed by the assessee are allowed for statistical purpose. Order pronounced in the open court on 29 th April, 2022. Sd/- sd/- (S.RIFAUR RAHMAN) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dt : 29 April, 2022 Pavanan ितिलिप अ ेिषतCopy of the Order forwarded to : 1. /The Appellant , 2. / The Respondent. 3. आयकर (अ)/ The CIT(A)- 4. आयकर CIT 5. िवभागीय , आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai