Minotiben Rakeshbhai Patel, Ahmedabad V. ITO, Ward-1(3)(3), Ahmedabad

ITA 655/AHD/2019

AI Insights

The case revolves around an appeal by Minotiben Rakeshbhai Patel against the order of the Commissioner of Income Tax (Appeals)-10, Ahmedabad, which confirmed the addition of ₹ 40,22,500 as unexplained income under section 69 of the Income Tax Act, 1961. The dispute originated from the purchase of a plot of land, where the assessee and her co-owner faced financial difficulties and borrowed funds from VRS Infrastructure to cover the land purchase and conversion premium costs. The Assessing Officer treated the amount paid to two individuals as unexplained income, leading to the appeal. The Tribunal, after reviewing the detailed transactions and supporting documents, concluded that the payments were legitimate and part of the loan arrangement for land conversion, thus allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131404 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 15-04-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 69; 271(1)(c)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Minotiben Rakeshbh ai Patel, 21 52-A, Panditji Ni Pole, Sarangpu r Chakla, Ah medabad -3 80001 PAN: AAXPP1 035D (Appellant) Vs The ITO, Ward-1(3)(3), Ah med abad (Resp ondent) Asses see b y : M s. Arti Shah, A. R. Revenue by : Smt. Trupti Patel, Sr. D. R. Date of hearing : 22-02 -2023 Date of pronouncement : 22-03 -2023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-10, Ahmedabad, in proceeding u/s. 250 vide order dated 11/03/2019 passed for the assessment year 2014-15. ITA No. 655/Ahd/2019 Assessment Year 2014-15 I.T.A No. 655/Ahd/2019 A.Y. 2014-15 Page No. Minotiben Rakeshbhai Patel vs. ITO 2 2. The assessee has taken the following grounds of appeal:- “1. The Learned Commissioner of Income Tax (Appeals)-10, Ahmedabad has erred in law and on facts of the case in confirming the payments of Rs. 40,22,500/- made by Shri S.M. Bharwad and Shri Shantilal K. Patel as unexplained income of the appellant u/s. 69 of the I.T. Act, 1961. Your Appellant prays to reserve the right to add, alter, amend and/or withdraw any of the above grounds of appeal.” 3. The brief facts of the case are that the assessee is an individual and had earned interest income during the year under consideration. The assessee had purchased a plot of land jointly with Mrs. Nittalben Patel for a total consideration of ₹ 1,74,26,500/- on 09-04-2013 vide registered deed. The said plot of land was purchased from 23 co-owners. The said plot of land was converted into non-agricultural land by the 23 sellers by paying the premium of ₹ 80,45,000 to the concerned Authorities. The said premium was paid by the sellers to the Government Authority by borrowing loan from Shri Shanti Lal Patel and Shri SM Bharvad. The said premium of ₹ 80,45,000/- was paid to the Government directly from the bank accounts of Shri Shanti Lal Patel and Shri SM Bharvad directly. The copies of approval letter from the Government Department for conversion of land to non- agricultural land was issued by the District Collector and the assessee also submitted proof of payment of premium amount of ₹ 80,45,000/ - determined by the concerned Department Authority and payment thereof before the assessing Officer. The assessee submitted that at the time of making payment for purchase of land, the assessee and other co-owner were facing financial difficulty and therefore they borrowed a sum by way of loan from I.T.A No. 655/Ahd/2019 A.Y. 2014-15 Page No. Minotiben Rakeshbhai Patel vs. ITO 3 M/s VRS infrastructure for purchase of land including payment for land conversion premium of ₹ 80,45,000/ - as referred to above. However, instead of taking loan from M/s VRS infrastructure and then paying the same to the 23 sellers, it was decided that M/s VRS infrastructure will directly pay the premium amount towards land conversion charges to Shri Shantilal Patel and Shri SM Bharwad of ₹ 40,22,500/- each (totaling to ₹ 80,45,000/-) and balance amount of ₹ 93,81,500/- was paid to the 23 co-owners of the land. Accordingly, 50% share of the total purchase cost (including stamp duty, registration fees etc.) which was paid by M/s VRS infrastructure as detailed above, was recorded as unsecured loan in the books of the assessee. The assessee’s case was selected for scrutiny and the AO asked the assessee to furnish explanation regarding payment of ₹ 40,22,500/-made to Shri Shanti Lal Patel and Shri MS Bharwad. The assessee filed letter dated 10-12-2016 giving detailed explanation regarding the transaction as narrated above. However, the AO held that the amount of ₹ 80,45,000/- shown as unsecured loan in the name of M/s VRS infrastructure by the assessee and the co-owner is the unexplained income in the hands of assessee and made addition of ₹ 40,22,500/- being 50% of the aforesaid amount (since the assessee was 50% as co-owner of the aforesaid land) in the hands of the assessee under section 68 of the Act. While making the addition, the AO made the following observations in the assessment order: “On going through the submission submitted by the assssee, it is gathered that the payment to the seller parties made by the M/s. VRS Infrastructure on behalf of the assessee of full sale consideration of Rs. 1,74,26,500/-, including payment made to the 2 other members namely Shri S M Bharwad and Shri Shantilal K Patel, who are not co- owner of the said property ( not real seller). The assessee has -shown I.T.A No. 655/Ahd/2019 A.Y. 2014-15 Page No. Minotiben Rakeshbhai Patel vs. ITO 4 in the books of accounts/balance sheet as an unsecured loans in the name of M/s. VRS Infrastructure. In view of the same,' an amount of Rs. 80,85,000/-, 1 / 2 share of the assessee, which comes to Rs. 40,22, 500/- is hereby added to the total income of the assessee as the assessee's unexplained income of the Act. Since assessee has concealed her income by furnishing inaccurate particular leading to concealment of income penalty proceedings u/s 271(1)(c) of the Act is initiated separately .” 4. In appeal before Ld. CIT(Appeals), the assessee submitted the entire flow of events and submitted that in order to get clear title of the plot of land, the assessee and the other co-owner were required to repay the amount paid by Shri Shanti Lal Patel and Shri SM Bharwad for converting the land use from agricultural to non-agriclutural. Therefore ₹ 40,22,500/-was paid each to Shri Shanti Lal Patel and Shri SM Bharwad by way of issuing of cheques. The copies of cheques were also placed on record before the Ld. CIT(Appeals) for his perusal and records. The assessee further submitted that in case payment of ₹ 80,45,000/-was not made to Shri Shanti Lal Patel and Shri SM Bharwad, then the same would have been recovered by sellers as part of sale consideration. Accordingly, the assessee submitted that the action of the AO in not considering the said amount as purchase cost and adding ₹ 40,22,500/- to the total income of assessee’s is unjustified in the instant set of facts. However, Ld. CIT(Appeals) dismissed the appeal of the assessee by holding that the transactions have been arranged in such a way so as to circumvent various laws as Shri Shanti Lal Patel and Shri SM Bharwad are not part of transaction directly and indirectly. The assessee had purchased land from 23 co-owners and Shri Shanti Lal Patel and Shri SM Bharwad appear to have some relationship with VRS infrastructure. While I.T.A No. 655/Ahd/2019 A.Y. 2014-15 Page No. Minotiben Rakeshbhai Patel vs. ITO 5 dismissing the appeal of the assessee, the Ld. CIT(Appeals) observed as under: “4.2 I have carefully considered the finding of the A.O. with regard to his holding that a sum of Rs. 40, 22, 500/- is unexplained income in view of the fact that payments was made to two persons viz. S.M. Bharwad and Shantilal K. Patel amounting to Rs.80, 85,000/-, who are not the co-owners of the said property. The Appellant has shown in the Balance Sheet this amount as unexplained loan from VRS Infrastructure and the Appellant's share being 1/2 therein, accordingly, Rs. 40, 22, 500/- has been considered as unexplained income. The Appellant in the submission has claimed that the land purchased was non-agricultural land and that conversion premium of Rs.80, 85, 000/- was to be paid which was a part of the total consideration of Rs. 1,74, 26,500/-. The said amount of Rs.80, 85,000/- was paid by S.M. Bharwad and Shantiial K. Patel. Since the co-owners of the land did not repay this amount to S.M. Bharwad and Shantiial K. Patel, VRS Infrastructure on behalf of the Appellant made the payments of Rs.80, 85,000/- to S.M.Bharwad and Shantilal K. Patel as a part of the total consideration of Rs. 1,74, 26,500/- and paid the balance amount of Rs,93,41,000/- to 23 co-owners of land. However, the total transaction has been arranged in such a way so as to circumvent various laws as S.M. Bharwad and Shantiiai K. Paiel are not part of transaction directly or indirectly. There is no understanding or any documentation between the appellant and these two persons S.M. Bharwad and Shantilal K. Patel so as to pay on her behalf. As per facts on record S.M. Bharwad and Shantilal K. Patel appear to have some relationship with VRS Infrastructure. The appellant had purchased the land from 23 Co-owners and S.M. Bharwad and Shantilal K. Patel are not part of this ground of 23 persons. It is not known as to what was the liability created against M/s. VRS infrastructure and haw the same were paid by M/s. VRS infrastructure. For instance, the cash in hand/funds have to be shown by the appellant before any such liability if at all legally to be paid. The appellant neither has funds nor legal liability to be met at the I.T.A No. 655/Ahd/2019 A.Y. 2014-15 Page No. Minotiben Rakeshbhai Patel vs. ITO 6 time of purchase of land in this transaction. In other words, if cash payments above Rs, 20.000/- each have been made by M/s, VRS Infrastructure on behalf of appellant as claimed, the appellant would claim immunity saying that the action u/s 269SS/269T should be taken against M/s. VRS Infrastructure. M/s. VRS Infrastructure would try to get benefit of- doubt as if the appellant is culprit and try to discharge" his onus, in the process, not only department is put into disadvantage but "there is negation of law as approved by the parliament. Therefore, Assessing Officer has rightly assessed the amount ns unexplained income. The addition of Rs.40,22,500/- has been made correctly and is confirmed. The ground no. 1 and 1.1 of appeal are dismissed.” 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). The assessee reiterated the submissions before us which were also made before Ld. CIT(Appeals). The assessee submitted that all the payments were made through banking channels and the entire flow of transactions was explained in detail to the AO and Ld. CIT(Appeals) and without pointing out any specific defect in the said flow of transactions, the Department has added the amount in the hands of the assessee without any cogent reasons. The assessee produced before us copy of conversion premium pay order issued by the City Mamlatdar at page 7-8 of the paper book. The assessee also produced before us approval letter by Government Authority for conversion of agricultural land to non-agricultural land at page 9 of the paper book. The assessee also produced before us details of payment of conversion premium along with copies of cheques issued by Shri Shanti Lal Patel and Shri SM Bharwad to the concerned Government Authority. On going through the relevant documents placed before us and the flow of transactions which has been elaborated before us, we are of the considered view that Ld. CIT(Appeals) erred in facts and in law in confirming the I.T.A No. 655/Ahd/2019 A.Y. 2014-15 Page No. Minotiben Rakeshbhai Patel vs. ITO 7 addition of ₹ 40,22,500/- in the hands of the assessee as unexplained income under section 68 of the Act. From the facts, it is evident that the said amount was taken as unsecured loan from VRS Infrastructure and which was paid directly to Shri Shanti Lal Patel and Shri SM Bharwad towards conversion charges of agricultural land to non-agricultural land. Accordingly, in light of the above observations, we are allowing the appeal of the assessee and the addition made under section 68 of Act in the hands of the assessee is directed to be deleted. 6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 22-03-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/03/2023 TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद